Six 2020 employment law cases that will resonate this year

Despite judicial slowdowns brought on by the COVID-19 epidemic, there were some major decisions delivered by courts in the area of employment law in 2020. Here’s a look back at some well-known cases, plus one that is a bit off the beaten path that deserves a lot more attention.

Upholding reasonable notice

A June decision in Waksdale v. Swegon North America Inc. by the Ontario Court of Appeal established that “for cause” termination language used to illegally deny an employee notice is void and, when it’s void, the rest of an otherwise lawful termination clause is void too, with the result that the employer owes an employee full reasonable notice of termination when ending the relationship.

“An employment agreement must be interpreted as a whole and not on a piecemeal basis,” the judgment reads. “The correct analytical approach is to determine whether the termination provisions in an employment agreement read as a whole violate the ESA.

Significantly, the employer in Waksdale tried to obtain permission to appeal the decision from the Supreme Court and the Court denied leave to appeal early in 2021. This decision spells the end for a number of these limitation provisions in employment agreements and represents an important victory for employees.

Termination provision ruled illegal

Speaking of the immediate impact of Waksdale, a month after the ruling, I represented the plaintiff in the Ontario Superior Court (OSC) case Sewell v. Provincial Fruit Co. Limited, where the precedent established by Waksdale was first applied.

Referring directly to the Waksdale decision, the judge noted in Sewell, “I find that the “Termination for Just Cause” provision of the contract was illegal insofar as it contracted around the ESA requirement to provide notice except in cases where an employee engaged in ‘willful misconduct.’ Based on the Court of Appeal’s reasoning, I must read the contract as a whole and set it aside if one or more of the terms are illegal, even if the offending term is not at issue in the instant case.”

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These two rulings are great news for employees. The clause in Sewell, in particular, is very commonly used in employment agreements.  Declaring it void on Waksdale principles means declaring many such clauses being used right now as void. I suspect these decisions will keep counsel and HR specialists busy advising employers as they rewrite termination clauses that have now been clearly identified as being unjust and unfair.

‘Oppressive’ termination provision

In July, with Battiston v. Microsoft Canada Inc, the OSC found that even if there is an otherwise legal termination provision contained within an employment contract that limits post-dismissal compensation, that provision may not be enforceable if it was not brought to the person’s attention.

The court agreed that the company’s failure to alert the plaintiff to the “harsh and oppressive” termination provisions made them unenforceable. This was an important decision that should have firms scrambling to look at their own termination agreements to see if these were just slipped into the employment relationship or added with both parties’ full knowledge and agreement.

Applying the ‘Paquette two-step’

In October, the Supreme Court of Canada (SCC) held that language in employment contracts limiting severance payments cannot easily be used by employers to reduce their liability when terminating an employee. Matthews v. Ocean Nutrition Canada Ltd. involved a manager with 15 years’ experience who the courts determined was constructively dismissed. He claimed he was owed $1.1 million from the company’s long-term incentive plan, but the firm presented language in his contract to the effect that participants must be actively employed by the firm to get the payout.

The trial judge sided with the plaintiff but the appeal court did not.  The SCC resolved the issue by relying on orthodox wrongful dismissal damages principles. Citing a 2016 Ontario appeal court decision in Paquette v. TeraGo Networks Inc., its judgment states: “courts should ‘consider the [employee’s] common law rights’ … that is, courts should examine whether, but for the termination, the employee would have been entitled to the bonus during the reasonable notice period. Second, courts should ‘determine whether there is something in the bonus plan that would specifically remove the [employee’s] common law entitlement … The question … is not whether the contract or plan is ambiguous, but whether the wording of the plan unambiguously alters or removes the [employee’s] common law rights.”

This “Paquette two-step” should become the standard in determining entitlements.

Fixed-term contract dangers

The negative consequences employers may face after signing a fixed-term contract was borne out by an October Ontario Court of Appeal decision in McGuinty v. 1845035 Ontario Inc., with a company ordered to pay damages of more than $1.2 million to a man who had signed a 10-year contract that was ended early.

Citing another OCA ruling, the court ruled that, if an employer terminates an employee on a fixed-term agreement, it must pay the employee as if they were still working for the employer for the duration of the agreement.

‘Unjust dismissal’ claims are unique, or are they?

The final case I want to highlight is one that deserves more attention: Bell Canada v. Hussey.  It centres around an “unjust dismissal” claim, a type of claim introduced in 1978 that applies to employees in federally regulated industries such as banking and airlines, giving them protection akin to a collective agreement. If such a worker is let go and is successful with an unjust dismissal claim, the remedy they generally get is full reinstatement with back pay, “to make the person whole again,” as the courts have noted.

Naturally, employers do not like to be subject to that condition, so for decades, they have tried to limit the impact of the unjust dismissal regime. One of the tricks that was successful for a time was to pay the employee a very generous termination payment, arguing that it was hardly unjust to let them go and cut them a big cheque. That argument was accepted by some adjudicators until the Supreme Court put that to rest in Wilson v. Atomic Energy of Canada Ltd. in 2016. The court affirmed that the unjust dismissal provisions are unique and that a successful claimant should generally be reinstated to their old position. Wilson emphasized that the unjust dismissal world is a different one from the one most employees face: the latter get reasonable notice of termination or damages if not given reasonable notice, but they don’t get to be “made whole” with reinstatement and back pay.

The Hussey decision, however, represents a step back from making employees whole. Here, an adjudicator took a different view. According to the judgment,  the plaintiff was terminated from her management position with just cause for not adhering to company policy in respect to work hours. As well, she “not good at supervising other employees.” The adjudicator found the dismissal was unjust since Bell did not apply progressive discipline principles. Following Wilson, Ms. Hussey naturally expected to be “made whole” with reinstatement and backpay.

However, the adjudicator then held that the employee’s lack of remorse meant that reinstatement was not an option, so Bell was ordered to pay her, more or less, the equivalent of what she would have received in a common-law regime. Such an amount falls far short of what is demanded with an unjust dismissal, and I will be making that point when I represent her when an appeal is heard later this year. It is not just that the number falls short: refusing reinstatement or a damages remedy that emulates reinstatement essentially converts the Wilson expectation of a “make-whole” remedy into a back-door way for employers to end the employment relationship with reasonable notice.

If the Hussey decision stands, the unjust decision regime that we thought we were getting as a result of Wilson will look a lot more like the common-law regime, which is not what the statute calls for. In that sense, Hussey is one of the more significant – if not fully appreciated – employment law decisions of 2020.