BY: ARJUN HAIR 

In 1994, Walt Disney Pictures released the instant-classic Christmas movie, The Santa Clause, inadvertently introducing the world to the often confusing but ever-so-important area of contract law.

If you haven’t seen the film or either of its two sequels in the 26 years they have been available, consider this your spoiler alert.

In the first act of the film, Scott Calvin (Tim Allen) runs outside after hearing a clatter on his roof. He sees Santa Claus on top of his house and yells at him, startling poor Santa into falling off of the roof and disappearing. All that remained was the famous red suit and Santa’s business card, on the back of which read the words “If something should happen to me, put on my suit. The reindeer will know what to do.”

Scott then puts the suit on to appease his son, unknowingly agreeing to be Santa Clause forever, or until something happens to him (like falling off a roof).

At the North Pole, the head elf, Bernard (David Krumholtz), explains to Scott that by putting on the suit he agreed to the Santa Clause, as in the contract written as fine print along the border of the card. The contract reads (in print so fine it requires a magnifying glass):

“ln putting on this suit and entering the sleigh the wearer waives any and all rights to any previous identity, real or implied, and fully accepts the duties and responsibilities of Santa Claus in perpetuity until such time that wearer becomes unable to do so by either accident or design.”

For those worried parents concerned about ending up in the same position as Scott Calvin, fret not because this contract is not enforceable in the slightest.

A contract requires the following elements:

• Offer and acceptance;
• Intention to create a legal relationship;
• Consideration;
• Certainty; and
• Privity

Even when all of those elements are there, there are a number of other issues that could cause part or all of a contract to be unenforceable.

Offer and Acceptance

In the movie, the offer is sort of made in the presentation of Santa’s card, but since the contract is in such tiny print its debatable that Scott Calvin really received the offer at all.

Acceptance was the point that Scott and Bernard debated during Scott’s first trip to the North Pole. Scott insists that he did not agree to the contract, and Bernard insists that he accepted by putting on the red suit and getting in the sleigh.

Perhaps surprisingly, Bernard is right. The contract is “unilateral”, which means its possible to accept the terms simply by doing an action that triggers acceptance. A common unilateral contract you might see is a “missing dog” poster that offers a monetary reward. If you find and return the dog, you have entered a contract with the dog’s owner and are entitled to the reward.

Scott did the actions that trigger acceptance for this unilateral contract, but that does not mean it is enforceable. Scott did not know about the contract, so he did not intend to agree to it.

Intention to Create a Legal Relationship

The intention requirement is pretty straightforward. All parties to a contract must intend on entering a legal relationship that holds them all accountable if the contract is breached. Scott did not know about the contract so he could not have intended to enter a legal relationship.

Consideration

When it comes to contracts, there needs to be consideration flowing both ways. Put in normal words, all parties need to be receiving some sort of benefit.

One party gets the benefit of having a successor to the previous Santa, but what does Scott get? You could say that Scott’s benefit is getting to be Santa, which is admittedly pretty awesome. Would you accept a contract that says you have to be Santa forever, and in exchange you get to be Santa forever?

Certainty

The certainty requirement means that the parties need to have a reasonable idea of what they are agreeing to. Let’s assume Scott saw the contract and agreed to it on purpose. The contract is so vague that it would be pretty much impossible to enforce.

The contract requires Scott take on the “duties and responsibilities of Santa Claus” but doesn’t explain what those might be. Everyone knows the main things, like checking the list twice, delivering presents, eating cookies, etc. but what else is there? Cleaning the reindeer? Paying the elves? Mall meet-and-greets?

The contract also binds Scott to performing these duties “in perpetuity” until he is “unable to do so”. This is also very vague – would catching the flu count? What about a scheduling conflict?

Even if Scott Calvin wanted to accept the contract, it would be unenforceable because it is too uncertain.

Privity

The idea of privity is that only the parties of a contract can try to enforce it. That brings up the question of who the parties are in this situation. We have Scott Calvin on one side, but who is the other party? Maybe its more than one party?

The previous Santa disappeared after falling off Scott’s roof, so it could be his estate. Some due diligence would need to be done to figure out exactly what his estate looks like and who is in charge (probably Bernard).

The other party could also be with Santa’s workshop, assuming its some sort of organization that is legally able to enter contracts.

Since we know Santa’s workshop is in Canada, with an address of North Pole, Canada H0H 0H0, it’s possible the workshop is a federal corporation. If this is true, the directors of the workshop could sue Scott to try and enforce the terms.

There is no real way to figure out who the other parties are to the contract since the contract was not signed and it did not list the parties.

The Bottom Line

If Scott Calvin decided he did not want to be the new Santa Claus and he was sued for it, he would almost certainly win that battle. He did not mean to accept the contract, the terms of the contract are too vague, he does not receive any consideration, and it is not even clear who the parties are.

If you find yourself the unwilling successor to Santa Claus, or if you have any other contract issue, contact our team at Kane Shannon Weiler LLP.

From everyone here, we wish you and your family a safe and happy holidays, and a very merry Christmas!

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

BY: Junki Hong 

With COVID-19 still raging, employers and employees continue to face challenging situations and decisions. The BC Human Rights Tribunal (the “Tribunal”)  continues to indicate that hasty terminations can have dire consequences and thus, should be carefully thought through. An example we will cover in this article is from their 2020 decision in Benton v Richmond Plastics, 2020 BCHRT 82.

Rachel Benton who made the complaint to the Tribunal was hired to work for Richmond Plastics Ltd. (the “Employer”). On her first day of work, Ms. Benton told a co-worker and management of a number of mental health conditions she had. On that same day, the Employer fired Ms. Benton. The Employer’s Chief Financial Officer told Ms. Benton that she was fired because her medications and/or mental health made the officer feel “uncomfortable”. Ms. Benton complained to the Tribunal that her disabilities were a factor in the termination of her employment. The Tribunal held that the Employer had indeed violated s.13 of the Human Rights Code (“Code”).

Background

The Employer hired Ms. Benton as a receptionist/administrative assistant. On her first – and last – day, Ms. Benton arrived early and began her training. By 10:00 am, the co-worker training Ms. Benton decided that Ms. Benton was not a good fit and further was incompetent: the co-worker reported the same to the Employer (note that Ms. Benton’s work competency was heavily disputed by Ms. Benton and her previous employer supported that Ms. Benton was in fact competent).

Following this brief stint of training, Ms. Benton had a facility tour and filled out forms from a human resources employee. In so doing, Ms. Benton disclosed medications she was taking and in communicating with the co-worker, told her that she had a number of mental illnesses.

The co-worker had reassured Ms. Benton that the Employer was very “accepting”. Before lunch, the same co-worker again went to the Employer to tell that Ms. Benton was not a good fit. In the afternoon, Ms. Benton was invited to a meeting and accused of her failure to tell about her medication.

Ms. Benton was told that her taking of the medication or mental disabilities, made the Employer feel “uncomfortable”. The Employer had provided no other explanation for Ms. Benton’s termination: the only explanation was her mental health. Both the start of her employment and the unanticipated and abrupt end occurred within the span of 6.5 hours.

Analysis

The Tribunal was clear that it was not necessary for Ms. Benton to prove that her mental illnesses were the only or overriding factor in the Employer’s decision to terminate but simply that they were a factor.

In view of the foregoing, the Tribunal held that it was more probable than not that Ms. Benton’s disabilities were a factor in her termination. This is somewhat alarming as the President of the Employer who decided to terminate Ms. Benton’s employment did not know about the mental disabilities. However, the Tribunal said that the CFO who hired and fired Ms. Benton knew and had sufficient role and authority.

In view of the nature of discrimination against Ms. Benton, Ms. Benton’s vulnerability, and the effect on Ms. Benton, the Tribunal awarded Ms. Benton $30,000 as damages for injury to her dignity, feelings, and self-respect. Further in consideration of the effects that discrimination had on Ms. Benton, the Tribunal awarded 12 months of wage loss, amounting to $35,000.

Takeaway

It is crucial to remember that the Tribunal stressed that mental disabilities did not have to be the only cause, and not even the principal cause for Ms. Benton’s termination.

While the Tribunal acknowledged that there may be other non-discriminatory factors that contributed to Ms. Benton’s termination, what really mattered was that the mental disabilities were in fact, a factor.

Another major point to remember is that the effect of the discrimination on the terminated employee is not within the employer’s control or foreseeability. In this case, the Employer was ordered to pay $65,000 in damages despite only having Ms. Benton employed for one day.

This case serves as a reminder for employers to be cautious in their decision making and the reasons given for terminations. This is particularly important when an employee has disclosed health issues to anyone at the workplace.

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 Employment & Labour Group.

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BY: ARJUN HAIR

Realtors are held to a high standard of professionalism, and have a legal duty to act in the best interest of their clients. Acting in their clients’ best interest involves disclosing information to their client where appropriate, and avoiding conflict of interest. This article aims to explain some of the more common situations in which a realtor is obligated to disclose certain information to their clients, and how they are supposed to avoid conflicts of interest.

For more thorough details on realtors’ legal obligations, read the Real Estate Rules, which are publicly available on the Real Estate Council of BC’s website here.

What is "Fiduciary Duty"?

When a realtor becomes your agent, you enter a fiduciary relationship with them where the agent owes you a fiduciary duty. Under this relationship, the realtor is required by law to act solely for your benefit, even if that results in a detriment to themselves.

This duty is the driving force behind all of the rules governing how realtors are to engage with their clients and represent them.

Disclosure Requirements

As a client, there are certain things that realtors are obligated to disclose to you in order to fulfill their fiduciary duties. The specific duties are listed under the Real Estate Rules, Division 2.

Disclosure of Representation

Before a realtor can represent you in a real estate transaction, they must first disclose to you their duties and responsibilities, and provide you information on how to file a complaint about their conduct should they act unprofessionally. In BC, this disclosure is standardized and you can see a copy of the disclosure form here.

Disclosure of Interest

Realtors are required to disclose whether they, or someone they’re close to, are the one buying your property, or if they’re the one selling you the property. This disclosure must be made even if the property is being bought or sold by the realtor indirectly. This is an important disclosure because it indicates that the realtor has an interest in the subject of the deal.

Disclosure of Risks to Unrepresented Parties

In some real estate transactions realtors find themselves acting for one party while the other party remains unrepresented. In these situations, the realtor has to disclose to the unrepresented party that the realtor is limited in how they can help, as the realtor has a duty to their own client above everything else. The realtor has to recommend that the unrepresented party seek professional advice from someone else.

Disclosure of Remuneration

Understandably, realtors are required to disclose the amount they anticipate being paid as a result of the services they provide to their clients. This should be disclosed as a dollar amount calculated based on the value of the offer for purchase of the property.

If a realtor expects to receive, directly or indirectly, any sort of income other than what they are supposed to receive directly from a client, they are required to disclose the source, the amount, and any other relevant facts about this additional income. For example, if a realtor receives a kickback for referring their client to a mortgage broker, lawyer, home inspector, or bank, they are required to disclose that to the client.

Avoiding Conflict of Interest

Dual Agency

Realtors are unable to represent the buyer and the seller in the same transaction. This is known as “dual agency” and has been prohibited since 2018.

If a realtor finds themselves with multiple clients involved in a single transaction, the realtor has to either choose a single client to represent, or opt out of representing anyone in that deal. If they decide to pick one of the clients to represent, the realtor needs to have all of the parties sign a written agreement which states:

• The parties acknowledge the realtor is terminating their relationship with all but one of them due to the conflict of interest;
• A description of the conflict of interest;
• That the realtor may have confidential information about them and is prohibited from disclosing any of it;
• That the realtor may be limited in their ability to advise their remaining client due to their duty to maintain confidentiality for their now former clients; and
• A recommendation that the realtor’s now former clients seek independent professional advice.

Bottom Line

With rules and regulations being regularly updated by RECBC, it’s important for realtors to stay up-to-date with what their obligations are, and for clients to know what information they’re entitled to receiving.

At Kane Shannon Weiler LLP, our clients include realtors and property owners, and we’re equipped to assist with every aspect of real estate transactions from conveyancing to real estate disputes. Get in touch with us to speak to one of our real estate lawyers!

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

BY: ARJUN HAIR

Here at Kane Shannon Weiler LLP, one of the most common questions our corporate lawyers get asked is, “should I incorporate?”

To answer that question properly, we should start at the beginning.

What Does Incorporating Mean?

Incorporation is the process of setting up a corporation, usually a company or a society. The rules around setting up a corporation in BC are set out in the BC Business Corporation Act. It’s also possible to set up a corporation federally under the Canada Business Corporation Act.

For the sake of keeping things simple, we’re just going to talk about setting up a company in BC.

Advantages to Incorporating

Creating a Separate Legal Entity

One of the main benefits to incorporating is that it creates a legal separation between you as an individual and your business. For example, your company’s revenue will not be on your personal income tax, and your company’s debt will not count as your personal debt.

If you have not incorporated and are working for yourself, you are probably a sole proprietorship. This means that you can be held personally liable for everything your business does, because you are your business and your business is you. This means that if your business owes money to someone, they can come after your personal bank account to collect.

Since your company’s creditors can only claim your company’s assets and not your personal one, companies have “limited liability,” which is why some company names end in “Ltd.” or “Limited.” On the flip side, as a sole proprietor your business’ creditors can come after your personal assets as well as your business assets, making it “unlimited liability.”

Perpetual Existence

With a sole proprietorship, since you and your business are one and the same, the second you stop working is the second your business ceases to exist. Your kids cannot take over the family business if *you* are the family business.

If you incorporate, your company can continue operating long after you retire. This is attractive for a few reasons. One reason, as already mentioned, is that you have the possibility of keeping the business in the family if you want your kid(s) to take over. Another reason is that if your business continues to operate after you retire, you could continue to collect dividends if you keep your shares in the company.

Raising Capital

It is easier to raise capital through a corporation. Through a corporation you can sell shares of your company to investors. Investors typically buy “preferred” shares in a company which generate a return on investment through guaranteed dividends. This is known as “equity capital” because you are raising money based on the value of your business and the investor’s belief that the business will continue its success enough to be able to keep paying out dividends.

It is also possible for corporations to raise capital through debt, by entering loan agreements. A business loan works just like any other loan, in which you borrow money that you have to pay back with interest.

Disadvantages to Incorporating

Unlike a sole proprietorship, which is free, incorporating costs money. Not only at the start when you initially file your documents, but also on an annual basis as you need to pay the government an annual maintenance fee. On top of that, you will have additional administrative costs, such as separate tax returns and financial statements for your company.

Things to Consider

If You’re Concerned about Liability

You should certainly incorporate if you are concerned about liability. Incorporating can protect you in most cases from being held personally liable for debts or obligations of your company.

If You're Concerned About Tax Savings

If your business is generating more money than you need for your lifestyle, you can likely save money by incorporating. Let’s say you only need $80,000 per year to keep up your lifestyle, but your sole proprietorship generates $200,000 per year. Without incorporating, your personal income tax will be based on the full $200,000, resulting in approximately $69,000 of personal tax.

Alternatively you could incorporate and earn business income through a company. The first $500,000 of business income earned in a company is taxed at a low preferential rate of 11%. If you incorporate and leave $120,000 in your company and pay yourself $80,000 your overall tax would be approximately $33,000 of corporate and personal tax, resulting in a tax deferral of approximately $36,000.

If You Want to Sell Your Business Eventually

As a sole proprietorship you could sell all of your assets when you decide it’s time to move on, but there are things you can’t sell, such as any contracts you entered for the business, including employment contracts.

With a corporation, you can sell the entire thing, including its name, goodwill, and the contracts with employees and clients will remain intact since the contracts are with the corporation, not with you personally.

Bottom Line

When deciding whether or not to incorporate your business there is a lot to consider. If after reading this article you are still unsure what the right choice is for you, come talk to us!

The business law team here at Kane Shannon Weiler LLP is more than happy to answer your questions and help guide you to making the right decision for your business.

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

BY: MIKE WEILER

One of the toughest things for a lawyer to do is to convince his client, especially when that is the CEO or owner, that he or she is simply wrong when they thought they had a good case.  This is especially true when it comes to termination for just cause.  An employee may well have engaged in serious misconduct but given the courts’ high standard that needs to be met to prove just cause, the client simply has to come to grips with the fact that in law “being right (i.e. the decision to terminate) doesn’t necessarily make it right at law (i.e. termination for just cause).  Often clients think that folding on the issue of just cause will be a sign of weakness so they may well want to proceed to court even where there is a risk of losing.  They are often prepared to fight a case simply on principle.  Where there is an arguable case on the evidence that is understandable.

But in some cases the evidence is so clear that a claim of just cause for termination has no legal merit that a lawyer has to convince the client to not proceed to trial on the issue.  Not only will the client likely face a huge damage claim they will also incur significant legal fees and may well have to pay the plaintiff’s legal fees.  Worst of all the court decision may reject the client’s evidence and find that the client is not to be believed.  It is never an easy task to explain the court’s Reasons for Judgment to a client in these circumstances.

A recent decision of the B C Supreme Court illustrates this principle.

In Hrynkiw v Cental City Brewers & Distillers 2020 BCSC 1640 the owner of the company terminated his 56 year old CFO of 6 years’ service and argued all the way through trial that he had just cause for a summary termination.  He claimed that the Plaintiff was only entitled to 2 weeks’ vacation whereas the Plaintiff had been paid 4 weeks since he was hired. Further he claimed that the Plaintiff falsely claimed an increase in his share bonus from $25,000 to $50,000.

At trial the Defendant argued just cause for termination based on the following:

1. The “unauthorized” share bonus payments and the falsification of vacation records
2. The alleged “theft” of the Plaintiff’s personnel file at the time of termination
3. The alleged failure of the Plaintiff to purchase shares with his share bonus compensation which was a term of that bonus

Not only did the Defendant fail to prove cause based on the above 3 items the court made it clear there was simply no basis in fact to make such allegations.  Further the owner rushed to judgment and made the decision to terminate without any investigation of the facts—the owner’s investigation of the alleged misconduct was “adversarial and biased from the start” and he made “no genuine effort to review the full circumstances.”

Since there was no written employment contract nor any documents regarding the increase of the share bonus the court had to decide the issue of credibility between the Plaintiff and Mr. Frost the owner of the Defendant.  After reviewing the principles of law that applied and the overview of the evidence the court stated:

The principles that govern the assessment of the credibility of a witness are summarized in Bradshaw v. Stenner, 2010 BCSC 1398, aff'd 2012 BCCA 296, as follows:

[186]    Credibility involves an assessment of the trustworthiness of a witness' testimony based upon the veracity or sincerity of a witness and the accuracy of the evidence that the witness provides... .The art of assessment involves examination of various factors such as the ability and opportunity to observe events, the firmness of his memory, the ability to resist the influence of interest to modify his recollection, whether the witness' evidence harmonizes with independent evidence that has been accepted, whether the witness changes his testimony during direct and cross-examination, whether the witness' testimony seems unreasonable, impossible, or unlikely, whether a witness has a motive to lie, and the demeanour of a witness generally... . Ultimately, the validity of the evidence depends on whether the evidence is consistent with the probabilities affecting the case as a whole and shown to be in existence at the time (Farnya at para. 356). [Citations omitted]

[86]         Generally speaking, I found the plaintiff to be a more credible witness than Mr. Frost. The plaintiff’s evidence was internally consistent, and consistent with the documentary evidence and the evidence of witnesses other than Mr. Frost. The plaintiff answered questions directly and concisely. He was not defensive or argumentative in cross-examination. He was clear in his memory of relevant events, and his evidence did not change over the course of direct and cross-examination.

[87]         Mr. Frost, by contrast, was a difficult witness. He was combative and argumentative in cross-examination. He was frequently evasive in answering direct questions and he disparaged plaintiff’s counsel with remarks like “I think you actually know, counsel, I think you’re a very smart fellow”. Mr. Frost’s memory was selective. He admitted to having no clear memory about critical events like the meetings that preceded his initial hiring of the plaintiff. When pressed in cross-examination about the accuracy of his recollection regarding Central City’s organizational charts, Mr. Frost responded “clearly I am not that detailed, counsel”. As the same time, he claimed to recall discrete facts that supported his case with absolute clarity that left no room for doubt or ambiguity. Mr. Frost was not careful or restrained in his evidence about the plaintiff’s alleged wrongdoing. For example, he testified to his certainty that the plaintiff had stolen his own personnel file from the Central City office even while acknowledging he had no evidence to support such an accusation. Mr. Frost’s evidence was, in important respects, inconsistent with the documentary record and the evidence of other witnesses.

[88]         I will more specifically address the difficulties I had with Mr. Frost’s evidence in resolving the particular issues in dispute. As a general comment, where the evidence of the plaintiff and Mr. Frost conflicts, I prefer the plaintiff’s evidence. [Emphasis added]

It seemed clear from reading the decision that the Defendant’s evidence would not support any of these serious allegations.  Among other things the documentary evidence and the fact the Plaintiff was paid for 2 years at the higher bonus rate and had taken 4 weeks’ vacation from the start of his employment was totally inconsistent with Mr. Frost’s evidence.  In one case a witness called by the defence gave evidence contradicting Mr. Frost’s evidence and supporting the Plaintiff’s evidence.

The Defendant insisted throughout the trial that the Plaintiff had stolen his personnel file—there was no evidence whatsoever to support that serious allegation.  In fact Mr. Frost admitted such an allegation was based solely on speculation. Allegation #3 was only made in legal argument after the trial and was without foundation.

Turning then to the issue of damages the Plaintiff hit a home run and succeeded 100% in his claims.

Notice:          

The Plaintiff claimed 12 months’ notice; the Defendant argued 6-7 months.

       Court Held:     12 months

Damages:

The Plaintiff claimed $118,492.76 after taking mitigation into account; the Defendant argued damages should not include any damages for the share bonus during the notice period thus reducing the damage claim substantially.

Court Held       Damages of $118,492.76

Share bonus to termination

The Plaintiff claimed $33,513.92 for unpaid bonus to termination date; the Defendant argued that no bonus should be paid

Court Held       damages of $33,513.92

Accrued Vacation

Although relying on the Defendant’s payroll records the Plaintiff was awarded $14,903.87 for accrued vacation

Aggravated (mental stress) damages

The Plaintiff argued that the defendant had breached its duty of good faith and fair dealing in the manner of dismissal by failing to conduct a balanced investigation and advancing and maintaining meritless allegations of serious misconduct against the Plaintiff,

The court found in favour of the Plaintiff on both counts:

Even by the defendant’s account, the plaintiff had been a loyal and competent employee of Central City for over six years up to the time that he was, virtually overnight, locked out of the office and terminated without notice. To the extent that the defendant had concerns as a result of the events around the plaintiff’s request for a share bonus payment in June 2018, the plaintiff deserved to have those concerns addressed through a process that was fair, objective, and respectful. In my view, the defendant’s closed mind and failure to objectively investigate the circumstances before purporting to terminate the plaintiff’s employment for cause was unfair, unduly insensitive to the plaintiff, and constituted a breach of the defendant’s duty of good faith and fair dealing.

The unfounded allegations of cause were also a breach of the duty of good faith and fair dealing that was entirely forseeable that the Plaintiff would suffer mental distress and reputational harm as a result of such conduct in the course of dismissal.

Court Held      

Plaintiff awarded $35,000 aggravated damages.  NOTE those damages are not taxable so worth substantially more to Plaintiff

Punitive Damages

The Plaintiff claimed punitive damages

The court rejected this claim but a careful review of its reasons shows that it would likely reward the Plaintiff by awarding Special Costs i.e. full indemnification for legal fees.  The court noted punitive damages are rarely awarded especially where other remedies are available:

In considering an employer’s alleged bad faith conduct in the course of litigation, care must be taken not to conflate the analysis of punitive damages and special costs. Generally speaking, reprehensible conduct of parties during the course of litigation should be addressed by way of an award of special costs, while punitive damages relate to an employer’s conduct at the time of termination: Marchen v. Dams Ford Lincoln Sales Ltd., 2010 BCCA 29 at paras. 66-69 [Marchen]. See also: Smithies Holdings Inc. v. RCV Holdings Ltd., 2017 BCCA 177 at paras. 128-134.

[214]     However, an employer’s conduct in the course of litigation may be taken into account in an award of punitive damages where an employer’s bad faith conduct at the time of termination continues in an “unbroken course” throughout the legal proceeding: Kelly at para. 128…

The conditions for an award of punitive damages include that other remedies available to the plaintiff are insufficient to serve the objectives of deterrence, retribution, and denunciation. Marchen directs that, generally speaking, allegations of reprehensible conduct during the course of litigation should be addressed by way of an application for special costs rather than by way of an award of punitive damages.

[217]     I have awarded the plaintiff compensatory damages for the mental distress caused by the defendant’s breach of its duty of good faith in the manner of his dismissal. He has requested, and will have, a further opportunity to make submissions on an appropriate costs order. To the extent that the plaintiff alleges the defendant’s conduct in the course of the litigation is reprehensible and deserving of rebuke, he will have an opportunity to seek a remedy in costs. [Emphasis added] 

TAKEAWAYS

It is easy to be a Monday morning quarterback and second guess litigation strategy without knowing the full details of what went into the decision to terminate for cause or pursue these matters through a full trial.  But here the court record and reasons show that such defense was clearly without merit given the lack of evidence, the fact that the Defendant’s own witness gave evidence against it, the fact that documentary evidence supported the Plaintiff’s claim and the fact that some allegations were clearly advanced on pure speculation without any evidence.

It is important to carefully examine the evidence of cause at the time of termination and the content of the termination letter.  It is also important to review the merits of such a claim and where appropriate pursue settlement.  And that often means counsel have to have a serious “Come to Jesus” meeting with the owner before proceeding.

November 5th 2020

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BY: CHRIS DRINOVZ

On November 7, 2020 the BC Provincial Health Officer announced a new public order to significantly reduce the level of social interactions and travel in the Vancouver Coastal and Fraser Health regions for two weeks up to November 23, 2020 at 12:00pm.

Businesses, employers and workplaces need to:

• Review their COVID-19 Safety Plans
• Conduct daily active screening for all workers on site between November 7 and November 23 using the COVID-19 Symptom Checklist. You can access our example Screening Form that our Employment & Labour Group has put together below and adapt it to your business and workplace as necessary.
• Ensure all customers and workers maintain a safe physical distance and wear a mask when appropriate to do so.
• Workplaces must be especially vigilant in shared settings like break rooms and kitchens.

Active inspections will increase, and businesses are encouraged to support working from home, where possible.

Travel: from November 7, 2020 at 10:00 pm travel into and out of the Lower Mainland and the Fraser Valley should be limited to essential travel only.

An ongoing Order was also issued on Gathering and Events on November 10, 2020 available here.

COVID-19 SYMPTOM CHECKLIST FOR THE WORKPLACE

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 Employment & Labour Group.

As the now infamous “CERB” comes to an end, the federal government has created three new temporary benefits aimed at supporting Canadians still unable to work or working less because of the COVID-19 pandemic. Bill C-4, the COVID-19 Response Measures Act received Royal Assent on October 2, 2020 and  introduces three new benefits: the Canada Recovery Benefit (CRB), the Canada Recovery Sickness Benefit (CRSB), and the Canada Recovery Caregiving Benefit (CRCB).

For those employers who thought things would be getting simpler, this is unfortunately not the case. Each of the three “CR” benefits are summarized below. It would benefit employers to be generally familiar with each of the benefits to be in a position to field questions from employees and assist them in understanding their rights. It is also important to recognize the integration between these new federal benefits and the provincial COVID-19 leave.

Canada Recovery Benefit (CRB)

This is basically CERB for the self-employed. It provides $500 per week for up to 26 weeks, for workers who are self-employed or are not eligible for Employment Insurance (EI) and who still require income support. A person is eligible for the CRB between September 27, 2020 and September 25, 2021 if that person:

• Was present in Canada for the period in which they were unable to work;
• Has a valid Social Insurance Number (SIN) and is at least 15 years old;
• Was not working for reasons related to COVID-19 or had a 50% reduction in  average weekly income compared to the previous year due to COVID-19;
• Did not apply for or receive any of the following: CRSB, CRCB, short term disability benefits, workers’ compensation benefits, or EI benefits;
• Was not eligible for EI benefits;
• Earned at least $5,000 in 2019, 2020, or in the 12 months before the date they apply from any of the following sources:

– employment income (total or gross pay)

– net self-employment income (after deducting expenses)

– maternity and parental benefits from EI or similar QPIP benefits

• Has not quit their job or reduced hours voluntarily on or after September 27, 2020, unless it was reasonable to do so (Query: what does “reasonable” mean?)
• Was seeking work during the period, either as an employee or in self-employment, and has not turned down reasonable work during the 2-week period you’re applying for (Query: how would this be enforced?)

**Note: an individual who has an income exceeding $38,000 for 2020 or 2021 will be required to repay an amount equal to 50 cents per dollar of income earned in that year above $38,000 up to the total amount of the CRB received in the given year.

Canada Recovery Sickness Benefit (CRSB)

This rather extraordinary benefit was born from the deal struck between the Liberals and the NDP to avoid an early election and essentially provides workers with 10 days of government-paid sick leave. The CRSB is a benefit of $500 ($450 after taxes) per week for up to a total of two weeks between September 27, 2020 and September 25, 2021 for workers who are unable to work because they are sick or must self-isolate for reasons related to COVID-19. A person will be eligible for the CRSB if that person:

• Is unable to work at least 50% of their scheduled work week because they are self-isolating because they:

– Are sick with COVID-19 or may have COVID-19;

– Have been advised to self-isolate due to COVID-19; or

– Have an underlying health condition that puts them at greater risk of getting COVID-19.

• Did not apply for or receive any of the following for the same period: CRB, CRCB, short term disability benefits, workers’ compensation benefits, EI benefits;
• Reside in Canada, were present in Canada, have a valid SIN and are at least 15 years old;
• Earned at least $5,000 in 2019, 2020, or in the 12 months before the date of application from any of the following sources:

– employment income (total or gross pay);

– net self-employment income (after deducting expenses); or

– maternity and parental benefits from EI or similar QPIP benefits;

• Are not receiving paid leave from the employer for the same period;
• **Note: Workers will not be required to have a medical certificate to qualify for the benefit. Also, they may not claim the CRSB and receive other paid sick leave for the same benefit period i.e. no double-dipping.

The CRSB is not without criticism from the business community as some are of the opinion this benefit will be highly damaging to Canada’s economy (due to the $40 billion cost) but more importantly, to workplace productivity. This is because unexpected absences from the workplace have a larger impact than planned absences such as holidays: if a replacement cannot be arranged for, work does not get done, customers are left without service or with substandard service.  In a recent article in the Financial Post, employment lawyer Howard Levitt cynically wrote:

Having negotiated many union agreements, there is one truism: when you allow for 10 “sick” days a year, all or virtually all employees miraculously are suddenly “sick” ten times a year. In the minds of the employees, the ten days become floating holidays, permitting them to call in “sick” ten times a year at a time of their, not their employer’s, convenience. You will see a particular surge of “illnesses” around weekends.

Canada Recovery Caregiving Benefit (CRCB)

The CRCB provides $500 per week for up to 26 weeks per household, for eligible Canadians unable to work because they must care for a child under the age of 12 or family member because schools, daycares or care facilities are closed due to COVID-19 or because the child or family member is sick and/or required to quarantine. A resident of Canada will be eligible for the CRCB benefit if that person:

• Is unable to work at least 50% of the scheduled work week because they are caring for a family member;
• Did not apply for or receive any of the following for the same period: CRB, CRSB, short term disability benefits, workers’ compensation benefits, EI benefits;
• Is not receiving paid leave from your employer for the same period;
• Is caring for their child under 12 years old or a family member who needs supervised care because they are at home for one of the following reasons:

– Their school, daycare, day program, or care facility is closed or unavailable to them due to COVID-19;

– Their regular care services are unavailable due to COVID-19;

– The person under the applicant’s care is:

* sick with COVID-19 or has symptoms of COVID-19;

* at risk of serious health complications if they get COVID-19, as advised by a medical professional; or

* self-isolating due to COVID-19;

• Earned at least $5,000 in 2019, 2020, or in the 12 months before the date of application from any of the following sources:

– employment income (total or gross pay)

– net self-employment income (after deducting expenses)

– maternity and parental benefits from EI or similar QPIP benefits

• Is the only person in your household applying for the benefit for the week.

An individual will only be eligible to receive one benefit in any given period.

You can review further details of Bill C-4 here.

Should you have any questions about these new federal benefits, please contact one of the lawyers in the KSW Employment & Labour Group.

BY: CHRIS DRINOVZ

The next BC Provincial General Election will take place on Saturday, October 24, 2020 (“General Voting Day”). 

Under the s 74 of the B.C. Election Act, employers have an obligation to provide voters with four consecutive hours free from work during advance voting or on General Voting Day. We are publishing this article to help employers understand the scope of these obligations.

RIGHT TO TIME OFF

Voters are entitled to four consecutive hours free from work to vote during advance voting or on General Voting Day. Voting hours during advance voting are 8 a.m. to 8 p.m. local time and on General Voting Day are 8 a.m. to 8 p.m. Pacific time.

This does not necessarily mean four hours off work. It means that there must be a four-hour period free from work during voting hours. Time off may be at the beginning or end of an employee’s shift, or unnecessary if normal working hours already provide enough time free from work to vote.

For example, if a shift ends at 4 p.m., or does not begin until noon, the employee is not entitled to any time off for voting purposes. Employers can decide when their employees can take time off to vote.

We encourage Employers to discuss with their employees in advance how they can exercise their right to vote to ensure that the requirements of the Election Act are met.

It is an offence if an employer deducts pay or penalizes employees for taking time off to vote. Employees are entitled to their regular compensation for any hours not worked during this time.

EXCEPTIONS

There are exceptions to the general rules outlined above. For example, if a voter is in such a remote location that they would not be able to reach any voting place during voting hours, they are not entitled to any time off for voting.

PENALTIES FOR FAILURE TO COMPLY

Failure to comply with section 74 of the Election Act is an offence and, upon conviction, an employer may be liable to a fine of not more than $10,000 or imprisonment for a term not longer than one year, or both.

UNIONIZED WORKPLACES

If you are a unionized employer, check your Collective Agreement as it may have specific provisions applicable to your workplace, on top of your obligations to employees under the Election Act.

Check out our Related Articles here.

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 Employment & Labour Group.

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SUPREME COURT OF CANDA TRIES TO CLARIFY VARIOUS LEGAL CONCEPTS

BY: MIKE WEILER

The Supreme Court of Canada (“SCC”) choses cases based on the importance of the legal principles the case evokes. Generally the role of our highest court is to correct errors of law in the lower courts and to bring clarity and uniformity to the law for future cases and to allow the population to “know the rules of the game”.  In some cases the court succeeds:  eg Shaffron which deals with restrictive covenants in employment contracts.  In other areas the court struggles to create that clarity for example in defining the scope of review of administrative tribunals:  e.g. Dunsmuir.

In Matthews versus Ocean Nutrition Canada Ltd. 2020 SCC 26 the SCC overturned the Nova Scotia Court of Appeal and awarded an employee who had been constructively dismissed $1 million under an incentive plan because the triggering event for payment occurred during the 15 month notice period. Further, it held that the language in the LTIP did not remove this common law right to the bonus as damages for wrongful dismissal.  This analysis clarified the law in this area but unfortunately the SCC also took this occasion to attempt to clarify various other aspects of wrongful dismissal law, including the duty of good faith in the performance of contracts.  While clarifying certain aspects of the law of wrongful dismissal and damages, the decision creates uncertainty in respect of the scope of the duty of good faith and honest performance of contracts.

FACTS

Mr. Matthews was a well-respected experienced chemist who occupied several senior management positions with Ocean.  As a senior manager he was entitled to and enrolled in the long term incentive plan (“LTIP”).  Under the LTIP a “Realization Event” such as a sale would trigger the payment to employees who would qualify under the plan. 

In 2007 Ocean hired a new COO who began “a campaign to marginalize” Mr. Mathews which included limiting his responsibilities and lying to him about his prospects and status. He was ostracized within the company and the actions of the company officials were “characterized by dishonesty”.  The misconduct was truly egregious as the company had “no qualms about leaving Matthews in a state of anxiety about his future” and left him in a “prolonged state of anxiety and uncertainty”.  Mr. Matthews endured the misconduct for years primarily because he knew the company would be sold and he wanted to preserve his LTIP bonus. However he finally had enough and quit.  He successfully sued for constructive dismissal and the court awarded damages based on a 15 month notice period.  Neither the constructive dismissal nor the notice period was challenged in the SCC.  The company was sold 13 months after he quit.  In his wrongful dismissal action he claimed payment of the $1 million bonus under the LTIP. He also sought a declaration that the dismissal was done in bad faith.

BONUS PAYMENT AS DAMAGES FOR WRONGFUL DISMISSAL

The SCC confirmed that in this case there were two basis to find a constructive dismissal as per its hallmark decision in Potter. First the employer had substantially breached an express or implied term of the employment contract by unilaterally reducing his responsibilities.  Secondly Ocean’s mistreatment of Mr. Matthews over the years made his continued employment intolerable and the cumulative actions over time demonstrated that Ocean no longer intended to be bound by the contract. 

The SCC noted that it was unnecessary to consider a separate claim for damages for the breach of the duty of good faith and honesty as the key issue of whether Mr. Matthews was entitled to the LTIP award was easily answered by applying common law damage principles.

The court clarified that a claim for the bonus was part of the claim for damages for wrongful dismissal and was not a claim under the LTIP.  That is to say a court will put the employee in the same position as he would have been if he had been given “reasonable working notice”.  Therefore the question was in the first instance “whether, but for the termination, the employee would have been entitled to the bonus during the reasonable notice period.”  The court had no problem in finding that Mr. Matthews would have been so entitled.

The second question then is whether the terms of the LTIP removed Mr. Matthews’ common law right. The test for exclusion is very onerous and the language of the clause will be “strictly construed”.   The language of the exclusion clause must be “absolutely clear and unambiguous”.  So, for example, language requiring an employee to be “full time” or “active” will not suffice.  Even language such as “with or without cause” will not suffice to remove the common law right to the bonus.  The SCC puts an exclamation mark on this point—the exclusion clause “must clearlycover the exact circumstances which have arisen” in order to be effective (emphasis added). 

The court applied these principles to find that the exclusion clause in the LTIP did not apply to exclude the bonus.  That clause 2.03 read:

“ONC shall have no obligation under this Agreement to the Employee unless on the date of the Realization Event the Employee is a full-time employee of ONC.  For greater certainty this Agreement shall be of no force and effect if the employee ceases to be an employee of the ONC regardless of whether the Employee resigns or is terminated, with or without cause.”

SCC then looked at clause 2.05 that had not been considered by the trial judge to see if it excluded the bonus claim.  The clause read:

“The Long Term Value Creation Bonus Plan does not have any current or future value other than on the date of a Realization Event and shall not be calculated as part of the Employee’s compensation for any purpose, including in connection the Employee’s resignation or in any severance calculation.”

The SCC said no.  It distinguished between “damages” and “severance”—the former protect employees by providing an opportunity to seek alternative employment; the latter “acts to compensate long-serving employees for their years of service and investment in the employer’s business and for the special losses they suffer when their employment terminates”. The court noted this is how the concept of severance is used in many provincial employment standards legislation.

The SCC also confirms that there is no implied term that an employer provide “pay in lieu” that would supplant the concept of reasonable notice.   Such a term would be too complex to provide pay in lieu of notice; if there was a term that required “pay in lieu” then that would require the employer to pay it at the time of termination and finally pay in lieu would eliminate the obligation to mitigate damages by seeking alternate employment.

Interestingly the SCC ducked two important arguments that were made by counsel.  First it did not consider whether the exclusion clause must be brought to the employee’s attention before it could be effective.  Secondly it did not consider whether such exclusion clauses were contrary to minimum employment standards: see Machtinger v. HOJ, [1992] 1 S.C.R. 986.

BAD FAITH

In the normal course this would have been the end of the decision. The plaintiff had argued not only breach of contract but also breach of the duty of good faith. The plaintiff did not claim mental stress damages which are usually associated with bad faith claims.  Nor did he pursue in the SCC claims for punitive damages.  These damages may have been available to him if he had pleaded same:

So long as damages are appropriately made out and causation established, a breach of a duty of good faith could certainly give rise to distinct damages based on the principles in Hadley …including damages for mental distress.  Punitive damages could also be available in certain circumstances.

The plaintiff never claimed damages for mental stress which are different than damages for wrongful dismissal. Since the result would have been the same i.e. payment of $1 million, it was unnecessary for the court to consider this alternative argument for damages for bad faith.

However although not necessary for the outcome of the case ,the SCC decided to opine on the nature of the duty of good faith performance of a contract as outlined by the SCC in Bhasin and further analyzed in Keayes and Potter.

The court noted that despite the outrageous conduct of the employer in the four year campaign highlighted by dishonesty, the trial judge did not explicitly find a breach of contract.  

Here are a few principles extracted from this portion of the judgment: 

• The duty of honest performance which applies to all contracts means simply that parties “must not lie [to] or otherwise knowingly mislead” the other side “about matters directly linked to the performance of the contract” and this principle applies to employment agreements.
• There are clear differences in the contractual breaches: “To say that one has been treated dishonestly is quite unlike saying that one has been dismissed without notice.”
• The failure to give reasonable working notice “does not turn on whether or not the employer acted honestly or in good faith”.
• An employee can allege dishonesty in the performance of a contract by the employer “independently of any failure to provide reasonable notice”. Such misconduct by the employer can “serve as a basis to answer for foreseeable injury that results from callous or insensitive conduct in the manner of dismissal”.
• “Damages out of the same dismissal are calculated differently depending on the breach invoked”. The failure to act in good faith “during the manner of dismissal can lead to foreseeable, compensable damages“. This is because the two breaches are different. “It suffices to say that a contractual breach of good faith rests on a wholly distinct basis form that relating to the failure to provide reasonable notice.”
• However although the causes of action are distinct they cannot be “deployed to provide what amounts to double recovery”. So in this case all the plaintiff sought under the breach of the duty of good faith was the payment of the LTIP but that was awarded to him under the heading of damages for lack of reasonable working notice.
• It was important that the trial judge found that Ocean had not intended to terminate Mr. Matthews in order to avoid payment of the LTIP. One would assume if that had been a motivating factor then damages may have been awarded for breach of the duty of good faith.
• Where an employee alleges a breach of the duty of good faith the court can look back over the period of employment and is not confined “to the exact moment of termination itself.” It was open to the trial judge to tie the dishonesty over the four year period to the “manner of dismissal”.  That is to say the “manner of dismissal” as considered in the cases is not tied to the “moment of dismissal”.  So for example constructive dismissal cases are often found as was the case here based on a history of misconduct and a series of changes over time.  This allows the court to apply a “more flexible measure of conduct over the period leading up to the moment of actual termination of the employment contract.”
• The court also raised some “interesting questions” but failed to answer them. For example it noted that not all mistreatment by the employer will lead to a constructive dismissal:

“It might be that, as argued by various parties in this appeal, a duty of good faith will one day bind the employer based on a mutual obligation of loyalty in a non-fiduciary sense during the life of the employment contract, owed reciprocally by both the employer and the employee.  I recognize, however, that whether the law should recognize this is a matter of fair debate.

This is a dismissal case.  In light of the comment in Bhasin that the common law should develop in an incremental fashion, I would decline to decide whether a broader duty exists during the life of the employment contract in the absence of an appropriate factual record.”

• Finally since no additional damages were sought in this case for breach of the duty of good faith the court considered whether it would be appropriate to issue a declaration of bad faith:

“Nevertheless, a proper acknowledgement that an employer’s conduct was contrary to the expected standard of good faith can transcend the request for damages, and may be meaningful for an employee in a way that a mere finding that reasonable notice was provided cannot.  One aspect of this relates to dignity in the workplace and the non-financial value associated with fair treatment upon dismissal…Indeed, this Court has been emphatic in recognizing that, in addition to whatever financial dimension work entails, a person’s employment is  ‘an essential component of [their] sense of identity, self-worth and emotional well-being’ …To this end , it is understandable that employees seek some recognition that they have been mistreated, reflecting that they feel it unfair beyond any compensatory matter, that they were forced to quit in such circumstances.” 

Since the plaintiff offered no explanation as to why such a declaration should be issued the court would not make a declaration of a contractual breach related to good faith in the formal sense.  But it went on to note on the facts that such a declaration would have been appropriate.

 This last comment by the court is most troubling.  The court provides no road map as to how these obiter comments will play out in future claims or what the utility of a declaration of a contractual breach related to good faith in the formal sense would be.   Yet it continues to assert the importance of the role of work in an employee’s life.  Nevertheless I am certain we will see plaintiffs’ counsel build on these comments to construct further claims against employers who have alleged acted in bad faith.  Such claims might include in the extreme case a claim for reinstatement or extension of the notice period beyond the normal notice period.

TAKEAWAYS

On the key issue in the appeal, employers should consider the wording of their employment contracts to see if in fact they have contracted out of the obligation to pay any incentive bonus that would otherwise come due during the notice period.  It will be extremely difficult to craft such enforceable language in light of this decision. 

But perhaps a better solution is to ensure that there is a written employment agreement in place that limits the employee’s right to reasonable notice at common law.  In this case it could have been possible under BC law to have an enforceable contract that limited Mr. Matthews’ damages to 8 weeks notwithstanding his 15 year tenure.  That in turn on the facts of this case would have eliminated the right to the $1 million bonus.

The uncertainty created by the SCC’s obiter comments on the duty of good faith and honest performance is unfortunate.  In the real world it is hard to be honest with employees all of the time. However the comments by the court serve as a good reminder to employers to treat their employees with respect and fairness and above all honesty.