Author: Chris Drinovz, Partner, KSW Lawyers Employment & Labour Group ([email protected])

‍

More Wage Cut discussion covered in our 2020 Return to Work After Covid-19: 5 Critical Questions to Ask Article.

CAN AN EMPLOYER IMPOSE A 10% WAGE CUT

If employers simply want to unilaterally impose a wage cut then they run the risk of creating a constructive dismissal. A constructive dismissal will occur when an employer unilaterally imposes a fundamental change to employment terms or otherwise changes fundamental terms. The courts ask whether the conduct evinces an intention on the part of the employer to no longer be bound by the employment contract.

While pay and benefits are clearly central to the employment relationship it is clear that some reductions in remuneration will not constitute a constructive dismissal. In Pavlis v HSBC Bank Canada 2009 BCSC 498 the court considered how big a decrease in pay would have to be to constitute a constructive dismissal. Generally the court stated that a reduction in salary of up to 10% would not be a fundamental breach; a reduction 14—17 % may amount to a fundamental breach if another significant or substantial unilateral change occurs and any reduction beyond 20% will on its own will be a fundamental breach.

Although these cases were decided in a Pre COVID world, early cases summarized below and in our recent 2021 articles indicate the courts continue to be more sympathetic to employees although these changes were necessitated in order to continue in business.

If the change does not constitute a constructive dismissal an employee may have a right to claim wages under the Employment Standards Act which now provides that claims can go back 12 months.

Employers should not take any chances in our view if they can get the employees to accept the reduction. Such an agreement in writing may well constitute a defence to a constructive dismissal claim. Further even in the absence of a written agreement if the employee continues on in the employ under the altered terms without complaint then likely she will have been found to have condoned the change.

Finally if the employee refuses to accept the reduction in pay then we recommend employers continue to offer that position as the employee may be bound to accept the new pay structure in mitigation of her damages.

2021 CASE LAW UPDATE

In a recent decision Kosteckyj v Paramount Resources Ltd, 2021 ABQB 225, the Alberta Justice found that the employer’s implementation of a COVID-19 related Cost Reduction Program imposing a salary reduction of 10%, a suspension of the RRSP contribution valued at 6% of the employee’s salary, and the “delay/cancellation of the 2019 Bonus Program” amounted to constructive dismissal. The total reduction in compensation was between 16.6 and 20%. The employee was a 47 year old Engineer who had worked with the employer for over 6 years, and was awarded 9 months notice.

An interesting aspect of the case was that the employee did not actually resign but was expressly terminated 25 days into the Cost Reduction Program. The issue of constructive dismissal arose in the context of assessing damages. In particular, the employer argued that the employee’s damages during the notice period should be based on her “post-cut” reduced income. The judge disagreed, finding that even though the employee had never actually resigned, it was a constructive dismissal which commenced at the time of the breach by the employer. Therefore, the employee’s “pre-cut” income was used. Further, the Court found that even though 25 days had passed after the compensation cut with no action by the employee, this was not long enough for the employee to have been deemed to have condoned the change, “in the turbulent economic conditions”.

Note to Readers: This is not legal advice. If you are looking for legal advice in relation to a particular matter or drafting of workplace vaccination policy, please contact Chris Drinovz at [email protected].

Chris Drinovz is an experienced employment and labour lawyer in Abbotsford, Langley, Surrey & South Surrey, a Partner at KSW and Head of the Employment & Labour Group at KSW Lawyers (Kane Shannon Weiler LLP). Chris has been assisting local businesses with workplace issues since 2010. His expertise covers all facets of the workplace including wrongful dismissal, employment contracts, workplace policies, and WorkSafeBC matters, including occupational health & safety. Chris is on the Executive of the Employment Law Section of the Canadian Bar Association BC, and a Director for Surrey Cares and Greater Langley Chamber of Commerce.

‍

Author: Chris Drinovz, Partner, KSW Lawyers Employment & Labour Group ([email protected])

CASE SUMMARY

In a recent case from the Ontario Superior Court, Iriotakis v. Peninsula Employment Services Limited, 2021 ONSC 998, the plaintiff was terminated from his employment with Peninsula without cause on March 25, 2020. He was then 56 years of age and had worked for Peninsula as a Business Development Manager for just over two years.

The job duties he had were more similar to a sales position than a manager position, and Mr. Iriotakis’ compensation was largely commission based. He received a base salary of $60,000 per year but his compensation for the last full year of his employment (2019) was $145,186.30.

Upon his termination, the plaintiff was paid four weeks of base salary plus all benefits accruing during that four-week period, pursuant to his Employment Contract. The plaintiff did not receive any amount in respect of commissions following his termination as Peninsula’s position was that he was not entitled to any following his termination even during his notice period. The plaintiff was able to secure alternative employment almost seven months following the termination.

At trial, the Court found that the termination clause in the Employment Contract was void for violating the minimum required payments/period prescribed under the Employment Standards Act (Ontario). The termination clause Peninsula tried to rely on in this case purported to absolve the employer of all liability towards the employee in the event of termination for cause, in language sweeping enough potentially to include accrued but unpaid wages. Although the plaintiff here was not terminated for cause, Ontario courts will strike the whole Termination clause in an Employment Contract where any of the subsections violate the Employment Standards Act (this is not the case in BC to date, but should be taken into consideration when drafting termination clauses as a precaution).

In this case the Court found that the plaintiff was entitled to 3 months of notice under common law, and held that the COVID-19 pandemic increased the notice period that the plaintiff would otherwise have been entitled to, though restraint was warranted in the circumstances:

[19] I was asked to make findings about the job market and the possible impact of Covid-19 on Mr. Iriotakis. I have little doubt that the pandemic has had some influence upon Mr. Iriotakis’ job search and would have been reasonably expected to do so at the time his employment was terminated in late March 2020. However, it must also be borne in mind that the impact of the pandemic on the economy in general and on the job market, in particular, was highly speculative and uncertain both as to degree and to duration at the time Mr. Iriotakis’ employment was terminated. The principle of reasonable notice is not a guaranteed bridge to alternative employment in all cases however long it may take even if an assessment of the time reasonably anticipated to be necessary to secure alternative employment is a significant factor in its determination. I must be alert to the dangers of applying hindsight to the measuring of reasonable notice at the time when the decision was made to part ways with the plaintiff.

[22] I do agree that the plaintiff’s age and the uncertainties in the job market at the time of termination both serve to tilt the period of reasonable notice away from the fairly short period of notice that his short period of service might otherwise indicate. However, these factors do not apply to the exclusion of the others. A balanced approach is what is called for.

Lastly, in addressing the issue of whether the CERB received by Mr. Iriotakis should be credited to his employer as mitigation income, the Court held as follows:

[21] … On balance and on these facts, I am of the view that it would not be equitable to reduce Mr. Iriotakis’ entitlements to damages from his former employer by the amount of CERB given his limited entitlements from the employer post-termination relative to his actual pre-termination earnings. I decline to do so.

In the upcoming months we will no doubt be seeing new decisions from British Columbia courts clarifying the effects of this pandemic on the notice period and mitigation.

Note to Readers: This is not legal advice. If you are looking for legal advice in relation to a particular matter or drafting of workplace vaccination policy, please contact Chris Drinovz at [email protected].

Chris Drinovz is an experienced employment and labour lawyer in Abbotsford, Langley, Surrey & South Surrey, a Partner at KSW and Head of the Employment & Labour Group at KSW Lawyers (Kane Shannon Weiler LLP). Chris has been assisting local businesses with workplace issues since 2010. His expertise covers all facets of the workplace including wrongful dismissal, employment contracts, workplace policies, and WorkSafeBC matters, including occupational health & safety. Chris is on the Executive of the Employment Law Section of the Canadian Bar Association BC, and a Director for Surrey Cares and Greater Langley Chamber of Commerce.

Author: Chris Drinovz, Partner, KSW Lawyers Employment & Labour Group ([email protected])

‍

One of the few early decisions issued by the BC Supreme Court so far looking at wrongful dismissal claims, notice periods and mitigation during “COVID” times is Mohammed v Dexterra Integrated Facilities Management, 2020 BCSC 2008.

EMPLOYEE'S DUTY TO MITIGATE

A terminated employee who fails to take reasonable steps to search for new employment may find that a court will reduce his or her entitlement to wrongful dismissal damages. The Court has a great deal of discretion when deciding how much the damage award should be reduced where the employee fails to mitigate their loss. The employer bears the evidentiary burden of proving that the dismissed employee failed to mitigate his or her damages.

CASE SUMMARY

In this case, the plaintiff worked for the employer as a supervisor of cleaning staff for the Tsawwassen Mills Mall for 17 months before being terminated without cause on November 11, 2019 (along with 40 other employees). He was 51 years old at the time. He was offered 4 weeks of working notice. He was able to secure alternative employment right after with Alpine Maintenance, but his employment was terminated after two months. He had not worked since.

The plaintiff brought a wrongful dismissal action, arguing that four weeks of notice was insufficient, and that he tried to find work in his field following his employment with Alpine Maintenance. He testified that the COVID-19 pandemic affected his ability to find work and mitigate his damages.

The Court looked at the usual Bardal factors and determined the plaintiff was entitled to five (5) months’ notice, mainly taking into account his age (finding that being over 50 years old was a material disadvantage) and job duties (including the importance of his role to help Dexterra maintain its contract with Tsawwassen Mills Mall). The Court made an important note that “length of service is less of a predominant factor where the job tenure was relatively short.” In this case although the plaintiff was with the employer for less then 2 years his notice period was five months.

It should be noted that the Court did not find that the length of reasonable notice was influenced by the COVID-19 pandemic since the notice period is determined as at the date of termination of employment and not by subsequent events – here the plaintiff was terminated prior to the pandemic starting.  However, in assessing whether the plaintiff mitigated his losses, the Court stated that economic factors “arising post-termination, such as those from the COVID-19 pandemic, can be relevant to mitigation if they impact the availability of equivalent employment” (para. 27). In this case, the plaintiff’s evidence that the pandemic affected his ability to find work was accepted by all parties.

TAKEAWAYS FOR EMPLOYERS

• The notice period increases for employees who are 50 years of age or older;
• For “short service” employees the length of service is less important when calculating the notice period;
• The COVID-19 pandemic might affect an employee’s duty to mitigate if it negatively affects their ability to secure alternative employment. However, each case is fact specific, and not all employees will be able to rely on this since many industries and job opportunities were not negatively impacted by the pandemic (some were in higher demand);
• Economic circumstances at the time of termination may be a factor, although they are not to attract undue influence (where employees were terminated after the pandemic started the notice period might be influenced by the conditions).

Note to Readers: This is not legal advice. If you are looking for legal advice in relation to a particular matter or drafting of workplace vaccination policy, please contact Chris Drinovz at [email protected].

Chris Drinovz is an experienced employment and labour lawyer in Abbotsford, Langley, Surrey & South Surrey, a Partner at KSW and Head of the Employment & Labour Group at KSW Lawyers (Kane Shannon Weiler LLP). Chris has been assisting local businesses with workplace issues since 2010. His expertise covers all facets of the workplace including wrongful dismissal, employment contracts, workplace policies, and WorkSafeBC matters, including occupational health & safety. Chris is on the Executive of the Employment Law Section of the Canadian Bar Association BC, and a Director for Surrey Cares and Greater Langley Chamber of Commerce.

‍

BY: Chris Drinovz, Partner, Employment & Labour Group

Our Employment & Labour Group works closely with local businesses and Human Resource professionals to help them deal with existing problems or complaints initiated by employees. Often times, through careful planning Employers can avoid these issues all together, along with the hefty legal fees that are involved in resolving a legal battle.

We have launched a new series called HR Done Right! Tips from an Employment Lawyer, where in this article as well as across our social media accounts (@kswlawyers) we will add weekly tips that can assist Employers in thoughtful workplace management, and hopefully assist with keeping the complaints away!

Our Group regularly hold seminars and presentations on Employment, Labour and Human Rights topics, so don't forget to sign up to our quartely newsletter to make sure you don't miss out on the event notifications! Please don't hesitate to email us any comments, feedback or suggestion on future topics!

HR DONE RIGHT! TIPS FROM AN EMPLOYMENT LAWYER

WHY?

It is a fundamental principle of employment law that employees who are terminated without just cause are entitled under “common law” to reasonable notice of termination, or pay if the employer does not want to provide advance working notice.

Where there is no enforceable written employment contract, a court will set the reasonable notice period of up to 24 months, or even more in exceptional circumstances, taking into consideration their age, years of service, position, the job market, and other factors.

Employers are permitted to circumvent the reasonable notice that a court would otherwise award by specifying another period of notice in the employment contract. However, the contractual notice must still comply with the minimum requirements of employment standards legislation.

The difference between what is required at common law versus employment standards can amount to tens, if not hundreds of thousands of dollars. As such, a well-drafted termination clause in a written employment contract is a useful tool for employers to provide both clarity and certainty regarding their obligations upon terminating the employee.

Many employers are unaware of the legal challenges that could occur if an employee doesn't sign their employment contract and policies before their first day of work.When you enter into a new employment relationship with a prospective employee, the consideration you're providing the individual after the contract has been signed, is work (employment), salary, benefits, etc.  In return, the consideration the individual is providing to you is signing off on your terms and conditions and providing you with services.Once the employee starts working, you can no longer offer the consideration of employment in exchange for the sign off, meaning the contract will not be enforceable.WHY DOES THIS MATTER? If a contract is not enforceable, the terms in it are not either, including any limiting termination or severance clause. So if the employer needs to terminate the employee later on, they will have to provide notice or severance pay in accordance with common law (what the Courts say), which results in much longer notice periods (usually months instead of weeks) - see Tip #1.

See Tip #1 and #2 for background.

Modification of a pre-existing contract (verbal or written) will likely not be enforced unless there is a further benefit to both parties. Mere continuance of employment by the employer is not readily viewed by the courts as constituting consideration. There must be adequate consideration and adequate consideration requires something more than the bald promise that the employee will not be immediately terminated if they don't agree to the new terms. Continued employment alone is not regarded as consideration for a new covenant extracted from an employee during the term of employment because the employer is already required to continue employment until there are grounds for dismissal or reasonable notice of termination is given.

Courts have provided some indication as to what is sufficient and insufficient consideration.  A one-time bonus, a raise or combination of bonus and more vacation time can be deemed sufficient consideration for the variation of an employment contract.

No Fault Insurance BC

BY: PETER UNRUH

PROVING YOUR CASE IN COURT: EVIDENCE

At any civil trial in British Columbia, individuals or corporations making a legal claim or claims (i.e. the plaintiff) against another party or parties (the defendant), are required to prove their case in front of the court. This is done by providing legally permitted evidence in court, in order to support what they maintain is owed to them by and as a consequence of the actions of a defendant.

The plaintiff is required to prove their case and do so on a balance of probabilities, in order for the court to award damages against the defendant. Accordingly, a plaintiff in a motor vehicle accident case must prove that the defendant was negligent and owed a duty of care to the plaintiff. The plaintiff must also prove that as a consequence of the negligence of the defendant, damages or losses were suffered by the plaintiff which were caused by the negligent actions of the defendant.

Our legal system requires that a plaintiff who has been injured as a consequence of a negligent driver must put forth to the court evidence concerning the injuries sustained in the accident (a diagnosis), and that the injuries were caused by the Defendant’s actions. The plaintiff is called upon to provide evidence concerning their long-term medical outlook (or their prognosis). The plaintiff must prove any losses claimed, such as income loss or other medical expenses that have been endured or reasonably could be incurred in the future, in order to be awarded such types of damages against any defendant.

USING EXPERT OPINIONS

In most motor vehicle accident claims, experts are utilized to provide opinions in court on issues relating to negligence or the damages flowing from the negligence.  Experts in accident reconstruction can help determine how the accident occurred and who may be at fault.  Medical experts can be used to prove the nature of the plaintiff’s injuries, including cause and prognosis.  The defendant is entitled to respond to those expert opinions by providing the court with their own experts who offer a different perspective from that of the plaintiff’s experts.  Again, the plaintiff is required to prove their case in order to be awarded damages.

Our courts require such proof as a matter of fairness and justice to all parties.  In so doing, our courts also have strict rules concerning the types of evidence which can be utilized to prove or disprove claims made in our courts.

COSTS ASSOCIATED WITH EXPERTS

Proving a case in court or providing expert evidence for the purposes of settling a claim out of court can be an expensive proposition.  Experts are paid considerable sums of money for their opinions, which are set out in their reports.  They are paid even more for their attendance at court.  There are many expenses which are paid and go well beyond experts’ fees in order for a plaintiff to successfully prove their losses arising form a motor vehicle accident.  If successful, the plaintiff is entitled to the reasonable recovery of those expenses which have been necessarily incurred to prove their case.  Such expenses are otherwise know as disbursements.

NEW LAW LIMITING RECOVERY OF DISBURSEMENT FEES

On February 12, 2021, on behalf of the Attorney General of British Columbia, David Eby, the NDP government sent out a brief communication which entirely changed the law concerning the recovery of disbursements.  The law exclusively applied to disbursements in motor vehicle accident cases.  Effectively, what the NDP have done, is severely limit a successful Plaintiff’s right to recover the disbursements which have been necessarily incurred to prove their claims.

The NDP specifically limited those plaintiffs making motor vehicle accident claims from recovering any more than a meager 6% of their disbursements, based on either the amount of the court award or the settlement amount if the matter does not proceed to court.  Essentially, this means that if a person goes to court and successfully obtains a judgement against a defendant in a motor vehicle case, (or settles prior to court) they will come nowhere close to recovering the court expenses they have paid to successfully prosecute their claim.  For example, if a plaintiff successfully receives a judgment of $100,000 at trial, they are limited to recovering $6,000 in trial expenses despite the fact that their trial expenses may be thousands of dollars in excess of that figure.

ICBC, on the other hand, can spend almost endlessly to defend a case, seemingly without consequence.  For example, they can needlessly deny liability claims and force the plaintiff to present expensive accident reconstruction evidence.  In my experience, ICBC almost always denies the nature and extent of the plaintiff’s injuries, often suggesting that the plaintiff is in no worse position than before the accident.  Again, the plaintiff bears the burden of proving their case and must hire medical experts.  Under the onslaught of defences raised by ICBC, a plaintiff could prove their case, receive a just award, but be bankrupted in the process because Minister Eby has severely limited their right to collect the costs of running a fair trial.   Given the massive finances of ICBC, the 6% rule would have no effect.  They can afford to spend dramatically unequal amounts on defending claims.

The NDP government and ICBC, through this legislation, have so heavily stacked the odds in favour of ICBC that most British Columbians will likely no longer be able to access the courts for justice.  They simply will not be able to afford the process, even if they fully succeed in court.  Similarly, British Columbians will be unable to afford to challenge the findings of liability or even meaningfully pursue a reasonable settlement for their losses.  This was the apparent intent of Minister Eby.

The NDP government has, through these most recent arbitrary and vindictive changes to our laws regarding recovery of court expenses, effectively undercut any realistic attempt by British Columbians involved in motor vehicle accidents to challenge ICBC and have a just outcome to their case.  Accident victims will likely be unable to afford to meet the primary requirement of motor vehicle litigation, which is to prove ones’ case, because they cannot get those expenses back from ICBC at the conclusion of their case.

Again, these changes only apply to one set of cases, which are motor vehicle accidents, and the changes intentionally only benefits one entity which is ICBC.  With these changes legislated by the NDP, British Columbians involved in motor vehicle accident cases seem completely handcuffed in terms of the evidence they can bring to court or otherwise use to prove their case.

WHAT ARE THE EFFECTS OF LIMITING RECOVERY OF DISBURSEMENTS?

The effects are far reaching and dramatic.  The NDP has, for example, made it extremely difficult, if not impossible, for non-English speaking plaintiffs to prove their case in court as they will likely receive only a fraction of the interpreter/translator fees which necessarily need to be paid in order to have evidence translated  into the English language.  Low-income and moderate income earners are further disadvantaged by these changes.  That is because a successful plaintiff in a motor vehicle case will only receive a fraction of the costs they will incur in order to prove their injuries.  They will be unable to afford to have their cases heard or even prosecuted against an ICBC represented defendant.

Sadly, that is the intent of the NDP legislation.  It is specifically designed to prevent a specific class of claimants, (those involved in motor vehicle cases), from being able to access justice.  It specifically and dramatically benefits ICBC.  This egregious attack on victims of motor vehicle accidents has all been done through the arbitrary stroke of a pen by the Attorney General Eby.

What is worse is that at the same time, victims of motor vehicle accidents are up against an incredibly powerful and monolithic Goliath known as ICBC.  In am finding that this Crown Corporation is currently as aggressive and adversarial in defending claims as at any time I have experienced in my thirty years of practicing law in British Columbia.  ICBC has instituted a system by which any offers made to victims of car accidents are based on internal ICBC criteria crudely referred to as a “meat chart”.  In so doing, I am finding that ICBC refuses to consider the individual suffering, circumstances or personal experiences of the accident victim or the effect of the accident on the victim’s family.  They simply do not seem to consider the actual victim of a car accident.  I have found lately that ICBC offers are, at times, ridiculously low and bear no relationship with the true suffering, disability or effect the accident may have had on the claimant.  As a consequence, I am finding that my clients are being forced into trials they do not seek.  Thankfully, the judges who heard some of my recent court cases came to a much better understanding of the true difficulties my clients were facing.

SOME CLIENT EXAMPLES AND TALES FROM THE TRENCHES

In recent a recent trial my client received an offer of just under $32,000.  We went to trial and I obtained judgment on her behalf of over $192,000.  In another trial my client was offered just over $42,000 and we were forced to go to trial, where I obtained judgment on behalf of my client in excess of $220,000.  In another recent judgment I obtained a judgment on behalf of my client in excess of $1,200,000 beyond ICBC’s offer.  Most recently, I obtained a judgment for over $317,000 on behalf of my client.  ICBC’s offer was just over $46,000.  In each of these cases, my clients did not want to go to trial but ICBC were incredibly intransigent and would not negotiate.  ICBC had followed their “meat chart” and seemed entirely disinterested in the experiences or losses my clients had incurred due to a negligent driver.  In each case, ICBC had poured enormous resources into investigations of my client, their own expert fees and their defence costs.  They were prepared to defend the callous positions they took at any cost.

WHAT’S NEXT?

Now, it seems, the NDP along with ICBC have determined that they must stack the deck even further against the motoring public in British Columbia.  For accident victims in British Columbia, they will now be required to pay most of the costs associated with proving their claims, particularly those who decide not to accept ICBC’s “meat chart” offers (should such an offer even be made).

ICBC has enormous financial resources and power at their disposal.  They have apparently been encouraged by the NDP to use their enormous financial resources against victims of accidents in this province, without much of any oversight, except by our courts.  They have been granted unparalleled access to the personal information of anyone driving in British Columbia or anyone involved in an accident on a B.C. roadway.  They have access to all driving records.  They can access the medical information of claimants.  They often easily obtain all manner of personal information as well.  ICBC has enormous resources which are dedicated to hiring investigators to follow and film claimants during their daily activities.  They are quite effective in conducting online investigations of claimants.  ICBC can and does easily absorb these types of costs.

The net effect is that such activities are largely designed to undermine, intimidate, cajole or at the very least, embarrass accident victims who have done nothing wrong other than to have had the grave misfortune to be in the path of a negligent driver.  This becomes even more tragic now that the NDP is attempting to limit accident victims to recovering only a fraction of the expenses that were necessarily incurred to successfully prove their motor vehicle claim in this province. This is an unparalleled assault on accident victims and their access to justice.  There is no balance or equality in any of what the NDP has done to assist ICBC.

The NDP is effectively attempting to nullify the voices of those who disagree with the way they have been treated by ICBC.  They are attempting to deny motor vehicle accident claimants the right to prove their case by denying them the right to recover their reasonable and necessary litigation expenses.  We will fight these changes with every measure available to us.  We hope we will prevail against this injustice.   I will have more to say on this issue in the next few weeks.

But let me leave you with one final thought.  

If the NDP can go to such lengths to try to tip the scales of justice so much in favour of ICBC, the question becomes which group of litigants is the next target for the NDP and Minister Eby?  Who shall the NDP next try to strip of legal rights to the point that they cannot access justice or defend themselves, and which massive Crown Corporation or government agency will be the beneficiary?

 Note to our Readers: This is not legal advice. If you are looking for legal advice in relation to a particular matter, please contact Peter Unruh.

Author: Jesse Dunning, KSW Lawyers ([email protected])

Share This Article:

During the Covid-2019 pandemic, there has been a significant increase in home renovation and remodelling by homeowners.  While this has presented some homeowners with an opportunity to beautify and improve their homes, and while it has provided businesses with much-needed work during the pandemic, it also unfortunately presents some potential pitfalls which can trip up the unwary homeowner employer.  These potential pitfalls exist not only when a homeowner retains someone to work on a renovation, but also when they hire anyone to do work around the home, from nannies, to cleaners, to landscapers.

Under the Workers Compensation Act, RSBC 2019, c 1 (the “Act”), WorkSafeBC is empowered to promote the prevention of workplace injury, illness and disease, rehabilitate and compensate injured workers.  To that end, all eligible employers are required to register with WorkSafeBC.  What many homeowners don’t realize, is that under the Act, they can be found to be the employer of an individual working on their property, which can expose them to potentially significant financial penalties if a worker is injured while working on their property.

Oops! You are Actually an Employer!

Whether a homeowner is an employer who must register with WorkSafeBC is not decided by the homeowner and the party they have retained to work on their home, but is solely determined by WorkSafeBC.  Even in cases where both the homeowner and the worker honestly believe there to be no employment relationship, it is possible for WorkSafeBC to determine that the true relationship is one of employer and employee.

WorkSafeBC applies a few basic rules when determining if registration as an employer is required:

• If you hire someone to provide before or after school care, and they work 15 or more hours per week, WorkSafeBC coverage is required;
• If you hire someone to provide ongoing home services, such as a gardener or nanny, and they work 8 hours or more per week, WorkSafeBC coverage is required;
• If you hire one or more individuals to work on a one-time project, such as a renovation, and they work a combined total of 24 hours or more, WorkSafeBC coverage is required.

Please note that even if you are not required to register, it is still possible to purchase voluntary coverage in circumstances where the individuals you have hired do not meet the hour requirements.

Hiring an Independent Business

Not everyone a homeowner hires is necessarily an employee, even if they do more than the set number of hours of work.  A homeowner is not an employer according to WorkSafeBC if they hire an independent business, but it can be difficult for homeowners to make this determination.  Some of the key indicia for an independent business are that:

• The business is incorporated;
• The individual providing the service has multiple clients; and/or
• The individual providing the service supplies all the labour and materials for a fixed price.

Even when homeowners have retained an independent business, it is important that they do their due diligence to ensure that the contractor is in good standing with WorkSafeBC.  Homeowners who fail to do so can become jointly liable with the business for unpaid WorkSafeBC insurance premiums.  You can confirm a contractor’s status by getting a clearance letter from WorkSafeBC.

In summary, it is important that homeowners take steps to determine whether the party or parties they have retained are employees who must be registered, or an independent business.  If you are unsure, it is important that you contact WorkSafeBC or a qualified legal professional who can advise you on the matter.  Failing to do so can open you up to unexpected penalties.

Penalties for Failing to Register with WorkSafeBC

The penalties for inadvertently failing to register with WorkSafeBC as an employer can be much larger than most homeowners would expect.  In addition to potentially being required to pay premiums, there is a significant exposure under s. 263(2) of the Act, which reads as follows:

(2)Subject to subsection (4), the employer must, in addition to any penalty or other liability to which the employer may be subject, pay the Board the full amount or capitalized value, as determined by the Board, of the compensation payable in respect of an injury or occupational disease to a worker in the employer's employ that happens during the period of the default referred to in subsection (1).

In brief, under s. 263(2), if someone working in your home is injured while on the job, and they are determined to be an employee, and if you lack WorkSafeBC coverage, you can be required to pay all of the costs incurred by WorkSafeBC as a result of the injured worker.  In the case of major injuries, this can be extremely expensive.  In WorkSafeBC Review Decision R0076657, July 19, 2007, a carpenter was injured while working on a home renovation.  WorkSafeBC had incurred costs of over $54,000 at the time the decision was issued, costs which were still rising.

Relief from Penalties

Fortunately for homeowners who have been found liable under s. 263(2), they are not necessarily forced to pay, as WorkSafeBC has discretion under s. 263(4) to relieve an employer of an ‘excusable default’:

(4)If satisfied that the default was excusable, the Board may in a specific case relieve the employer in whole or in part from liability under this section.

In Decision R0076657, for example, WorkSafeBC exercised its discretion under the predecessor to s. 263(4), the largely similar s. 47(3) under the old Workers Compensation Act, RSBC 1996, c 492,, and relieved the homeowner of 90% of the penalty cost.  Such an exercise of discretion is by no means guaranteed; in Review Decisions 16905 and 16906, September 13, 2004, for example, WorkSafeBC refused to provide any relief, and charged the full amount to the homeowner for the costs incurred on behalf of an injured worker.

Accordingly, it is important to remember that relief is by no means guaranteed, and even if granted, the extent of the relief is within the hands of WorkSafeBC and the Workers Compensation Appeal Tribunal.  Their decision to grant or withhold relief will be guided by a number of considerations, including the following, as set out in item AP5-263-1 of the WorkSafeBC Assessment Manual:

• there has been a Board error;
• the employer contacted the Board prior to the injury with a view to registration, and the employer supplied the information required to proceed with registration within 30 days of the original contact;
• the employer is already registered as a different legal entity;
• the employer is a labour contractor who would be considered a worker if not registered;
• the costs associated with the claim are less than the minimum set by the Board;
• there is sufficient evidence that the employer mailed a registration form prior to the date of injury; or
• any other circumstances which the Board considers are consistent with the Act and the purpose of this charge.

If WorkSafeBC has made a determination and requested payment from a homeowner under s. 263, it is imperative they seek legal advice promptly, as there are deadlines limiting the time to seek a review or to bring an appeal against the decision.

Takeaways

• Homeowners should take care to determine whether they are required to register as an employer, paying particular attention to the hours worked by individuals in their home, and the nature of the service provided;
• Where homeowners have retained an independent business, they should always seek a clearance letter from WorkSafeBC to avoid potential exposure to premium payments;
• Homeowners should always consider seeking legal advice and/or contacting WorkSafeBC when retaining someone to work on their property;
• Homeowners should be aware that a failure to register exposes them to potentially serious financial penalties; and
• If homeowners have been found to be an employer, and had a penalty levied against them, they should seek immediate legal advice.

Note to Readers: This is not legal advice. If you are looking for legal advice in relation to a particular matter, please contact Jesse Dunning at [email protected].

Jesse Dunning is an experienced employment and labour lawyer in Abbotsford and part of the Employment & Labour Group at KSW Lawyers (Kane Shannon Weiler LLP). Jesse assists both individuals and local businesses with workplace issues. His expertise covers all facets of the workplace as well as general civil litigation, estate disputes and personal injury.

‍

Author: Michael Weiler, KSW Lawyers ([email protected])

“Work is one of the most fundamental aspects in a person’s life, providing the individual with a means of financial support and, as importantly, a contributory role in society. A person’s employment is an essential component of his or her sense of identity, self-worth and emotional well-being”: [Reference re Public Service Employee Relations Act [1987] 1 SCR 313 quoted at paragraph 179 of Francis Remedy Decision infra.]

‍

Introduction

‍

Levan Francis was employed in a secure union position as a corrections officer since 1999.  He was athletic, healthy, a good father involved in his children’s lives and sport and a loving husband who was living the Canadian dream.  He had a passion for being involved in coaching. He had lots of friends and a loving supportive wife.  But all this changed in 2012.  Francis began 18 months of suffering racial discrimination that included direct explicit racial slurs from supervisors and fellow workers.  The BC Human Rights Tribunal (the “Tribunal”) described the instances of racial discrimination as covering the entire spectrum of racial discrimination and harassment.  He filed a Human Rights complaint on October 25 2012 after management failed to adequately respond to his complaints.  That resulted in retaliation by his fellow workers and supervisors.  The discrimination continued and on July 28 2013 Francis left work following an emotional breakdown resulting from the death of an inmate.  He did not return to work and has not been able to work since.  Six years later on July 4 2019 the Tribunal found that his employer and fellow workers had violated the BC Human Rights Code  (the “Code”) by discriminating against him contrary to section 13 of the Code based on his race and colour, which resulted in a toxic work environment and further had retaliated against him contrary to section 43 of the Code due to his filing his Complaint (referred to herein as “Contraventions”)  see Francis v BC Ministry of Justice No 3 2019 BCHRT 136 (the Liability Decision).  The particulars of the Contraventions and retaliation are found at paragraphs 371-379.

‍

On January 28 2021 the Tribunal issued its decision on remedies: Francis v BC 2021 BCHRT 16 (Remedy Decision). Seven and a half years after his termination the Tribunal awarded Francis damages exceeding $1 million-- a record award.

‍

For those who want to review a leading decision on the nature of race discrimination and toxic work environment we recommend you read the Liability Decision.  This blog posting will review the Remedy Decision and the implications for employers.

‍

The Remedy Award

‍

A summary of the Award is as follows:

‍

1. $264,060 as compensation for past loss of earnings;
2. $431,601 as compensation for future loss of earnings
3. $65,881 as compensation for pension loss
4. $25,515.24 plus $1140 as compensation for disbursements and expenses
5. $176,000 as compensation for injury to his dignity, feelings and self-respect (injury to dignity)
6. Interest

‍

It should be noted that above awards included a 20% contingency reduction.  Further no award was made with respect to legal fees which Mr. Francis claimed were in excess of $250,000.

‍

The Remedy Award is focused primarily on causation.  The losses and damages suffered by Francis and his wife and children were catastrophic.  At one point the Tribunal stated the impact “destroyed him as a human” (para 216).  The precedent setting awards of damages for future loss of earnings and injury to dignity reflect the extreme impact of the discrimination on Francis.

‍

(a) Contingency Reduction

‍

A complainant is only compensated for losses that result solely from the discrimination. This is different than proving the discrimination in the first instance where a complainant simply has to prove that discrimination played a role in the termination or adverse impact (the taint theory). The Tribunal has the authority to reduce any award for contingencies to account for the fact that the harm suffered as a result of the acts of discrimination including creating a toxic work environment may have been suffered in any event due to other non-discriminatory causes or unrelated events—“A respondent is not required to compensate a complainant for any harms that a complainant would have experienced anyway” (para 92).

‍

In this case the Tribunal concluded that there would be no reduction of damages for mitigation.  However Francis suffered from the disputes over his disability payments and the litigation process itself both of which “intervening events [were] not sufficiently related to the Contraventions to justify compensation.” (para 95).  Although a very arbitrary calculation, the Tribunal applied a 20% reduction across the board to the monetary awards.

‍

At the same time the Tribunal made it clear that damages for future losses were not too remote.  It applied the “thin skull” or “eggshell skull” analysis to assess damages:

‍

In Francis’ circumstances, there can be no question that, given the duration and severity of the Contraventions and the resulting poisoned work environment that flowed from those Contraventions, it is reasonably foreseeable that a person of ordinary fortitude would have suffered a significant mental injury from the Respondent’s discriminatory acts. That Francis may have suffered greater mental injury than others in his circumstances is immaterial. The Respondent must take their victim as they find him and compensate him for the actual harm caused by their discriminatory conduct (para 98).

‍

(b) Past Wage Loss

‍

The Tribunal had two expert evidence reports before it that spoke to the issue of past and future wage loss.  It chose a Report that assessed past wage loss calculated as the difference between Francis’ actual income from July 2013 to November 20 2020 and what Francis would have earned had he remained actively employed.  It is not clear from the Award what the specifics of the calculations were (for example not clear if LTD payments were taken into account—LTD benefits appear to have been cut off in February 2018) but the end result was the Report’s conclusion that the past income loss was $236,939 net of taxes and including interest (para 119).

‍

From that amount the Tribunal deducted $22,000 as STIPP benefits from March to September 2014.  It also grossed up the Award to calculate Gross Income of $293,947 plus it added $58,128 as income taxes payable as a result of receiving the wage loss as a lump sum.  Therefore the past wage loss was calculated at $352,075 with a net loss after deduction of STIPP benefits of $330,075.  Applying the 20% contingency the compensation for past wage losses was $264,060.  

‍

(c) Future Loss of Earnings

‍

The Tribunal recognized that assessing future loss of earnings that are related solely to the Contraventions is speculative.   Because the award is made “once and for all” at the time of the decision, the Tribunal must “peer into the future” and “fix the damages as best they can”. Therefore such awards are only made in the extreme and extraordinary circumstances.  Here after 6 years Francis was still “deemed to be unable to work in any capacity and his prognosis for recovery [was] guarded” (para 125).  Accordingly the “extraordinary circumstances of this case warrant a future loss of earnings award” (para 140).

‍

The Tribunal then had to consider the likely retirement age for Francis.  It ultimately concluded he would have worked until age 63 which happened to be the conclusion of the expert in the Report.  The future loss of earnings was calculated in the Report as $539,501 based on retirement at age 63 and given the contingency  reduction of 20% the future loss of earnings was calculated at $431,601.

‍

(d) Pension

‍

There is no real analysis of the pension loss in the Award.  Relying on the Report pension loss to age 63 was calculated at $82,351 and after applying the 20% contingency reduction the award was $65,881.

‍

(e) Expenses and Disbursements

‍

Francis sought $250,000 for legal fees.  The Tribunal ruled it did not have the authority to award legal fees.  It awarded a small amount for therapy.

‍

Frances was awarded compensation for expert reports, witness fees and related disbursements in the amount of $31,894.05 and after accounting for the 20% reduction the net award was $25,515.24.

‍

(f) Injury to Dignity, Feelings and Self-Respect

‍

This award is what makes this case a landmark decision that will affect future cases in a very significant way.  The Tribunal has authority under section 37(2)(d)(iii) of the Code to award damages to compensate a complainant who has been discriminated against  for injury to their dignity, feelings and self-respect “or to any of them” (para 153).  There is no cap on these damage awards and the decision lies solely in the discretion of the Tribunal.  The Tribunal summarized the law in this area at paragraphs 154 and 155 as follows:

‍

[154] This discretion, however, must be exercised on a principled basis. The purpose of an injury to dignity award is to compensate the complainant for the actual harm they have suffered as a result of the discrimination: Kelly Appeal, at paras. 60-62. This assessment is based on the evidence before the Tribunal and all of the relevant circumstances of the case:

‍

The Tribunal has frequently stated that injury to dignity awards are compensatory, not punitive, and should place the complainant in the position they would have been in absent the discrimination. But what does that mean in the context of a non-pecuniary award? The fixing of a monetary amount to compensate for the impact of discrimination on a complainant’s dignity, feelings and self-respect is highly contextual and fact-specific (Gichuru, para. 256)

‍

[155] A number of factors may be relevant to the quantification of such an award. The Tribunal generally considers three broad factors: the nature of the discrimination, the person’s vulnerability, and the effect of the discrimination on that person: Basic v. Esquimalt Denture Clinic and another, 2020 BCHRT 138, para. 193. A more nuanced approach is necessary in the circumstances of this case. I will consider five factors set out by the Tribunal in Gichuru that can and have been applied to assist in the quantification of an injury to dignity award in these kinds of cases:

• the nature of the discrimination found;
• the time period and frequency of the discrimination;
• the vulnerability of the complainant;
• the impact of the discrimination upon the complainant; and
• the totality of the relationship between the parties (at para. 260; cited with approval in Gichuru Appeal, at paras. 53-56.).

‍

The highest ever award up to this point in B.C. was $75,000 for a “complex and multi-year discrimination involving a medical resident with a mental disability: Kelly v UBC 2013 BCHRT 30.

‍

The Tribunal rejected the argument that the damages under this heading are limited to those that are reasonably foreseeable.  Rather the damages are to compensate for the actual harm to the victim.

‍

The Tribunal assessed the 5 Gichuru factors above at paragraphs 158 through 218 (which reasons are well worth reading in their entirety and found:

‍

In all of the circumstances, I find that an award of $220,000 is reasonably proportionate to the extreme injury to dignity, feelings and self-respect suffered by Francis. Accounting for a 20% contingency, I order $176,000 as damages for injury to dignity under s. 37(2)(d)(iii) of the Code.

‍

Takeaways for Employers

‍

As early as 1837 jurists and lawyers have opined that “hard cases make bad law” and it has been noted that “cases in which the moral indignation of the judge is aroused frequently make bad law.”  Whether Francis will be considered bad law, employers and businesses must be very concerned with the trend in recent Human Rights cases to award damages and the potential impact on employers.

‍

‍

It was not that long ago that awards for compensation for injury to dignity were capped and after the cap was removed the awards were initially in the $3,000 to $5,000 range and escalated from that point on:  B.C. HUMAN RIGHTS TRIBUNAL DOUBLES CAP FOR DAMAGES FOR HURT FEELINGS TO $75,000 (weilerlaw.ca).

‍

The Tribunal’s decisions in this case on both future wage loss and compensation for injury to dignity are extraordinary decisions.  But the same was said of the Kelly decision when the Tribunal awarded a record setting $75,000 for damages for injury to dignity noting that was an extraordinary situation.  The Francis case triples the amount of that award.  The question is will that mean an ever increasing amount of compensation for such claims?  Will a rising tide raise all ships?  I think that is more than likely.  Since damages for injury to dignity and future loss of income are very specific to the employee complainant and rely on the discretion of the adjudicator there is no limiting framework to keep these awards from becoming the norm and not the exception.  And consider specifically the impact of COVID on the mental health of all employees and the consequent increase in damages to an employee who is discriminated against.

‍

For businesses that is a scary proposition especially when you consider the additional costs to the employer to defend one of these cases.  In this case Mr. Francis was looking for $250,000 reimbursement for legal fees on a case where he retained counsel well after the complaint had been filed.  Many of these cases work their way through the courts resulting in even greater legal fees (e.g. see B.C. COURT OF APPEAL RESTORES $75,000 AWARD FOR INJURY TO DIGNITY – UBC v Kelly 2016 BCCA 271 (weilerlaw.ca)

‍

It is most noteworthy in my view that many of these leading human rights cases involve public employers and these damage awards are paid by you and me as taxpayers.  The leading case that expanded exponentially the Duty to Accommodate involved the NDP government as the employer whose accommodation of a fire fighter was found to have violated the Code:  BCGEU v BC [1999] 3 SCR 3 (“Meiorin”); Gichuru was a claim against the Law Society; Kelly was a claim against UBC.  But if the principles established in these cases are applied to small and medium sized private businesses the impact can be devastating especially in this COVID world.  The bar doesn’t just rise for public employers it applies to all employers.

‍

The difficulty for all employers is that a violation of the Code does NOT require an intention to violate the Code.  In many of these cases the employer is bound by the unauthorized acts of its employees and cannot shield itself from liability based on a due diligence basis.   Obviously the Government in Francis qua employer could well have taken steps to resolve the complaints of Francis but it failed to do so.  But the precedent created by the Remedy decision in this case will apply to all employers where there has been a finding of a contravention of the Code.

‍

Further the damage award here was exasperated in part by the extraordinary delay in the proceedings.  Here there was a 7 year delay; in Kelly there was a 6 year gap from the time he was terminated from the program to the Tribunal’s Award which as noted was appealed to the B C Court of Appeal.  The experts opined in the Francis decision that the longer you suffer from depression the worse the prognosis (para 130).

‍

Finally awards for damages for injury to dignity are likely tax free so are often worth double what an award for lost wages would be.  While this allows employers to strike lower cost settlements it also encourages complainants to pursue complaints even where there is little or no wage loss.

‍

There is in my view no likelihood that the NDP government will put a cap on damages for compensation for injury to dignity awards.  The Francis case will likely remain the rare exception to damage awards.  But there is little doubt the bar has been raised.  Employers must therefore do all they can to eliminate discrimination in the workplace and the early resolution of such claims.  This starts in my view with the education of the management team including the Human Resource professionals and the implementation or proper policies in this regard.  I encourage all our employer clients to speak to someone in our Employment and Labour Group if you have any questions about your policies.

‍

Note to Readers: This is not legal advice. If you are looking for legal advice in relation to a particular matter or drafting of workplace vaccination policy, please contact Mike Weiler at [email protected].

‍

Mike Weiler is senior counsel with the Employment & Labour Group at KSW Lawyers (Kane Shannon Weiler LLP). Mike specializes in labour law and helping unionized employers, and has more than 35 years of experience practicing employment, labour and human rights law, and related areas, including governance and shareholders rights (and corporate defences to same). He represents employers, management, executives and other senior employees.

‍

Author: Chris Drinovz, KSW Lawyers ([email protected])
Contact us for more information, 604-591-7321

‍

This has been a hot topic since the news of the first approved vaccine. Can an Employer Require Employees to Get the COVID-19 Vaccine? Please also read our latest article update from August 13, 2021 on this topic here.

Currently, in British Columbia, there is no specific legislation requiring private businesses employees to get vaccinated. However, please note that this could evolve as some federal and provincially regulated employers have started introducing mandatory vaccinations in certain settings.

The short answer to this question is yes, generally non-unionized employers (and in some cases unionized employers) can require employees to get the vaccine (with certain exceptions discussed below). BC Employers have an obligation to ensure the health and safety of all workers in the office or on the jobsite under section 21 of the Workers Compensation Act. WorkSafeBC Policy Item P2-21-1 provides further context on the scope of this duty:

Section 21(1)(a)(ii) reflects that purpose and ultimately requires an employer to ask "Have I done all that I can reasonably do to ensure the health and safety of those other workers?"

Nature of Workplace

Each employer will have to assess its specific workplace and make a fundamental decision as to whether it needs all employees to receive the vaccine or provide a vaccination certificate to make the workplace safer. There may be workplaces where social distancing, wearing masks and washing hands may be determined to be sufficient protection for all or certain departments or areas of the workplace. In some cases outside factors may require vaccination, such as an individual who is required to travel frequently for his/her job, where the individual works in the health care sector or with vulnerable individuals, and where it would be a reasonable expectation the individual maintains the proper vaccinations (including COVID-19). These are considerations for the employer - requiring all employees to receive the vaccine is a fundamental issue that can be controversial and lead to legal action against the employer.

Employers can also consider requiring different work conditions for employees depending on whether or not they have been vaccinated. For example, employees who have not been vaccinated may be required to continue to work remotely, or to continue to complete COVID-19 daily assessments before entering the workplace, maintain distance and wear a mask at the workplace.

Covid-19 Vaccination Refusals and Terminations

Employers can’t physically force employees to get the vaccine, but they can make the COVID-19 vaccination a condition of continued employment. Depending on the nature of the employment and the risk associated with it, certain employers have a stronger case for making the COVID-19 vaccination a condition of employment (e.g hospitals, medical clinics, long-term care, group homes, retail, service industry).

The more interesting question becomes whether an employer can terminate an employee who refuses to get vaccinated against COVID-19. The answer to this is: it depends on the reason for the refusal. If the reason involves a protected ground under the BC Human Rights Code, such as a physical (medical) disability or religious grounds, then the employee may have a human rights claim against an employer who terminates on the basis of the protected ground. However, if the reason is mere personal preference that is unrelated to a protected characteristic, then the employer can terminate an employee, provided they offer the appropriate notice or severance pay mandated by the employee’s written employment contract or in the absence of a written contract, the common law. In the case of unionized workplaces, the employer should pay special attention to the collective agreement in place and seek advice from an experienced labour lawyer prior to terminating or disciplining an employee. Mike Weiler is our labour expert at KSW Lawyers, with over 37 years of experience in labour law ([email protected]).

Examples of protected grounds for refusing to take the vaccine may include:

• A person who has a severe allergy to a vaccine or an ingredient in it;
• A person who has a medical condition, disease or takes medicine that reacts with the vaccine or ingredients in it;
• Based on religious beliefs – belonging to a recognized religious group that objects to vaccines.

Mandatory vaccination is not without precedent in Canada. Some examples of mandatory vaccinations (or mask) policies include public school settings for some provinces and healthcare settings involving mandatory vaccination policies or “vaccine or mask” policies in relation to seasonal influenza. BC has had an influenza prevention policy in place since 2012. The policy requires all healthcare workers to be vaccinated against influenza or wear a mask in patient care areas throughout the influenza season. The policy also applies to visitors, volunteers and students who attend a patient care area.

In an Ontario case Barkley v Mohawk Council, 2000 CarswellNat 3877, a nurse working as a non-unionized employee on a fixed term contract at a federally regulated adult care facility refused to comply with the facility’s mandatory influenza immunization policy on the basis she had never been sick with the flu and had faith in her immune system (reasons not protected by human rights legislation). The employer described the immunizations as a condition of continued employment, and anyone who refused to get the vaccination would be dismissed. At the hearing, the employer led evidence about the risks the flu posed to residents with whom the employee had frequent contact. The Arbitrator ruled that there was a legitimate interest on the part of the employer in the residents’ wellbeing and health. The decision to impose vaccination was therefore not unreasonable and the termination of the employee’s employment was upheld. While this case dealt with the unjust dismissal provisions of the Canada Labour Code, its principle may be applied in provincial cases.

Privacy, COVID-19 Vaccine Policy and Recommendations

Employers should keep in mind that even asking an employee whether they have had the vaccination and requesting proof of vaccination or a vaccination certificate is a collection of personal information/personal health information triggering privacy considerations. Any employer should be mindful of the privacy legislation that applies to them. We also recommend keeping a close eye on the vaccination system that Canada and British Columbia will engage and on balancing the privacy rights of Canadians and public safety during a pandemic.

The employer’s obligation to ensure the health, safety and welfare of its workers must be balanced with the employee's right to privacy. As previously mentioned, employers should evaluate whether implementing a vaccine verification program is integral to providing a safe workplace and ensure that such a program does not unreasonably infringe on an employee's privacy expectations.

Once an employer has made a decision, the employer should consider developing a policy on COVID-19 vaccinations. The policy should contain the following: authority for collection, statement of purpose, statement whether vaccination certificate will be required, statement on possible actions taken based on whether employee is vaccinated or not, statement on storage, sharing and destruction of the information. Our team can assist employers with developing policies.

Some best practices to keep in mind when developing and implementing a vaccine verification program include:

• Determine what information will be requested and minimize the amount of information collected (verbal statement of vaccination sufficient; or ask to show vaccination certificate without making a copy, etc.);
• Determine the purpose for requiring vaccinations and the purpose for requiring a copy of the vaccination certificate (is it to prevent transmission of COVID-19 from employee to employee, or customer, patient);
• Notify employees and maintain open and transparent communication regarding implementation;
• Do not share information regarding names or identity of employees not vaccinated (only share statistical information such as percentage of employees vaccinated);
• Share collected personal information with only those who need to know for the purposes of implementing the vaccine program;
• Keep the information secure and destroy it when no longer needed;
• Seek legal advice as needed.

Takeaways for Employers

• Evaluate your workplace and your workforce to determine whether a (mandatory or optional) vaccination policy is advisable or necessary to meet the company’s obligation to maintain a safe and healthy workplace for all workers and to protect your clients/customers and the public at large;
• When facing an employee who refuses to get the vaccine, be sure to ascertain the reasons for the refusal and evaluate whether any human rights obligations are triggered before taking action against the employee. Consult with an employment and human rights lawyer where not sure;
• Prior to implementing a vaccine program, seek legal advice and review applicable privacy legislation. Consider the above best practices when collecting employee's personal information/personal health information in any vaccine verification program.

Note to Readers: This is not legal advice. If you are looking for legal advice in relation to a particular matter or drafting of workplace vaccination policy, please contact Chris Drinovz at [email protected].

Chris Drinovz is an experienced employment and labour lawyer in Abbotsford, Langley, Surrey & South Surrey and Head of the Employment & Labour Group at KSW Lawyers (Kane Shannon Weiler LLP). Chris has been assisting local businesses with workplace issues since 2010. His expertise covers all facets of the workplace including wrongful dismissal, employment contracts, workplace policies, and WorkSafeBC matters, including occupational health & safety. Chris is on the Executive of the Employment Law Section of the Canadian Bar Association BC, and a Director for Surrey Cares and Greater Langley Chamber of Commerce.

‍

Principal Residence Exemption and House Flipping: Court Allows Appeal as Taxpayer Relied on Accountant’s Advice

Our Tax lawyer Ruby Grewal summarizes recent Tax Court appeal case regarding Principal Residence Exemption and House Flipping below.

The Tax Court of Canada recently released a decision in Hansen v. The Queen, 2020 TCC 102. This was a case where the taxpayer was reassessed for property that he owned and respectively sold between 2007 and 2012. Mr. Hansen (the “Taxpayer”) sold 5 homes during the respective tax years, and claimed the principal resident exemption. However, the Canada Revenue Agency (the “CRA”) treated the sale of each of these properties as income from a business or from an adventure in trade and reassessed the Taxpayer at 100% of the gain. A typical argument relied on by the CRA is the intention of the taxpayer to purchase the home with an intention to sell them at a profit.

The Taxpayer lived in each of the 5 properties for under a year, and made improvements to each of the homes to suit his family. While filing his taxes, he testified that he informed his accountant of all the property transactions, including his intension for each property and reason for sale, at which time the accountant advised the principal residence exemption applied. The accountant testified at trial and corroborated the Taxpayer’s evidence at trial.

Statue Barred Years

The 2007-2009 reassessments were issued to the Taxpayer outside of the “normal reassessment period” of 3 years as defined by subsection 152(3.1) of the Income Tax Act (the “Act”). This is something that we often refer to as the statute barred years. In order to open up an assessment beyond the normal period of 3 years, the CRA must justify why a reassessment should be reopened or reconsidered. One such reason that the CRA can reopen reassessments beyond the normal period is if the CRA can prove that (1) the Taxpayer had made misrepresentations in his or her tax returns; and (2) this misrepresentation was attributable to neglect, carelessness, willful default or fraud.

In this case, the CRA relied on the argument that the Taxpayer reported the sale of the properties as his principal residence, when they should have been declared as business income.

The Tax Court cited longstanding case law which states that there is no negligent misrepresentation where, at the time of filing the return, the taxpayer carefully considered his or her position and filed on a basis that he or she believed, in good faith, to be correct. This is the case even if the CRA does not agree with the manner in which the taxpayer reported his or her income even if the taxpayer’s position is ultimately found to be incorrect by the Tax Court.

In this decision the Tax Court found that the Taxpayer carefully assessed his situation and filed his returns on a reasonable and honest belief that he was entitled to claim the principal residence exemption. The Taxpayer was honest with his accountant when the sale of the properties occurred, and the court relied heavily on the accountant’s evidence regarding the Taxpayer’s intention at the time of filing.

The Tax Court held that the CRA was not entitled to reassess the Taxpayer for the statute-barred years (2007-2009), and overturned those reassessments.

Is the Transaction an Adventure in the Nature of Trade

The Taxpayer was still assessed for the 2011 and 2012 taxation years. The Tax Court relied on whether the Taxpayer had an intention to make a profit from the transaction by looking at the primary and secondary intention of the Taxpayer at the time of acquiring the properties. Was the intention to live there long term, or was it a temporary move with the intent to resell the properties for profit?

The Tax Court in this case found that the Taxpayer had the primary intention to resell the two properties in 2011 and 2012 as the Taxpayer had already purchased another bare lot and was starting to build on that lot before buying the two properties that were reassessed in 2011 and 2012. While purchasing the two properties, the Taxpayer chose houses that would be easier to resell once his constructed home was complete. As such the principal residence exemption did not apply to these two properties.

Gross Negligence Penalties

The CRA has the ability to impose penalties for the taxation years that have been reassessed under subsection 163(2) of the Act. The Taxpayer in this case was assessed with penalties for making a false statement or omission in filing his income tax returns. Typically penalties range from 5% to 50% of the amount that is being reassessed.  

In regards to the gross negligence penalties the Tax Court emphasized that “gross negligence” is a high level of misconduct.

The Tax Court ultimately decided that the 2007-2009 years were statute barred, and as such gross negligence penalties did not apply.

With respect to the 2011-2012 taxation years, the Tax Court considered factors that the CRA must establish to justify the penalties. The CRA must prove that the conduct of the taxpayer was a marked and substantial departure from the conduct of a reasonable person in the same circumstances. The question to be answered is whether the Taxpayer was knowingly or willfully blind in his reporting obligations.

The Tax Court found that the Taxpayer’s conduct was that of a reasonable person, and again found that the Taxpayer’s reliance on his accountant was an important factor. The Tax Court considered the fact that the Taxpayer provided his accountant with all the necessary information prior to the accountant advising him that the principal residence exemption applied.

The Tax Court overturned the gross negligence penalties.

Takeaways

1. House flipping has complex tax considerations - you should be aware of the tax consequences as capital and business income are treated very differently.
2. When the CRA reassesses statue-barred years and gross negligence penalties, it is prudent to seek legal advice because there are many factors that are considered in upholding the two, absence of which could ultimately result in success for a taxpayer. These issues should be considered in any case.
3. Reliance on a professional in filing tax returns can carry significant weight in a case where an individual is selling properties within a relatively short timeframe. A taxpayer should always provide their accountant or other tax advisor with all relevant information regarding a real estate transaction prior to completing tax returns. Also, keep notes when these discussions occur with the advisors, as they may prove to be critical if the situation goes to trial.
   

Note to our Readers: This is not legal advice. If you are looking for legal advice in relation to a particular matter, please contact our Tax Group.