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The new year brings new challenges for employers. Join us as we take stock of changes over the last year and strategize for what’s on the horizon. 

In our 75-minute “quick hits” format, we’ll help Canadian in-house counsel and human resources leaders track what to keep top-of-mind for 2023. We’ll also provide practical takeaways to help navigate the new landscape.

Among other topics, we will cover:

  • COVID-19 case law updates on vaccinations, masking and workplace health and safety policies
  • Terminations, reductions in force and ways to reduce employer liability in a changing economy
  • Changes to public sector wage caps in Ontario
  • A selection of cross-Canada legislative changes including:
    • Working for Workers (again) in Ontario
    • Paid Sick Leave in BC
    • French Language and Privacy amendments in Quebec
  • Immigration – The solution to labour shortages in a post COVID-19 world?

Date: Wednesday, February 1

Time: 10:00 am to 11:15 am ET

We look forward to connecting with you!

Click here to register for the webinar.

Also presenting: Sarah Adler.

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In 2023, uncertainty is the new certainty, with the economic cycle replacing Covid-19 as the main driver of instability. Experience, along with the insights we’ve gathered from more than 600 senior lawyers at large corporations across the globe, point to an anticipated rise in employment disputes. Organizations should proactively identify risk and involve dispute practitioners as early as possible to mitigate the impact of this rise in complaints.

Uncover the outlook in our sixth annual report, The Year Ahead: Global Disputes Forecast 2023. Featuring results from our global survey of 600 senior lawyers at large organizations, we unpack the survey findings and highlight the top disputes risks across key industry sectors and locations. See full report and highlights. 

And — to go deeper, register here for The Year Ahead: Global Disputes Forecast 2023 – Employment webinar scheduled for February 21, 2023, 8:00 am CT.

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As we near the end of 2022 and bonus season is right around the corner, now is a great time for employers to review and update their employment agreements. In order to make changes to an existing employment agreement, the employer must give the employee “consideration.” Without consideration, the changes would not be enforceable.

Consideration can come in many different forms, but is generally a benefit that the employee would not have received had they not signed the amended employment agreement. Typically, it comes in the form of a one-time payment, an increase in salary or hourly wage rate, or increased benefit entitlements or vacation. A non-discretionary bonus payment that the employee would have earned at the end of the year regardless of whether they signed the revised employment agreement would not be sufficient consideration, but a discretionary bonus can be. If the employer can show that the employee was not guaranteed an end of year bonus, and that the bonus—or a portion of it—was paid in exchange for the employee signing the amended employment agreement, this will likely be sufficient consideration.

With that in mind, we have highlighted some areas that employers may want to shore up in their employment agreements:

  1. Termination provisions: This is typically one of the most important clauses in an employment agreement, and one which employers should review and update regularly. In the last couple of years, the majority of termination clauses have been rendered unenforceable by operation of Waksdale v. Swegon North America Inc., 2020 ONCA 391, where the Ontario Court of Appeal determined a termination clause was unenforceable because the “just cause” provision allowed the employer to terminate an employee without notice or pay in lieu for reasons that did not constitute cause under Ontario’s Employment Standards Act, 2000 (“ESA“). We have now seen Waksdale applied in a number of cases, and it is clear that it is here to stay. In Gracias v. Dr. David Walt Dentistry, 2022 ONSC 2967, the Ontario Superior Court reiterated the rule from Waksdale and found that a termination provision will not be saved by a severability clause. In Rahman v. Cannon Design Architecture Inc., 2022 ONCA 451, the Ontario Court of Appeal found that the employee’s sophistication and the parties’ subjective intention to not contravene the ESA an employment agreement was not relevant when assessing the enforceability of the termination provision. The Court of Appeal held that the just cause provision in the employment agreement ran into a Waksdale problem and was therefore unenforceable.
  2. Unpaid layoff provisions: This is something we saw a lot of during the COVID-19 pandemic, when employers needed to temporarily lay off employees to match a slow down in work, particularly in manufacturing and service industries. Unless there is a provision in the employment agreement allowing an employer to temporarily lay off an employee without pay, the employee may argue that doing so constitutes a constructive dismissal. While many provinces enacted legislation during the pandemic which technically allowed employers to engage in temporary layoffs, this did not stop employees from bringing claims for constructive dismissal under the common law. Coming out of the pandemic, we recommend to all of our clients that they have language in their employment agreements permitting them to temporarily lay off employees without pay.
  3. Long term and short term incentive plans: We are seeing more and more litigation regarding the payout of long and short term incentives. Recent case law[1] has made it clear that unless the language of the incentive plan specifically excludes payout during a notice period, it will be payable. Language requiring an employee to be “actively employed” to qualify for payment will not suffice. Employers with this kind of language in their employment agreements and bonus plans will need to pay out an employee’s incentives during the notice period, including bonus payments, stock option vesting, etc. Combined with an unenforceable termination provision and an employee with an extended length of service, the liability for something like this could be significant. Avoiding this requires updating not only the respective incentive plan document (if any), but also the termination provisions used in employment agreements.

Takeaways for Employers

Making changes to an employment agreement requires consideration and employers can make good use of their discretionary end of year bonuses to do so. Employers should review and revise their employment agreements regularly and have them updated to address changes in the law. Above are some examples of provisions or language that often require changes, but there are certainly others. If you have not had your employment agreements reviewed in the last year, we recommend doing so prior to payout of discretionary bonuses.

[1] In Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26, the Supreme Court of Canada found that an employee was still entitled to a bonus payment under a long term incentive plan (“LTIP”) even though language in the employment agreement precluded any such payment. In Matthews, the employer’s company was sold 13 months after the employee resigned, which constituted a “Realization Event” under the LTIP and triggered bonus payments to qualifying employees. The plaintiff sought damages for constructive dismissal, including the bonus payment, and the employer argued that no bonus payment was owing under the LTIP since the plaintiff was not an employee. In finding for the employee, the Court reiterated that reasonable notice upon termination includes all salary and benefits, including bonuses that an employee would have earned had the employee continued to work through the reasonable notice period. The language of the LTIP did not unambiguously limit or remove the employee’s common law right to damages. Matthews emphasizes the need for employers to review the language of their incentive plans to ensure that they are carefully drafted and comply with the analytical framework provided in the decision.

 

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Special thanks to Sarah Adler, Immigration Legal Counsel, and Simran Nandha for their assistance with this blog.

Further to the increased compliance requirements from Employment and Social Development Canada (ESDC) and Immigration, Refugee, and Citizenship Canada (IRCC) on all employers which commenced on September 30, 2022 (Government of Canada strengthens protections for temporary foreign workers as new regulations come into force – Canada.ca), IRCC has now incorporated these requirements in its regular audits on employers engaging in the Temporary Foreign Work Permits program in Canada.  In particular, the audits are focused on employees’ rights and program compliance.

Specifically, these changes to regular audits are requesting certain documentation that has not previously been asked of employers, including:

  • Proof that the employee received a copy of the pamphlet entitled International Mobility Program: Get to Know Your Rights While working in Canada. See the following link:  International Mobility Program – Get to know your rights while working in Canada – Canada.ca
    • A copy of the pamphlet must be provided to the employee in their official language of choice on or before the first day or work, and proof of provision of the pamphlet must be provided upon request.
    • The pamphlet must also be readily available within the workplace in both official languages.
  • Proof that the company is compliant with recruitment law in the applicable Province (if applicable);
  • Copy of the employment agreement signed by the employer and the foreign worker prior to the submission of the foreign worker’s work permit application (which is indicated in the attestation section of the Offer of Employment filing);
    • Note that IRCC is currently recognizing that Employment Agreements between the foreign worker and the Canadian company are not always applicable, for example in the case of intermittent travellers, and are currently reviewing their position on this. In the meantime, we recommend that applicants at least have an assignment letter from the company confirming the terms and conditions of their employment in their home office remains applicable.
  • Copies of policies and procedures that address situations of abuse in the work force, and a description of the mechanism to resolve situations of abuse;
  • Proof of training within the last two years provided to employees and supervisors to recognize and address abuse.

In particular these compliance requirements are being implemented to better protect temporary foreign workers from potential reprisal by employers for bringing forward reasonable complaints and prohibiting employers from charging recruitment fees to workers.  Also, there is an increased focus on providing temporary foreign workers with reasonable access to health care services.

Should you have any questions regarding the above, please feel free to reach out to the Employment or Immigration teams here at Baker McKenzie.

 

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Summary

On November 14, 2022, Bill 26 – Strengthening Post-secondary Institutions and Students Act, 2022, passed second reading in the Ontario legislature. If passed, Bill 26 will be effective on July 1, 2023, and will transform how post-secondary institutions and private career colleges address sexual misconduct by faculty and staff.

Bill 26’s key changes will be:

  • Sexual misconduct will be defined as: (a) physical sexual relations with a student, including touching of sexual nature or behaviour or remarks of a sexual nature toward a student, or (b) reprisals or threat of reprisal for rejection of sexual solicitation and advances. The definition of sexual misconduct also encompasses acts that constitute an offence under the Criminal Code, acts that infringe the right to be free from a sexual solicitation or advance under the Human Rights Code, and acts that contravene an institution’s sexual abuse and misconduct policies.
  • It would allow an institution to discharge and discipline an employee for an act of sexual misconduct. Sexual misconduct will constitute just cause for all disciplinary purposes, and the employee would not be entitled to notice of termination, termination pay, or any other form of compensation or restitution. An adjudicator can’t substitute the penalty imposed by the institution.
  • It would prevent an institution from rehiring an employee who was discharged or who resigned after they were found to have committed sexual misconduct.
  • It would prevent institutions from entering into agreements, including collective agreements or settlement agreements, which preclude the institution from disclosing that an allegation has been made that an employee of the institution committed an act of sexual misconduct toward a student of the institution. The Bill’s latest version provides for an exception to this prohibition in cases where a student requests a non-disclosure agreement and: (a) the student had an opportunity to receive independent legal advice, (b) there have been no undue attempts to influence the student with respect to the request, (c) the agreement includes an opportunity for the student to waive their own confidentiality in the future and the process for doing so, and (d) the agreement is of a set and limited duration.
  • It would require all institutions to have an employee sexual misconduct policy, whether a standalone policy or as part of another policy. This policy must specify the institution’s rules about sexual behavior between employees and students. It must also include examples of potential disciplinary measures. The policy may specify what kind of conduct amounts to sexual misconduct.

Major points

Bill 26 will have important implications for post-secondary institutions and private career colleges in Ontario. They will have to review and adjust their policies to ensure compliance with the new provisions. The Bill will also affect their approach to employee discipline and discharge for sexual misconduct, and how such cases are litigated. Following the proposed changes, the only issue in any ensuing litigation would be whether the institution has proven sexual misconduct.

If you have any questions, please contact a member of our team.

Special thanks to Anton Rizor for his assistance with this blog. 

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Special thanks to Arlan Gates and Justine Johnston.

Amendments to the Competition Act that come into force on June 23, 2023 will make it a criminal offence for employers to enter into no poach, wage fixing or other agreements related to the terms and conditions of employment in Canada.

In this In Focus video, our Labour and Employment and Competition and Foreign Investment Review lawyers discuss the risks associated with non-compliance and what employers should consider as they prepare for the prohibition to come into effect.

Click here to watch the video.

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In September 2022, the Ontario Court of Appeal in Pavlov v. The New Zealand and Australian Lamb Company Limited (“Pavlov“) confirmed that an employer may be liable for a longer notice period, even for a short-term employee, based on prevailing economic factors beyond the parties’ control. In this case, it was COVID-19.

Background

Phillip Pavlov was hired by The New Zealand and Australian Lamb Company Limited (“NZAL Co.”) as their Director of Marketing and Communication on June 12, 2017. Pavlov’s employment was terminated on May 28, 2020. As a result, Pavlov brought an action for damages for alleged wrongful dismissal. Given that NZAL Co. did not argue that this was a termination for just cause, which would not have required notice, the main issue centred around the reasonable notice period, or pay in lieu thereof, that Pavlov was entitled to.

At trial, the judge turned to the well-established Bardal factors to determine the length of reasonable notice, including the age of the employee, character of employment, length of service, and availability of similar employment. In the Court’s analysis, it considered that Pavlov was forty-seven years old at the time of termination, had only served a short term of approximately three years in his position, and although his position was a senior role, he was not a corporate director or an officer. Nevertheless, the Court emphasized the “prevailing economic uncertainties” of COVID-19 which had a negative impact on Pavlov’s ability to secure similar alternative employment. As a result of these circumstances, the Court determined that Pavlov was entitled to ten months’ reasonable notice of termination, and consequently pay in lieu thereof, as opposed to the three to five months offered by NZAL Co. The Court also rejected NZAL Co.’s argument that Pavlov failed to mitigate his damages by not seeking adequate employment. On the contrary, Pavlov gave evidence accepted by the Court demonstrating that he applied to over 100 jobs for which he was qualified, but remained unemployed at the time of trial. Finally, the Court found that Pavlov was eligible for his annual bonus and benefits that he would have earned during his notice period.

On appeal, NZAL Co. challenged the following: (1) the trial judge’s application of the Bardal factors in determining the notice period; (2) Pavlov’s entitlement to his annual bonus during the notice period; and (3) the costs awarded to Pavlov in the amount of $50,000. In response, the Ontario Court of Appeal found that the lower court made no error in its analysis or conclusions and ordered NZAL Co. to pay an additional $24,000 in costs.

Key Takeaways

Employers are not in the clear from the effects of COVID-19. When considering termination, Pavlov serves as a reminder to employers about the additional liabilities they may have to their employees. In fact, as stated in the lower court and affirmed by the Ontario Court of Appeal, it should have been known by NZAL Co. at the time of Pavlov’s dismissal that the effects and uncertainties of the COVID-19 pandemic were obstacles to Pavlov’s efforts to obtain alternate employment.

Pavlov‘s emphasis on considering the “prevailing economic uncertainties” when conducting the Bardal analysis can likely extend to present day, in light of the current shift in the economic climate and potential recession. To help navigate the anticipated workforce changes and mitigate risks in the process, you can check out our recent 3-part video series on Reductions in Force.

Many thanks to Eloise Somera for her assistance with this blog.

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Employers are being faced with difficult decisions about potentially reducing their headcount to eliminate redundant positions in light of a shift in the economic climate and an increased focus on business efficiency.

With any termination comes liability.

In this 3-part series of In Focus videos specific to Reductions in Force, our Labour and Employment lawyers discuss how employers can navigate these significant workforce changes while limiting their liability and complying with legal requirements, as follows:

  • In Part 1 – Planning Your Workforce Redesign we cover best practices for employers as they consider planning their workforce redesign, including conducting due diligence to understand exposure and potential liabilities.
  • In Part 2 – Undertaking Your Workforce Redesign our group explores the key steps in employment terminations such as preparing the termination letter, severance package offer, a full and final release and a meeting script, as well as outlining post-termination duties for the employer.

Click the titles above to watch each video in our 3-part mini-series on Reductions in Force.

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Background

In May 2020, the Government of Ontario first introduced O. Reg. 228/20: Infectious Disease Emergency Leave (the “Regulation”) under the Employment Standards Act, 2000 (the “ESA”). The Regulation provided employers with temporary relief from the notice of termination and severance pay obligations under the ESA during the COVID-19 period. The Regulation first defined the COVID-19 period as March 1, 2020 to September 4, 2020, but this has since been extended a total of five times.

During the COVID-19 period, a non-unionized employee was deemed to be on an unpaid infectious disease emergency leave (“IDEL”) if their employer had temporarily reduced or eliminated their hours of work or temporarily reduced their wages because of COVID-19. In other words, such acts that would otherwise constitute a constructive dismissal would not be considered as such.

Deemed IDEL Comes to an End

As of July 30, 2022, however, non-unionized employees can no longer be deemed to be on an IDEL. Consequently, the ESA’s regular rules around constructive dismissal have resumed. That is, when an employer makes a significant change to a fundamental term or condition of an employee’s employment without the employee’s actual or implied consent, i.e. by temporarily laying them off, this may be considered a constructive dismissal, even if it was done for reasons related to COVID-19.

Constructive Dismissals Post-Deemed IDEL

When deemed IDEL was in place, the question arose for the courts to determine whether an employer’s right to temporarily layoff its employees pursuant to the Regulation restricted an employee’s common law right to pursue a civil claim against their employer for constructive dismissal. In Coutinho v. Ocular Health Centre Ltd., the court determined that the Regulation did not affect the plaintiff/employee’s right to sue for constructive dismissal. But in Taylor v. Hanley Hospitality, the court found that the Regulation did displace the common law. The Regulation was introduced to help businesses survive during the pandemic by allowing them to temporarily layoff employees without the usual statutory liability as a consequence. Therefore, the court’s reasoning in Taylor was that if it had ruled in favour of Coutinho, i.e., to find that employers were still liable under common law, the Regulation would be counter-intuitive.

These contradicting decisions provided little guidance to employers relying on IDEL regarding their exposure to constructive dismissal claims at common law. However, as of July 31, 2022, this has become a moot point because non-unionized employees can no longer be on deemed IDEL. Doing so would put employers at a significant risk of constructive dismissal claims being brought against them under the ESA and at common law. As a result, employers should return to their pre-COVID-19 period practices regarding temporary layoffs and should add language to employment agreements that may allow temporary layoffs to occur under the common law.

Paid and Unpaid IDEL to Continue

While non-unionized employees can no longer be on deemed IDEL and the ESA’s regular rules around constructive dismissal have resumed, employers should note that unionized and non-unionized employees can still elect to take unpaid, job-protected IDEL if they are not performing the duties of their position because of specified reasons related to COVID-19. This leave is available to employees covered under the ESA and lasts for as long as the COVID-19 related reason that triggered it. Similarly, up until March 31, 2023, the ESA will continue to allow eligible employees to take up to three days of paid IDEL for specific reasons related to COVID-19.

Many thanks to Eloise Somera for her assistance with this blog.

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On July 13, 2022, the Government of Ontario published a chapter in its guide to the Employment Standards Act (“ESA”) on the recently legislated requirement for employers to develop a written policy on electronic monitoring. “Electronic monitoring” includes all forms of employee monitoring that is done electronically. The purpose of this new requirement is for employers to be transparent about whether they electronically monitor employees by describing how and in what circumstances they monitor and by stating the purposes for which the information obtained may be used.

Below we have summarized the requirements and necessary contents of the electronic monitoring policy and have offered key takeaways.

Application

Since coming into force on April 11, 2022, employers who electronically monitor its employees and employed 25 or more employees in Ontario on January 1, 2022 must implement a written electronic monitoring policy by October 11, 2022. Beginning in 2023, employers with 25 or more employees on January 1 of any year must have a written policy in place before March 1 of that year.

When determining how many employees an employer has on January 1 of any year, it must include part-time and casual employees, not just full-time employees. The number of employees must also include employees from all of the employer’s locations in Ontario. Assignment employees of temporary help agencies are employees of the agency, not of the agency’s clients.

If, on January 1 of a given year, an employer does not meet the 25 employee threshold, this will be assumed for the remaining calendar year, even if the employee count increases at a later point that year. This means that the ESA requirement for a written policy on electronic monitoring will not apply.

If, on January 1 of a given year, an employer employs 25 or more employees, then the ESA requirement will apply for the remaining calendar year, even if the employee count decreases at a later point that year.

Contents

An employer’s written policy on electronic monitoring of employees is not required to be the same for all of its employees, as long as it includes the following information:

  1. A statement as to whether the employer engages in electronic monitoring of employees.
  2. Where the employer does electronically monitor employees, the policy must also contain the following information:
    • A description of how the employer may electronically monitor employees.
    • A description of the circumstances in which the employer may electronically monitor employees.
    • The purposes for which information obtained through electronic monitoring may be used by the employer.
  3. The date the policy was prepared and the date any changes were made to the policy.

An employer’s written policy must be provided to all employees within 30 calendar days of the day the employer is required to have the policy in place or the day the existing policy is being changed. Employers may provide the policy to employees as a printed copy; as an attachment to an email if the employee can print a copy; or as a link to the document online if the employee has a reasonable opportunity to access the document and a printer.

Key Takeaways

Although an employer’s written policy must contain the purposes for which it may use information obtained through electronic monitoring, the ESA does not limit the employer’s use of the information to the stated purposes.

A complaint can only be made by an employee to the ministry, or be investigated by an employment standards officer, where there is an alleged contravention of the employer’s obligation to provide a copy of the written policy within the required timeframe to its employees. This ESA requirement does not establish a right for employees not to be electronically monitored by their employer, nor does it create any new privacy rights for employees.

For 2022, employers engaged in electronic monitoring and meeting the 25 employee threshold on January 1, 2022 should begin developing their policy before the October 11, 2022 deadline. Thereafter, on January 1 of any year, the written policy must be implemented by March 1 of that year. The policy must contain all of the required information noted above and must be delivered to all employees in the appropriate format and within the required timeframe. A copy of every written policy must be retained for three years after the policy is no longer in effect.

Many thanks to Eloise Somera for her assistance with this blog.