It is crucial for businesses to navigate the dynamic landscape of employment law to stay ahead in 2024. The past year has brought significant shifts, prompting employers to re-evaluate their practices and policies.

In this article, we delve into some key developments that emerged in 2023 and carry implications for the year ahead. As we explore these legal developments, it becomes evident that proactively addressing issues such as termination tactics, employment agreements, and workplace safety is paramount for maintaining a harmonious workplace environment and reducing the risks of non-compliance, which can be costly for employers. In the evolving landscape of employment law, staying up with these developments is not just advisable – it is essential.

 

Employment Development #1: Evolving Job Roles May Void Employment Contracts

As businesses change, employee roles can shift, invalidating original employment contracts and surprising employers with increased termination entitlements. In Celestini v. Shoplogix Inc., 2023 ONCA 131, the employee’s role change led to the court granting extended notice upon termination despite a contract stipulating otherwise.

The Ontario Court of Appeal revisited the doctrine of “changed substratum.” The Court found the employment contract void due to substantial changes in the employee’s duties, showing the importance for employers to promptly update contracts when assigning new responsibilities to avoid unexpected and costly terminations. Hum Law explored this development in detail.

 

Employment Development #2: Contractor’s Duty to Mitigate and Employer’s Risk in Fixed-Term Contracts

In Monterosso v. Metro Freightliner Hamilton Inc., 2023 ONCA 413, the absence of a clear termination clause in a fixed-term contract led to substantial damages awarded to the contractor. Although the ruling reinforced the expectation that contractors have a duty to mitigate damages upon early termination (as opposed to employees, who do not have the duty of mitigation in the context of early termination of fixed-term employment), the onus remains on the employer to prove the contractor’s failure in mitigation.

Additionally, this case alerts employers that the misclassification of workers as independent contractors can lead to financial repercussions, including tax obligations, EI premiums, and even severance pay, placing a significant burden on employers. Employers should also bear in mind that inadvertent extensions beyond the contract’s expiry date can convert the arrangement to indefinite-term employment. For more details, please click here.

 

Employment Development #3: A Case in BC Reveals the Risk of Playing Hardball

Poor tactics in dealing with termination can lead to surprisingly high damages, legal costs, or both.

The case of Chu v China Southern Airlines Company Limited, 2023 BCSC 21 highlights the perils of being aggressive when terminating an employee. In this particular case, the employer’s wrongful dismissal resulted in a $150,000 award of moral and punitive damages. The court found that the employer handled the termination in a deceitful and unjust manner, and had failed to fulfill some of their basic legal obligations as an employer, such as providing the employee with a record of employment (ROE).

This case echoes a 2022 Ontario case (Janmohamed v. Dr. M. Zia Medicine Professional Corporation, 2022 ONSC 6561), where the court awarded $30,000 in legal costs against the employer, on the basis of what is “fair and reasonable” in the circumstances, doubling the settlement the employer agreed to pay.

Taking a fair and reasonable approach, making sensible offers, and complying with employment laws can help minimize legal risks and costs for employers. For more details, please click here.

 

Employment Development #4: Alberta Recognized the Independent Tort of Harassment

The 2023 case, Alberta Health Services v Johnston, 2023 ABKB 209, marked a significant legal milestone as the Alberta Court of King’s Bench recognized the independent tort of harassment. Defined by repeated unwelcome behaviours causing harm and emotional distress, this recognition empowers Alberta employees to pursue claims against employers for workplace harassment.

Although its specific implications on Ontario cases remain uncertain, employers in Ontario should remain vigilant. Employers should heed this ruling as a call to promptly investigate and respond to harassment complaints. A robust and timely investigation can serve as a crucial defence against claims of this nature. For a more detailed article about employer obligations to deal with workplace harassment, please click here.

Tips on workplace harassment investigation and mediation can also be found here.

 

Employment Development #5: Supreme Court of Canada Affirms Ontario Construction Owners as “Employers” under OHSA

In R. v. Greater Sudbury (City), 2023 SCC 28, the Supreme Court of Canada (“SCC”) upheld the Ontario Court of Appeal’s decision that “owners” of construction projects can be deemed “employers” under the Occupational Health and Safety Act (“OHSA”). This means project owners can now be held accountable for OHSA violations by their contractors, albeit with a due diligence defence.

The case involved the City of Greater Sudbury, acting as the project’s owner while employing a general contractor. Despite the absence of direct involvement in construction activities by the City, the SCC deemed the City an “employer” under OHSA, emphasizing OHSA’s intent to allocate safety responsibilities among various workplace entities.

This ruling expands liability for project owners but underscores the due diligence defence available to employers under OHSA. To fulfill the duty of due diligence, construction owners must prioritize rigorous adherence to safety measures and collaborative efforts with workers to mitigate accidents.

 

Employment Development #6: Some Ontario Employers are Required to Provide Naloxone Kits under OHSA

Starting June 1, 2023, some Ontario employers must provide naloxone kits in workplaces, as mandated by the OHSA. This measure addresses the risk of opioid overdoses at work. Specific requirements outlined in Regulation 559/22: Naloxone Kits include storing kits according to manufacturer instructions, using hard cases, and promptly replacing single-use contents.

The Ministry of Labour also provided guidance on compliance, emphasizing the exclusion of risks beyond the workplace or from non-employees. Indicators for opioid risk include worker disclosures, previous incidents, or safety committee advice. The guidance advises on storage, disposal, required kit contents, and staff training, emphasizing comprehensive workplace coverage.

 

Employment Development #7: Tax Implications in Employment Dispute Settlements

Employment dispute settlements can carry unexpected tax implications, especially concerning general damages. In 2023, the changes in mandatory disclosure rules (Bill C-47) have triggered concerns among employment lawyers about reporting such settlements to the Canada Revenue Agency (“CRA”).

Usually, terminated employees claim different types of damages: income loss compensation (taxable) and non-monetary loss compensation (not taxable). To safeguard against CRA disputes, including a tax indemnity clause in settlements was common advice. However, the expanded duty of mandatory disclosure under Bill C-47 could mean even these clauses need to be reported under certain circumstances.

Failure to report can lead to penalties. While the CRA clarified that typical tax indemnities might not need reporting, excessive general damages could still raise flags. Employers must now be cautious and seek legal advice to craft reasonable settlements that will not attract unexpected tax liabilities. For more details, please click here.

 

Employment Development #8: Changes to Canada Labour Code (“CLC”)

Changes that Came into Force in 2023:

• Employment Statements: Federally regulated employers must provide existing employees with a statement of employment conditions within 90 days post-July 9, 2023. New employees should receive this statement within the initial 30 days of employment. Employers must retain these statements for 36 months post-employment.
• Ministry of Labour Materials: Federally regulated employers are obligated to provide their employees with Ministry-made materials regarding their rights under the CLC. These materials must be provided to existing staff within 90 days and to new hires within 30 days of their start date. The materials must be prominently displayed. Terminated employees should receive termination-related materials on their last day. This requirement is similar to Ontario employers’ obligation to provide Employment Standards Act posters.
• Reimbursement of Work Expenses: Effective from July 9, 2023, federally regulated employers are mandated to reimburse reasonable out-of-pocket work expenses within 30 days of employees submitting their claims, unless a different timeline is agreed upon in writing or through a collective agreement.
• Provision of Menstrual Products: As of December 15, 2023, federally regulated employers must furnish menstrual products (tampons, menstrual pads) in toilet rooms or another accessible location controlled by the employer, offering reasonable privacy.

Upcoming Scheduled Changes in 2024:

• Enhanced Termination Entitlements for Individual Termination: Starting February 1, 2024, the termination notice or pay in lieu of notice for individual termination under the CLC will increase based on the length of continuous employment, from two weeks after three consecutive months to a maximum of eight weeks after extended employment periods.
• Statement of Benefits during Individual Termination: Also starting February 1, 2024, upon individual termination, federally regulated employers must furnish employees with a comprehensive statement of benefits. This statement should outline their entitlements such as vacation benefits, wages, severance pay, and other employment-related benefits. The statement must be provided either during the working notice or, if pay in lieu is offered, by the termination date. This aligns with the existing requirement for group terminations.

Effective February 1, 2024, the termination entitlements under Part III of the Canada Labour Code (“CLC”) will undergo significant changes. These changes were introduced in the Budget Implementation Act, 2018, No. 2, which aimed to modernize labour standards.

What Employers Are Regulated by Part III of the CLC?

Part III of the CLC, which sets labour standards for employment conditions, applies to employers in the following industries:

• air transportation, including airlines, airports, aerodromes and aircraft operations;
• banks, including authorized foreign banks;
• grain elevators, feed and seed mills, feed warehouses and grain-seed cleaning plants;
• first Nations Band Councils (including certain community services on reserve);
• most federal Crown corporations, for example, Canada Post Corporation;
• port services, marine shipping, ferries, tunnels, canals, bridges and pipelines (oil and gas) that cross international or provincial borders;
• radio and television broadcasting;
• railways that cross provincial or international borders and some short-line railways;
• road transportation services, including trucks and buses, that cross provincial or international borders;
• telecommunications, for example, telephone, internet, telegraph and cable systems;
• uranium mining and processing and atomic energy; and
• any business that is vital, essential or integral to the operation of one of the above activities.

Change #1: The Length of Termination Notice During Individual Termination

Under the current rules, employers are required to provide two weeks’ notice of termination or two weeks’ pay in lieu of notice to employees who have completed at least three months of continuous employment. The length of the notice is fixed at two weeks, no matter the employee’s tenure. This requirement does not apply in cases of termination for just cause or during a “group termination,” involving 50 or more employees facing termination.

Effective February 1, 2024, employers will have a graduated notice of termination, pay in lieu, or a combination of both, based on the length of an employee’s continuous employment.

For employees with three months to three years of continuous employment, their notice entitlement remains at two weeks. However, as employees reach the three-year mark, their entitlement increases to three weeks. Subsequently, entitlement increases in one-week increments for each additional year of employment, reaching a maximum of eight weeks:

• 3 months to 3 years less a day: 2 weeks
• 3 years to 4 years less a day: 3 weeks
• 4 years, to 5 years less a day: 4 weeks
• 5 years, to 6 years less a day: 5 weeks
• 6 years, to 7 years less a day: 6 weeks
• 7 years, to 8 years less a day: 7 weeks
• 8 years or more: 8 weeks

The increase only applies to individual termination.

Change #2: Statement of Benefits Requirement During Individual Termination

In addition to the increase in termination notice periods, employers will also be obligated to provide employees with a statement of benefits upon termination in the case of individual termination, starting February 1, 2024. This statement should detail employees’ entitlements, including vacation benefits, wages, severance pay, and any other benefits and pay arising from their employment. The statement must be provided at the time of termination, either as part of a working notice or, if pay in lieu is provided, no later than the date of termination. Note that this is the existing requirement for employers in the case of group termination.

How Will This Affect Employers?

For federally regulated employers, the increase in individual termination notice introduces a more nuanced and graduated approach to termination obligations, which aligns with employment and labour standards at the provincial and territorial levels. Bear in mind that, in addition to the termination notice, employers are required to pay severance pay when terminating employees with at least twelve months of continuous employment under S.235 of the CLC. Severance pay is calculated based on either two days’ wages for each completed year of employment or five days’ wages, whichever is greater.

Starting on February 1, 2024, it will be important for employers to ensure that employment contracts comply with the new minimum entitlements. Any contracts that provide less than the new minimum entitlements, such as limiting notice to the existing minimum of two weeks, may not be enforceable. This means that employers who do not comply with the new law may have to provide an employee with a common law reasonable notice, which can be a much larger amount than the minimum notice under the CLC. It is important for employers to review their employment contracts to ensure they are in compliance with the new minimum entitlements.

Next Steps for Employers?

Employers in federally regulated industries should take good note of these changes. Here are four key steps to take before February 1, 2024:

• Update Employment Contracts: Seek legal counsel to ensure your employment contracts align with these changes to the CLC.
• Update HR Policies: Review and update HR policies to ensure they are aligned with the amendment, reducing the risk of disputes and legal issues.
• Update Termination Documents: Revise termination documents to ensure compliance with the amendment to CLC.
• Budgetary Planning: Assess the potential financial impact of these changes and adjust your budgetary planning accordingly if you are planning to downsize or re-organize.

Many employers are required to implement mandatory vaccination policies. Others, while not explicitly mandated by the government to do so, are implementing them to ensure a safe workplace. As these vaccination policies are implemented, employers face the complicated problem of terminating employees who refuse to comply with a vaccination policy.

So, how do you protect your business now from wrongful dismissal claims in the era of COVID-19 policy-related dismissals? And what steps can you take now to protect your business in the future?

Protecting your business today

Many employers are terminating employees who refuse to comply with mandatory vaccination policies.

Some employers are laying off or placing employees on unpaid leave if they refuse to comply with the mandatory vaccination policy. However, employers should be cautious when doing so because, unless expressly permitted in the employee’s employment agreement, lay offs and unpaid leave are generally not permitted and could invite a constructive dismissal claim.

To avoid a constructive dismissal claim, you may wish to terminate an employee without cause and provide the appropriate notice or pay in lieu of notice. If you decide to terminate an employee without cause, you must first carefully review the employee’s employment agreement to determine whether the termination provisions are enforceable. If the termination provisions are enforceable, the employee’s notice period or pay in lieu of notice could be limited to the Employment Standards Act, 2000 (“ESA”) minimum. In this case, the cost effective and safe approach may be to simply terminate the employee without cause and provide them with their minimum entitlements. However, if the termination provisions are unenforceable, or the employee does not have an employment agreement, you will be required to provide common law reasonable notice or pay in lieu of common law reasonable. This can amount to up to 24-months compensation for long term employees.

Alternatively, you may wish to terminate the employee with cause and withhold any termination or severance pay. An experienced employment lawyer will ensure you are taking the right approach if you decide to terminate an employee with cause. Terminations with cause due to non-compliance with a vaccination policy have not yet been considered by a court and are highly contextual. This approach bears more risk because an employee terminated with cause and not provided with any severance will likely look to improve their situation through legal recourse.

Protecting your business in the future

Moving forward, the best strategy to avoid costly litigation is to update your employment agreements.

As we have noted in the past, many employment agreements do not have enforceable termination provisions due to the decision in Waksdale v Swegon North America. Accordingly, you should update your employment agreements to ensure the termination provisions are enforceable. This way, you can comfortably rely on without cause terminations, including in circumstances where an employee refuses to comply with a vaccination policy.

Most employment agreements do not have a provision permitting a temporary lay off or unpaid leave. Therefore, if you were to place an employee on temporary layoff or unpaid leave due to non-compliance with a mandatory vaccination policy, they could successfully claim constructive dismissal. You should immediately update your employment agreements to permit temporary layoffs and unpaid leave.

Finally, when hiring new employees, ensure they expressly agree to the mandatory vaccination policy as a term of their employment with your business.

The best strategy is to create air-tight employment agreements that dissuade employees and their lawyers from even considering a lawsuit. We encourage you to consult with an experience employment lawyer to assist you navigate these issues.

 

Contact HUM Law today to ensure your employment contracts will remain valid.

 

Call today at (416)214-2329 or email info@thehumlawfirm.ca or Complete our Free Assessment Form Here