Long-Term Disability insurers in Canada might be treading a little lighter these days, as the Ontario Court of Appeal has upheld a landmark $1.5 million punitive damages award, the largest in Canada for a Long-Term Disability claim, in the decision of Baker v. Blue Cross Life Insurance Company of Canada.

Facts

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Sara Baker was the Director of Food Services, Environment, and Porter or Transport Services at Humber River Hospital. In October of 2013, at just 38 years old, Ms. Baker suffered a stroke while exercising.

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Following her injury, Ms. Baker applied for, and was subsequently paid, short-term disability benefits through her employer’s policy with Blue Cross. In January of 2014, Blue Cross ceased Ms. Baker’s benefits, only to reinstate them just two months later after appeal.

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Following the completion of Ms. Baker’s short-term disability benefits, Ms. Baker was transitioned to Blue Cross’ long-term disability benefits (“LTD”). In order to be eligible for LTD benefits, Ms. Baker, like many insured persons under similar policies, had to demonstrate that she satisfied the definition of “total disability”.

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For the first two years, the first prong for Ms. Baker to satisfy the definition of “total disability”, was to prove that she was unable to perform the regular duties of her own occupation. Following the two-year period, in order to still qualify for benefits, Ms. Baker had to prove an inability to perform any occupation that would earn 60% or more of her previous earnings with her employer.

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Ms. Baker was paid two years of “own occupation” benefits following the conclusion of her short-term disability. During this period, Ms. Baker’s benefits were yet again cut-off by Blue Cross, only to be reinstated – again – after an appeal.

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When Ms. Baker hit the “any occupation” stage, Blue Cross cut her off again. This time, however, Blue Cross refused to reinstate Ms. Baker’s benefits after she exhausted Blue Cross’ appeal process. It was at this point that Ms. Baker elected to commence a civil action against Blue Cross, seeking her “any occupation” benefits, along with aggravated and punitive damages for Blue Cross’ conduct.

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Following a 22-day jury trial, Ms. Baker was awarded a whopping, $1.76 million dollars. Although Ms. Baker’s retroactive benefits was substantial, $1.5 million of the award was made up of punitive damages alone. On top of this award, Ms. Baker was subsequently awarded $1,083,953.50 in full indemnity costs.

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Blue Cross filed an appeal strictly against the punitive damages and costs awards.

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The Appeal Decision

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On appeal, Blue Cross argued that a contextual and fair reading of the record demonstrated that Ms. Baker’s claim was handled in a balanced and reasonable manner. The Court rejected this argument, providing Blue Cross with a wake-up call for handling of future claims.

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Early into the Court’s decision, it becomes immediately clear that this was not going to sway in Blue Cross’ favour:

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[9]         For the reasons discussed below, I would dismiss the appeal and grant leave to appeal costs but deny the costs appeal. In summary, the evidence at trial raised serious concerns regarding the manner in which several disability claim examiners and reviewers at Blue Cross processed Ms. Baker’s file. At best, it shows reckless indifference to its duty to consider the respondent’s claim in good faith and to conduct a good faith investigation, and at worst, a deliberate strategy to wrongfully deny her benefits.

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[12]      Further, there is nothing about the quantum of the award that warrants appellate interference. It was open to the jury to conclude that Blue Cross engaged in systemic and deliberate misconduct in handling Ms. Baker’s claim and that a significant punitive damages award was necessary to deter Blue Cross from conducting themselves in that fashion in the future.

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The Court of Appeal detailed a number of factors which weighed heavily on the jury’s decision to award such a precedent-setting amount. These factors included:

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• Ceasing Ms. Baker’s benefits on three separate occasions. On each occasion, rather than warning Ms. Baker first, Blue Cross chose to cut-off her benefits and then request additional documentation to support her ongoing disability;
• Relying on opinions from contracted general practitioners which it knew or ought to have known were incorrect;
• Selectively relying on evidence that supported their decision to deny Ms. Baker’s benefits, while ignoring conflicting medical evidence. Then, in the face of conflicting evidence, Blue Cross delayed obtaining an independent medical examination (or “IME”) of Ms. Baker;
• Distorting various specialist reports; and
• Misreading a Transferable Skills Analysis report in a way which supported Blue Cross’ decision to deny Ms. Baker’s benefits.

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In upholding the punitive damages award, the Court emphasized the ample evidence that this was a systemic issue within Blue Cross, not simply an issue limited to the handling of Ms. Baker’s claim. The Court confirmed that a punitive damages award of such significance was required to deter similar misconduct by Blue Cross in the future.

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With respect to the pricey full indemnity costs award against Blue Cross, to the tune of just over $1 million, the Court chose not to hold back in detailing to Blue Cross how reprehensible its conduct truly was:

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[44]      There was undoubtedly misconduct by Blue Cross that was worthy of sanction by the court by awarding full indemnity costs. Without repeating the specific instances referenced above, it is fair to conclude that Blue Cross has markedly disregarded its good faith obligations to Ms. Baker. Although some of that conduct is addressed in the awards of damages, not all of it is. In addition to wrongfully denying the respondent coverage in the manner that it did, Blue Cross engaged in a litigation strategy wherein it shielded its employees from appearing at trial to explain themselves. This is one of those rare cases where there has been bad faith conduct that warrants costs on this scale: see e.g., Clarington (Municipality) v. Blue Circle Canada Inc., 2009 ONCA 722, 100 O.R. (3d) 66, at para. 40; Hunt v. TD Securities Inc. (2003), 2003 CanLII 3649 (ON CA), 66 O.R. (3d) 481 (C.A.), at para. 131.

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Takeaways

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The Baker decision is a warning to disability insurers across the country – if you do not act in good faith in the dealing on an insured’s claim, you will be sanctioned. Following this decision, insurers will likely be acting much more carefully in adjudicating individual disability benefit claims.

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For insured individuals, the important message here is that being denied short or long-term disability is not necessarily the end of the road. There could be thousands (or millions, in this case) being left on the table. If you are cut off from your benefits, or it feels as though the insurer is doing everything possible to try and get you cut off from your benefits, speak with a disability lawyer immediately.

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Note to Readers: This is not legal advice. If you are looking for legal advice in relation to a particular matter please contact one of our group members. We communicate all these updates to our clients and readers on our Employer Resources Portal and through monthly Newsletters.

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Sometimes bad facts make bad law.  The BC Human Rights Code (“Code”)  provides that if the Tribunal finds discrimination under the Code it can order a variety of remedies under section 37  including  under section 37(2)(d) (iii) ordering the respondent to:

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(iii)pay to the person discriminated against an amount that the member or panel considers appropriate to compensate that person for injury to dignity, feelings and self respect or to any of them. (Emphasis added)

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An order for such damages is particularly worthwhile for a complainant as the award is generally not taxable versus an award for lost wages.

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But such awards are very hard to estimate in advance of an actual award.   As one judge said in another context it is somewhat like judging “by the length of the Chancellor’s foot” . For example under the Code the complainant does not have to prove intent on the part of the Respondent but when intent to discriminate is found then the awards might differ.  In one case involving a McDonald’s restaurant the employer acted in a totally bona fide manner in finding that the complainant could not do the work due to a rash she had.  The Tribunal found discrimination and awarded the complainant $25,000 for injury to dignity, feelings and self respect, representing more than one year’s wages.  At the time that was considered by many of us as a significant escalation of such damage awards.

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In the recent case of Ms. L v. Clear Pacific Holdings Ltd. and others, 2024 BCHRT 14, the Tribunal raised the bar in awarding damages for injury to dignity, feelings and self respect by awarding the Complainant  $100,000.

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The case is highly unusual.  The respondent did not appear at the hearing so the Tribunal relied on the evidence of the Complainant and her witnesses including some experts.  The evidence of sexual discrimination, assault and abuse was extraordinary.  The Complainant suffered from a drug addiction that the respondent took advantage of.

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The Tribunal summarizes the decision in the opening paragraphs of the Award:

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I caution the reader that this decision discusses sexual assault and violence.

[2]               Ms. L worked as a personal executive assistant to Sydney Hayden and his companies, Clear Pacific Holdings Ltd. and Whitehawk Investments Ltd. During her employment, Mr. Hayden sexually assaulted and harassed Ms. L, withheld her wages, emotionally abused her, physically assaulted her, and abandoned her in a foreign country. He exploited her disability, a substance use disorder, to maintain control over her.

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Clearly the facts in this case are so egregious that there can be little sympathy for the respondents.  I will not summarize the facts beyond the opening passage quoted above but invite the reader to review the decision to see how outrageous the respondent’s conduct was.

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What was important about this decision was that the Tribunal analyzed the law under section 37(1)(d)(iii) and awarded the second highest amount ever, highest was awarded in Francis v BC 2021 BCHRT 16 (Remedy Decision), which I summarized in our article here: https://www.kswlawyers.ca/blog/bc-human-rights-tribunal-orders-record-damages-award-of-over-1-million-to-terminated-employee-following-racial-discrimination

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Injury to Dignity, Feelings and Self Respect

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The Tribunal provides a very thorough analysis of the law under this heading of damages.  It is worthwhile to consider the full legal analysis:

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[63]             A violation of a person’s human rights is a violation of their dignity. The primary way that the Human Rights Code addresses this violation is by giving the Tribunal discretion to order compensation for injury to a complainant’s dignity, feelings, and self-respect. The purpose of these awards is to compensate the complainant, and not to punish the respondent.

[64]           To determine an appropriate award, the Tribunal generally considers three broad factors: the nature of the discrimination, the complainant’s social context or vulnerability, and the effect on the complainant: Torres v. Royalty Kitchenware Ltd., 1982 CanLII 4886 (ON HRT); Gichuru v. Law Society of British Columbia (No. 9), 2011 BCHRT 185 at para. 260, upheld in 2014 BCCA 396. Ultimately, the amount of injury to dignity damages is “highly contextual and fact-specific”: Gichuru at para. 256. While the Tribunal may consider awards in other cases, the exercise is not to identify a “range” established in other cases. Rather, it is to try to compensate a complainant, as much as possible, for the actual injury to their dignity: University of British Columbia v. Kelly, 2016 BCCA 271 at paras. 59-64; Francis v. BC Ministry of Justice (No. 5), 2021 BCHRT 16 at para. 176. In this case, Ms. L seeks an award of $100,000. I agree this amount is appropriate.

[65]           To begin, the nature of the discrimination was extremely serious. It was ongoing over a 21-month period and included sexual and physical assault, as well as rampant sexual harassment, and emotional and economic abuse. This Tribunal has frequently recognized that sexual assault by a supervisor is “at the extreme end of the spectrum” of sexual harassment: Ban v. MacMillan, 2021 BCHRT 74 at para. 39; MP v. JS, 2020 BCHRT 131 at para. 196. Physical assault is in the same category. The discrimination ultimately resulted in the loss of Ms. L’s employment and – for some period – her ability to work in any capacity. Because of the significance of employment to a person’s dignity, cases which involve the termination of employment have often attracted the top end of this Tribunal’s awards: see e.g. Senyk v. WFG Agency Network (No. 2), 2008 BCHRT 376 at paras. 463-470; Basic v. Esquimalt Denture Clinic and another, 2020 BCHRT 138 at para. 194.

[66]           Next, Ms. L was uniquely vulnerable to the impacts of Mr. Hayden’s conduct. In using the term “vulnerability”, I am mindful that the causes of this vulnerability are rooted in systemic social inequality and not factors endemic to Ms. L as a person: Nelson v. Goodberry Restaurant Group Ltd dba Buono Osteria and others, 2021 BCHRT 137 at para. 35; Ms. K at paras. 139-140.

[67]           The power imbalance between the parties was profound. Some of that imbalance was inherent to the relationship. Ms. L was vulnerable as an employee: Ms. K at para. 143. She had a history of traumatic sexual assault and domestic violence: Araniva at para. 135. When she began working for Mr. Hayden, she had an active substance use disorder and was engaged in expensive court proceedings with her abusive ex-husband over his refusal to pay spousal support. Mr. Hayden was 17 years older than Ms. L, and positioned himself as her “mentor” and caretaker. Most of Ms. L’s work took place in the isolation of Mr. Hayden’s home or boat: Basic at para. 202; Araniva, at para. 134; JS at para. 156.

[68]           Mr. Hayden then leveraged these power dynamics to his advantage. His conduct exhibited many of the markers that the Tribunal outlined in PN, which allow abusers to maintain power and control in a relationship: para. 68. He intimidated and threatened Ms. L, for example telling her that he had access to her medical records and had given his lawyers incriminating evidence about her. He denigrated and demeaned her, infantilized her by calling her a “good girl” and making her call him “sir”, took unflattering photos to embarrass her, and treated her like a servant that he “owned”. He manipulated her connection to his dog to make her feel guilty and beholden to him. He blamed her for the abuse, isolated her from her friends and family by constantly monopolizing her time, and controlled who she could interact with in Mexico. He justified his actions by his jealousy and concern for her, and his health problems. He exerted economic power over Ms. L by ensuring that she was dependent on him for money and drugs. He knew about Ms. L’s struggles with money. He put Ms. L in the position to constantly have to be asking for her wages. He encouraged and exploited her dependence on cocaine by encouraging her to use cocaine from his supply. He gave her drugs and alcohol and then assaulted her.

[69]           In this context, the impact on Ms. L was profound. I have set out some of that impact already. Here, I do not intend to repeat myself but rather to identify some of the most significant considerations. In determining the award, I have considered all the impact set out in this decision.

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I would hope that this case is an outlier based on the most egregious misconduct of sexual harassment and assault but I am afraid it is not.  In my view over the last number of years the Tribunal’s analysis and awards are moving very much towards findings that are favourable to complainants  both in the context of liability (including findings of what constitutes discrimination under the Code) and in making significant damage awards.  For a good recent example of this see my recent blog regarding the City of Nanaimo:  https://www.kswlawyers.ca/blog/mema-v-city-of-nanaimo-a-600-000-wake-up-call-on-human-rights

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Coupled with this trend  is the Tribunal’s struggle to process and adjudicate complaints—an employer might not find out for upwards of 2 or 3 years that there is even a complaint filed and then have to wait another few years before a formal hearing.  That creates  a huge problem for employers to marshall the evidence to defend themselves whereas the complainant and their lawyer can prepare the evidence in a timely manner.

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Employers may think that such cases would never happen to them perhaps because they are small employers.  But remember—it only takes one employee to have a Human Rights Complaint filed against you.  So the best course of action is to learn what the law requires and avoid any suggestion that you and your business discriminated under the Code.

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If you want to discuss this case or the practical steps you can take to limit the risk of liability  under the Code give me or my partner Chris Drinovz a call.

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January 31, 2024

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Note to Readers: This is not legal advice. If you are looking for legal advice in relation to a particular matter please contact one of our group members. We communicate all these updates to our clients and readers on our Employer Resources Portal and through monthly Newsletters.

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For federally regulated employers in Canada, there are several key recent and incoming amendments to the Canada Labour Code to note. If you are uncertain regarding whether your business is “federally regulated”, we recommend speaking to one of the members of our Employment & Labour Law team. Some examples of common types of federally regulated workplaces include the interprovincial/international transportation, maritime, and telecommunications sectors.

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Among the amendments to the Code, there are some that have already come into force in July 2023, and some that are coming into force in 2024.

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These are just some of the highlights of the new amendments to the Canada Labour Code that affect employers and employees in federally regulated sectors. We hope that this newsletter has given you some useful information and guidance on how to comply with these changes and what they mean for your business.

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2023 Amendments

1. Reimbursement for work-related expenses: Employers are now required to reimburse employees for reasonable work-related expenses, similarly to the existing requirements for provincially regulated employers in BC.

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a. What this means for your business: if you ask your employees to use their own equipment, tools, or materials for work purposes, you have to pay them back for the costs incurred.

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b. Example: if you ask your employees to work from home and use their own internet connection, phone line, or computer, you have to cover these expenses. The amount of reimbursement should be based on the actual costs or a reasonable estimate agreed upon by both parties.

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2. Providing information to employees: Under the new amendments, employers must provide employees with materials made available by the Ministry of Labour containing information regarding employer and employee rights (e.g. information on labour standards, occupational health and safety, human rights, and collective bargaining). This is similar to some existing provincial requirements.

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a. What this means:

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i. You have to provide these materials to your employees within 30 days of their hiring date or within 30 days of updated materials being made available by the Ministry.

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ii. You also have to make these materials accessible and visible in your workplace at all times.

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iii. Employers will also need to provide materials to terminated employees, no later than on their last day of employment, with materials made available by the Ministry relating to termination of employment.

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3. Employment Statements: Employers are also required to provide employees with written statements regarding certain terms and conditions related to their employment such as wage rate, hours of work, job title, duties, overtime pay, vacation entitlements, benefits, and termination.

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a. What this means:

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i. You have to provide these statements to your employees within 30 days of their hiring date or when there is a change in their terms and conditions.

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ii. You also have to keep these statements updated and accurate throughout the employment relationship.

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iii. The information can be provided in one or more of the employee’s employment agreement, offer letter, a policy manual, and/or collective agreement (if applicable).

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b. Example: Employment and Social Development Canada provides this template that can be used.

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4. Penalties: The amendments also establish administrative monetary penalties for a failure to comply with these new requirements.

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a. What this means:

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i. The penalties range from $250 to $50,000 per violation, depending on the severity and frequency of the non-compliance.

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ii. The penalties can be imposed on both employers and individuals who are responsible for the violation, and are in addition to any other remedies or sanctions that may apply under the Canada Labour Code or other laws.

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5. Prohibition against replacement workers: The Code now prohibits the use of replacement workers during a strike or lockout.

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a. What this means: It means that unionized workplaces cannot hire or use any person to perform the work of an employee who is participating in a lawful strike or who is locked out by the employer. If an employer violates this prohibition, they may face a penalty of up to $50,000 per day or part of a day.

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b. Exception: the exception from this requirement is if the replacement worker is necessary to prevent an imminent danger to the life, health, or safety of any person.

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6. Menstrual Products: Effective December 15, 2023, employers are required to provide menstrual products in washrooms as part of their occupational health and safety obligations.

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2024 Amendments

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1. Increased Notice Period for Without Cause Terminations: As of February 1, 2024, employers will be required to provide employees with a increasing notice of termination based on the employees’ length of (continuous) service.

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a. What this means: The termination notice is the period of time that an employer has to give an employee before terminating their employment without cause. The statutory notice periods will vary from two weeks to eight weeks, depending on how long the employee has worked for the employer. These requirements essentially put the Canada Labour Code in line with existing requirements under the Employment Standards Act for provincially regulated employers in BC.

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Length of service completed Notice Period

3 months 2 weeks

3 years 3 weeks

4 years 4 weeks

5 years 5 weeks

6 years 6 weeks

7 years 7 weeks

8 years and more 8 weeks

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b. Warning: it is critical to keep in mind that these will only be the minimum requirements under the Canada Labour Code and therefore in many cases employees may be entitled to more notice. As always, we recommend speaking with one of our experienced employment lawyers prior to terminating any employee as it will almost always be more cost-effective to consult with us prior to terminating an employee rather than after the fact.

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c. Impact on existing employment contracts: It is important to also keep in mind that these new amendments may negatively impact the enforceability of existing agreements if the agreements do not account for potential amendments to the requirements under the Canada Labour Code. To prevent this issue, we recommend speaking with one of our lawyers prior to February 1, 2024

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2. Written Statement of Benefits: Employers will also be required to provide a statement of benefits to employees whose employment is terminated.

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a. What this means: The statement of benefits is a document that summarizes the benefits that an employee is entitled to receive upon termination, such as severance pay, vacation pay, pension contributions, and insurance coverage.

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b. Timing:

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i. If an employee is given written notice of termination, the written statement of benefits must be given at least two weeks prior to the termination date.

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ii. If the employee is given pay in lieu of notice, the statement must be given to the employee no later than their termination date.

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iii. If the employee is given a combination of written notice and pay in lieu of notice, the statement must be given on the termination date, unless the employee is provided with at least two weeks of written notice, in which case the statement must be given at least two weeks before the termination date.

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Other 2024 Amendments

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1. Modifications to Hours of Work Requirements: The amendments also provide additional exemptions from and modifications to the hours of work provisions of the Canada Labour Code in some sectors. The provisions regulate how many hours an employee can work in a day or a week, how much rest they are entitled to between shifts or days off, and how overtime pay is calculated.

a. Note: the “coming into force” for the changes to these provisions will vary by sector

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i. The amendments relating to the banking, telecommunications and broadcasting, and rail transportation sectors are set to come into force on January 4, 2024.

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ii. The amendments relating to the airline sector come into force on June 4, 2024.

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Up until 2001, our Court of Appeal held that dishonesty would always be just cause to dismiss an employee summarily.  Unfortunately for employers the Supreme Court of Canada modified the law of just cause to say that dishonesty won’t always be cause for dismissal; rather the court must embark on a “contextual” approach to see if the misconduct is sufficiently egregious to constitute cause: McKinley v. BC Tel, 2001 SCC 38.

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A recent case of the B C Court of Appeal provides an example of where dishonesty in respect of fraudulent business expenses can in and of itself constitute cause.

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The employee TM was employed as President of Operations of a large used car dealership and RV dealership in the Lower Mainland and on Vancouver Island.  While on a business trip to Parksville the Plaintiff and his wife had dinner.  TM wrote the names of two employees on the receipt and submitted for payment by the company.  The next morning he and his wife had breakfast and he wrote the name of another employee on the receipt and submitted for payment.  The total amount for which the Plaintiff was reimbursed was $250 (“Parksville expenses”).  The employer’s policy was that the name of the employee had to be written on the receipt.  

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A week later TM was having dinner with the owner and TM picked up the tab.  He then submitted the bill for payment claiming the owner had agreed it was a “team building event” and was justified as a business expense.  The owner denied that she agreed it was a business expense.

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The owner then did a spot audit and learned of the Parksville expenses.  She confronted TM and instead of admitting the fraudulent expense claims he said could not recall any discussion of the Parksville expenses in that meeting.  He also claimed that he was told by the CFO controller to put the names of the employees on the receipts “to keep it simple”. The CFO who approved expenses testified that he was unaware that the Parksville Expenses were for dinner and breakfast with TM’s wife.

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The trial judge found that the Plaintiff’s conduct with respect to the Parksville Expenses constituted just cause.  The Plaintiff appealed.

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The Court of Appeal described the trial judge’s findings as follows at paragraphs 19 and 20:
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The judge then turned to the issues of dishonesty and just cause. He found on the evidence that Mr. Mechalchuk submitted the Parksville restaurant receipts as business expenses when he knew they were personal in nature, and tried to deceive Galaxy Motors into thinking they were for a business purpose. He was also dishonest about the expenses when he was confronted by Ms. and Mr. Jones about this during the July 11, 2022 meeting.

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[20] The judge observed that Galaxy Motors bore the onus to establish just cause, and concluded it had done so. He noted that dishonesty does not automatically comprise just cause for dismissal, but in these circumstances where Mr. Mechalchuk was in the most senior management position at the company, that position commanded authority, responsibility and trust, and he breached that trust. Accordingly, “his conduct was such that the defendant’s loss of faith and trust in him was justified”: at para. 65.

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The employer had relied on a pattern of conduct broader than the Parksville Expenses but only proved the events regarding those expenses.  The Court of Appeal held  that Parksville Expense evidence was sufficient in and of itself to prove just cause.

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In dismissing the appeal the court held that the trial judge did not err when he found:

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[65] I agree with the submissions of counsel for the defendant that the facts in Roe are analogous to those before me in this case. Although the total amount of the Parksville restaurant dinner and breakfast receipts (approximately $250) was relatively small, the misconduct went to the very root of the plaintiff’s employment relationship with the defendant. He was in the most senior management position at the defendant. His position commanded a high level of authority, responsibility, and trust. He breached that trust by submitting false expense receipts and thereafter being untruthful about them when given an opportunity to explain them on July 11, 2022. Moreover, he failed to “come clean” when he had a second opportunity to do so during the meeting on July 13, 2022. His conduct was such that the defendant’s loss of faith and trust in him was justified.

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The court of appeal concluded:

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[39] In conclusion I am of the view that there is no principled basis upon which this Court could or should interfere with the judge’s conclusions, in particular that Mr. Mechalchuk’s conduct was such that Galaxy Motor’s loss of trust and faith in him was justified. The judge correctly applied the contextual analysis which was required in considering Mr. Mechalchuk’s position and level of responsibility. He assessed the severity of the misconduct, that is submitting false expense receipts and being untruthful when given a chance to explain and found that in all the circumstances, termination of employment for cause and without notice was a justifiable response by the employer.

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The lesson to be learned for senior employees and owners is fairly obvious.  Cheating on expense accounts and then lying about it is not the same thing as telling a little white lie.  There are consequences for dishonesty regardless of the amount involved. Here the Plaintiff’s income in the year in which his termination occurred “was between $750,000 and $1,000,000”.  For the value of $250 it cost TM up to a $1 million a year income plus the legal fees in pursuing is claim as well serious mental stress and finally significant reputational damage.

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END NOTE

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When I first began practicing I juniored a senior lawyer as he prepared to defend a wrongful dismissal action.  It was a without cause termination.  Shortly before the trial the employer for some reason late in the day decided to look in the employee’s desk.  It found a blank receipt book that matched many of the expense receipts submitted by the employee.  Senior counsel invited the opposing counsel over for coffee with us—the case was settled for a nominal amount shortly thereafter.

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Employers are wise to do their due diligence following termination with or without cause.  That includes ensuring all IT information and any business records are retained, reviewed and preserved.

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Note to Readers: This is not legal advice. If you are looking for legal advice in relation to a particular matter please contact one of our group members. We communicate all these updates to our clients and readers on our Employer Resources Portal and through monthly Newsletters.

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To increase the supply of housing and address the affordability crisis, the BC provincial government has introduced 3 new laws which could result in the most significant housing reforms in decades. Once enacted, these laws will allow up to 6 units on single-family lots, increasing density near transit hubs, and streamlining how cities collect fees from developers.

Bill 44 (Residential Housing) will permit secondary suites or accessory units on every single-family lot and allow for 3, 4, or 6 units depending on the lot size and proximity to transit. Bill 44 will also ban public hearings for any residential rezonings which are consistent with Official Community Plans.

Bill 46 (Development Finance) will allow cities to collect Development Cost Charges (DCCs) from developers for items currently funded through taxation and Community Amenity Contributions (CACs). It will also introduce Amenity Cost Charges (ACCs) to replace CACs for certain items.

Bill 47 (Transit-Oriented Areas) will allow development of buildings with minimum heights of 8, 12, or 20 storeys, depending on their proximity to transit hubs. It will also remove parking minimum requirements for residential projects near transit hubs.

There is no document, per se, to confirm the date of a legal separation.

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You are separated from your common law or marriage spouse as soon as one of you makes your intention to end the relationship clear to the other.

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To be absolutely clear to your spouse that you are separated, you should put the date of separation in writing to your spouse. This can mean by text message or e-mail.

As recently highlighted in various publications including the Toronto Star, there has unfortunately been an increasing amount of layoffs recently in the tech sector.

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In times like these, it is essential for employers and employees to understand their rights (and obligations).

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Recent layoff have not been confined to startups feeling the pinch of venture capital drying up, but also affects established tech giants streamlining their operations (including here in the Lower Mainland). Regardless of the reasons behind these layoffs, the impact of a layoff or termination on employees can be significant and often stressful.

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One key aspect to understand is that although they’re used interchangeably colloquially, “layoff” and “termination” mean two separate things from a legal standpoint. A “layoff” as in a “temporary layoff” is a situation where an employee is told to not report to work for a period of time due to a shortage of work. A “termination” on the other hand, is where the person’s employment is ended.

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Both a “temporary layoff” and a “termination” can potentially entitle an employee to a significant amount of severance pay, depending on the terms of their employment agreement (if any).

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Understanding Severance Packages

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When layoffs occur, companies, particularly larger organizations, typically will offer severance packages to affected employees. However, it’s important to note that these packages may not fully reflect an employee’s legal entitlements.

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Your Legal Entitlements

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In British Columbia, employees (in the absence of an enforceable termination clause), are entitled to reasonable notice or pay in lieu of notice when terminated without cause. This also applies where an employee has been “constructively dismissed” due to being placed on a temporary layoff without their consent (and without a clause in their contract that allows the employer to do so).

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Because employees’ severance entitlements vary based on a wide range of factors, what is offered in a severance package may not reflect the employee’s actual entitlements (for example, an employee who is in fact entitled to over 9 months’ pay in lieu may only be offered 3 months).

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Conclusion

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If you’re facing a temporary layoff or termination, it’s crucial to seek legal advice before agreeing to or signing anything. Once you sign a release accepting the severance package, it’s usually impossible to go back and ask for more.

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An experienced employment lawyer can help you understand your rights and potentially negotiate a better package on your behalf.

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At KSW, our employment law team has extensive experience representing both employers and employees, including tech sector employees and executive-level employees. We understand the unique challenges of this industry and are here to help. If you’re facing a challenging employment situation, don’t hesitate to reach out to us for a consultation.

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Note to Readers: This is not legal advice. If you are looking for legal advice in relation to a particular matter please contact one of our group members. We communicate all these updates to our clients and readers on our Employer Resources Portal and through monthly Newsletters.

A question that both employers and employees commonly have is “what counts as constructive dismissal?” As detailed in our previous blog post linked below, there are many types of unilateral changes that can result in a constructive dismissal: https://www.kswlawyers.ca/blog/constructive-dismissal-unexpected-consequences-of-changes-to-the-employment-relationship

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One of the more common scenarios that we deal with however is where an employee has been constructively dismissed as a result of changes to their compensation. This is, of course, more obvious when an employer has reduced the employee’s salary (unsurprisingly, this is usually constructive dismissal).

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Where it gets murkier is in dealing with compensation structures such as commissions, performance-based bonuses, or similar arrangements where an employee’s compensation can vary from month to month.

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In short, if an employee’s compensation structure is changed in a way that reduces or potentially reduces their pay, this will often be considered constructive dismissal. For example, if an employee is moved from their sales territory to a new territory that has historically performed much worse, this would likely be considered constructive dismissal.

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Similarly, if an employer unilaterally changes the way that the employee’s compensation is calculated (e.g. by implementing a new formula which might result in the same pay, but makes achieving that level of pay more challenging), this could also be a form of constructive dismissal.

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Conclusion

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As emphasized in our other blog post, constructive dismissal (like many legal issues) is highly fact-specific and varies case by case. Employers should consult with legal counsel before making significant changes to the employment relationship, to ensure that they are not inadvertently terminating an employee and exposing themselves to potentially significant claims for constructive dismissal.  

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Employees who believe that they have been subject to a constructive dismissal should seek legal advice as soon as possible to avoid inadvertently condoning (i.e. accepting) a fundamental change to the employment relationship, and to determine if the change is sufficient to constitute constructive dismissal.

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It is important for employees to seek legal advice before resigning from their employment as an unsuccessful claim of constructive dismissal will result in the employee receiving no severance.

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Note to Readers: This is not legal advice. If you are looking for legal advice in relation to a particular matter please contact one of our group members. We communicate all these updates to our clients and readers on our Employer Resources Portal and through monthly Newsletters.

The City of Nanaimo, a medium sized BC community of 170,000 residents employed Victor Mema as its CFO for 3 years from 2015 to 2018 when he was dismissed for cause related to misuse of the City’s credit cards. Mema was a Black person from Zimbabwe.   5 years after his termination the Chair of the Human Rights Tribunal found his race was a factor in his termination and awarded him lost wages of $583,413.40 (after deducting some portion for mitigation!), $50,000 as compensation for injury to dignity, feelings and self-respect, $10,150.04 for expenses and post judgment interest.

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The decision represents in my view a marked departure from the usual findings of a violation of the Code that all employers, especially municipal and public sector employers should note.

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Decision - Mema v City of Nanaimo

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The decision is 107 pages and delves into the facts in great detail.  But the City would have known from the first 5 pages of the Award that it was in trouble.
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The Tribunal spends the first 4 pages analyzing the concept of anti-Black racism:

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[6] This case alleges anti-Black racism in a predominantly White workplace, in which Mr. Mema was one of very few Black employees. The social context of anti-Black racism in Canada is a critical element. I take notice that, as Mr. Mema submits in argument, “Black people can be treated adversely in the workplace because of a conscious or unconscious stereotype of Black people being criminals, dishonest, of questionable moral character or poor.”

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It concludes in the opening section:

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[12] Ultimately, I have applied the above in my consideration of whether the evidence as a whole could support an inference that, on a balance of probabilities, Mr. Mema’s protected characteristics factored into the City’s suspension and termination of his employment.

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Evidence and Findings of Fact

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It is not possible to review in any detail in this article the extensive analysis of the facts and findings of the Tribunal that span almost 70 pages and indeed it is difficult to fully summarize the various findings. Although the findings are important the focus of this article is the legal analysis of discrimination under the Code. Anyone who wants to really understand the impact of this decision should take the time to read the section on “EVIDENCE AND FINDINGS OF FACT” pages 9 through 76. We will summarize the key findings as follows

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All employees who had use of corporate credit cards (referred to as P-cards) were required to sign a P-Card Agreement which prohibited personal use.  The P-Card Agreement included the following provisions:

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3. I understand that under no circumstances will I use the [P-card] to make personal purchases. Failure to do so could be considered as misappropriation of City funds. Failure to comply with this Agreement may result in either revocation of my user privileges or other corrective action, up to and including termination of my employment.

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4. I agree that should I violate the terms of this Agreement and use the [P-card] for personal use or gain, that I will reimburse the City for all incurred charges and any fees related to the collection of those charges

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The Tribunal found however that:

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[44] In practice, however, some personal use of P-cards was accepted. Where someone used their P-card for personal expenses, they were expected to indicate that expense as personal on their P-card statement and reimburse the City. There were no guidelines for the timelines for such repayment, but most people repaid promptly.

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Mr. Mema in his role as CFO had to approve other employees’ P-Card expenses.  He noticed that some employees would indicate personal expenses and would reimburse the City promptly.  Notwithstanding his role as CFO Mr. Mema concluded that the City condoned this practice and therefore he used his P-Card for personal use.  He knew the practice had to be updated as it clearly was not good practice but concluded that while “it may not have been good practice it was the practice at the City.  Notwithstanding his conclusion it was a bad practice he took no steps to amend the policy when he became CFO.
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However unlike other employees Mr. Mema did not repay his personal expenses promptly.  Unfortunately, the CAO who herself had a dispute with the City simply approved Mr. Mema’s personal expenses and sent them to the finance staff for processing.
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This then became a major problem for employees in the finance department as Mr. Mema continued to rack up large amounts of personal expenses and would not repay them.
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The decision outlines the serious problems at the City at the time.  By 2016 the acrimony between the CAO and the Mayor had escalated to the point where the City paid $10,000 for the CAO to get her own legal advice regarding:

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alleged defamation, bullying, harassment and discrimination by the Mayor and a Councillor, after Council’s directing them to “work collaboratively and respectfully” with Ms. Samra [the CAO]”

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Fast forward to the point where certain staff in the finance department make formal complaints about what they saw as abuse by Mr. Mema and the CAO of the P-Card policy.  The City engaged auditors to review the P-Card practices and filed its Report.
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The finance staff filed a Serious Misconduct Report regarding Mr. Mema.  Broadly the allegations were:
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1. Mr. Mema began using his P-card for personal purchases in March 2016;

2. Since then, in total, he made 70 personal transactions totaling $14,148.97;

3. He was aware that the cardholder agreement prohibits personal use of the Pcard;

4. Mr. Mema’s personal use of the P-card meets the definition of “serious misconduct” because it constitutes “unauthorized and inappropriate use of the City’s assets”,

5. In September 2017, DD and Ms. Mercer reported Mr. Mema’s use of the P-card to the City’s regular auditors, under s. 172 of the Community Charter;

6. Repeated attempts were made to have the funds repaid;

7. Mr. Mema issued a cheque to the City that was ultimately returned NSF;

8. On February 17, 2017, “the City of Nanaimo began a $500 biweekly payroll garnishment to begin to repay the amount owing”;

9. Around the same time, the City of Nanaimo began to pay Mr. Mema $600 per month as a “vehicle allowance”. Ms. Slater alleged that the CFO position requires very little travel for business, and that she did not have any details on how this was authorized;

10. All of Mr. Mema’s P-card statements were approved by Ms. Samra;

11. Ms. Samra disciplined Ms. Mercer and DD when they brought Mr. Mema’s personal P-card purchases to her attention;

12. Ms. Slater was concerned that Mr. Mema and Ms. Samra were using their “management override capabilities” to authorize payments and expenditures for each other. Ms. Slater noted the $16,922.50 payment to Ms. Samra on for the Samra Legal Invoices and another amount for the 2017 bonus payment to Mr. Mema; and

13. Mr. Mema requested that Mr. Mloyi be granted access to the banking system

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Mr. Mema was first suspended and then ultimately terminated.   A key problem at the City were numerous leaks of confidential information to the media.  Mr. Mema first found out about the Misconduct Report when a radio reporter contacted him asking about his suspension.

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Legal Analysis

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The Tribunal summarizes the applicable law of discrimination under the Code:

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[281] In a human rights complaint, the burden to establish that discrimination has taken place rests with the complainant. It is not up to the respondent to prove that they did not discriminate: Heyman v. Saunders (No. 2), 2010 BCHRT 88, at para. 6. A complainant is required to prove a case of discrimination on a balance of probabilities. If the complainant is successful in establishing a case of discrimination, the burden shifts to the respondent to justify its conduct. If the complainant fails to prove a case of discrimination, then there is no breach of the Code…
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[282]  In order to establish a case of discrimination, Mr. Mema must prove that he experienced an adverse impact regarding his employment and that his ancestry, place of origin, race or colour was a factor in that adverse impact: Moore v. British Columbia (Education), 2012 SCC 61, para. 33. There does not need to be an intention or motivation to discriminate: s. 2 of the Code. One’s protected characteristics need not be the sole or even the overriding factor in the adverse impact experienced; they need only be a factor…
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[283]  In this case, there is no dispute that Mr. Mema has the protected characteristics under which he filed this complaint. He is Black and was born in Zimbabwe. There is also no dispute that he suffered an adverse impact when he was suspended and later terminated from his employment, following the filing of the Misconduct Report.

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What makes this case interesting and scary for employers is the analysis the Tribunal considered in finding discrimination in this case:

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[284] The issue I must decide is whether there is a connection between Mr. Mema’s protected characteristics and the City’s suspension and termination of his employment. This is a question of fact for the Tribunal to decide after a review of all of the evidence: Stewart v. Elk Valley Coal Corp., 2017 SCC 30 at para. 5. Aside from the perceptions of the witnesses including City Councillors and employees, there is no direct evidence that Mr. Mema’s protected characteristics were a factor in the City’s decisions. Rather, this is a connection that can only be made from drawing an inference. [emphasis added]

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The Tribunal rejected what it said was the City’s arguments that there was no evidence of any connection between the decision to terminate and any prohibited ground.  It stated:

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[288] To the extent the City is arguing that discrimination can only be established by direct evidence, this approach is inconsistent with the prevailing jurisprudence, specifically in respect of race-based discrimination. In fact, the jurisprudence is express in highlighting that such discrimination is often proven precisely from drawing inferences. The Tribunal made this point in Kennedy, developing it further in Radek v. Henderson Development (Canada), 2005 BCHRT 302 [Radek]. In Radek, the Tribunal acknowledged that discrimination will more often be proved by circumstantial evidence and inference; and that subtle unconscious beliefs, biases and prejudices usually inform racial stereotyping, which can be inferred from circumstantial evidence.

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[289]  This Tribunal has more recently articulated the approach to be taken in the context of race discrimination in Campbell v. Vancouver Police Board (No. 4), 2019 BCHRT 275 [Campbell] and Francis. I adopt the Tribunal’s statements in Campbell at paras. 102 – 105, regarding the subtle, pernicious nature of racial discrimination, with most racial discrimination complaints turning on an inference. There, the Tribunal said that (at para. 103): an inference of discrimination may arise “where the evidence offered in support of it renders such an inference more probable than the other possible inferences or hypotheses”: Vestad v. Seashell Ventures Inc., 2001 BCHRT 38 at para. 44; Abbott at para. 31. In this case, the question is whether an inference of discrimination is more likely than the VPB’s explanation for the officers’ conduct. In making this assessment, it is not necessary that the officers’ conduct be consistent only with the allegation of discrimination and not any other rational explanation…

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[291]  I similarly adopt this Tribunal’s approach in Francis at paras 284 – 289, as cited by Mr. Mema, where the Tribunal emphasized the importance of a contextual approach to race discrimination, noting that several contextual factors informed the analysis of the inferences that could be drawn from the facts in that case. As the Tribunal explained at para. 284: Establishing what constitutes a reasonably objective observer in the context of race discrimination cases is challenging. There are "no bright lines" in cases where discrimination must be proven by circumstantial evidence, and these cases are often "difficult" and "nuanced"… A contextual examination of all relevant circumstances is often required to identify the "subtle scent of discrimination"… For example, one such contextual circumstance is any historical disadvantage experienced by the group: Mezghrani v. Canada Youth Orange Network Inc. (CYONI) (No. 2), 2006 BCHRT 60 [CHRR Doc. 06-066], para. 28

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The Tribunal concludes:

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[293] In sum, as stated earlier in this decision, I have applied the recognition by courts and human rights Tribunals of pervasive stereotypes of Black men in my consideration of the issue before me. That issue is whether the evidence as a whole could support an inference that, on a balance of probabilities, Mr. Mema’s protected characteristics factored into the City’s suspension and termination of his employment.

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In rejecting all the City’s arguments including the fact that their CFO had engaged in serious financial misconduct that there was no evidence to support a finding of discrimination, the Tribunal comments:

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[295] The City argues that there was no differential treatment of Mr. Mema because “any CFO in a similar position and engaging in such serious misconduct would have been terminated from employment in February, 2017; and, if not then, in October, 2017.” Evidence of differential treatment is not necessary, and in any event, this argument relies on a hypothetical. The issue before me is not whether the City treated Mr. Mema as it would have any other hypothetical CFO in the same situation, but whether his protected characteristics were a factor in how the City did treat him.

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[296]  The City then argues that there is no evidence that the February or October reporting of the P-card issues by finance staff, or Ms. Mercer’s flagging it to the auditors were “triggered by racist motives”. However, “motive” and intentions are not required to establish discrimination under the Code, as s. 2 of the Code makes plain. Further, it disregards the reality that racial stereotypes may operate subconsciously, as this Tribunal recognized in Campbell and Francis. [Emphasis added]

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Despite what appeared to be a strong argument by the City of a “non discriminatory explanation” for the suspension and termination the Tribunal found:

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[298] Ultimately, for the reasons set out below, I am satisfied on a balance of probabilities that – however subconsciously – pernicious stereotypes of a Black man as less honest or trustworthy factored into the Misconduct Report, and as such there is a connection between the Misconduct Report and Mr. Mema’s protected characteristics. The City’s reliance on the discriminatory Misconduct Report tainted its decisions to suspend and terminate Mr. Mema’s  employment, rendering it discriminatory. I am thus satisfied on a balance of probabilities that the City breached the Code when it suspended then terminated Mr. Mema’s employment. [Emphasis added]

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Remedies

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As noted, the Tribunal found that an award of $50,000 for hurt feelings, injury to dignity and self respect. Mr. Mema had asked for $75,000.

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The really interesting finding is the wage loss.  The Tribunal found that Mr. Mema tried to mitigate his damages.  However despite a finding of discrimination that resulted in his lost employment the Tribunal was not satisfied that Mr. Mema’s difficulties in finding reemployment arose solely from the discrimination by the City and therefore the City was not responsible for all the loss from the time from the termination to the time of the hearing, ie the normal award [a claim of $777,884.54].  Why did the Tribunal find that not all the loss in remaining unemployed lay at the feet of the City?
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[385] However, on a balance of probabilities, I am not satisfied that Mr. Mema’s difficulties in finding reemployment arise solely from the discrimination or that that awarding compensation for all lost wages between the time of the termination and the hearing would be an appropriate exercise of my discretion under s. 37(2)(d)(ii).

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[386]  I am satisfied that publicly available information about the matter with Sechelt contributed to his difficulties in finding reemployment. In my view, that situation would reasonably raise questions for a prospective employer about Mr. Mema’s judgment.

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[387] I note that Mr. Mema recalled in his evidence, one prospective employer asked him, “have you Googled yourself?”, presumably referring to the various media articles. I understand this to relate not only to the publicity surrounding his employment with the City, but also his employment with Sechelt. I have not considered the media coverage of the situation at the City. Regardless of the events at the City, the City’s witnesses testified that they came across publicly available material highlighting Mr. Mema’s having used his corporate credit card for 105 personal purchases while employed by Sechelt. Further, the article referenced Sechelt’s having had to pursue him through the courts to seek repayment. It is reasonable to expect this information would have a chilling effect for prospective employers. The article was put into evidence. There is no dispute about that.

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[388] For the reasons set out above, I have reduced the wage loss award sought by a quarter, resulting in a final award of $583,413.40. In my view, this appropriately accounts for the fact that Mr. Mema’s loss of employment was discriminatory, while also accounting for the fact that not all of the wages lost by Mr. Mema fall at the feet of the City for its breach of the Code. It accounts for the fact that some of the information in the public domain related to his alleged conduct while at Sechelt more likely than not played a role in prospective employers’ reticence to hire him and his difficulties in finding reemployment.

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Interesting that this probative evidence of the same issue of misconduct at his previous employer did not factor into the accepting the City’s defense but did factor in to reducing the claim by almost $200,000.
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Finally it is important to note (and a little bit scary) that the Tribunal made no award for future loss as none was sought by the complainant.

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TAKEAWAYS

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The decision is simply too complicated to summarize all the findings. The Tribunal appears to be more readily able to reject the City’s evidence in favour of Mr. Mema’s evidence ignoring the onus that rested on Mr. Mema to prove the discrimination ie the connection between his termination and his protected ground.  And as noted it makes this extraordinary finding based on assumed stereotypical unconscious prejudices against Black men. While acknowledging the deeply rooted history of discrimination faced by the Black community, it's crucial to underscore that, in these cases, it is crucial for the tribunals to adhere to the established legal tests to maintain the integrity of the process and avoid opening the floodgates.

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But the reality is that with legal fees the cost to the City could well exceed $1 million. The same findings could be made of a small municipality say of 10,000 as each case is an individual assessment—it only takes one employee to have a human rights complaint.  How would the citizens of a small community handle payment of a $1 million award plus legal fees especially when most in BC are suffering from horrendous destruction and costs fighting forest fires?

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In my view the decision of the Tribunal here fails to provide proportionality in its analysis and conclusions.  Further I think public sector employers are easy targets for employees to file human rights complaints.  But how long can public employers bear these costs?  The answer might have to be amendments to the Code to limit such awards and more clearly define what is needed to prove discrimination.

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Finally this award highlights the significant procedural problems that now exist at the Tribunal.  The delay in processing complaints has become epidemic.  For example in a recent case the alleged discrimination took place in December 2020; the Complaint was filed at the very end of the one year limitation period Dember 2021 and the Tribunal first notified the Employer that the complaint had been filed in May 2023 some 32 months after the events alleged to constitute discrimination.

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Here there was almost a 5 year gap from the termination to the award and the potential wage loss was exacerbated due to the Tribunal’s inefficient process to conduct a proper formal hearing.

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I acknowledge that the Government has stepped up with further financial support and the Tribunal is doing everything it can to resolve the backlog and increase the efficiency of the system. Yet fixing the problem will likely take years.  In the meantime employers large and small pay the price.

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NOTE the City advises that it will be filing an appeal by way of a Judicial Review—watch this space.

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Mike Weiler & Chris Drinovz

August 23, 2023

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Note to Readers: This is not legal advice. If you are looking for legal advice in relation to a particular matter please contact one of our group members. We communicate all these updates to our clients and readers on our Employer Resources Portal and through monthly Newsletters.