With the trend towards workplaces that are more collaborative and less confrontational, more team oriented and less hierarchical, some are heralding mediation as the future of workplace dispute resolution.   Employers and employees alike are realizing the absurdity of dealing with each other as adversaries when they must produce goods or perform services together.  Consequently, they are finding out that mediation is the best dispute resolution process to achieve these goals.    Even unionized workplaces, which have historically used the arbitration process to resolve disputes, are slowly shifting towards an evaluative model of mediation given the economic and non-economic advantages.  However, despite the high hopes for workplace mediation, there are still a few hurdles on the horizon.

Why Mediate in the Workplace?

Avoiding Litigation Costs and Reducing Risk:

Simply put, mediation is less expensive than going to court.  Since mediations generally only last a day or two, some estimate the average cost of a workplace mediation at less than a $1000, meanwhile virtually all research and discovery costs, court and counsel fees and expert witness expenses are eliminated.  One of the ironies of employer enthusiasm for mediation is that mediation actually favours plaintiff employees over employers in the ultimate results.  In most cases, an employer will include some kind of monetary payment in a mediated settlement to avoid the costs and risks associated with litigation, even if the claim might have had little chance of success at law.  One the other hand, while the courts may leave plaintiff employees with little to no award in the majority of cases, the employee can be assured of some recovery through a mediated settlement.

Economic Efficiency and Production:

Despite the cliché of the old saying ‘a happy worker, works harder,’ it carries an undeniable ring of truth.  While the win/lose result of litigation can cause negative emotions between parties and  impact performance at work, using mediation to allow parties to communicate and reach workable agreements together results in higher productivity, increased sales and improved morale.  Moreover, the open discussion and collaboration offered by mediation of disputes can be used to identify and remedy underlying problems in the workplace, both relational and physical, which may also help improve efficiency and production.

Confidentiality and Reputation:

The confidentiality afforded by the mediation process is generally beneficial to both parties.   Adverse publicity can negatively affect the attitudes of a business’s stockholders, customers and potential job applicants.  Likewise, many employees may prefer to keep the dispute quiet to avoid becoming alienated from co-workers or simply to retain their right to privacy in the matter.

Party Autonomy, Creativity and Compliance:

Unlike litigation, mediation does not limit the possibilities of a remedy.  Parties are free to brainstorm and collaborate on remedies, which can produce longer-term, mutually beneficial resolutions as opposed to the short-term court orders or tribunal imposed fines.  Often the remedy the complainant party is seeking may be something other than a monetary payment or they may be willing to reduce their demands for a monetary payment if they are offered something else of value.  Apologies, additional training, employee awareness programs or other benefits are examples of value-added remedies that can reduce financial costs to the employer, while satisfying the underlying interests of the employee.  Moreover, there is growing evidence that people who reach agreements themselves are more likely to comply with them than people who are told what to do.

Contribution to a Positive Work Environment:

The use of mediation to foster loyalty, teamwork and a collaborative work environment can play an important role in the prevention of unionization.  Workplace mediations maintain and repair relationships, addressing issues early on and creating open canals of information that can help prevent the spark, which can bring about unionization.

Challenges to Mediation in the Workplace

Organizational Culture:

Certain organizational cultures and norms may result in an unwillingness of one or both parties to seek out or participate in mediation to resolve a dispute.  Consider a workplace where employees are expected to be assertive and independent.   These employees may not seek help in resolving disputes through mediation since it would contradict the organizational norm of handling conflict themselves.  Such circumstances may require additional awareness training or even just the passing of time to successfully implement a mediation program.  When designing a new conflict resolution program, it is important to recognize how organizational and workplace norms will affect the parties in responding to conflict.

Neutrality/Impartiality of the Mediator and Mediation Process:

One of the most significant challenges facing workplace mediations is the issue of neutrality and impartiality, especially with many corporations now training in-house or internal mediators.   Naturally, an employee must believe the mediation process can bring about a fair result and the mediator is sufficiently independent and free from bias in order for them to effectively participate in mediation.  How employers will successfully achieve this remains a challenge.

Balancing Power:

The unique context of workplace mediation carries a high potential for a negative effect on a party as a result of the power imbalance.  With more to lose and less resources available to them, the employee is virtually always the weaker party in workplace mediation.  Though the existence of an imbalance of power does not necessarily indicate that the stronger party will act in bad faith, an imbalance of power will certainly have effects on the success of mediation.  Both the structure of workplace mediation and individual mediators must address this dynamic and empower the employee to ensure the interests of both parties are being heard and met and the process is ultimately successful.

Conclusion

Despite these challenges, mediation has nonetheless proven to be an invaluable resource for conflict resolution, which will undoubtedly see continued growth and success in the workplace context as it shapes the labour and employment law landscape.

Melissa Fedsin

We encourage more students to submit guest blog entries – it’s a fantastic talking point during interviews and really helps get your name out there, so e-mail us if you have an idea!

Introduction

The rights and obligations of both employers and employees with respect to drug and alcohol testing in Canada remains a controversial issue. While the first reported case regarding drug testing in the workplace was heard more than 20 years ago in Re Canadian Pacific Ltd. and United Transportation Union, (1987) 31 L.A.C (3d) 179, there is still a significant amount of debate. In particular, ambiguity still looms with respect to random drug and alcohol testing and under what circumstances it is permitted by employers.

The Issue

The primary obstacle in deciphering how the law on random alcohol and drug testing in the workplace should be applied is achieving an appropriate balance; that is, a balance between management rights and obligations in maintaining a safe and productive work environment, while also protecting employee rights to dignity, privacy and accommodation. The law over the past decade seems to suggest that while random alcohol testing for safety-sensitive positions is permissible under certain circumstances, random drug testing for those same positions is not. The case law provides some context as to why these distinctions are drawn, however, some uncertainty remains in this area of the law causing confusion for both employees and employers.

Evolution of the Law

Entrop v. Imperial Oil Limited, 2000 CanLII 16800 (ON C.A) (“Entrop”)

Entrop v. Imperial Oil Limited is one of the earlier cases that dealt comprehensively with the issue of random alcohol and drug testing in the workplace for safety-sensitive positions. The case was originally arbitrated in 1992 and found its way to the Ontario Court of Appeal in 2000. The facts revolved around an alcohol and drug policy instituted by Imperial Oil as part of its health and safety plan; among other things, the plan called for random testing using breathalyzers to test for alcohol use and urinalysis to test for drug use. The random testing provisions of the policy were challenged under the Human Rights Code (HRC) by an employee, Entrop, who was a recovering alcoholic. Entrop claimed the policy discriminated against people with alcohol dependence and are considered disabled according to relevant legislation. At the time the provisions of the policy were challenged, there was no collective agreement in place at Imperial Oil.

Ultimately, the Ontario Court of Appeal found that while random alcohol testing is prima facie discriminatory it can be justified as a bona fide occupational requirement (BFOR) providing that the repercussions of the test were tailored to individual circumstances and that the employer met his or her duty to accommodate to the point of undue hardship. However, with respect to random drug testing, the Court came to an alternative conclusion. Although not a direct issue in the case, the Court ruled that random drug testing is not permissible. The reasons given to justify the allowance of alcohol testing and the prohibition of drug testing revolved primarily around the two methods used for testing; while the breathalyzer could give an immediate reading on impairment, the urinalysis test could not. Therefore, there was no accurate way to measure the effect of drug use on job performance and so the testing could not be justified as a BFOR.

Imperial Oil Limited v. Communications, Energy & Paperworks Union of Canada, Local 900, 2009 ONCA 420 (“Imperial Oil”)

In reaction to the decision in Entrop, in 2003 Imperial Oil instituted random drug testing using a new method geared towards detecting immediate impairment. After consultation with experts, the company replaced urinalysis with oral fluid (saliva) testing. At this point the plant had become unionized. As a result, the union filed a grievance challenging the new drug testing under the collective agreement and not under the HRC as was the case in Entrop. The final judgment in the case was given by the Ontario Court of Appeal.

The Court affirmed the arbitration board’s decision in some respects, thereby clarifying certain aspects of the law. The decision in Imperial Oil stands as a strong pronouncement against both random alcohol and random drug testing. Namely, the Court affirmed that random testing in safety sensitive positions was not an implied right for management.

The law can be summarized as follows: an employee can only be subjected to random, unannounced alcohol or drug testing as part of an agreed rehabilitative program or where the facts give the employer reasonable cause to do so. Moreover, the employer has the right under a collective agreement to require such testing after a significant incident or accident, whereby it is imperative to identify the underlying reasons for such an event. Continuing testing may also be appropriate for individuals found to have substance abuse problems; however, management does not have untrammeled rights in such a case as there must be a time limit imposed on continued testing and the employee’s union must be involved in the creation of terms and conditions. While jurisprudence recognizes the need for safety and deterrence, management rights are limited with respect to random testing in order to protect the dignity and privacy of employees.

In dealing specifically with the issue at hand and despite the new method of drug testing, Imperial Oil was held to have violated its collective agreement with the new policy. With a view to balancing employer and employee interests under the collective agreement, the Court once again distinguished Imperial Oil’s method of alcohol testing with the use of the breathalyzer from its drug testing. Whereas the breathalyzer is minimally intrusive and provides immediate results, the drug testing methods employed inImperial Oil involving saliva swabs are more cumbersome, invasive and take several days to process.  Thus drug testing methods were deemed to violate employee rights to dignity and privacy.

Petro-Canada Lubricants Centre (Mississauga) v. CEP, Local 593, 2009 CanLII 44405 (ON C.A) (“Petro-Canada”)

In the most recent arbitrated case dealing with these issues, Arbitrator Kaplan held that an employer was in breach of its collective agreement when it implemented random alcohol testing for safety-sensitive positions. In supporting his decision, Kaplan relied heavily on the analysis in Imperial Oil and its strong stance against random testing. Although the decision makes no mention of the particular case, it stands in contrast to Entrop where random alcohol testing for safety sensitive positions was seen as BFOR.

Current Law and Outstanding Issues

In light of the most recent case law, it appears as though Imperial Oil stands as the most authoritative pronouncement on the law of random alcohol and drug testing. While Imperial Oil comes down strongly against all randomized testing, except under specific circumstances as mentioned above, random drug testing remains the more controversial issue. It is also evident that the Court of Appeal decision in Imperial Oil on which Petro-Canada relies is somewhat at odds with the Court of Appeal decision in Entrop.

How can these decisions be reconciled? While the Court of Appeal in upholding Imperial Oil does not directly address their seemingly inconsistent decisions, supporting the denunciation of random drug testing in one case and allowing random alcohol testing in another, it does make mention of some distinctions pointed out by Arbitrator Picher’s analysis in Imperial Oil. In his decision, Picher distinguishes Entrop from Imperial Oil primarily on the grounds that Entrop “did not involve the interpretation, application or administration of the terms of a collective agreement” (Imperial Oil, para. 72), but rather dealt with an HRC claim. Significantly, Picher also emphasizes the fact that random alcohol testing was permitted in Entrop primarily because of the method used for testing.

Implications

The arguments used to distinguish Entrop and Imperial Oil lead us to certain conclusions and certain questions. For one, they can be seen as a reaffirmation of the importance of collective agreements in protecting certain employee rights: in both Imperial Oil and Petro-Canada where a collective agreement was at issue, the employees were protected to a greater extent than in Entrop where a non-unionized workplace policy was at issue. As Picher explains, “it is important to remember that that which is permissible under human rights legislation may not be permissible under collective agreements” (Imperial Oil, para. 110). Further however, the distinctions leave the question regarding the permissibility of random drug testing in unionized environments slightly open: if alcohol testing is permitted due to the manner used to test an individual, what if a new method of random drug testing, reflecting similar characteristics, is developed and employed?

In May 2002, the B.C. government introduced Bill 48, the Employment Standards Amendment Act which contained a broad union derogation provision that would allegedly enable both workers and employers to benefit from increased workplace “flexibility” by providing “opt out” provisions for unionized employees from the core minimum legal standards mandated by the B.C. Employment Standards Act.   In reality, however, according to a recent study by the Canadian Centre of Policy Alternatives, the effect of Bill 48, by eliminating the “meet or exceed provisions” has been to strip unionized workers of their basic rights enshrined in the ESA and has resulted in substandard working conditions and, potentially, a future Charter challenge.

The Provenance of Bill 48

The predecessor of Bill 48 can be found in Social Credit party Premier Bill Bennett’s controversial amendment to the B.C. Employment Standards Act (hereinafter “ESA”) in 1983 which excluded unionized workers from the core protections of the ESA.  Although Bennett’s 1983 amendment was repealed by the NDP government in 1992, employer organizations lobbied strenuously in favour of retention of the provision, arguing that parties to collective bargaining should have the right to create their own resolutions to issues covered by the Employment Standards Act, unhampered by legislated legal minimum standards.  The following years saw a concerted effort by two major employer organizations, the coalition of B.C. Businesses and the Business Council of B.C., to pressure the government to make changes to the ESA, relying on a policy document which asserted that government-mandated basic workplace standards protecting employees “should not preclude employees and employers from agreeing to variations on those standards to meet their mutual interests”.

In a 2001 submission to Gordon Campbell’s Liberal government, the Business Council of B.C. called for a reinstatement of the 1983 exclusionary provision, arguing that “employment standards should not interfere with the daily operations of unionized worksites”.  Following a consultation process in which the respondents, when asked whether workers covered by collective agreements should be protected by the ESA, were given only the options advanced by business associations and were granted merely twenty-eight days to reply, all employer organizations, predictably, supported some form of exclusion of unionized workers from the ESA, while all unions opposed any such exclusion.   In spite of this opposition from unions, from workers’ rights groups and from such notable public figures as the 1993 Employment Standards Review Commissioner Mark Thompson who in a letter to the Assistant Deputy Minister of Skills Development and Labour, said that such an exclusionary policy was unwise “because it opens the door to corrupt arrangements between employers and pseudo unions… [which] now exist in BC”, Bill 48 was introduced in May 2002 and passed in the BC legislature, incorporating language that actually expanded the scope of the collective agreement exclusions from the original 1983 provision.

Bill 48: Opting Out of Legal Minima

For eight years, from 1994 to 2002, employees covered by a collective agreement were deemed to have rights and benefits at least equal to those in the Employment Standards Act, regardless of the scope of the governing collective agreement: the “meet or exceed” provisions.   After the passage of Bill 48, however, in a feature of employment law unique in Canada, parties to a collective agreement could “opt out” of the legal protections of the Act and agree to conditions of employment below or contrary to what all other workers are required to receive by law, if their collective agreements contain any language regarding the specific provisions.   Such provisions include those concerning hours of work and overtime, statutory holidays, annual vacations or vacation pay, paydays, termination of employment and layoff, termination pay and payroll records.  Initially, one might presume that such exclusion is immaterial because employees covered by a collective agreement have recourse to the union for protection, and that the existing collective agreement contains provisions well above the minimum standards prescribed in the ESA.  Fairey and McCallum, however, in “Negotiating Without a Floor: Unionized Worker Exclusion from BC Employment Standards”, articulate four compelling reasons why all workers, including unionized employees, should have access to the protections afforded by the ESA which bear mention.

Reasons ESA Protections are Important to Unionized Workers

1) Bill 48 Denies Unionized Employees the Protections of Government Enforcement of the Law

Prior to the passage of Bill 48, employees covered by a collective agreement could grieve any provision in the agreement which fell below any ESA minimum and have the provision declared illegal.   Now, unionized workers no longer have recourse to the any of the wage recovery mechanisms of the ESA, the powers of enforcement of the Employment Standards Branch or the grievance procedure through the Labour Relations Board.

2) Unions Must “Re-Win” Basic Rights

The Employment Standards Act sets out minimum workplace protections and benefits which bind employers regarding issues such as minimum wage, minimum and maximum hours of work, overtime pay and statutory holidays.   Such standards are meant to provide a basis for negotiation of improved conditions during collective bargaining between unions and employers.  With the advent of Bill 48, however, because unions have been excluded from the minimum standards stipulated in the ESA, unions have been compelled to allocate time and resources battling for the basic rights that other workers possess automatically, rather than focusing on improving working conditions for union members.

3) Employers Exploiting Lacunae in Collective Agreements

Because many collective agreements don’t cover every issue dealt with in the Employment Standards Act, prior to Bill 48, when an agreement was silent on an issue, the ESA minima were deemed to apply.  Now, in the absence of this default application of the ESA and as a result of the failure of the B.C. government to allow unions to re-open their collective agreements for revision prior to the passage of Bill 48, some employers are taking advantage of lacunae in collective agreements to deny workers the minimum ESA protections.   Indeed, any collective agreement in effect as of May 2002 that contained “any provision” whatsoever, regardless of whether it was substandard or contained a glaring omission was, by Bill 48, legislated into an exclusion status without recourse.  A particularly egregious example of the application of this principle is an October 2005 decision cited by Fairey and McCallum in which a laid-off Steelworker was denied a grievance against the employer for not providing eight weeks wages in lieu of notice of termination pursuant to the ESA because the collective agreement provided only for severance in the event of a plant closure.  The arbitrator found that because the agreement contained specific language providing for the payment of severance (in spite of the fact it was limited to situations of plant closure) and the ESA, in section 3(2) contained a provision regarding “termination of employment” no differentiation between “severance pay” and “termination pay” was necessary.  The minimum standards for terminations or layoffs in the ESA didn’t apply because the collective agreement “addressed” a subject set out in Section 3(2) of the ESA.

4) Collaboration Between Employer and “Alternative” Employer-Accommodating Unions

When the ESA prohibited contracting out of its provisions from 1994 to 2001, applying pressure on unions during collective bargaining to accept working conditions lower than the minimum standards or forcing a union to strike over employer demands for substandard provisions would have been an “unfair labour practice”.  Now, employees working under a substandard agreement no longer have such recourse.  Further, as Professor Thompson warned, Bill 48 created incentive for employers to seek out and certify unions which will  “opt out” of the legal protections of the ESA and agree to substandard conditions of employment.

With reference to BC’s largest “employer accommodating union”, the Christian Labour Association of Canada,  Fairey and McCallum found that of the thirty-two CLAC agreements negotiated after Bill 48, twenty-eight contained at least one substandard condition relative to the core provisions of the new ESA.  In one notable instance, a Letter of Understanding between JJM Construction Ltd and CLAC Local 67, employees’ regular rates of pay were reduced by twenty percent for work in excess of 40 hours per week and on weekends and holidays before overtime rates apply, while the Employment Standards Act would have required the premium paid to be based on the employees’ regular rates and pay:  JJM Construction’s agreement with the extremely “cooperative” CLAC clearly violated the ESA as the overtime rates of pay are 20% less than they would have been under the legal minima mandated by the ESA.

Conclusion

It is interesting to note that in 1996, Ontario attempted to introduce a similar piece of legislation (Bill 49) which would have allowed employer and unions to negotiate their own employment standards as part of the Harris government’s policy to increase labour market “flexibility”.   Bill 49 was quickly withdrawn after a coalition of unions, workers’ rights advocates and legal clinics (the “Employment Standards Working Group”) managed to draw attention and opposition to the Harris government proposal.  British Columbia, unfortunately, did not have the benefit of this widespread public opposition to Bill 48 and unionized workers are now suffering the consequences of the inequitable, arbitrary initiative which promotes corrupt arrangements between employers and “employer-influenced” unions and deprives unionized workers of the basic rights that should be (and once were) guaranteed to all employees.

I agree with Fairey and McCallum’s recommendation that section 3(2) of the Employment Standards Amendment Act excluding  unionized workers from core provisions of the ESA be repealed, and the “meet or exceed” provisions of the 1994-2001 Act be returned so as to ensure that any lacunae in collective agreements may be filled by recourse to the Employment Standards Act.  Further, the Employment Standards Branch should assume its previous role in scrutinizing collective agreements, thereby granting unionized employees access to effective enforcement measures.

Introduction

After more than a decade of intensifying debate around the issue of workplace violence, it seems Parliament has finally taken notice with Bill 168.  Unfortunately, this one-size fits all solution has much to be desired.  Apart from the criticisms that Bill 168 does not do enough to protect workers from emotional or psychological violence prevalent in some industry sectors, the bill also seems to impose a needlessly heavy burden on other workplaces, which do not share the same risks of violence as those that made the Bill necessary in the first place.

Concern about One-Size-Fits-All Design of Bill 168

Workplace violence undoubtedly poses a real and serious threat in some workplaces, particularly those in the service sectors.  Nevertheless, workplace violence is certainly not a uniform threat.  The Ministry of Labour has already identified many susceptible workplaces, which carry an inherent risk of violence, including healthcare service, social service, retail, hospitality, financial institutions, education, and transportation.  The vast majority of workplace violence incidences fall into these identified industries, with seriously volatile incidents generally uncommon.

Blanketing the burden imposed by Bill 168 without regard for the differences between workplaces could have serious effects on the ability of many businesses and industries to produce efficiently and remain competitive, especially given the uneasy state of the economy.  Although, Ontario is not the first jurisdiction in Canada to incorporate laws dealing with the potential for violence into its health and safety legislation, Bill 168 will likely do little to help Ontario attract further business, particularly in manufacturing.  The additional onus it creates represents yet further legislative creep, adding more unwarranted burden to those employers in industries where very few problems existed.

Bill 168 and the Right to Refuse Unsafe Work

Among the proposed amendments to the Occupational Health and Safety Act (OHSA) requiring employers to help prevent workplace violence is a proposed amendment to the ‘right to refuse unsafe work.’  Currently, legislation allows a worker to refuse work on the basis of perceiving an unsafe physical condition, machine, device or thing in the workplace, aspects of the workplace within the employer’s control.  Despite arguments that the mental state of an individual is outside the employer’s control, Bill 168 would add the word ‘person’ to the mix; affording workers a new basis to refuse potentially unsafe working conditions.  However, Bill 168 fails to address many of the challenges facing employers trying to comply with the Act, leaving an abundance of unanswered questions and the continued presence of uncertainty.

Complications with Unsafe Work Investigations

Compliance with the OHSA requires investigation of work refusals, while the worker remains in a safe place until the investigation is completed.  While employee work refusals regarding an alleged risk of danger due to physical conditions or things in the workplace can almost always be determined objectively, allegations of personal intent to do harm can only be evaluated subjectively, except for the most blatant incidences of malice. How then will the inspectorate determine that the refusing worker legitimately had ‘reasonable grounds’ for the continuance of refusal?  How can an employer remedy refusals stemming from over-sensitivity without causing undue disruption to the workplace?  What constitutes abuse and falls short of the protection of the Act?   Moreover, abuse of the right to refuse is a particular concern to manufacturers, where such refusals can shut down certain operations, relieving affected workers of their duties and earning the complainant a certain degree of praise from his/her coworkers.

While work refusals due to violence in the high-risk workplaces identified by the Ministry generally stem from the inherent risks of violence in those workplaces, most work refusals due to violence in other workplaces would likely stem from co-worker disputes.  In manufacturing, work refusals due to violence are expected to almost exclusively originate from co-worker altercations.  Although co-worker disputes very rarely end in violence, Bill 168 would still require an employer to conduct an investigation in response to a work refusal.

Co-worker altercations present yet another set of challenges: the topic of dispute may be personal in nature, both parties may have contributed to the confrontation, facts may be difficult to ascertain as well as privacy issues may need to be considered.  Moreover, if the refusing worker is discovered to be culpable through contributing to or instigating in the original altercation, not an uncommon situation in manufacturers, can he/she be subject to discipline notwithstanding the Act’s reprisal prohibition?  Bill 168 removes the employer’s ability to deal swiftly with these co-worker issues, but offers little guidance on these questions.

Conclusion

All these issues and questions barely scratch the surface of the challenges facing Bill 168.  In response to such critiques, Parliament should consider a workplace specific approach to workplace violence legislation.  The Ministry of Labour has already recognized workplace contexts which have an inherent risk.  In fact, many provisions in the Occupational Health and Safety Act are already tailored to the specific risks associated with certain workplaces and industries.  A workplace specific approach can be crafted to avoid unnecessary burdens on employers where few problems exist, while more fully addressing the challenges to implementation of the proposed legislation.

Melissa Fedsin

We are pleased to have representatives speaking about the following practice areas:

• Individual Employment/Human Rights – Sharaf Sultan, Rubin Thomlinson LLP
• Management-side Labour – Lorenzo Lisi, Sherrard Kuzz LLP
• Union-side Labour – Niki Lundquist, Canadian Autoworkers Union
• Occupational Health & Safety – Landon Young, Stringer Brisbin Humphrey LLP
• Provincial Employment Standards Enforcement – Valerie Baker, Ministry of Labour

We encourage all interested parties to join us for the event.

When? – November 16 @ 12 :30 p.m.

Where? – Room 107, Osgoode Hall Law School

Why? – Free pizza! (and also a career panel)

Please RSVP should you wish to attend.

Even though the Office of the Superintendent of Bankruptcy Canada claims business insolvencies are at their lowest levels since January, 1987 (466), it seems the wrath of the recession isn’t over yet:  Auto-parts manufacturer Maxtech has ceased production in Waterloo, closing all its plants, just as Progressive Mouldings did in Vaughn over a year ago.

The difference between Progressive Mouldings and Maxtech?  Maxtech’s employees can make claims for unpaid termination/severance pay under  recently-amended Wage Earner Protection Program Act.  A year ago, those workers Progressive Mouldings were SOL, so what happened?

Background on WEPPA 1.0

The Wage Earner Protection Program Act (“WEPPA“) was introduced by the Federal Government in 2005, but did not come into force until July 7, 2008.  The purpose of WEPPA is to provide employees whose employment is terminated as a result of business insolvency with a priority claim for unpaid wages.  Accordingly, the Bankruptcy and Insolvency Act was amended to allow employees with a secured claim for up to $2,000 in respect of unpaid wages.

Under WEPPA, an eligible employee is permitted to claim a maximum of $3,254 from the Wage Earners Protection Program.  An employee is eligible so long as he/she is not a manager/officer/director of the employer, and the employee is owed wages for a six month period immediately preceding the business insolvency.  In return for a payment from the Wage Earners Protection Program, the Minister of Labour is allowed to subrogate the employee’s secured claim on the employer’s assets for $2,000 in respect of unpaid wages.

Where Did WEPPA 1.0 Go Wrong?

The main problem with WEPPA 1.0, which the case of Progressive Mouldings unfortunately demonstrates, is that termination/severance pay was not included in the definition of “wages”.  Under WEPPA 1.0, “wages” was defined to include salaries, commissions, vacation pay, gratuities, and for travelling salespeople, disbursements of travel expenses – termination/severance pay was expressly excluded.

The omission/termination pay from WEPPA 1.0 was glaring.  Since corporate directors are personally liable for unpaid wages, employers typically become insolvent on the date in which the firm can no longer pay its liabilities (including employee wages).  However since termination/severance pay received no priority or security under WEPPA 1.0, in the event of insolvency employees, though paid for wages worked, were left with no recourse for their statutory entitlements.  The end result was that WEPPA 1.0 was highly ineffectual.

Enter WEPPA 2.0

WEPPA 2.0, as we’ll call it, is quite a bit more expansive than the original WEPPA 1.0 scheme.  The principal change?  Expansion of “wages” to include termination/severance pay and amounts earned by the employee for the benefit of a third party.

Termination/Severance Pay

The 2009 Federal Budget rectified WEPPA’s shortcomings by amending the Act to include payment of termination/severance pay to eligible employees.  Note however that the maximum amount was not increased and still remains at $3,254, and that this amount is not only taxable, but also reportable (and possibly deductible) from EI.

Judicial Expansion of “Wages”

WEPPA’s scope was further broadened by the BC Supreme Court in Ted Leroy Trucking Ltd., which held that “wages” not only included amounts paid directly to an employee (e.g. compensation), but also included amounts paid from the employee’s earnings to a third party for the employee’s benefit (e.g. union dues, benefit premiums).

In Ted Leroy Trucking, the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Unit (“the Union”) brought an application on behalf of employees, claiming all liabilities arising out of the collective agreement between the Union and the employer ought to be covered by WEPPA.  At issue was the payment of union dues, which had been rejected by the employer’s receiver, PriceWaterhouseCoopers.

The court held that like under bankruptcy legislation, “wages” under WEPPA ought to be interpreted broadly to include all amounts earned by an employee, regardless of to whom it was ultimately directed.  This meant holiday and overtime pay, benefit premiums, and union dues were captured by “wages”, as “they are clearly returns given by an employer to or for the benefit of the employee for services given by the employee”.

Where Does Canada Rank Internationally With WEPPA 2.0?

Although WEPPA 2.0 is much more effective than WEPPA 1.0, it’s worthwhile to review what other jurisdictions have done with respect to employee entitlements in the event of employer insolvency.

United States

In the United States, employees may make claims up to $4,300 for unpaid wages (which captures wages/salaries/commissions and vacation/severance/sick pay) earned within 90 days before an employer’s bankruptcy.  These claims are given preferred status and rank third among preferred creditors.

There are two problems with this scheme:  first, preferred creditor status offers limited protection, since few assets are typically left over after secured credits have recovered.  Secondly, although US legislation covers severance pay, most states utilize ‘employment-at-will’, meaning employees already had no statutory entitlement to severance pay.

United Kingdom

Under the Employment Rights Act 1996, the UK provides a National Insurance Fund which provides payment for outstanding employee entitlements.  Similar to WEPPA, if an employer becomes insolvent, employees can claim outstanding entitlements owing at termination.  Further, like under WEPPA, in such a case the Government subrogates the employee’s rights to recover against the insolvent employer.

However unlike WEPPA, the UK’s Fund is much more expansive, covering up to eight weeks’ unpaid wages, up to six weeks’ unused annual leave time, and up to twelve weeks’ pay in lieu of notice.  As of October 1, 2009, employees’ are limited to £380 per week on outstanding entitlements.

Australia

The General Employee Entitlements Redundancy Scheme (GEERS) provides employees who have been terminated as a result of bankruptcy with the following:

• up to three months unpaid wages for the period prior to the appointment of the insolvency practitioner (a receiver);
• unpaid annual leave;
• unpaid long service leave; and
• up to a maximum of five weeks unpaid pay in lieu of notice.

Depending on annual earnings, GEERS weekly payments vary from $1,441 to $2,076 per week.

Conclusion

While WEPPA 2.0, with its inclusion of termination/severance pay and amounts owed to third parties, is much more effective than WEPPA 1.0, Canada still has a long way to go to catch up to the UK and Australia in terms of protection of employee entitlements upon employer insolvency.  While WEPPA 2.0 offers much more than what’s offered in the US (no surprise), the maximum amount offered of $3,254, which is taxable and deductible from EI, pales in comparison to other jurisdictions.  Further, some have also voiced their concerns about the cost to receivers of administering WEPPA.

This all said, as the employees of Progressive Mouldings would likely tell the employees of Maxtech, “some of something is better than a lot of nothing!”

LEAF is looking for law student volunteers to facilitate one-hour LEAF at Work workshops in high schools. These workshops provide students with tools, resources, and information to help them make informed decisions about their legal rights in the workplace. As a facilitator you will receive training, tools and support, including a curriculum that provides current legal information and an equality rights analysis.

There is a mandatory 5-hour training session tentatively scheduled for Sunday, October 18, 2009, at a downtown location. This training session will give you the relevant legal information and provide you with excellent public speaking training/practice. Volunteers are expected to facilitate 1-2 school sessions per semester, in pairs. This is a 4-5 hour commitment per semester (exclusive of training), including travel time to schools. The LEAF at Work program is eligible for OPIR hours.

If you are interested in becoming a LEAF at Work facilitator, please contact:
Liane Fong
LEAF at Work Coordinator
Email: liane.fong@gmail.com

About LEAF: The Women’s Legal Education and Action Fund (LEAF) is a national non-profit organization committed to using the Charter of Rights and Freedom to promote equality.

Definitions

Bill 168 defines workplace violence as:

(a) The exercise of physical force by a person against a worker in a workplace that causes or could cause physical injury to the worker

(b) An attempt to exercise physical force against a worker in a workplace that could cause physical injury to the worker;

While workplace harassment is defined as:

Engaging in a course of vexatious comment or conduct against a worker in a workplace that is known or ought reasonably be known to be unwelcome

Obligations on the Employer

With respect to workplace violence, the employer must first conduct an assessment of the workplace to determine risk areas. This is not so with regard to the harassment provision which does not require an assessment, but rather begins with the creation of policies. On the issue of harassment, the employer must design an anti-harassment program that satisfies the following criteria:

(a) includes measures and procedures for workers to report incidents of workplace harassment to the employer or supervisor;

(b) sets out how the employer will investigate and deal with incidents and complaints of workplace harassment;

All of this information must be relayed to the employee and must be written and posted in the workplace in a conspicuous location.

Both the workplace violence program and workplace harassment program are to be reviewed by the employer as needed, but at least annually. Unless otherwise required by an investigator, these provisions only apply to workplaces with more than 5 employees.

Does Protection from Violence and Harassment in the Workplace Not Already Exist?

Not quite. The proposed amendments to the Occupational Health and Safety Act would provide much broader protection than the Human Rights Code which only protects employees from harassment that is based on prescribed discriminatory grounds. Bill 168 has no restrictions or definitions on the subject matter of the harassment.

As for the present duty clause in the Occupational Health and Safety Act, although it has been interpreted as a general duty for the employer to take precautions for the protection of the employee from workplace violence, it is not a protection from psychological harm. Further, the Ministry of Labour found support for the specific inclusion of workplace violence and harassment provisions to be included explicitly in the Occupational Health and Safety Act.

Precedent for Protection from Psychological Harm in the Workplace

Ontario is not pioneering any new-founded rights for the employee in this proposal. Both Quebec and Saskatchewan have already passed legislation that obligates employers to ensure the psychological well-being of their employees. The brief history of these jurisdictions in dealing with these requirements will be helpful for Ontario in determining some of the inevitable questions that will arise with respect to these protections. For example, Quebec has already established that an objective standard will first be applied in determining whether there has been harassment: would a reasonable person placed in similar circumstances find the behaviour harassing? The assessment of damages then takes into account a subjective standard which considers the particular impact on this particular employee. This allows for thin-skull complainants to be compensated in proportion to their injuries. Of course this is Quebec’s interpretation of the protection and the Ontario provisions will have to be clarified through its own challenges.

The Perpetrator

Both the protection from physical violence and from psychological harm applies to strangers, clients, patients, customers, fellow employees, strangers, employers and importantly, domestic / intimate partners. Basically, the proposed amendment is broad enough to capture harm suffered by the employee from any human source so long as it is encountered at the workplace.

Work Refusal

An extension of the proposed protection from workplace violence is that an employee can refuse a work assignment based on exposure to risk of violence. This work refusal provision, however, is not extended to harassment and so employees who fear exposure to psychological harm cannot refuse a work assignment on that basis under this provision.

Conclusion

Social support for the protection from psychological harm suggests that Bill 168, at least in some form, is likely to pass. Given the amount of hours employees spend at the workplace, incurring repeated psychological harassment while at work can be extremely damaging. This type of injury can lead to depression, anxiety, and extended sick-leave. Since harassment in the workplace is almost certainly more frequent than violence in the workplace and can be equally or even more damaging, there should be protections in place to guard the employee from it. It will, of course, take time for employers to accommodate their practices to ensure this protection and to learn how to deal with complaints, but if the result is a happier and certainly more productive work environment, the effort is more than warranted.

It is best to think of this pendulum in terms of duties owed, and how stringent or flexible these duties are.  Keays allowed employers to be more bullish when managing employees by doing away with bad faith Wallace damages, instead adopting the Hadley approach to aggravated damages.  As discussed (here, here, and here), this fundamentally re-weighed an employer’s duty of good faith and fair dealing, allowing for more confrontation without the presumption of liability.

Similarly, although the facts of Evans are extreme, it too showed that, in certain circumstances, an employer will not be held responsible for bearing the brunt of an employee’s poor decision.  In that case, an employer’s liability for 24-months of reasonable notice was wiped out when the terminated employee refused an offer to return to his former workplace to work out some of the notice period.  Combined with Keays, Evans has the effect of dramatically shifting the balance of power towards employers during severance negotiations.

Hydro Quebec speaks to an employer’s duty to accommodate, and the Supreme Court’s most recent enunciation in that case hints at relieving employers of some of their burdensome accommodation responsibilities.  In Hydro Quebec, the Supreme Court held that a “global analysis” was required in assessing accommodation requests, and that previous attempts at accommodating a then-undiagnosed illness could evidence an employer’s satisfaction of its duty.  Employers struggle with disability accommodation, as shown by these startling statistics, so perhaps Hydro Quebec is a further example of the Court loosening the stringent demands previously put upon employers.

And what of RBC Dominion Securities?  On one hand it may be difficult to reconcile with the previous three pro-employer cases, as the Supreme Court held there was no moratorium at common law on competition during the reasonable notice period.  However the Court’s imposition of a positive duty on employees to provide reasonable notice of resignation, and holding them liable for failing to do so, cannot be ignored.  This duty, along with confirming the duty not to misuse of confidential information, provides employers with staffing stability by disincentivizing abrupt departures.

Reading these cases together, it would be tempting to say that the Supreme Court simply looked into their crystal ball back in February 2008 when it released the first of these decisions and foresaw the world’s financial meltdown.  In a way this almost seems plausible, because without doubt, through Evans, Keays, Hydro Quebec, and RBC Dominion Securities, the Court has given employers the employment relations tools necessary to weather the current recession.  While the timing is impeccable, what is more likely is that the rulings handed down in 2008 were simply the product of the natural ebb and flow of common law, not so dissimilar from Justice Iaccobuci’s “dialogue theory” about the flow between government and the judiciary.  Either way, employment law enthusiasts will eagerly await the next set of cases to see where the employer-employee pendulum swings next.

Introduction

In the previous Quadrilogy cases, we covered a number of obligations that employers owe employees.  These include an employer’s duty to accommodate (Hydro Quebec) and the employer’s obligation to act in good faith towards its employees, particularly at the time of dismissal (Keays).

But what duties do employees owe employers?  At termination we saw that employees have a duty to mitigate, and while this can affect the quantum of damages owed by employers (Evans), it’s a bit of a stretch to say that it’s a duty owed to the employer per se.  Generally speaking, employees must abide by the implied term in every employment contract which stipulates that he/she will carry out his/her duties in good faith, and that he/she will provide reasonable notice of resignation.  The corollary to these terms is an assumption that employees cannot compete unfairly with his/her (former) employer.

Sounds simple, right?  Wrong.  Unfair competition disputes between former employees/employers are highly contentious matters in employment law.  Absent a contractual term to the contrary (which, as an undue ‘restraint on trade’, may not even be enforceable), all employers will have to go on when suing employees who misuse confidential information acquired in the course of their former employment is the breach of that implied term of good faith dealings and, if applicable, reasonable notice of resignation and/or breach of fidicuiary obligations.

So while it may seem like employers carry most of the burden in terms of duties owed in the employment relationship, RBC Dominion Securities v. Merrill Lynch Canada (“RBC Dominion Securities“) illustrates the extent of damages employees can be liable for should they run afoul of their obligations.

Extreme Facts Lead to Extreme Law

The facts of RBC Dominion Securities are astonishing.  In Cranbrook, British Columbia, RBC and Merrill Lynch were the principal providers of investment advice, and as such were largely in competition with one another.  That said, Mr. Delamont, the RBC branch manager, and Mr. Michaud, the Merrill Lynch branch manager, were actually pretty good friends, and together orchestrated a shocking exodus of investment advisors to Merrill Lynch that utterly eviscerated RBC’s office.  It was bad enough that none of the staff gave notice of their departure, but it was worse that they duplicated confidential client files before they left.  Together, these two points brought RBC’s office to the point of collapse.

Naturally, RBC sued.  It not only brought an action against Merrill Lynch for inducing breach of contract, but it also sued its former investment advisors, as well as the former branch manager, Mr. Delamont.  Unfortunately for RBC, none of its former employees were subject to restrictive covenants in their employment contracts, meaning RBC was only able to sue for breach of the common law obligations described above.  This is the main point of significance to the case, and previously was an area that required judicial clarification.

Procedural History

At trial, Justice Holmes of the BC Supreme Court founds the investment advisors liable to RBC for the failure to provide reasonable notice and further liable for breaching the implied terms of their employment contracts by engaging in acts tantamount to unfair competition.  Justice Holmes ordered each investment advisor to pay $40,000 for failure to give reasonable notice, and a total of $225,000 for RBC’s lost profits due to unfair competition.  Further, as the principal orchestrator, Mr. Durmont was ordered to pay $1.5m in loss of profits due to the breach of duty of good faith.

The majority of the BC Court of Appeal overturned the lost profit award against Mr. Durmont and the unfair competition damages award against the investment advisors.  The Court of Appeal, relying on stalwart Hadley v. Baxendale, reasoned that what transpired could not possibly have been in the contemplation of the parties at the time of contract formation.  As such, the Court of Appeal reasoned the damages for lost profit were not proximate and therefore not compensable.

Mixed Bag:  SCC Varies the Damages but Clarifies the Obligations of Departing Employees

In its decision, the Supreme Court varied the damages award and made a number of important remarks regarding the obligations of departing employees.

Damages

On the issue of damages against Mr. Durmont, the Supreme Court found that the Court of Appeal applied Hadley incorrectly:  instead of asking whether damages of this sort were in the reasonable contemplation of the parties in the event of a breach, the Court of Appeal asked whether the breach itself (that is, the orchestrated mass exodus) was foreseeable.  Finding that the losses incurred by RBC were reasonable to suppose at the time of contract formation, should what happened actually have happened, the $1.5m award against Mr. Durmont for lost profits was reinstated.

More significant was the Supreme Court’s treatment of the investment advisors’ damage award for unfair competition.  The Court held that upon termination of the employment contract, a non-fiduciary employee (non-manager) owes no duty not to compete during the reasonable notice period.  In other words, upon the cessation of the employment relationship (by either the employer or employee’s doing), a non-fiduciary employee is free to work for a competing employer so long as their employment contract contains no restrictive covenants to the contrary.  Consequently, the Supreme Court overturned the investment advisors’ damages award for unfair competition.

Obligations of Departing Employees

Regarding the obligations of departing employees, the Supreme Court confirmed that there exists an obligation for employees leaving a company to provide reasonable notice.  Just as employers must provide notice, or pay in lieu of, employees must do the same.  However in this case, the employees were not required to provide payment in lieu of notice, but rather they incurred liability for failing to provide notice.  Finding 2.5 weeks to be an appropriate notice period, each investment advisor was ordered to pay $40,000, representing the lost profits RBC would have generated during this time.

Although the Supreme Court did not elaborate on this point, it hinted that all employees, fiduciary or otherwise, were under a duty not to misuse confidential information acquired in the course of their employment, once that employment comes to an end.  This is a significant piece of obiter from the Court, however it remains to be seen what the scope of that duty is.  For example, does it only cover express theft, as in the present case?  What about the information employees leave with “in their head”?  While RBC Dominion Securities has provided much needed clarification on the obligations of departing employees, and the liabilities they face for running afoul of those obligations, further litigation will be required to clarify this final point about confidential information.