Written by Michael J Weiler

B.C. COURT OF APPEAL RESTORES $75,000 AWARD FOR INJURY TO DIGNITY – UBC v Kelly 2016 BCCA 271

The B.C. Human Rights Tribunal has statutory authority to award a complainant an amount “to compensate that person for injury to dignity, feelings and self-respect or to any of them”.In the August 31st, 2014 edition of the Weiler Law Blog we reported on a case involving a doctor who successfully won his complaint against UBC. He was awarded 6 years back pay amounting to $385,194.70 as compensation for lost wages, as well as an award for expenses, a tax gross-up and pre and post-judgment interest. Most importantly in a groundbreaking decision the Tribunal also awarded him $75,000 for injury to dignity, feelings and self-respect. This was more than double the previous highest award. B.C. HUMAN RIGHTS TRIBUNAL DOUBLES CAP FOR DAMAGES FOR HURT FEELINGS TO $75,000In our November 2nd, 2015 blog update we reported on the judicial review decision of Mr. Justice Silverman. The court upheld the finding of liability and also the large damage award. However it struck down the $75,000 award. HUMAN RIGHTS UPDATE—SOME GOOD NEWS FOR EMPLOYERS….MAYBE Not surprisingly UBC appealed and Dr. Kelly cross-appealed the reduction of the $75,000 award.On June 24th 2016 the BC Court of Appeal issued its decision. It dismissed UBC’s appeal on the merits and upheld the Tribunal’s decision that there had been discrimination and that UBC had not accommodated Dr. Kelly to the point of undue hardship. It dismissed the appeal on the large wage loss award. However it allowed the cross-appeal and restored the Tribunal’s award of $75,000 for damages to injury to dignity, feelings and self-respect.The decision is definitely not good news for employers. Mr. Justice Ian Donald writing for the court dismissed all of UBC’s arguments on why the decision on liability was wrong. It upheld for example the Tribunal’s “holistic approach” in considering both the accommodation process (i.e. the procedural aspects) as well as the reasons for dismissal (i.e. the substantive aspects). The court held this holistic approach did not offend the law that “there is no free-standing procedural duty”. Further the lost wages award was based on the calculation of damages resulting from “delayed entry” into the program. Although this was a case of first impression it was nevertheless within the Tribunal’s discretion and was justified because of the clear causal link between the discrimination and the delayed entry.But the biggest concern for employers is the court’s acceptance that the Tribunal was entitled to find that $75,000 was justified. The court pointed out that judicial review is “not to be treated as though it were a quantum award in a personal injury case.” Ranges of awards established in previous decisions of the Tribunal “play a more diminished role in the Tribunal’s determination of an award for injury to dignity.”What is troubling in my view with the Tribunal’s decision and the court’s decision on this point is that there is very little analysis of how the 3 separate items are to be interpreted and applied. And is the court saying that this case was so unique that the award is justified but in most cases this award would be excessive?In my August 31st, 2014 blog reviewing the Tribunal’s original decision I suggested that given the courts’ reluctance to interfere with Tribunal decisions it would be unlikely the decision would be overturned. While I was wrong with respect to the BC Supreme Court the ultimate decision of the Tribunal has been upheld on all aspects. I also commented on the lack of certainty created by this decision and the negative effect that will have on employers. Absent a legislative amendment to the Code placing a cap on these damages that uncertainty is even more troublesome having the Court of Appeal’s stamp of approval.

Written by Michal J Weiler

Suncor Energy Inc. v Unifor Local 707A 2016 ABQB 269

In 2013 in the Irving Pulp & Paper the Supreme Court of Canada decided the rules on drug and alcohol testing. With the legalization of marijuana in Canada on the Liberal’s agenda there has been greater interest in this topic. While the Irving decision set the guidelines the courts and other adjudicators have grappled with the thorny question of applying that decision to the real world.A recent Alberta Court of Queen’s bench decision adds to the dialogue in this important area. Christin Elawny and Jenna Kirk of Field Law, to which firm we refer our Alberta clients, have drawn our attention to this case that you will find of interest if your organization is contemplating implementing drug and alcohol testing.See also our earlier post on drug and alcohol testing, called Impairment Testing: Has its time come? featuring presentations by Gabe Somjen of BLG and Dr. Ken Baker.

Written by Michael J WeilerReaders of my blog and newsletters over the years will know I have one constant theme—employers should get enforceable written agreements for all employees and even “contractors”. In that way, the chances of expensive and time-consuming litigation will be in most cases eliminated [I say ‘in most cases’ because as the case of Miller v. Convergys CMG Canada Limited Partnership (leave to appeal to the Supreme Court of Canada denied) demonstrates, even a well-drafted employment agreement can be challenged. But employers continue to avoid the up-front effort of getting written agreements and therefore it is not surprising that there continue to be court cases involving the termination of employees.In a recent case, James v The Hollypark Organization Inc. 2016 BCSC 495, the Supreme Court of British Columbia found that the employer was bound by a fixed-term contract which greatly increased the employee’s damage claim upon termination. What is unique about this case is that the parties did not have a written employment agreement.The Plaintiff Ms. James had been employed in Vernon, B.C. as the general manager of a Marriott hotel. Her experience included both opening and operating a new hotel. Ms. James retired and shortly thereafter the defendant, who had owned a Super 8 motel in Vernon, decided to upgrade their holdings and entered into a contract with Marriott. It then commenced building the new hotel which opened in 2013.In the spring of 2012, the Defendant hired Ms. James to work as general manager of the new hotel and assist in opening. No formal written agreement was signed. Ms. James was terminated on August 26th, 2013. Ms. James alleged she was hired to act as general manager of the hotel on a fixed one-year term contract to operate the new hotel upon opening and claimed damages for that period. She maintained that on the basis of a conversation that took place in August 2012 the parties agreed to this one year term. The Defendant denied a fixed term agreement had been reached and argued her damages were limited to a short period of notice.The Court summarized the law regarding fixed-term contracts as follows:[12] Where termination of employment occurs in the context of a fixed-term contract, the damages assessed will be calculated based on the unexpired portion of the term. The plaintiff will generally be paid the entire balance of the contract, less any deductions for work the plaintiff could reasonably be expected to earn from other employment: Nevin v. British Columbia Hazardous Waste Management Corp. (1995), 129 D.L.R. (4th) 569 at para. 18 (B.C.C.A.).[13] The onus is on the plaintiff to prove, on a balance of probabilities, that her employment contract was for a definite term: Herold v. Marathon Developments Inc./Societe Developpement Marathon Inc., 1999 CarswellBC 863 at para. 6 (WL Can) (S.C.). A fixed-term contract can be created orally: Singh v. The Empire Life Ins. Co., 2002 BCCA 452; see also Ellen E. Mole, Wrongful Dismissal Practice Manual, 2d ed, Vol. 1 (Markham, ON: LexisNexis, 2014) at §1.64.[14] In determining whether an employment contract was for a fixed term or an ongoing period, Betton J., in Alsip v. Top Rollshutters Inc. doing business as Talius, 2015 BCSC 1166 at para. 40, cited with approval the summary of considerations set out in Canelas v. People First of Canada, 2009 MBQB 67. That summary is helpful and indicates:● A fixed-term contract can be in writing or orally made or partly in writing and partly oral. The term may be fixed to a certain time or certain event. However, to be fixed, the intention of the parties must be clearly expressed or necessarily implied;● The parties must be ad idem as to the term. If only one of the parties inferred the term was fixed, that is insufficient; and● Whether the parties’ agreement was oral or partly written and partly oral – the evidence of the parties’ oral discussions should allow the reasonable observer to conclude the individual at issue was hired for a fixed term.[15] I note Newbury J.A., in De Cotiis v. Viam Holdings Ltd., 2010 BCCA 368 at para. 21, pointed to flexibility in the nature of the evidence to prove the oral contract at issue:[21] … As G.H.L. Fridman notes in The Law of Contracts in Canada (5th ed., 2006) “[i]n the case of a completely oral contract there is greater flexibility in the nature of the evidence that is admissible to prove the contents of the contract and the meaning of the language used by the parties.” (At 440.) This flexibility follows intuitively from the recognition that oral contracts must often be construed without the key interpretive tool used to understand written contracts – the words of the agreement.The Court noted that the contract was an oral one and as such there was little documentary evidence as to the terms of that agreement. It noted “the parties also have very different views of their meetings, conversations and the ultimate terms of the employment agreement.” [para. 17]. The Court reviewed all the evidence including the meetings, conversations and documents. It relied on, among other things, the Franchise Agreement, the Marriott “Opening Your Hotel Timeline”, emails and other related documents. It found that it was unlikely that Marriott would accept someone else who was not as qualified as Ms. James to manage the hotel. The Court held that although some of the evidence was not definitive one way or the other, a consideration of “all of these factors lead to the conclusion the meeting and discussion in August 2012 took place as Ms. James related” and therefore the Court found that “Ms. James had an employment agreement with Hollypark for a fixed term of one year from the date of the Hotel opening.”Damages were assessed based on the one-year fixed term contract and there was no need therefore to determine what reasonable notice might have been in the absence of such an agreement. No reduction was made for a failure to mitigate. She was awarded $53,485.72 as well as 4% vacation pay and special damages of $837.49 related to moving and storage expenses. The parties were left to agree on what costs Ms. James would receive failing which they were at liberty to apply (it may well be that Ms. James made a formal Offer to Settle and would have therefore been entitled to significantly greater costs than normal).LESSONS LEARNEDDespite the onus on Ms. James to prove the actual terms of the contract she was able to point to evidence that supported her version of what was agreed to in August 2012 in that meeting. The defendant then was found liable for over $50,000 plus it must pay a portion of Ms. James’ legal fees and disbursements. Obviously the defendant had to pay its lawyer for preparing and attending a 3-day trial. The defendant also had to suffer the embarrassment of having their evidence rejected in a formal court decision. It also ran the risk of collateral damage to its reputation and relationship with Marriott.And consider what would have been the damages if the employee had proven a much longer fixed-term contract? She was 65 years old so her chances of finding another job would have been very slim and so damages would have been calculated on the balance of the fixed term period. Add in other claims like stock options, pensions, benefits etc and the damage award could be enormous: see for example Hawkes v Levelton.All of those costs and aggravations could have been easily avoided if the employer had simply confirmed in a written contract their version of the terms of the agreement and resolved any disagreement with Ms. James at the outset.I tell my young referees in our officiating clinics “Experience is just how we describe our mistakes” and therefore mistakes are good but only IF we learn from them. Even better is to learn from someone else’s mistake.

Guest post, written by Timothy J NicholsA. INTRODUCTIONThe new BC Societies Act will come into force on November 28, 2016, replacing the current Society Act. The new Act will be more similar to the current legislation for both business companies and not-for-profit corporations in BC and other Canadian jurisdictions. The changes are significant. Most commentators agree that the upgrade is long overdue.The following is a brief summary highlighting some of the impact of the new legislation on the many existing BC societies. There is also a discussion regarding certain steps that should be taken by every society’s principals now and in due course. This memorandum is of a general nature, is not exhaustive, and is not intended to represent legal advice. Please contact Tim Nichols for additional information or consideration of your particular society’s circumstances.B. SUMMARY OF CHANGES

1. With several specific exceptions, the new Act will automatically apply to all existing societies as soon it is proclaimed in force on November 28.

2. Any provision in the current bylaws of an existing society that is inconsistent with the new Act will immediately cease to have an effect on November 28.

3. Some of the most important revisions of the new legislation relating to directors and senior managers of societies. Some of those sections will not apply to existing societies for a grace period of two years after the new Act comes into force. (See for example item 8 below.)

4. There will be a mandatory transition of existing societies under the new Act, which must be effected within two years after November 28, 2016. At a minimum this will entail the entry of certain basic information regarding all existing societies in the new electronic database being instituted by the BC Registrar of Companies. The filing will include the full text of their current constitutions and bylaws. (Reporting societies must also include prescribed provisions in their bylaws in the course of this transition filing. See Part C below.)

5. Under the new Act there will for the first time be a distinction between member-funded societies and other societies. As the phrase suggests, societies that rely to a significant extent on public sources of funding will not be “member-funded”. A society which is a registered charity; or which received the greater of $20,000 or 10% of its gross income over the prior two fiscal years from donations or government funding, will be deemed not to be member-funded. Societies that are not member-funded must disclose certain financial information such as the remuneration of their directors and employees. (An example of a member-funded society would be a private club. Member-funded societies are not required to comply with these new disclosure obligations.)

6. The format of constitutions of societies will change such that they include only the name and purposes of a society (and, if applicable, the fact that the society is member-funded). All other provisions in the constitution must be transferred to the bylaws. This includes provisions of the constitution that were previously unalterable. They will in effect become alterable by virtue of their inclusion in the bylaws.

7. Perhaps the most important amendment of the new Act is the reduction of the threshold for the passage of special resolutions of the members of a society from the current majority of 75% to two-thirds. Special resolutions are required for proposed bylaw amendments such as name changes and other extraordinary matters. An existing society may avoid this fundamental change by amending its bylaws before November 28 to provide for a higher majority threshold for special resolutions than two-thirds. The majority may be determined to be as high as 100% on all or certain matters. (Amendments to bylaws only take effect when filed with the Registrar. If a society wishes to adopt a majority for special resolutions greater than two-thirds before November 28, it should initiate the requisite corporate proceedings right away. The current filing process will continue to apply until it is revamped as described in item 11 below.)

8. The qualifications of directors will be heightened as specified. In addition, directors must consent in writing to their election or appointment. (These are some of the provisions of the new Act whose application is delayed until 2018 as mentioned in item 3 above.)

9. Directors may not be remunerated by a society in that capacity unless the bylaws expressly permit such remuneration. Reimbursement of expenses will continue to be permissible.

10. Fewer than a majority of the directors of a society may receive remuneration as employees or contractors. There will be enhanced procedures and provisions relating to conflicts of interest of directors and management.

11. Most filings required to be made by societies with the Registrar of Companies will be made electronically. For example it will no longer be necessary to make paper filings of certified copies of special resolutions amending the constitution or bylaws. This online filing system has been used for BC companies for several years and is both convenient and efficient. However its adoption means that it will now be more important than ever to maintain a society’s official record book to a meticulous standard.

C. REPORTING SOCIETIES

1. Only approximately 1% of BC societies are reporting societies so this part of this summary will not be of interest to many readers.
2. Pursuant to the regulations under the new Act, a reporting society must include six specific provisions, word for word, in the set of bylaws filed by the society as part of its transition application. These mandatory prescribed bylaws relate to the appointment of auditors and financial reporting.

D. WHAT MUST BE DONE BY EXISTING SOCIETIES?

1. Management should determine whether or not their society is member-funded under the new scheme (as summarized in item B-5 above). If they are not member-funded, management should familiarize themselves with the new related financial reporting obligations.

2. The constitution and bylaws of every existing society should be reviewed in order to determine whether they conflict with the new Act. Any such conflicting provisions will cease to be effective as of November 28. It may, therefore, be necessary to enact related amendments of the constitution or bylaws prior to that date. Any such amendments must be effected the “old-fashioned way” under the current scheme, requiring the passage of special resolutions of the members by a 75% majority followed by paper filings in Victoria. In many cases this may also entail the convening of an extraordinary general meeting of the members of the society.

3. Management should consider adopting new incorporation documents which conform generally to the new Act. It may not be necessary to do so prior to November 28.

4. One of the possible options is to adopt the model bylaws appended to the new Act, perhaps with some customizing. The new model bylaws are fairly basic. They are materially different from the current model bylaws.

5. Management should otherwise plan for mandatory transition under the new Act. Some of the detailed transitional steps and procedures are still in the process of being ironed out and published by the Registry.

E. CONCLUSIONThe above summary should provide any person who is a member, director, officer, manager, contractor or advisor of an existing BC society with some important basic information about the impact of the new legislation. You are encouraged to obtain legal advice with respect to your particular situation. For additional information, please contact Tim Nichols.© Copyright 2016 Timothy J. NicholsPublished with permission of Timothy J. NicholsHUNGERFORD TOMYN LAWRENSON AND NICHOLS LAWYERS1100 Cathedral Place, 925 West Georgia Street, Vancouver, BC V6C 3L2Tel. 604 408 5600 Fax 604 408 5630 email: [email protected]

Written by Michael J WeilerTCF Ventures Corp. v. The Cambie Malone’s Corp. 2016 BCSC 1521Can a corporation bring a “wrongful dismissal “action? The answer is yes.TCF Ventures Corp (“TCF”) sued The Cambie Malone’s Corporation (“Malone’s”) for wrongful dismissal. TCF was the incorporated entity of Tim Fernback who provided a range of financial and commercial services through TCF. In 2009 Mr. Fernback answered a job posting for CFO of Malone’s. He was awarded the job which the court found was not full time but rather Malone’s expected Mr. Fernback to work “in the order of 3 days a week” and that it would be acceptable for Mr. Fernback to have other clients even though he had taken this position at Malone’s. The parties agreed Mr. Fernback could provide his services by way of his personal corporation TCF.In November 2009 Mr. Fernback took on the duties of COO as well and had his income increased from $75,000 to $100,000 per year and he worked full time. In 2012 his COO duties were removed, his compensation reverted to $75,000 but he took on additional duties of raising capital for which he was to be paid a 4 % finder’s fee.Malone’s ended the relationship in November 2012. TCF sued for wrongful dismissal. Malone’s argued, inter alia, that relationship between it and TCF was that of an independent contractor and not an employee or “dependent contractor” and as such TCF was not entitled to any notice.The court found that “the essential nature of the relationship was akin to an employer-employee situation, as opposed to a pure independent contractor” and as such Mr. Fernback/TCF was entitled to reasonable notice of termination.Sometimes I find a case that provides a very useful and succinct summary of the law. TCF v Malone’s is one such case so I will quote at length from the decision with respect to the distinction between an independent contractor and an employee and the intermediate relationship of “dependent contractor”:Nature of the relationship[45] It is necessary to determine the essential character of the relationship between the plaintiff and the defendant.[46] Mr. Fernback provided his services to the defendant by way of his personal corporation; that was an arrangement that was acceptable to both parties. It was done at the behest of Mr. Fernback. It is clear that he had his reasons for doing so—principally, it seems to me, to enable him to achieve significant tax savings. A related factor is Mr. Fernback’s practice to be almost constantly looking for other job opportunities and situations. The evidence disclosed a nearly incessant sending of resumes and expressions of interest for a wide range of positions. While that might have been, for some employers, a matter of concern or dissatisfaction, it was not an issue for Mr. Yehia (although I do not believe he was fully aware of the extent of Mr. Fernback’s endeavours on that front). He knew from the outset that Mr. Fernback wished to have the latitude of pursuing additional or supplementary business as circumstances allowed, and he did not object, presumably so long as those activities did not interfere with Mr. Fernback’s ability to fulfil his obligation to CMC. Indeed, the initial agreement contemplated that Mr. Fernback would work only on a part-time basis for CMC.[47] There were material differences between the format that these parties had and what one might characterize as a purely conventional, traditional arrangement whereby a worker is hired as an employee. In that type of structure, the individual is on the company payroll and generally receives paychecks each pay period where the statutory deductions are made by the employer and remitted to the relevant authority, in addition to a host of other earmarks of a typical salaried employee.[48] The jurisprudence of employment law has, in relatively recent times, evolved to recognize the realities of the modern workplace and the fact that the relationship between workers and those to whom they provide their services is not simply binary—either employee-employer or independent contractor. In a number of decisions, the courts have come to acknowledge that there are a variety of different arrangements that the parties may have. The approach to be taken is to examine the situation from a functional perspective.[49] The result has been the recognition of relationships that fall within an area between the two traditional models. Dealing with a similar issue in Kahn v. All-Can Express Ltd., 2014 BCSC 1429, I made the following comments, which I feel are pertinent to the matter at hand:[21] … Based upon a number of authorities to which I have been referred, I am satisfied that the common law with respect to this issue has evolved into a more nuanced state, one that reflects the reality of an economy where many workers perform services for others in arrangements that are specifically structured such that they are neither employer-employee relationships nor are they properly characterizable as independent contractor relationships.[22] In effect, the courts have recognized that these sorts of relationships, depending upon their particular features, can fall at different points along a continuum, ranging from pure employer-employee situations to classic independent contractor arrangements: Hillis Oil and Sales Ltd. v. Wynn’s Canada, [1986] 1 S.C.R. 57; Stewart v. Knoll North America Corp., 2007 BCCA 11; and Movassaghi v. Steels Industrial Products Ltd., 2012 BCSC 1663.[23] In that analytic framework, there is a recognition of what is sometimes labelled a dependent contractor status. It is neither of the traditional positions, but rather has some features of each.[24] … In Mancino, Mr. Justice Lederman stated the following at paras. 9-10:Although the plaintiff in fact ran his own business, an examination of the relationship between the parties shows that there was a dependency that was mutual and permanent in nature….There is no doubt that the plaintiff, to use the words in the Labour Relations Act, was in “a position of economic dependence” upon the defendant which “more closely [resembled] the relationship of an employee than that of an independent contractor”. The fact of dependency continued even after the plaintiff’s change of status from a “dependent contractor” to a broker. In either capacity the plaintiff’s arrangement had all the hallmarks of an employment relationship with the defendant. This relationship was of a permanent and exclusive nature implicit in which was the understanding that it would be terminated only on the giving of reasonable notice. [Citation omitted.][50] In Marbry Distributors Ltd. v. Avrecan Int. Inc., 1999 BCCA 172, at para. 38, Braidwood J.A. provided the following non-exhaustive list of factors for determining where on the continuum a relationship falls, noting that not one is by itself conclusive nor necessary to determine the type of relationship as one requiring notice:[38] … Those factors are:[1] Duration/Permanency of the Relationship. The longer the duration of the relationship or the more permanent it is, militates in favour of a reasonable notice requirement. Amongst other evidence, the purchase and maintenance of inventory, which contains a permanency aspect, should be considered;[2] Degree of Reliance/Closeness of the Relationship. As these two interrelated sub-factors are increased the more likely it is that the relationship falls on the employer/employee side of the continuum. Included in this factor is whether the sale of the defendant’s products amounted to a significant percentage of the plaintiff’s revenues; and[3] Degree of Exclusivity. An exclusive relationship favours the master/servant classification.[51] Notwithstanding the formal structure (that is, the provision of services through a corporation) and the lack of complete exclusivity, it is my conclusion based on all of the above that the arrangement the parties agreed upon in this case entailed a significant element of personal service. CMC set out to hire a CFO; it wanted a professional person to provide certain services to the corporation. That entailed having a specific, identified, and qualified person to perform those functions. The person CMC selected was Mr. Fernback. It was his package of attributes that CMC wanted to have working for it, and that is what occurred.[52] By way of analogy, this was not a situation where CMC entered into a contract with a third-party corporate entity—say, for example, one of the major accounting firms—to have that firm assign a properly qualified worker to provide the services required. CMC bargained to have Mr. Fernback join its workforce, and that is what happened. There was a permanency to that relationship that persisted for a significant time—some three and a half years.[53] Accordingly, I am satisfied that the essential nature of the relationship was akin to an employer-employee situation, as opposed to a pure independent contractor.[54] My view is that Mr. Fernback was “employed” by CMC between April 1, 2009, and November 2012. Over that span of time, his responsibilities and rate of remuneration changed from time to time. Initially, he was the CFO at $75,000 per year; he subsequently took on the dual COO/CFO role at a rate of $100,000 per year. Finally, in March 2012, he reverted to the CFO job description at a rate of $75,000 per year. That was augmented by the fundraising assignment that he took on.[55] The actual end of the relationship between the plaintiff and the defendant is somewhat shrouded in confusion. Some insight into that is to be found in an email exchange between Mr. Fernback and Mr. Yehia at the end of October.[56] My conclusion is that Mr. Fernback was effectively terminated on November 15, 2012. That date is somewhat arbitrary, as Mr. Yehia and Mr. Fernback carried on their discussion regarding the matter over a period of time. However, it seems to me that, by then, the parties knew that the relationship that had subsisted to then, albeit in somewhat shifting forms, was over. Notwithstanding that, Mr. Fernback appears to have continued to pursue his activities to raise capital for the defendant for a period of time. In fact, the plaintiff subsequently rendered an invoice to the defendant with respect to the commissions related to those funds. I made mention of that invoice earlier.[57] In the result, I find that the relationship between the plaintiff and the defendant was such as to entitle the plaintiff to notice at common law. The termination was without cause. It is my view that, at the point of termination, that is, on November 15, 2012, the rate of remuneration upon which any damages in lieu of notice would be based would be comprised of two components: (a) an annual salary of $75,000 per year, and (b) the commission earned at a rate of 4% with respect to funds generated for the business enterprises of CMC under the Finder’s Fee Contract.The court found that Mr. Fernback through TCF was entitled to gross damages of $131,000 based on 9 months’ notice less $23,000 he earned from another contract.LESSONS LEARNEDMore and more courts are finding that employees who operate through their companies are in fact and law either “employees” or “dependent contractors” and as such are entitled to reasonable notice of termination absent just cause. In this case the notice period of 9 months is certainly in line with the notice period for an employee so there is little reduction for the fact that the Plaintiff here was a corporation.Readers who follow my blog will know what I say the answer is —to avoid litigation, get a formal written, enforceable contract that spells out clearly the nature of the relationship and the amount of notice required to terminate that relationship absent “cause”. The court, in this case, would appear to agree with my philosophy as evidenced by these closing remarks:[82] By way of a final observation, it seems to me that this dispute and this lawsuit are a regrettable outcome of experienced and ostensibly competent businessmen entering into important arrangements without documenting the terms they expect to apply to that relationship. When differences arise, as not-infrequently occurs, litigation, with all the attendant uncertainties and risks, often results. Ultimately, that is to the benefit of no one.

Written by Michael J WeilerIt’s getting increasingly tougher to give a clear statement to clients about their legal rights and obligations. Take for example the issue of termination for cause for dishonest conduct. Up until 2001, BC counsel would generally advise their clients that dishonesty would always constitute cause for termination based on a leading Court of Appeal decision. The Supreme Court of Canada overruled that case and found that dishonesty will not always constitute cause—the court must apply a “contextual approach” to determine if dishonesty in any particular case constitutes cause.Up until this year, I would advise employer clients that in order to successfully argue a damage claim should be reduced because of mitigation, we would have to prove not only that the employee failed to take reasonable steps to find alternate employment but also that if reasonable steps had been taken, the employee would in fact have found such alternate employment. The onus on the employer to prove these two branches of the test was a very heavy one. Furthermore courts generally did not allow evidence of job opportunities in newspapers to prove a failure to mitigate.The law appears to have changed in the decision of Logan v Numbers Cabaret Ltd (Hamburger Mary’s) 2016 BCSC 1473.The two employees were long-service employees who were temporarily laid off while renovations were being done. That constituted a dismissal. They were awarded 14 months’ notice.The court however reduced their damage award significantly because the employees took no or at best minimal steps to find alternate employment. What is remarkable about the case is that the court held that the employer did not have to prove that if they had used reasonable efforts they would have found alternate employment. The court stated:[35] In these circumstances, I find that the plaintiffs have failed to discharge their duty to seek out alternate employment. They have not acted reasonably. Instead of continually and assiduously applying themselves to find employment, Mr. Logan and Ms. Bocking chose to reflect on their options, which included moving out of the province or pursuing education. I find that their efforts to look for work began only recently, in the spring of this year, and even so, those efforts have been so minimal that they cannot be said to meet their duty.[36] The plaintiffs argue that the onus rests squarely on Cabaret to demonstrate that had they been diligent in looking for work that they would have found suitable alternate employment. Otherwise, they submit that there can be no basis to reduce their award. They submit that the onus resting on Cabaret is a heavy one, and that Cabaret’s attempts to discharge it by attaching articles from a local newspaper reporting on the plethora of jobs for cooks and waitresses in Vancouver is inadmissible, and in any event, insufficient to discharge its onus. Therefore, the plaintiffs submit that Cabaret has failed to prove a failure to mitigate defence such that their entitlement to an award of 14 months cannot be reduced.[37] I agree with the plaintiffs’ characterization of the onus resting on Cabaret to prove a failure to mitigate defence is a “heavy one”: see, e.g., Smith at para. 32; Peterson v. Labatt Breweries of British Columbia (1996), 25 C.C.E.L. (2d) 241 (B.C.S.C.) at para. 10. Before consideration of that onus is engaged, however, the plaintiffs must nevertheless demonstrate that they have discharged their onus to look for work.[38] I find that Mr. Logan and Ms. Bocking deliberately chose not to discharge their duty to find suitable employment through constant and assiduous application to act in their own interest to maintain their income. They cannot now say to Cabaret that it must pay the full amount of the notice period. Their attempts do not constitute a bona fide effort to obtain alternate employment.[39] This is not a situation where the plaintiffs needed additional time beyond the fall of 2015 to recover from what Mr. Justice Burnyeat described in Smith at para. 35 as “the shock of having their employment terminated.” They appreciated by the summer of 2015 that they would not be returning to work any time soon. To the extent they needed time to recover from any shock or upset arising from their longstanding affiliation with the restaurant, it should not have extended beyond the commencement of this action on October 7, 2015. The plaintiffs do not have any reasonable excuse for delaying beyond that date to look for alternate employment: Stuart v. Navigata Communications Ltd., 2007 BCSC 463 at paras. 43, 52.[40] I disagree that the plaintiffs’ failure to discharge their duty is of no consequence unless and until Cabaret proves that suitable employment was to be found. As I read them, the cases cited by the parties that speak of the obligation of the employer to prove that employment was available in the context of the duty to mitigate defence involve circumstances where the discharged employee is being criticized by the employer in respect of his or her efforts to find work or rejecting offers of employment. In other words, the onus is on the former employer to prove that had the employee done more, they would have been successful in obtaining employment (see, e.g. Szczypiorkowski v. Coast Capital Savings CreditUnion, 2011 BCSC 1376 at paras. 90-91). In this case, the plaintiffs did nothing other than take a recent and cursory look for job opportunities. Cabaret has proven that if the plaintiffs had read the local newspaper, which they say they did to track the progress of renovations at the restaurant, they would have seen reports of an abundance of immediate job opportunities for cooks and waitresses in the lower mainland. That they continued to receive EI benefits beyond the date this action was commenced while at the same time representing to EI that they were actively looking for work speaks poorly of their credibility.[41] My approach is consistent with the analysis taken by Mr. Justice Wilson in Horn v. Ikon Office Solutions, Inc., 2002 BCSC 1658. In that case, Ikon, the former employer, pointed to evidence that the former employee “stood idly or unreasonably by” and did not take reasonable steps to avoid the “unreasonable accumulation of damages suffered as a result of the termination”. Wilson J. found the case to be “borderline”; he did not see the plaintiff in that case as acting unreasonably in seeking self-employment as an option. At the same time, Wilson J. rejected the employee’s submission that the employer Ikon must produce evidence to prove there was a job available that he “would most probably have obtained”: paras. 24 and 30.The court went on to note that on the evidence the employer had provided some evidence of the abundance of employment opportunities for cooks and waitresses. The court allowed evidence from newspapers and Statistics Canada to prove alternate positions were available.The court reduced the damage claim from 14 months to 7 months due to the failure to mitigate.

Written by Michael J WeilerThe most common question from clients with respect to terminations without cause and without notice in the absence of an enforceable agreement is “How Much Notice?” Courts will look at four key elements to determine how much is reasonable notice: age, length of service, position and the availability of similar employment having regard to the employee’s skills and qualifications. The court will often look at economic circumstances but will not give that factor undue weight.Contrary to popular belief there is no legal rule of thumb of “one month for each year of service”. The highest period of notice, subject to a few exceptions, is 24 months. Please bear in mind the fact that each case will be decided on its own facts and there is no litmus test. Further the amount of notice will not always define the amount of damages as the employee must mitigate her damages and must also prove her loss (e.g. lost benefits or bonuses). On the other hand, the employee may be awarded additional punitive, exemplary or aggravated damages.The following cases from this past year will give you some idea of the courts’ present thinking on the matter. A bit of good news for employers is found in Cabott v Urban Systems Ltd where the Court of Appeal reduced the amount of notice by 1/3 given the short period of service. These can be very important factors in each case especially dealing with senior executives whose compensation can often exceed $20,000 per month.CASEPOSITIONCOMPAGESERVICENOTICEO’Dea v Ricoh Canada Inc.salesman$103,00577 years9 monthsKeenan v Canac Kitchens [dependent contractors]husband and wife supervise and install kitchens as contractors$125,00063/6132/2526 monthsSaliken v Alpinemechanic5415 months6 monthsWaterman v Mining AssociationVP Env & Tech453 ½ yrs10 monthsCabott v Urban Systems Ltdregional planner/leader5314 months4 monthsPakozdi v B & Bbidder/estimator$125,0005513 months8 monthsCheong v Grand PacificDirector of Sales/Marketing$60,000+ bonus5913 yrs14 monthsLuchuk v StarbucksSr Regional Mgr–significant responsibilities$194,665+ bonus $85004818 years18 monthsSmith v Pacific Coast TerminalsManger/engineer$171,000+ 30% bonus4816 years19 monthsOzorio v Canadian Hearing SocietyReg Director/Sr Mgr$102,0006030 years24 monthsTCF Venture v MalonesCFO$100,000*?3.5 years9 monthsGust v Right of Way“jack of all trades” not certified tradesman$60,0003113 months2 monthsSchinnerl v KwantlenDirector programs$99,000489 years10 monthsBishop v RexelBuyer (clerical not specialized$52,0006127 years20 monthsPrice v #’d CompanyManager$77,000 + Commission4720 years20 months

Written by Michael J WeilerIn a wrongful dismissal action the amount of damages will be determined by the court on the basis of putting the employee “in the same position as he would have been if he had been given reasonable working notice.” In most cases the key compensation component is salary so that is easily determined. But in many cases employees are also paid bonuses. The question then becomes whether the employee is also entitled to a bonus during the notice period including a pro-rata bonus. Two recent Ontario court decisions demonstrate that the issues may not be all that straightforward.Paquette v TeraGo Betworks Inc.In Paquette v TeraGo Netorks Inc. the employee sued for wrongful dismissal and was awarded damages based on a 17 month notice period. He was entitled to a bonus but the bonus plan required that the employee be “actively employed” at the time of payout. The trial judge held that although the bonus was an integral part of his compensation Mr. Paquette was not entitled to a bonus payment during the notice period. The Court of Appeal reversed that decision.It held that first the bonus was an integral part of Mr. Paquette’s employment and compensation and therefore if he had been given 17 months working notice he would have received a bonus. The question was whether the bonus plan itself precluded him from being awarded damages for loss of the opportunity to earn the bonus. The court described the proper analysis as follows:Similarly, in the present case the appellant’s claim was not for the bonuses themselves, but for common law contract damages as compensation for the income (including bonus payments) he would have received had TeraGo not breached his employment contract by failing to give reasonable notice of termination.[24] The motion judge’s next error was in looking to the terms of the bonus plan, and its requirement of “active employment”, and then concluding that because that term was unambiguous, and the appellant could not meet the requirement, no amount for bonus would be included in his damages. The motion judge ought to have commenced his analysis from the premise that the appellant’s common law right to damages was based on his complete compensation package, including any bonus he would have received had his employment continued during the reasonable notice period and then examined whether the bonus plan specifically limited or restricted that right.The court stated the test here was not properly applied by the trial judge:A term that requires active employment when the bonus is paid, without more, is not sufficient to deprive an employee terminated without reasonable notice of a claim for compensation for the bonus he or she would have received during the notice period, as part of his or her wrongful dismissal damages.Mr. Paquette was therefore awarded a bonus payment for 2014 and compensation for the lost opportunity to earn a bonus in 2015 that would have been payable in 2016. The court relied on the average bonuses from the previous three years and awarded him $58,386.64 plus interest.Fraser v Canerector Inc.Mr. Fraser worked as a senior executive for the employer for 2.8 years when he was terminated without notice. He obtained alternate employment fairly quickly. He was awarded damages based on 4.5 months' notice. He participated in an executive bonus program each year earning $50,000 in his first year, then $75,000 and then $175,000 in his last full year of employment.The court held that Mr. Fraser was not entitled to any bonus for 2014 as the notice period expired in October 2014. The court stated:The question the court must ask when a bonus is claimed as part of compensation in a wrongful dismissal case is whether any identifiable amount of bonus is a contractual entitlement of the plaintiff. In this case, I cannot conclude that the plaintiff was entitled to any such amount. There is no formula that the court is in any position to apply, objectively or otherwise. Any amount or methodology posited by the plaintiff (or the court) would be as arbitrary and thus subject to the same criticism as the plaintiff makes regarding his exclusion from bonus awards in 2014.[58] I reach this conclusion both because the bonus plan in question implicitly required participants to be employees at the time the assessment process is undertaken after year-end and because the plan itself was fundamentally discretionary and subjective, lacking any formula which a court might objectively apply. For both reasons, there is no amount of bonus to which the plaintiff was contractually entitled as of June 10, 2014 when his employment was terminated or as of October 25, 2014 when his 4.5 months of reasonable notice would have expired.[59] The following considerations lead me to the conclusion that only employees who were still active, contributing employees after year-end had any rights to be considered for bonus:a. The plaintiff’s prior employment agreement expressly conditioned eligibility upon employment at the time of declaration of the bonus and the parties specifically negotiated Mr. Fraser’s starting time with the defendant in order to ensure he would be able to qualify for that bonus from his prior employer in a plan which was formula-driven – this may be relevant to the reasonable expectations of the parties as regards the requirements of the defendant’s discretionary bonus program without any prescribed formula, floor or ceiling;b. While the defendant had communicated no written bonus policy expressly excluding the eligibility of departing employees, the plaintiff was advised that his salary was reviewed annually in February and he was also aware that his contributions were reviewed and bonus amounts announced at the same time;c. The program was described (and understood by participants) as being discretionary, employing no fixed formula and based upon the subjective assessments of contribution by the owners (Mr. Hawkins and his daughter) which were communicated confidentially along with each award.LESSONS LEARNEDBonuses are often a large part of compensation and can be very useful tools in motivating employees to perform at the highest standards. But as can be seen from these cases care in drafting the bonus schemes and employment contracts is crucial to ensure the employer’s liability is limited during the notice period.

Written by Michael J WeilerHaving a written, enforceable contract is important as readers of my blog will know. Primarily because it can limit an employer’s liability for termination without cause by limiting the amount of notice the employee would be entitled at common law (see related blog on 2016 notice cases). But there are other important terms in a contract that should not be overlooked especially when employing a senior manager. In order to protect your business interests all contracts should spell out confidentiality and trade secret obligations. In certain cases employers may seek to further protect their business through restrictive covenants such as a non-competition clause or a non-solicitation clause. These provisions can prevent an employee from walking away with your customers and/or setting up shop next door to steal your business.Unfortunately for employers the courts have made it extremely difficult to enforce such clauses. They start from the premise that such clauses are illegal restraints of trade and place a heavy onus on employers to prove that the clauses in question were “reasonable” from a legal perspective and necessary to protect legitimate interests: see Shafron v KRG 2009 SCC 6.Every now and then a case comes along that provides a very thorough summary of the law in a particular area. One good example of this is seen in the recent decision in IRIS v Park.IRIS The Visual Group Western Canada Inc v ParkDr. Park was employed as an optometrist in Vernon BC. She signed an employment agreement with respect to her and her company that include a non-competition clause for a term of 3 years preventing her from competing within 5 km of the location she worked in Vernon. She also agreed not to solicit or entice away anyone “that is in the habit of dealing with [IRIS]” or from soliciting any employees of IRIS. Further the contract included a liquidated damage clause that quantified what damages are payable upon breach in the amount of $250,000. Dr. Park resigned and set up business within 5 km of her work location.The court provided a useful summary of the law “which will guide my analysis of enforceability of the non-competition clause” as follows:A restrictive covenant in a contract is what the common law refers to as a restraint of trade: Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6 at para. 15.A covenant in restraint of trade is enforceable only if it is reasonable between the parties and with reference to the public interest: Elsley et al. v.J.G. Collins Insurance Agencies Ltd., [1978] 2 S.C.R. 916 at 923.… in exceptional cases … the nature of the employment may justify a covenant prohibiting an employee not only from soliciting customers, but also from establishing his own business or working for others so as to be likely to appropriate the employer’s trade connection through his acquaintance with the employer’s customers: Elsley at 926.Whether a restriction is reasonably required for the protection of the covenantee can only be decided by considering the nature of the covenantee’s business and the nature and character of the employment: Elsley at 926.… despite the presumption that restrictive covenants are prima facie unenforceable, a reasonable covenant will be upheld: Shafron at para. 17.The interpretation of restrictive covenants requires the application of different rules depending on whether the covenants are found in commercial agreements or in contracts of employment. These rules will be more generous in the commercial context, but much stricter in the context of contracts of employment or service: Payette v. Guay Inc., 2013 SCC 45 at para. 2.… the legal framework applicable to contracts of employment takes account of the imbalance of power that generally characterizes an employer-employee relationship, and it is designed to protect employees. In relationships between vendors and purchasers in the commercial context, on the other hand, there is ordinarily – with some exceptions – no such imbalance: Payette at para. 3.As a general rule, according to Dickson J. in Elsley, at p. 925, the geographic coverage of the covenant and the period of time in which it is effective have been used to determine whether a restrictive covenant is reasonable. The extent of the activity sought to be prohibited is also relevant: Shafron at para. 26.The agreement sued upon is the employment agreement. It would be wrong, in my opinion, to test that agreement by the criteria applicable in the case of a vendor/purchaser agreement, or by some hybrid test. The restrictive covenant, if enforceable, must stand up to the more rigorous tests applied in an employer/employee context: Elsley at 925.However, for a determination of reasonableness to be made, the terms of the restrictive covenant must be unambiguous. The reasonableness of a covenant cannot be determined without first establishing the meaning of the covenant. The onus is on the party seeking to enforce the restrictive covenant to show the reasonableness of its terms: Shafron at para. 27.… if the covenant is ambiguous, in the sense that what is prohibited is not clear as to activity, time, or geography, it is not possible to demonstrate that it is reasonable: Shafron at para. 43.The court found that Dr Park was in an employment situation and not that of a medical practitioner with patients and thus it would analyze the clauses with “with closer scrutiny”.NON-COMPETITION CLAUSEThe court found the non-competition clause was unenforceable because its scope was too broad. While IRIS had a legitimate interest in its patients who required regular eye examinations and new prescription vision product, it did not have a reasonable interest in protecting its ability to sell nonprescription reading glasses or sunglasses to its patient base. That made the clause unreasonable and thus it was found to be unenforceable.This was enough to dispose of the claim but the court went on to comment on the geographic and temporal scope of the non-competition clause. The court found the 5 km radius and the 3-year term of the prohibition were reasonable based on the evidence.NON-SOLICITATIONAs noted the clause referred to clients and patients “in the habit” of dealing with IRIS. The court held that that meant repetition and further there was no evidence of which patients had “become habituated to the company’s offerings”. The clause, therefore, was “so vague as to make enforcement problematic”. Further the real issue was whether Dr. Park’s advertisements were a breach of the non-solicitation clause. The court held there was no breach because the ads did not solicit or endeavour to entice away any of IRIS’ patients.LIQUIDATED DAMAGES As a preliminary comment the court noted:But Dr. Park wisely does not argue that she should not be held to the terms of the damages clause based on her cavalier approach to the agreement. I say wisely because Dr. Park is a well-educated person who must take the consequences of signing an agreement without reading it through.This is an important judicial observation in my view that is often overlooked when an employer tries to hold an employee to the terms of the bargain.The legal issue here is whether the clause was a genuine pre-estimate of damages in the event of a breach, or a penalty which would not be enforceable.Again the court provides a useful summary of the law in this area:Justice Newbury in Maxam Opportunities Fund v. Greenscape Capital Group Inc., 2013 BCCA 460, set out the approach to resolving this issue:[53] This court has ruled that the following approach is to be taken to payments that are stipulated to be payable on a breach of contract:…where the issue is whether a contractual clause is for liquidated damages or is a penalty:(1) The question of “penalty” or “liquidated damages” is to be answered as at the date of the making of the agreement;(2) If the answer is “liquidated damages”, that is the end of the matter, but, if the answer is “penalty”; then,(3) There arises the next question: should relief be granted against the penalty?(4) The answer to that question depends upon whether to enforce the penalty would be unconscionable, and that unconscionability has to be determined at the date of the invocation of the clause.(5) Sec. 21 [now s. 24] of TheLaw and Equity Act only applies if and when stage 3 has been reached.[54] The Supreme Court of Canada in H.F. Clarke Limited v. Thermidaire Corp. Ltd., [1976] 1 SCR 319, affirmed at 338, that a “sum will be held to be a penalty if it is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach.”[55] Similarly, the Court of Appeal in Newman, Hill, Duncan & Lacoursiere v. Murray, 1987 Carswell BC 1103, cited Dunlop Pneumatic Tyre Co. Ltd. v. New Garage and Motor Co. Ltd., [1915] A.C. 79 (H.L.), for the following proposition, at para. 14:There is a presumption (but no more) that it is a penalty when ‘a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage.’[56] The court in Murray at para. 15 also cited with approval the following extract from McGregor on Damages, 14th edition, which is at para. 342 on page 247 of the text:The same sum cannot in the same agreement be treated as a penalty for some purposes and as liquidated damages for others, for if the same sum is extravagant and unconscionable in relation to one breach to which it applies it cannot be a genuine pre-estimate and the sum becomes branded as having a penal nature which it cannot lose in relation to other more serious breaches to which it also applied. It adds nothing to say that it would not have been a penalty as to the other breach or breaches or that it is the other breach or breaches that have in the event occurred.Applying these principles the court found the clause to be “extravagant and unconscionable” and therefore it was a penalty and not liquidated damages. It noted that it must still go on and determine whether it should grant relief against the penalty which hinges on a finding of whether the clause was unconscionable at the date of invocation. On this point the parties did not provide sufficient evidence on the question of relief against the penalty to decide the issue and thus the court declined to decide whether Dr. Park should be relieved from the penalty. (Bear in mind this issue was obiter because the non-competition clause was found to be unenforceable and therefore Dr. Park had not breached the covenant.)LESSONS LEARNED Here are some observations on this case.

1. Non-competition and non-solicitation provisions are not appropriate or necessary in many cases. In my view they should be used only when a good case can be made for the protection of the employer’s business.
2. The courts will bend over backwards to find the clauses unenforceable. Therefore if they are important to employers, they should spend sufficient time to analyze what they need. The clauses should be drafted with the narrowest provisions possible that will provide adequate protection. And of course they must be clear and unambiguous.
3. Clauses that are the product of negotiations will more likely be upheld in my view especially where the employee seeks or is offered time to seek legal advice.
4. Obtaining the evidence to prove a breach is critical. That includes ensuring that computer data is maintained and the employee’s access to the computer information is cut off as soon as possible upon termination. A strong computer policy should be in place.
5. Finally the fact that the clause might not ultimately be upheld in court should not necessarily preclude the insertion of such a provision in a contract so long as a reasonable argument can be made that it is enforceable. The reality is an employee may not want to engage in litigation where his/her exposure may be significant including legal fees.