EMPLOYMENT AND LABOUR LAW: 2007 - 2008

BACK TO THE BASICS

G

Labour and Employment Group Calgary Office

by

DAVID J. CORRY Gowling Lafleur Henderson LLP

Barristers and Solicitors 1400, 700 – 2nd Street S.W.

Calgary, Alberta T2P 4V5

Phone: (403) 298-1812

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INTRODUCTION

This past year, the Supreme Court of Canada issued several landmark labour and employment decisions and went back to the basics. The following are the highlights:

• Reversing the lower court’s significant damages award, in Honda Canada v. Keays1, the Court discarded Wallace2. In this landmark decision, the Court reaffirmed clear and established principles of contract law set out in Hadley v. Baxendale3 and Addis v. Gramaphone Co.4 Resisting the invitation of some intervenors, the Supreme Court of Canada applied its decision in Seneca College5 and held that discrimination and breach of the duty to accommodate does not create a separate common law actionable wrong.

• Allowing an appeal from the B.C. Court of Appeal, awarding significant damages to an employer against employees and their new employer arising from failure to give notice of dismissal and breach of the duty of fidelity. The employee stock brokers left en masse and damages were nearly $2 million, including the former employer’s loss of profits for a 5-year period.6

• Applying established principles regarding the duty to accommodate, the Supreme Court of Canada affirmed the dismissal of a disabled employee of Quebec Hydro because ongoing accommodation reached the point of undue hardship.7

• Establishing that an employee who is wrongfully or constructively dismissed, in some cases, may be obligated to mitigate damages by accepting an alternative position with the same employer. (The other lesson from this case is that the Teamsters can also benefit from good employer counsel.)8

• Providing guidelines on when employers are entitled to suspend employees for administrative and disciplinary reasons. In this case an employer suspended an employee without pay for two years pending disposition of his criminal charges.9

• Finally, modifying the right to procedural fairness to a crown appointed “statutory employee” and simplifying the standards of review to two: correctness and reasonableness in Dunsmuir.10

Although the Supreme Court of Canada cases clearly “grab the headlines”, other cases at the Appellate Court levels that cap a remarkable a year include: 1 2008 SCC 39 2 [1997] 3 S.C.R. 701 3 (1854), 9 Ex. 341, 156 E.R. 145 4 [1909] A.C. 488 5 Seneca College of Applied Arts & Technology v. Bhadauria, [1981] 2 S.C.R. 181 6 RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc., 2008 SCC 54 7 2008 SCC 43 8 Evans v. Teamsters Local Union No. 31, 2008 SCC 20 9 Cabiakman v. Industrial Alliance Life Insurance Co. 2004 SCC 55 10 Dunsmuir v. New Brunswick, 2008 SCC 9

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• An Alberta Court of Appeal decision involving drug testing, which established that recreational alcohol and drug abusers are not entitled to protection of Human Rights legislation. 11

• The Northwest Territories Court of Appeal reversed the decision of the trial court and dismissed the $10.7 million negligence claims against the Union, security firm and company arising from the tragic murders of the miners during the Giant Yellowknife Gold Mine labour dispute.12

Meanwhile, the newly recognized Charter right to collective bargaining appears to be limited to the British Columbia health sector, and is currently in hibernation waiting for a new opportunity to expand its “constitutional” wings.13

Honda Canada v. Keays14

Chief Justice McLachlin’s dissent in Wallace v. United Grain Growers Limited15 became the foundation for the majority decision written by Bastarache J16 in Honda Canada v. Keays. This landmark decision reversed Wallace and reverted to historical common law principles.

Keays worked for Honda for 11 years, first on the assembly line and later in data entry. He was off work for one year with chronic fatigue syndrome and returned to work after the Honda insurer discontinued disability benefits. Keays returned to work, but was frequently absent due to his disability. Due to the frequency of the absences, and Honda’s concern about the legitimacy, the employer asked Keays to meet with a company-retained doctor who was an occupational medical specialist in order to determine how Keays’ disability could be accommodated. On the advice of his counsel, Keays refused to meet with the doctor without an explanation of the purpose, methodology and parameters of the consultation. Finally, on March 28, 2000, the employer gave Keays a letter stating that it supported his full return to work, but that his employment would be terminated if he refused to meet with the company-retained doctor. Keays remained steadfast, and Honda terminated Keays’ employment. Keays sued Honda for wrongful dismissal.

At trial, McIsaac J held that Keays was wrongfully dismissed and entitled to a notice period of 15 months. He held that Honda had committed acts of discrimination, harassment and misconduct against Keays. He therefore awarded a Wallace bump for “bad faith” and increased the notice period to 24 months because of the manner of dismissal. He also awarded punitive damages against the employer in the amount of $500,000.00, a costs premium, and costs on a substantial indemnity scale.

11 Alberta v. Kellogg Brown & Root (Canada) Company, 2006 ABQB 302 12 2008 NWTCA 04 13 Health Services and Support-Facilities Subsector Bargaining Association v. British Columbia, 2007 SCC 27 14 2008 SCC 39 15 [1997] 3 16 McLachlin C.J. and Binnie, Deschamps, Abella, Charron and Rothstein JJ. concurring. Justices LeBel and Fish dissented in part.

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The Court of Appeal substantially upheld the decision of the trial judge, but reduced the costs premium and a majority of the Court reduced the punitive damages award to $100,000.00. The Supreme Court of Canada agreed that Keays had been wrongfully dismissed and affirmed the assessment of damages based on a period of reasonable notice of 15 months. However, in allowing the remainder of Honda’s appeal the Supreme Court of Canada held that the Ontario Court of Appeal erred in maintaining the damages for the manner of dismissal (Wallace damages) and simply reducing the quantum of punitive damages. The Wallace damages, punitive damages as well the costs premium were all set aside.

Although the Supreme Court of Canada held that the trial judge erred in focusing on Honda’s “flat management structure”, rather than on the true character of Keays’ employment, they affirmed the 15 month notice period:

“[27] It is true that Honda’s ‘flat management structure’ did not truly illuminate the character of Keays’ employment and that this label should not matter; what matters is experience, qualifications and other factors mentioned in Bardal.17

[28] In determining what constitutes reasonable notice of termination, the courts have generally applied the principles articulated by McRuer C.J.H.C. in Bardal, at p. 145:

There can be no catalogue laid down as to what is reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant.

[29] These four factors were adopted by this Court in Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986. They can only be determined on a case-by-case basis.

[30] …The particular circumstances of the individuals should be the concern of the courts in determining the appropriate period of reasonable notice. Traditional presumptions about the role that managerial level plays in reasonable notice can always be rebutted by evidence.

[31] This position is consistent with the original formulation of the Bardal test where McRuer C.J.H.C. stated:

17 Bardal v. Globe & Mail Limited (1960), 24 D.L.R. (2d) 140 (Ont.)

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There can be no catalogue laid down as to what is reasonable notice in particular classes of cases. [Emphasis added; p. 145.]

[32] No one Bardal factor should be given disproportionate weight. In the present case, the trial judge erred in applying one of the factors, alluding to the flat management structure, rather than examining the actual functions of Keays. Despite this error, the 15-month notice period is entitled to deference since, on the entirety of the circumstances here, there is no basis to interfere with the conclusions of the trial judge. Keays was one of the first employees hired at Honda’s plant. He spent his entire adult working life with Honda. He did not have any formal education and suffered from an illness which greatly incapacitated him. All these factors will substantially reduce his chances of re-employment and justify an assessment of 15 months’ notice.”

I. Affirmation of Bardal

In affirming the Bardal test in the Honda Canada case, the Supreme Court of Canada put to rest the ongoing debate between the Bardal courts and the Lazarowicz18 courts. In Lazarowicz, Roach J held that the proper question to be answered in assessing the quantum of notice is what the parties themselves would have seen as fair at the time of hiring:19

”Opinions might differ as to what was reasonable, but in reaching an opinion a reasonable test would be to propound the question, namely, if the employer and employee at the time of the hiring had addressed themselves to the question as to the notice that the employer would give in the event of him terminating the employment, or in the notice that the employee would give on quitting, what would their respective answers have been?”

In the decades that followed the Bardal and Lazarowicz decisions, judges at both the trial and appellate levels struggled with the dilemma of the two irreconcilable differences between the two approaches. The first opportunity for the Supreme Court of Canada to weigh in on the matter was in Machtinger v. HOJ Industries Limited20. However, there remains controversy as to whether to Supreme Court of Canada in upholding the trial judge’s assessment of reasonable notice (which was based on Bardal) makes the Bardal approach binding. That was not the central issue in the decision, which dealt with one issue: if an employment contract stipulates a period of notice less than required by the employment standards legislation, is an employee who is dismissed without costs entitled to reasonable notice of termination, or to the minimum period of notice required by the Act?

18 Lazarowicz v. Orenda Engines Limited, [1961] O.R. 141 (C.A.) 19 Supra at page 144 20 [1992] 1 SCR 986

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The court held that the contract termination clause was void for illegality, and applied the common law. However, the comments of Justice Iacobucci in the reasons (for the majority) led some judges and legal authors to suggest that Machtinger did not overrule Lazarowicz’s implied intention approach. In fact, the Supreme Court in Machtinger does not even refer to Lazarowicz to overrule it.

On the other hand, McLachlin J (as she then was) in her separate but concurring judgment in Machtinger addresses the issue squarely on and clearly rejects the implied intention approach. She stated that the real issue was: In the absence of a contract of employment of a legally enforceable term providing for notice on termination, on what basis is a court to imply a notice period, and in particular to what extent is intention to be taken into account in fixing a term of reasonable notice in an employment contract?

She reviewed the law and pointed out that the intention of the contracting parties is relevant to the determination of some implied terms, but not all. Intention is relevant to terms implied as a matter of fact, where the question is what the parties would have stipulated had their intention been drawn at the time of contracting to the matter at issue. Intention is not, however, relevant to terms implied as a matter of law21.

Then, McLachlin J concludes:22

“But what is at issue is not the intention of the parties, but the legal obligation of the employer, implied in law as a necessary incident of this class of contract. The duty can be displaced only by an express contrary agreement: See Sterling Engineering Co. v. Patchett, 72 RPC 50, [1955] A.D. 534 (HL), at pp. 543-44 per Viscount Simonds and at p. 547 per Lord Reid; Treitel, supra, at pp. 161-162. Since there is no contrary agreement here, the Act having rendered what contrary agreement there was null and void, the reasonable term of notice implied by the law is not displaced and will be imposed by the Court.”

In short, McLachlin J (as she then was) concluded that when a court implies a term into the contract that reasonable notice to terminate is required, this is implied as a matter of law, and not implied as a matter of fact.

If there was ever any controversy concerning Machtinger, and the debate between the Lazarowicz or the Bardal approaches, the Bardal approach has been affirmed once again in Honda Canada v. Keyes.

II. Damages for Conduct in Dismissal

The Supreme Court of Canada overturned the trial judge’s findings that Honda’s manner of dismissing Keays was an egregious display of bad faith and therefore set aside the Wallace bump which extended the notice from 15 to 24 months. However, in doing so the Court reversed its own decision in Wallace and essentially applied the 21 Machtinger v. HOJ Industries Limited, [1992] 1 S.C.R. 986 at pp. 1005 to 1012 22 Supra, p. 1012.

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dissenting decision of McLachlin C.J. In doing so, Bastarache J. (for the majority) went back to the basics.

In that regard, Bastarache J. for the majority states:

“[34] The Court of Appeal concluded that given the factual nature of determining whether Honda acted in bad faith, Honda had to demonstrate that the trial judge committed a palpable and overriding error. It concluded that Honda had failed to demonstrate this and that the trial judge's decision was sufficiently supported in the evidence. I cannot agree with this conclusion. A proper reading of the record shows that Honda's conduct in dismissing Keays was in no way an egregious display of bad faith justifying an award of damages for conduct in dismissal.

[49] The trial judge's decision in this case highlights the problems we face in dealing with damages for conduct in the context of termination of employment. In particular, it raises questions about the propriety of damages for manner of dismissal, whereby damages are awarded by extending the notice period (Wallace damages). This re-evaluation is mandated particularly by this Court's recent decision in Fidler v. Sun Life Assurance Co. of Canada, [2006] 2 S.C.R. 3,2006 SCC 30.

[50] An action for wrongful dismissal is based on an implied obligation in the employment contract to give reasonable notice of an intention to terminate the relationship in the absence of just cause. Thus, if an employer fails to provide reasonable notice of termination, the employee can bring an action for breach of the implied term (Wallace, at para. 115). The general rule, which stems from the British case of Addis v. Gramophone Co., [1909] A.C. 488 (H.L.), is that damages allocated in such actions are confined to the loss suffered as a result of the employer's failure to give proper notice and that no damages are available to the employee for the actual loss of his of her job and/or pain and distress that may have been suffered as a consequence of being terminated. This Court affirmed this rule in Peso Silver Mines Ltd. (N.P.L.) v. Cropper, [I 966) S.C.R. 673, at p. 684:

[T]he damages cannot be increased by reason of the circumstances of dismissal whether in respect of the [employee's] wounded feelings or the prejudicial effect upon his reputation and chances of finding other employment.

[51] Later in Vorvis v. Insurance Corp. of British Columbia, [I989] 1 S.C.R. 1085, McIntyre J. stated at p. 1103:

I would conclude that while aggravated damages may be awarded in actions for breach of contract in appropriate cases, this is not a case where they should be given. The

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rule long established in the Addis and Peso Silver Mines cases has generally been applied to deny such damages, and the employer/employee relationship (in the absence of collective agreements which involve consideration of the modern labour law regime) has always been one where either party could terminate the contract of employment by due notice, and therefore the only damage which could arise would result from a failure to give such notice.

[52] The Court in Vorvis nevertheless left open the possibility of allocating aggravated damages in wrongful dismissal cases where the acts complained of were also independently actionable. McIntyre J. stated at p. 1103:

I would not wish to be taken as saying that aggravated damages could never be awarded in a case of wrongful dismissal, particularly where the acts complained of were also independently actionable, a factor not present here. [Emphasis added.]

[53] In Wallace, Iacobucci J. endorsed a strict interpretation of the Vorvis "independently actionable wrong" approach, rejecting both an implied contractual duty of good faith and a tort of bad faith discharge. At para. 73, he said:

Relying upon the principles enunciated in Vorvis, supra, the Court of Appeal held that any award of damages beyond compensation for breach of contract for failure to give reasonable notice of termination "must be founded on a separately actionable course of conduct" (p. 184). Although there has been criticism of Vorvis ... this is an accurate statement of the law....An employment contract is not one in which peace of mind is the very matter contracted for (see e.g. Jarvis v. Swan Tours Ltd., [I973] 1 Q.B. 233 (C.A.)) and so, absent an independently actionable wrong, the foreseeabilitv of mental distress or the fact that the parties contemplated its occurrence is of no consequence. [Emphasis added.]

[54] This brings us to Fidler, where the Court, per McLachlin C.J. and Abella J., concluded that it was no longer necessary that there be an independent actionable wrong before damages for mental distress can be awarded for breach of contract, whether or not it is a "peace of mind" contract. It stated at para. 49:

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We conclude that the "peace of mind" class of cases should not be viewed as an exception to the general rule of the non-availability of damages for mental distress in contract law, but rather as an application of the reasonable contemplation or foreseeability principle that applies generally to determine the availability of damages for breach of contract.

This conclusion was based on the principle, articulated in Hadley v. Baxendale (1 854), 9 Ex. 341, 156 E.R. 145, that damages are recoverable for a contractual breach if the damages are "such as may fairly and reasonably be considered either arising naturally. .. from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties" (p. 15 1). The Court in Hadley explained the principle of reasonable expectation as follows:

Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. [p. 15 11]

[55] Thus, in cases where parties have contemplated at the time of the contract that a breach in certain circumstances would cause the plaintiff mental distress, the plaintiff is entitled to recover (para. 42 of Fidler; p. 1102 of Vorvis). This principle was reaffirmed in para. 54 of Fidler, where the Court recognized that the Hadley rule explains the extended notice period in Wallace.

It follows that there is only one rule by which compensatory damages for breach of contract should be assessed: the rule in Hadley v. Baxendale. The Hadley test unites all forms of contractual damages under a single principle. It explains why damages may be awarded where an object of the contract is to secure a psychological benefit, just as they may be awarded where an object of the contract is to secure a material one. It also explains why an extended period of notice may have been awarded upon wrongful dismissal in employment law: see Wallace v. United Grain Growers Ltd.,

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[I997] 3 S.C.R. 701. In all cases, these results are based on what was in the reasonable contemplation of the parties at the time of contract formation. [Emphasis deleted.]

[56] We must therefore begin by asking what was contemplated by the parties at the time of the formation of the contract, or, as stated in para. 44 of Fidler: "what did the contract promise?" The contract of employment is, by its very terms, subject to cancellation on notice or subject to payment of damages in lieu of notice without regard to the ordinary psychological impact of that decision. At the time the contract was formed, there would not ordinarily be contemplation of psychological damage resulting from the dismissal since the dismissal is a clear legal possibility. The normal distress and hurt feelings resulting from dismissal are not compensable.

[57] Damages resulting from the manner of dismissal must then be available only if they result from the circumstances described in Wallace, namely where the employer engages in conduct during the course of dismissal that is "unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive" (para. 98).

[58] The application of Fidler makes it unnecessary to pursue an extended analysis of the scope of any implied duty of good faith in an employment contract. Fidler provides that "as long as the promise in relation to state of mind is a part of the bargain in the reasonable contemplation of the contracting parties, mental distress damages arising from its breach are recoverable" (para. 48). In Wallace, the Court held employers "to an obligation of good faith and fair dealing in the manner of dismissal" (para. 95) and created the expectation that, in the course of dismissal, employers would be "candid, reasonable, honest and forthright with their employees" (para. 98). At least since that time, then, there has been expectation by both parties to the contract that employers will act in good faith in the manner of dismissal. Failure to do so can lead to foreseeable, compensable damages. As aforementioned, this Court recognized as much in Fidler itself, where we noted that the principle in Hadley "explains why an extended period of notice may have been awarded upon wrongful dismissal in employment law" (para. 54).

[59] To be perfectly clear, I will conclude this analysis of our jurisprudence by saying that there is no reason to retain the distinction between "true aggravated damages" resulting from a separate cause of action and moral damages resulting from conduct in the manner of termination. Damages attributable to conduct in the manner of dismissal are always to be awarded under the Hadley principle. Moreover, in cases where damages are awarded, no extension of the notice period is to be used to determine the proper amount to be paid. The amount is to be fixed according to the same principles and in the same way as in all other cases dealing with moral damages. Thus, if the employee can prove that the

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manner of dismissal caused mental distress that was in the contemplation of the parties, those damages will be awarded not through an arbitrary extension of the notice period, but through an award that reflects the actual damages. Examples of conduct in dismissal resulting in compensable damages are attacking the employee's reputation by declarations made at the time of dismissal, misrepresentation regarding the reason for the decision, or dismissal meant to deprive the employee of a pension benefit or other right, permanent status for instance (see also the examples in Wallace, at paras. 99-100).

III. Punitive Damages

The Supreme Court of Canada, in reversing both Courts below, held that there was no basis for the trial judge’s decision to award punitive damages on the facts. In the trial decision, McIsaac J held that Honda’s discriminatory conduct against Keays and the failure to accommodate him to the point of undue hardship constituted an independent actionable wrong that was so “egregious, harsh and vindictive”, that it justified an award of $500,000.00 in punitive damages. Reversing the trial judge, the majority decision in the Supreme Court of Canada held:23

“That being said, there is no need to discuss the concept of ‘actionable wrong’ here; this was done in Whiten.24 What matters here is that there was no basis for the judge’s decision on the facts. I will therefore examine the facts and determine why punitive damages were not well justified according to the criteria in Whiten. I will also discuss the need to avoid duplication in damage awards. Damages for conduct in the manner of dismissal are compensatory; punitive damages are restricted to advertent wrong acts that are so malicious and outrageous that they are deserving of punishment on their own. This distinction must guide judges in their analysis.”

The Court then went on to accept Honda’s argument that discrimination is precluded as an independent cause of action under Seneca College of Applied Arts and Technology v. Bhadauria, 25. Applying its earlier decision in Seneca College, the Court held that a person who alleges a breach of the provisions of the human rights legislation must seek the legislatively prescribed remedy set out within the statutory scheme itself. That is, via complaint to the Human Rights Commission and adjudication by a Human Rights Tribunal. In other words, the Courts have no jurisdiction, except upon either judicial review or appeal as set out in the legislation. The Court concluded at para. 64:

“It is my view that the Code provides a comprehensive scheme for the treatment of claims of discrimination and Bhadauria established that a breach of the Code cannot constitute an actual wrong; the legal requirement is not met.”

23 paras. 62 to 78 24 Whiten v. Pilot Insurance Company, [2002] 1 S.C.R. 595, 2002 SCC 18. 25 [1981] 2 S.C.R. 181

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Keays attempted to argue in cross-appeal that the decision in Bhaduria should be set aside and that a separate tort of discrimination should be recognized. The Court did not accept the invitation. The Court noted the intervenor briefs of various Human Rights Commissions emphasized that human rights legislation vests jurisdiction exclusively with the provincial and territorial human rights tribunal. Recognition of a common law tort of discrimination would be inconsistent with the legislative intent. Then, the Court stated at para. 66:

“The Council of Canadians with Disabilities, another intervener, raised the concern that recognition of a tort of discrimination may undermine the statutory regime which, for many victims of discrimination, is a more accessible and effective means by which to seek redress.”

The intervenor’s submission of The Council of Canadians with Disabilities is difficult to comprehend without context. One would have thought that they would have welcomed the expanded jurisdiction of the courts as another avenue of redress to address ongoing challenges of discrimination of Canadians with disabilities. However, they took the opposite view. They recognize the realities that:

• The courts are complex and their jurisprudence, developed on a case-by-case basis, is often unpredictable.

• There is a need for legal counsel, which is costly and expensive. Only the very wealthy can normally access the courts. It takes a great deal of time to bring a case to trial, and often the lower court decisions are appealed.

• The remedies of the common law courts are limited, often to damages, which provides only partial redress for persons suffering from discrimination because of disability.

• The Human Rights Tribunals (at least in theory) provide a far more accessible, cost-effective and specialized process which also has a broader range of remedies available to complainants who suffer discrimination.

In setting aside the punitive damages award, the Court questioned the findings of fact that Honda had “retaliated” against Keays. At para. 77 the Court noted:

“[77] Finally, the Court of Appeal pointed to Honda’s refusal to deal with Keays’ counsel. There is no legal obligation on the part of any party to deal with an employee’s counsel while he or she continues with his or her employer. Parties are always entitled to deal with each other directly. What was egregious was the fact that Honda told Keays that hiring outside counsel was a mistake and that it would make things worse. This was surely a way of undermining the advice of the lawyer. This conduct was ill-advised and unnecessarily harsh, but it does not provide justification for an award of punitive damages.”

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Therefore, the Court concluded that Honda’s conduct was not sufficiently egregious or outrageous to warrant an award of punitive damages under the Whiten criteria.

The following is a summary of the lessons taken from the Supreme Court of Canada decision in Honda Canada v. Keays:

• Damages arising from wrongful dismissal will normally be assessed on the principles of Bardal, with reference to the facts of each particular case having regard to the character of the employment, the length of service, the age, the availability of similar employment, having regard to the experience, training and qualifications of the employee.

• Damages will no longer be awarded for bad faith discharge by extending the notice period.

• There is no longer a need to establish an independent actionable wrong before damages for mental distress can be awarded for breach of contract, whether or not it is a “peace of mind” contract. That is, aggravated damages resulting from the manner of dismissal will be awarded. Such damages will be available where the employer engages in conduct during the course of dismissal that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive.” There is no longer any need to suggest that such damages flow from the implied duty of good faith in an employment contract. Rather, applying the principles of Fidler:

“As long as the promise in relation to state of mind is a part of the bargain in the reasonable contemplation of the contracting parties, mental distress damages arising from its breach are recoverable.”

Such damages are not awarded by an extension of the notice period, but rather through an award that reflects the actual damages.

• Common law courts will not recognize a tort of discrimination, but rather victims of discrimination must file complaints pursuant to the applicable legislation before the federal or provincial/territorial Human Rights tribunals. With proper resources and support from the legislature, this should provide a more accessible, cost-effective and quicker and more effective avenue of redress for victims of discrimination.

• Punitive damages are rare, awarded only after the most careful consideration, and the discretion to award them should be most cautiously exercised. The conduct that merits punitive damages must be “harsh, vindictive, reprehensible and malicious”, as well “extreme in its nature and such that by any reasonable standard it is deserving of full condemnation and punishment” and should be cautiously exercised.

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• Where it is reasonably foreseeable that the conduct of the employee would cause mental distress, then those damages are recoverable.

The decision of the SCC in Honda Canada v. Keays is a refreshing decision that reverses several years of troubling jurisprudence. Wallace was a poorly reasoned decision based on bad facts. It imported a concept of “bad faith discharge” which was developed in the United States in order to provide some limited judicial remedies in employment-at-will states. The concepts and the principles were utterly foreign to Canadian jurisprudence where employees had the benefit of the implied notice of termination at common law protecting them from dismissal without just cause or reasonable notice.

In developing the concept of bad faith discharge, the Supreme Court of Canada in Wallace was not clear as to whether it was a breach of an implied contractual term to act in good faith and in fair dealing with the employee, or rather, it was a breach of a tort duty of care to act in good faith or fair dealing. As such, it was not clear whether the employee was obligated to mitigate damages or not.

As a result, since Wallace virtually all claims of wrongful dismissal alleged bad faith and occupied considerable time to tender evidence on behalf of both the plaintiff and the defence on that issue. Further, evidence was tendered on the impact of the bad faith conduct on the employee. It was difficult to predict if and when a court would apply Wallace and award the “Wallace bump”. It was even more difficult to predict how much of a bump that would be. It varied significantly from one month to 18 months of additional damages. The average Wallace bump was three months.

In the end result, cases became more complex, more protracted and more expensive. They were more likely subject to appeal. The courts became clogged and the common law system became even more ineffective for employees.

The only jurisdiction that seemed to provide cost effective and timely justice was in British Columbia where the vast majority of wrongful dismissal cases were decided by summary trial shortly after the filing of pleadings and prior to examinations for discovery. All other jurisdictions seemed to default to the usual costly, protracted, complex proceedings and plaintiffs would have to endure years of civil justice in order to recover damages that were clearly available based on any objective analysis at the time of their dismissal. Because of the delays and the costs, most cases settled and many opted for voluntary arbitration as opposed to the court process.

RBC DOMINION SECURITIES INC. v. MERRILL LYNCH CANADA INC., et al26

In this appeal, the Supreme Court of Canada substantially restored the trial judge’s assessment of damages against Merrill Lynch and several former stock brokers from RBC Dominion, who quit en masse to move to Merrill Lynch. The court held that they

26 2008 SCC 54

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had breached their implied duty of fidelity and failed to give reasonable notice of resignation.

At issue in this appeal is the damages arising from a breach of contract where a branch manager of a brokerage firm and virtually all of the investors left RBC Dominion to go to Merrill Lynch. The trial judge held that the branch manager was not a fiduciary employee. Consequently, he was only subject to his contractual duties which included the duty to give reasonable notice of dismissal and an implied duty of good faith during the currency of his employment contract. The trial judge held that there was an obligation to give two and a half weeks’ notice of dismissal in the circumstances. Finding both a breach of the duty to provide reasonable notice and the duty of fidelity, he awarded the following:

• $40,000.00 for failure to give notice of departure;

• $225,000.00 for loss of profits due to unfair competition;

• $5,000.00 each as punitive damages

• Against the branch manager, Delamont, $1,483,239.00 for loss of profits due to the breach of the duty of good faith and an additional $5,000.00 as punitive against Merrill Lynch, joint and several liability for $225,000.00 for unfair competition and $250,000.00 in punitive

• The investment advisor Michaud was liable for an additional $5,000.00 in punitive damages.

The B.C. Court of Appeal affirmed the punitive damages awards, but eliminated all other damages except for $40,000.00 in total for the failure to give reasonable notice. RBC appealed asking the Supreme Court of Canada to reinstate the damages awarded by the trial judge.

The Supreme Court of Canada reinstated the trial judge’s award with the exception of the damages the trial judge found to be payable by the investment advisors for losses due to unfair competition based on their actions during the reasonable notice period. In doing so, the Supreme Court of Canada appears to have extended the duty of fidelity and the potential damages for which an employee could be liable for failure to provide reasonable notice of termination of employment. Chief Justice McLachlin for the majority held:27

“[10] Second, the respondents argue that the award does not meet the requirement of proximity for contract damages set out in Hadley v. Baxendale. That test provides that damages arising in respect of a breach of contract should be such as arise either naturally, i.e., in the usual course of things, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as

27 Paras. 10-13

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the probable result of a breach. The respondents argue that it was not within contemplation of the parties that Delamont be held liable for losses beyond the applicable notice period.

[11] The trial judge rejected the defendant’s arguments on this point, finding that reasonably contemplated losses were not confined to the notice period:

I do not conclude that the parties to his employment contract contemplated that Mr. Delamont’s liability for such a breach would be restricted to losses associated with the period of notice he ought to have given. [2004 BCSC 1464, at para. 55]

[12] It is apparent that the majority of the Court of Appeal applied the proximity test wrongly. Instead of asking whether damages of this sort would have been within the reasonable contemplation of the parties had they put their minds to the potential breach when the contract was entered into, the majority of the Court of Appeal asked whether the breach was foreseeable. The majority held that the collapse of the branch was not a foreseeable consequence of Delamont’s chosen course of action, because “neither of the parties to this contract would have ever thought about this sort of alleged breach” (para. 106). With respect, this argument conflates the unforeseeability of the consequences with the unforeseeability of the breach. The correct question to ask is whether, had the parties at the time of entering into the contract of employment directed their minds to the possibility that Delamont might orchestrate the departure of substantially all the office’s investment advisors, would they have contemplated a loss of profits giving rise to damages. In my view, the trial judge asked the correct legal question and arrived at an appropriate conclusion on the facts. There is no basis for interference on the grounds of Hadley v. Baxendale.

[13] Other objections to this award can be quickly dispensed with. The basis of the largest part of the award, as conceived by the trial judge and the dissenting judge in the Court of Appeal, was the breach of Delamont’s duty of good faith in the discharge of his employment contract. An implied term of that contract, as he admitted at trial, was to retain the employees of RBC who were under his supervision. In organizing their mass exit, he breached that duty of good faith. The damages for that breach are the amount of loss it caused to RBC. To calculate that loss, the trial judge chose a position intermediate between those advanced by the plaintiff and the defendant. After hearing extensive expert evidence from both sides, she measured the loss on the basis of five years, discounted for various contingencies. That was reasonable and supported by the evidence. “

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Although the majority upheld the trial judge’s award of damages, they agreed with the B.C. Court of Appeal on the law. The majority stated:28

“[17] The difference between the trial judge and the Court of Appeal on this issue reflects a different view of the obligations of employees leaving their employ without notice. The trial judge, as discussed above, took the view that the employees continued to be under a general duty not to compete with their former employer during the notice period. This formed the basis of her award for non-competition damages against them.

[18] The majority of the Court of Appeal, by contrast, held that once the investment advisors left RBC, they were no longer under a duty not to compete with it. The view of the Court of Appeal on the law for the purposes of this issue may be summed up as follows. Generally, an employee who has terminated employment is not prevented from competing with his or her employer during the notice period, and the employer is confined to damages for failure to give reasonable notice (Southin J.A. for the majority). To this general proposition Rowles J.A. may be read as adding the qualification that a departing employee might be liable for specific wrongs such as improper use of confidential information during the notice period. This appears to be consistent with the current law, which restricts post-employment duties to the duty not to misuse confidential information, as well as duties arising out of a fiduciary duty or restrictive covenant: see England, Employment Law in Canada (4th ed. loose-leaf), § 11.141. Neither of the latter duties are at issue here.

[20] To the extent the trial judge awarded damages on the basis that the employees continued to be a under a general duty not to compete, this award of damages was wrong in law.”

The Court then concluded:

“[22] …The duties found here for all the defendant employees were the implied duties to perform one’s employment functions in good faith and to give reasonable notice of termination. The compensatory damages awarded are grounded in these implied duties which were not seriously disputed. It is therefore unnecessary for the purposes of this case to go beyond these duties.

[23] Nor was there any dispute about the period of reasonable notice assigned by the trial judge. In fixing the notice period at 2.5 weeks, the trial judge took into account the effect on RBC of the simultaneous departure of virtually the entire staff of the branch. The trial judge, it may be noted, clearly segregated the different duties that arose in these

28 Paras. 17, 18 and 20

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employment contracts. The duty to give notice of departure led to damages, assessed in relation to the length of the notice period. Other contractual duties, such as the duty of good faith, gave rise to the large award against Delamont for loss of profit. Overlaps in damages arising from the various duties were avoided. Finally, it is not suggested that the awards of punitive damages were in error.”

In summary, because the manager Delamont failed to provide two and a half weeks notice of his resignation, and during his employment term with RBC spoke to the other investment advisors and they decided to leave together without reasonable notice, the Defendants were liable for the entire loss of profits of RBC Dominion for a five-year period, loss of profits for unfair competition, an amount for failure to give notice of departure, and punitive damages.

Employees can only hope that the principles and damages of this case are based on the unique facts and the fact that the manager and all of the key employees left at the same time. In this respect the case is analogous to Tree Savers v. Savoy.29

In a persuasive dissent, Abella J. would have dismissed the appeal. She states:

“[39] The employment contract is one of personal service. That means that subject to the discussion that follows about non-competition clauses and fiduciary duties, employees are generally free to leave their employment and, on leaving, to compete with their former employer. This is understandably a painful reality for an employer to accept, but it is, nonetheless, a lawful one. (Canadian Aero Service Ltd. v. O’Malley, [1974] S.C.R. 592, at p. 606, distinguishing fiduciary employees; CRC-Evans Canada Ltd. v. Pettifer (1997), 26 C.C.E.L. (2d) 294 (Alta. Q.B.), at para. 54; Alnor Services Ltd. v. Sawyer (1990), 31 C.C.E.L. 34 (B.C.S.C.); Faccenda Chicken Ltd. v. Fowler, [1986] 1 All E.R. 617 (C.A.); Geoffrey England, Canadian Employment Law (4th ed. (loose leaf)), at §11-161).

[40] As Hall J.A. stated in Barton Insurance Brokers Ltd. v. Irwin (1999), 170 D.L.R. (4th) 69 (B.C.C.A.), at para. 39:

. . . the general interest of the public in free competition and the consideration that in general citizens should be free to pursue new opportunities, in my opinion, requires courts to exercise caution in imposing restrictive duties on former employees in less than clear circumstances. Generally speaking ... the law favours the granting of freedom to individuals to pursue economic advantage through mobility in employment.

And in Imperial Sheet Metal Ltd. v. Landry (2007), 315 N.B.R. (2d) 328, 2007 NBCA 51, Robertson J.A. similarly observed, at para. 37, that

29 1992 (Alta. C.A.)

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... if there is a clash between the interests of former employers in protecting their business interests and the interests of former employees in earning a livelihood, coupled with the public interest in free competition for goods and services, it is the interests of the former employee that will generally prevail.

[45] In this context, the observations of Martin J. in a case involving similar circumstances are resonant:

... [the employer] had not engaged any of the personal defendants in an employment contract with a non-competition clause. . . . I find that to be particularly significant because [the employer] cannot reasonably contend that a mass defection of its employees to a competitor was unforeseeable.

Clearly, it could have protected itself better by having its [employees] enter into such an employment contract.

(Research Capital Corp. v. Yorkton Securities Inc. (2002), 329 A.R. 190, 2002 ABQB 957, at para. 26)

[46] In addition to the absence of a non-competition clause in his employment contract, it must be stressed that Delamont was found by the trial judge not to have been a fiduciary employee. This is a crucial finding. There is a clear distinction between those employees who are subject to elevated fiduciary duties and those who are not.

[47] The finding that Delamont was not a fiduciary employee means that the trial judge in examining Delamont’s duties and responsibilities, the control and independent authority he exercised over RBC’s business, and the nature and organizational structure of that business, was satisfied that he ought not to be subject to the heightened duties expected of fiduciary employees — duties that could well extend beyond an employment relationship. (See Randall Scott Echlin and Christine M. Thomlinson, For Better or For Worse: A Practical Guide to Canadian Employment Law (2nd ed. 2003), at p. 254.)

[52] Expanding the scope of the duty of good faith in this manner represents a novel and potentially enormous liability on employees. This development, in my view, is not only unwelcome in its uncertainty and punitive in its impact, it also risks widening what this Court has long recognized to be the imbalance of power in employment relationships, by further entrenching the inherent vulnerability of employees (Slaight Communications Inc. v. Davidson, [1989] 1 S.C.R. 1038, at pp. 1051‑ 52,

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Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701, at paras. 91‑ 93).

[53] Even if it could be said to have been implicit in Delamont’s role as branch manager that he try to retain the investment advisors, it does not follow that this expectation should be elevated into the content of an implied duty of good faith giving rise to a claim for damages. An employee is not an indentured servant. In the absence of competition during employment or improper use of confidential information, the duty of good faith has never before been applied to hold a non-fiduciary employee liable in damages for his or her failure to exercise the fullest possible diligence in the pursuit of the employer’s interests.”

In my view, the reasoning of the majority in the RBC Dominion case promoted expansive view of the duty of fidelity and expose former employees, and their new employers to substantial damages. The damages might have been justified if Delamont, the branch manager, was a fiduciary. But he was not. Now, if an employee makes plans to leave to join a competitor, persuade some colleagues to join him, and fails to give reasonable notice of termination, they could be liable for substantial losses.

HYDRO-QUEBEC30

In Hydro-Quebec, the unanimous court held that the duty to accommodate an employee’s disability does not preclude an employer for dismissing a chronically absent employee who, despite past attempts at accommodation, was not able to return to work in the foreseeable future. The employee missed 960 days from 1994 to 2001. At the time of her dismissal on July 19, 2001, the employee had been absent from work since February 8, 2001. The attending physician recommended that the employee stop work for an indefinite period. The employee’s psychiatric assessment stated that the employee would no longer be able to: “work on a regular and continuous basis without continuing to have an absenteeism problem as in the past”.

The unionized employee filed a grievance under her collective agreement alleging that she was dismissed without cause. The arbitrator dismissed the grievance based on the fact that the employee had not proven that she was able to return to steady and regular employment in the foreseeable future. Furthermore, the conditions for the employee’s return to work would constitute an undue hardship. The Quebec Superior Court dismissed the motion for judicial review. However, the Quebec Court of Appeal set aside the Superior Court’s judgment and held that the employer had not proven that it was impossible to accommodate the employee short of undue hardship. In the Court of Appeal’s view, the arbitrator should not have taken only the absences into account, since the duty to accommodate must be assessed at the time the decision to terminate the employment was made. The employer appealed to the Supreme Court of Canada and the appeal was allowed and the decision of the arbitrator was upheld. The 30 Hydro-Quebec v. Syndicat des employé-e-s de techniques professionnelles et de bureau d’Hydro-Québec, section locale 2000 (SCFP-FTQ), 2008 SCC 43

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employee had been validly terminated from her employment. The Supreme Court of Canada held that the test for undue hardship stated by the Court of Appeal was erroneous. Deschamps J. writing for the unanimous Court stated:

“[16] The test is not whether it was impossible for the employer to accommodate the employee’s characteristics. The employer does not have a duty to change working conditions in a fundamental way, but does have a duty, if it can do so without undue hardship, to arrange the employee’s workplace or duties to enable the employee to do his or her work.

[17] Because of the individualized nature of the duty to accommodate and the variety of circumstances that may arise, rigid rules must be avoided. If a business can, without undue hardship, offer the employee a variable work schedule or lighten his or her duties — or even authorize staff transfers — to ensure that the employee can do his or her work, it must do so to accommodate the employee. Thus, in McGill University Health Centre (Montreal General Hospital) v. Syndicat des employés de l’Hôpital général de Montréal, [2007] 1 S.C.R. 161, 2007 SCC 4, the employer had authorized absences that were not provided for in the collective agreement. Likewise, in the case at bar, Hydro Québec tried for a number of years to adjust the complainant’s working conditions: modification of her workstation, part-time work, assignment to a new position, etc. However, in a case involving chronic absenteeism, if the employer shows that, despite measures taken to accommodate the employee, the employee will be unable to resume his or her work in the reasonably foreseeable future, the employer will have discharged its burden of proof and established undue hardship.

18] Thus, the test for undue hardship is not total unfitness for work in the foreseeable future. If the characteristics of an illness are such that the proper operation of the business is hampered excessively or if an employee with such an illness remains unable to work for the reasonably foreseeable future even though the employer has tried to accommodate him or her, the employer will have satisfied the test. In these circumstances, the impact of the standard will be legitimate and the dismissal will be deemed to be non-discriminatory. I adopt the words of Thibault J.A. in the judgment quoted by the Court of Appeal, Québec (Procureur général) v. Syndicat des professionnelles et professionnels du gouvernement du Québec (SPGQ), [2005] R.J.Q. 944, 2005 QCCA 311: [TRANSLATION] “[in such cases,] it is less the employee’s handicap that forms the basis of the dismissal than his or her inability to fulfill the fundamental obligations arising from the employment relationship” (para. 76).

[19] The duty to accommodate is therefore perfectly compatible with general labour law rules, including both the rule that employers must

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respect employees’ fundamental rights and the rule that employees must do their work. The employer’s duty to accommodate ends where the employee is no longer able to fulfill the basic obligations associated with the employment relationship for the foreseeable future.”

In my view, the unanimous decision of the Supreme Court of Canada in Hydro-Quebec recognizes the proper balance between the duty to accommodate and the reasonable expectation of employers that employees must do their work. It recognizes that the employer’s duty to accommodate ends when the employee is no longer able to fulfill the basic obligations associated with the employment relationship for the foreseeable future.

EVANS v. TEAMSTERS31

Evans was employed as a business agent of the union. After 23 years, he was wrongfully dismissed after the new union executive took office. Later that same day, the incoming union president telephoned the plaintiff to “commence discussions”. Evans retained legal counsel. His lawyer wrote a letter to the incoming President the following day submitting that Evans was entitled to reasonable notice of termination of employment. He said that Evans was prepared to accept 24 months notice of termination and suggested that this could be granted through 12 months of continued employment followed by a payment of 12 months’ salary in lieu of notice. Despite an ongoing exchange of correspondence between lawyers, no resolution was reached. In the meantime, the Union continued to pay Evans his salary and benefits. On May 23rd, Evans received a letter from the Union’s legal counsel requesting that he “return to his employment…to serve out the balance of his notice period of 24 months” and stating that, if he refused to return, the Union would “treat that refusal as just cause, and formally terminate him without notice”. Evans indicated that he would return to work provided the union immediately rescinded its termination letter of January 2003, but the union was not prepared to do so.

At trial, the judge held that Evans had been wrongfully dismissed and awarded 22 months’ notice. He also held that the union had not shown that Evans had failed to mitigate his damages. The B.C. Court of Appeal set aside the damage award, holding that Evans had not acted reasonably with respect to the job offer made to him by the union, and that this constituted a failure to mitigate his damages. The majority of the Supreme Court of Canada dismissed the appeal. The Supreme Court of Canada accepted that in some circumstances it would be necessary for a dismissed employee to mitigate his or her damages by returning to work for the same employer. The majority of the Court held:32

“[28] In my view, the courts have correctly determined that in some circumstances it will be necessary for a dismissed employee to mitigate his or her damages by returning to work for the same employer.

31 Evans v. Teamsters Local Union No. 31, 2008 SCC 20 32 Paras. 28-29

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Assuming there are no barriers to re-employment (potential barriers to be discussed below), requiring an employee to mitigate by taking temporary work with the dismissing employer is consistent with the notion that damages are meant to compensate for lack of notice, and not to penalize the employer for the dismissal itself. The notice period is meant to provide employees with sufficient opportunity to seek new employment and arrange their personal affairs, and employers who provide sufficient working notice are not required to pay an employee just because they have chosen to terminate the contract. Where notice is not given, the employer is required to pay damages in lieu of notice, but that requirement is subject to the employee making a reasonable effort to mitigate the damages by seeking an alternate source of income.

[29] There appears to be very little practical difference between informing an employee that his or her contract will be terminated in 12 months’ time (i.e. giving 12 months of working notice) and terminating the contract immediately but offering the employee a new employment opportunity for a period of up to 12 months. In both situations, it is expected that the employee will be aware that the employment relationship is finite, and that he or she will be seeking alternate work during the 12- month period. It can also be expected that in both situations the employee will find that continuing to work may be difficult. Nonetheless, it is an accepted principle of employment law that employers are entitled (indeed encouraged) to give employees working notice and that, absent bad faith or other extenuating circumstances, they are not required to financially compensate an employee simply because they have terminated the employment contract. It is likewise appropriate to assume that in the absence of conditions rendering the return to work unreasonable, on an objective basis, an employee can be expected to mitigate damages by returning to work for the dismissing employer. Finding otherwise would create an artificial distinction between an employer who terminates and offers re-employment and one who gives notice of termination and offers working notice. In either case, the employee has an opportunity to continue working for the employer while he or she arranges other employment, and I believe it nonsensical to say that when this ongoing relationship is termed “working notice” it is acceptable but when it is termed “mitigation” it is not.”

The employer bears the onus of demonstrating both that an employee has failed to make reasonable efforts to find work and that work could have been found. Where the employer offers the employee a chance to mitigate damages by returning to work for the employer, the central issue is whether a reasonable person would accept such an opportunity. The following are the factors that the Court noted would be reasonable for the employee to stay:

• The salary offered is the same.

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• The working conditions are not substantially different or the work demeaning.

• The personal relationships involved are not acrimonious.

Other factors include:

• The history and nature of employment.

• Whether or not employee has commenced litigation.

• Whether the offer of re-employment was made while the employee was still working for the employer. The employee is not obligated to mitigate by working in an atmosphere of hostility, embarrassment or humiliation

The Court concluded that looking at the evidence as a whole, Evans was not justified in his refusal to resume employment with the union.

In a persuasive dissent, Abella J. held that when an employee is fired without cause and without reasonable notice, the dismissal is, at law, “wrongful”. The employee is immediately entitled to an action in damages. Such an employee should not be expected or required to mitigate any damages by remaining in the workplace from which he or she has been dismissed. To do so disregards the uniqueness of an employment contract as one of personal service.33

In the result, Abella J would have restored the trial judge’s decision. Evans’ circumstances, viewed objectively, justified his refusal to resume employment with the union.

The Supreme Court of Canada decision in Evans is an extension of the duty to mitigate. In a case out of Ontario involving constructive dismissal, Mifsud v. MacMillan Bathurst Inc.34 the Court held that an employee who had otherwise been constructively dismissed, was obligated to accept another position with the same employer in mitigation of his damages “where the salary offered is the same, where the working conditions are not substantially different or the work demeaning, and where the personal relationships involved are not acrimonious.” However, the Evans v. Teamsters case represents the first time that a court has held that an employee is obligated to mitigate damages by remaining in the workplace from which he or she had been wrongfully dismissed.

CABIAKMAN v. INDUSTRIAL ALLIANCE LIFE INSURANCE CO.35

Although this case was decided in 2004, it may have escaped notice. However, it provides clear guidance on when an employer can impose an administrative or disciplinary suspension from employment. It also clarifies circumstances where a

33 Paras. 106-108 34 (1989), 70 O.R. (2d) 701 (C.A.) 35 2004 SCC 55

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suspension will go to the very root of the employment contract and constitute a constructive dismissal. Although decided under the Civil Code in Quebec, the case provides valuable guidance for the common law provinces as well.

Cabiakman was the sales manager for the defendant insurance company. Three months after he was hired he was arrested at his home for an attempt to extort money from his securities broker. (One can only speculate that he might have lost money in the stock market, as many of us have this year, and that he had a heated discussion with his securities broker as a result.) In any event, he pleaded not guilty to the criminal charges against him, and waited two years for his case to come to trial. After consulting with its legal counsel, the company suspended Cabiakman’s contract without pay until the final decision of the courts because of the connection between the nature of the charges and the duties of his position. This was felt necessary to protect the business’ image and to protect its customers, if need be. Cabiakman commenced an action against the company for dismissal without good and sufficient cause together with moral and punitive damages. At his criminal trial, Cabiakman was acquitted in a judgment delivered from the bench. The company reinstated him in his position shortly thereafter, some two years after he had been suspended. The Quebec Superior Court at the civil trial held that the suspension imposed by the company was justified, but held that the failure to pay the employee was unjustified. The Quebec Court of Appeal affirmed the judgment but varied its disposition to award the employee the quantum of damages fixed by the parties. The appeal to the Supreme Court of Canada was dismissed.

The Supreme Court of Canada concluded that the flexibility and malleability of an individual contract of employment enables the parties to provide in the contract that the employee has the power to suspend, and to establish the conditions on which it may do so. Absent an express agreement, an employer has the unilateral power to temporarily suspend the effects of an individual contract of employment or certain obligations under the contract. The power to impose a disciplinary suspension is generally recognized. The employer also has the power to suspend for administrative reasons. This is a necessary component of the power of direction the employee has accepted if the performance of his or her work should compromise the business’ interest. The residual power to suspend for administrative reasons because of acts of which the employee has been accused of is an integral part of any contract of employment, but it must be exercised in accordance with the following requirements:

1. The action must be necessary to protect the legitimate business interests. The employer has the burden of showing that its decision is fair and reasonable. This must be considered from the perspective of the point in time when the decision was made. Although facts subsequent to the employer’s decision may be admissible in evidence, they must be used to determine whether the employer’s decision was justified at the time it was made. Otherwise, subsequent evidence is irrelevant.

2. The employer must be guided by good faith and the duty to act fairly in deciding to impose an administrative suspension. Although an employer does not have to make its own inquiries, to ensure the charges are well founded, the employer has

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an obligation to allow the employee to explain the situation if the employee wishes to provide his or her version of the facts.

3. The temporary interruption of the employee’s performance at work must be imposed for a relatively short period that is fixed, or else it will be no different from a dismissal.

4. The suspension must, other than in exceptional circumstances, be with pay. The employer cannot unilaterally avoid its obligation to pay the employee’s salary if it denies the employee an opportunity to work. Therefore, if an employee is subject to an administrative suspension without pay, as a rule, the employee may properly treat this as a constructive dismissal. Also, there’s an implied term that the employee is entitled to be reinstated once the basis for the administrative suspension (or the cause for non-performance of the employee’s duties) has ceased to exist.

In the Cabiakman case, the employer was justified in its administrative suspension in order to protect the business’ legitimate interest. The Court concluded that the employer had conducted itself properly. However, it would have been preferable to give the employee an opportunity to provide his own version of the facts before taking the administrative action. Under the circumstances, it was not justifiable for the employer to impose the administrative suspension without pay. Damages were therefore awarded for the loss of salary and benefits during the period of the administrative suspension.

DUNSMUIR v. NEW BRUNSWICK36

Dunsmuir was employed in the Department of Justice of New Brunswick. His position was under the Civil Service Act and he was an office holder “at pleasure”. His probationary period was extended twice. The employer reprimanded him on three separate occasions. On the third occasion, a formal letter of reprimand was sent to Dunsmuir warning him that if he failed to improve his performance it would result in further disciplinary action up to and including dismissal. While preparing for a meeting to discuss Dunsmuir’s performance review, the employer concluded that he was not right for the job. The next day he was terminated from his employment. Dunsmuir was provided four months’ pay in lieu of notice. Cause for termination of employment was not explicitly alleged.

Dunsmuir filed a grievance under the Public Service Labour Relations Act. He alleged that the reasons for the employer’s dissatisfaction were not made known and that he was not given a reasonable opportunity to respond. He alleged that he was terminated without notice, due process or procedural fairness. Lastly, he alleged that the length of notice period was inadequate. The grievance was denied and referred to adjudication. The adjudicator held that he could determine whether Dunsmuir had been discharged or otherwise disciplined for cause. Because the termination letter provided pay in lieu of notice, it was not disciplinary. As such, the adjudicator held that Dunsmuir was entitled

36 2008 SCC 9

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to and did not receive procedural fairness in the employer’s decision to terminate his employment. He declared the termination void ab initio and ordered Dunsmuir reinstated as of the date of his dismissal. The adjudicator added that in the event that his reinstatement order was quashed on judicial review, he would find the appropriate notice period to be eight months.

On judicial review, the New Brunswick Court of Queen’s Bench applied the correctness standard and quashed the adjudicator’s preliminary decision. The court concluded that the adjudicator did not have jurisdiction to inquire into the reasons for the termination, and that his authority was limited to determining whether the notice period was reasonable. The court concluded that the grievance hearing before the adjudicator afforded the grievor procedural fairness.

The New Brunswick Court of Appeal agreed with the lower court, held that the proper standard of review from the adjudicator was reasonableness simpliciter, not correctness. The court held that adjudicator’s decision was unreasonable. It found pursuant to the statute that once the employer elects to dismiss with notice or pay in lieu of notice, the employee may only grieve the length of notice. The Court of Appeal agreed that the employee’s right to procedural fairness had not been breached.

In its decision, the Supreme Court of Canada correctly noted that the system of judicial review in Canada has proven to be difficult to implement. The court found it necessary to reconsider both the number and definitions of the various standards of review, and the analytical process employed to determine which standard applies in a given situation. The court held that notwithstanding the theoretical differences between the standards of patent unreasonableness on reasonableness and reasonableness simpliciter, any actual differences between them in terms of their operations appear to be illusory. The court concluded that there ought to be only two standards of review: correctness and reasonableness.

At last there is a glimmer of hope regarding clarity and common sense coming from the Supreme Court of Canada regarding standards of review. The decision is absolutely bang-on and has been a long time coming.

Then examining the merits of the case, the court correctly concluded that Dunsmuir was not entitled to procedural fairness where a public employee is employed under a contract of employment. Regardless of his or her status as a public office holder, the applicable law governing dismissal from public employment is a law of contract, not general principles arising out of public law. As such, there is no right to procedural fairness. The court then limited the application of its earlier decision in Knight v. Indian Head School Division37 and stated:

“In relation to the general duty of fairness owed by public authorities when making decisions that affect the rights, privileges or interest of individuals are valid and important. However, to the extent that Knight ignored the

37 [1990] 1 S.C.R. 653

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important effect of a contract of employment, it should not be followed. Then, in the case at bar, the Civil Service Act provided that the civil servant could only be dismissed in accordance with the ordinary rules of contract. As the relationship was contractual, it was unnecessary to consider any public law duty of procedural fairness. By ordering reinstatement, the adjudicator erred and his decision was therefore correctly struck down.”

The decision of the Supreme Court of Canada in Dunsmuir v. New Brunswick is a sensible decision. It properly limits the application of Knight v. Indian Head, recognizing primacy of the employment contract. Most importantly, it recognized the need to clarify the standards of review, recognize the two defacto standards and provided guidance to their application. Hopefully, this decision will be followed by the lower courts and we will finally get clarity in this important area of administrative law.

IMPORTANT DECISIONS IN THE LOWER COURTS

There are several important decisions of the lower courts that merit comment.

Kellogg, Brown & Root38

The Supreme Court of Canada refused leave to appeal the Alberta Court of Appeal decision in Kellogg, Brown & Root.39 This case establishes that recreational alcohol and drug abusers are not entitled to protection of human rights legislation. Kellogg, Brown & Root (“KBR”) was a construction contractor working at the Syncrude Oil Sands project in Fort McMurray. It is a huge project described as a literal anthill of activity, where construction of many levels was integrated with production at many levels. The accident risk was high. The consequences of an accident could be severe, possibly impacting workers, the plant and the environment. After offering employment to Chiasson, he was required to pass a pre-employment drug test before being hired and dispatched to the Syncrude site. Chiasson took the test and started work. Chiasson smoked marijuana six days before the test and failed. Once the test results were released to KBR, Chiasson was dismissed from his employment because he failed the pre-employment drug test. Chiasson filed a complaint with the Alberta Human Rights and Citizenship Commission alleging that he had been discriminated in employment practices on the grounds of physical and mental disability.

Chiasson’s testimony at the Human Rights Tribunal hearing was that he was a recreational marijuana user and that he had no actual disability due to drug addiction. As a result, the Human Rights Tribunal concluded that Chiasson was employed in a safety-sensitive position at a hazardous worksite, and there was no perceived disability. Obviously, KBR would not have assigned Chiasson to such hazardous work had the company perceived that he had a disability; particularly one involving drug or alcohol addiction. 38 Alberta (Human Rights and Citizenship Commission) v. Kellogg Brown & Root (Canada) Company, 2007 ABCA 427 leave to appeal dismissed 2008-05-29 (SCC) 39 Supra

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On appeal to the Alberta Court of Queen’s Bench, the Chambers Judge concluded that the effects of the KBR policy was to treat recreational cannabis users as if they were addicted to cannabis. She therefore held that KBR must have perceived Chiasson to be a cannabis addict and therefore disabled. As such, KBR had a duty to accommodate to the point of undue hardship. She held that the evidence of KBR regarding the zero tolerance drug policies coinciding with substantial reduction in workplace accidents was not determinative of the policy having any effect, since other changes in the workplace environment could have been responsible for the reduction. The Chambers Judge therefore concluded that KBR’s policy “imposes a pre-employment barrier, with zero tolerance, automatic termination and no accommodation.”40

The Chambers Judge therefore concluded that Chiasson had been discriminated against on the ground of a perceived disability and that KBR failed to accommodate him to the point of undue hardship.

The Alberta Court of Appeal reversed the decision of the Chambers Judge. The unanimous Court stated:

[29] From all the evidence in this case, Chiasson is not in fact drug addicted. Nor was Chiasson’s termination based on the perception by any KBR employees that he is drug addicted. Those were findings of fact made by the human rights panel, and as such are reviewable on a standard of patent unreasonableness.

[30] Therefore, the only basis on which the KBR policy would be discriminatory against casual marijuana users, such as Chiasson, would be if, as the chambers judge concluded, the effect of the policy is to perceive anybody testing positive as drug addicted and therefore disabled, and to impose restrictions, penalties, or differential treatment on those persons based on the perceived disability.

[32] …She concluded the effect of KBR’s policy was to exclude Chiasson from employment on the basis of perceived disability, stating: “[t]he policy not only treats all prospective employees who test positive for drugs the same, it treats them as if they were drug dependent and further assumes that they are likely to report to work impaired.’

[33] That conclusion cannot be sustained. The evidence disclosed that the effects of casual use of cannabis sometimes linger for several days after its use. Some of the lingering effects raise concerns regarding the user’s ability to function in a safety challenged environment. The purpose of the policy is to reduce workplace accidents by prohibiting workplace impairment. There is a clear connection between the policy, as it applies to recreational users of cannabis, and its purpose. The policy is directed at actual effects suffered by recreational cannabis users, not perceived

40 Alberta (Human Rights and Citizenship Commission) v. Kellogg Brown & Root, 2006 ABQB 302 at para. 110

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effects suffered by cannabis addicts. Although there is no doubt overlap between effects of casual use and use by addicts, that does not mean there is a mistaken perception that the casual user is an addict. To the extent that this conclusion is at odds with the decision of the Ontario Court of Appeal in Entrop v. Imperial Oil Ltd. (2000), 50 O.R. (3d) 18, 189 D.L.R. (4th) 14, we decline to follow that decision.

[36] We see this case as no different than that of a trucking or taxi company which has a policy requiring its employees to refrain from the use of alcohol for some time before the employee drives one of the employer’s vehicles. Such a policy does not mean that the company perceives all its drivers to be alcoholics. Rather, assuming it is aimed at safety, the policy perceives that any level of alcohol in a driver’s blood reduces his or her ability to operate the employer’s vehicles safely. This is a legitimate presumption. Its goal is laudable since carnage on the highways is a leading, but often ignored, cause of death nearing epidemic proportions. Extending human rights protections to situations resulting in placing the lives of others at risk flies in the face of logic.

[37] Having come to this conclusion it is not necessary to consider the question of accommodation. Since there was no breach, there is nothing to accommodate. Nor is it necessary to consider whether KBR’s policy constitutes a BFOR.

The Alberta Court of Appeal decision in Kellogg, Brown & Root is correct in law and a sensible decision. Clearly, the initial onus is on a complainant to establish that he or she has been discriminated against on the ground of a physical or mental disability. In this case, there was no doubt that Chiasson did not have a physical or mental disability. Furthermore, there was no doubt that KBR did not perceive him to have a disability. Surely KBR was entitled to take steps to ensure that any workers undertaking construction work at the Syncrude site were not under the influence of drugs and alcohol. As a company they had a clear moral and legal obligation to ensure that the work was done safely.

The issue of mandatory random drug testing came to the forefront in the investigation of the Queen of the North ferry disaster in British Columbia. On March 21, 2006, the ferry struck an island after a normal course correction was made on the route. The 42 crew members and 57 of the passengers abandoned the ferry and it sank soon after. Two passengers were killed. The investigations into the accident determined that the sinking was a result of human error. The investigation by the Transportation Safety Board of Canada (the “Board”) revealed that several crew members of the doomed ferry had smoked marijuana between shifts. This took place both on and off the ferry.

The Board recommended that B.C. Ferries review its drug and alcohol policy and ensure the policy was properly enforced. B.C. Ferries acknowledged the report and agreed that it was important to address the issue. However, mandatory drug and

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alcohol testing has been challenged under human rights legislation and struck down by the courts.

B.C. Ferries said public safety is very important in the transportation industry and suggested the Federal Government give power to ferry operators across Canada to conduct mandatory drug and alcohol testing.

The investigation raises the issue of safety versus human rights in the debate involving employee drug testing. Courts have ruled that testing violates human rights, mainly because it only proves past use rather than present intoxication. However, it appears that the rights of casual drug users have taken a back seat to safety considerations.

Mandatory drug and alcohol testing was recommended by investigation boards following both the Hinton train disaster and the sinking of the Exxon Valdez. Both tragedies caused significant loss of life, extensive environmental damage and huge costs due to loss of property. Imperial Oil developed a zero tolerance and firm alcohol and drug use and testing policy following the Exxon Valdez disaster. However, its testing policies and programs have been struck down by human rights commissions, the courts and arbitrators in several decisions, including the Entrop case of the Ontario Court of Appeal. Each of these decisions have reflected a casual application of human rights law and have prevented employers from establishing effective mandatory drug testing policies.

That trend may have changed through the recent decision of the Alberta Court of Appeal in Kellogg, Brown and Root. In that case, the Alberta Court of Appeal rejected a challenge by a casual drug user to a company’s mandatory drug testing policy. The Court held that drug testing at a safety-sensitive Syncrude Oilsands project was justified for safety reasons. In its ruling, the Alberta Court of Appeal expressed disagreement with Ontario’s Court of Appeal which, in the Entrop case decided in 2000, disapproved of mandatory drug testing on the ground that it treated casual drug users as addicts. The Alberta Court of Appeal held that such a policy “perceives that persons who use drugs at all are a safety risk in an already dangerous workplace”.

In its decision, the Alberta Court of Appeal got it right. Following general principles of human rights jurisprudence, the onus is initially on the complainant in a human rights complaint to establish that he or she has suffered discrimination on a prohibited ground set out in the human rights legislation. Casual drug users are not addicts. They do not suffer from disabilities. They use drugs because they choose to. As the complainant, John Chiasson, had not met the onus of showing that he suffered discrimination under Alberta’s human rights legislation, his complaint was dismissed. It is only persons who suffer from drug or alcohol addiction who are disabled. In appropriate cases, where such individuals can establish discrimination based on an employer policy or conduct, then they certainly are entitled to remedies under the human rights legislation, including the duty to accommodate their disability unless it amounts to an undue hardship. However, that protection should not and does not extend to casual drug users.

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Prior decisions (such as Entrop), and the Court of Queen’s Bench in Kellogg, Brown & Root, held that there was a prima facie case of discrimination because the employer discriminated against all drug users on the ground of a ”perceived disability”. That is, through the imposition of mandatory drug testing, the employer treated al drug users as if they were addicted to drugs. It is clear that human rights legislation protects persons who have, or have had, an actual or perceived disability. However, in protecting casual drug abusers, the tribunals have often misapplied the evidence.

For example, the evidence in Kellogg, Brown & Root, was clear that the complainant was not addicted to marijuana, and was a recreational drug user. He was not addicted to marijuana, was not disabled and did not require accommodation. The employer was not under any misapprehension that the complainant had a “perceived disability”. On the contrary, the complainant admitted to his employer that he was a recreational drug user.

In declining to follow Entrop, the Alberta Court of Appeal held that the company’s pre-employment drug testing policy did not, contrary to the lower court’s conclusion, treat all those testing positive as if they were addicts and likely to report to work impaired. Rather, the policy “perceives that persons who use drugs at all are a safety risk in an already dangerous environment”. This approach was justified in the court’s view given the evidence that “the effects of the casual use of cannabis sometimes linger for several days after its use. Some of the lingering effects raise concerns regarding the user’s ability to function in a safety-challenged environment. The purpose of the policy is to reduce workplace accidents by prohibiting workplace impairment. There is a clear connection between the policy, as it applies to recreational users of cannabis , and its purpose. The policy is directed to actual effects suffered by recreational cannabis users, not perceived effects suffered by cannabis addicts. Although there is no doubt overlap between effects of casual use and use by addicts, that does not mean there is a mistaken perception that the casual user is an addict.”

It is hoped that the sound reasoning of the Alberta Court of Appeal in Kellogg, Brown and Root will have influence on other human rights tribunals and courts throughout Canada. If so, then employers will finally be able to take effective steps in the workplace to eradicate drug and alcohol abuse which elevates the risk of workplace injury and death, drug dealing in the workplace and other drug and alcohol-related problems.

Fullowka v. Royal Oak Ventures Inc.41

The North West Territories Court of Appeal reversed the decision of the trial court, and dismissed the $10.7 million negligence claims against the union, security firm and company arising from the tragic murders of the miners during the Giant Yellowknife Gold Mine labour dispute. The Court of Appeal concluded that the defendants did not owe a duty of care in negligence to the plaintiffs. Furthermore, the trial judge did not

41 2008 NWTCA 04

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use the test for determining causation as it was subsequently clarified by the Supreme Court in Hanke.42

This civil case is the most recent of several legal actions arising out of the most violent strike in Canadian history. After agreeing to a tentative collective agreement, the union was unable to obtain ratification from their members and this led to a bitter and protracted strike in the City of Yellowknife. The Company, which at the time was Royal Oak Mines Inc., used replacement workers (as legally permitted) to continue to operate the mine during the labour dispute. A striking miner, Warren, trespassed on the mine property and planted an explosion on the track leading down the mine. A transport vehicle struck the explosion and killed nine of the replacement miners working during the strike. Warren was a member of the militant local union and the fatal blast was a culmination of a bitter labour relations struggle. Eight widows and a mother of a murdered miner brought a civil claim against Warren, the mine owner, directors and officers of the mine owner, the consulting firm hired by the owner, the union, individual officers of the union, and the Crown pursuant to the Fatal Accidents Act. As the surviving families of the deceased miners received Worker’s Compensation, the Worker’s Compensation Board of the North West Territories was subrograted in the claim. The trial judge found that the defendants Royal Oak, Pinkertons, the Government of the North West Territories, Seeton, Bettker ???, Shearing, Warren (the murderer), and the CAW National liable. The CAW National had merged with the predecessor union, Canadian Association of Smelter and Allied Workers, and was therefore liable for the actions of the predecessor union local. The trial judge awarded the Fullowka plaintiffs the sum of $10,731,672.94. He awarded the plaintiff O’Neill (the mother) $586,736.47. The North West Territories Court of Appeal reversed the decision and dismissed the claims.

In essence, the North West Territories Court of Appeal concluded that the convicted murderer, Warren, was solely responsible for the death of the miners. The court held that the mine did not owe a duty of care to the miners. The harm to the miners was not reasonably foreseeable. This was an extreme case where the chance of bombing was improbable, and the worker acted intentionally to set the bomb. There was insufficient proximity between the tortfeasor (Warren) and the other defendants to create liability. Specifically, the court held:

• There was no special relationship between the security company and the replacement miners which would create liability.

• The security company’s duties arose from contract and do not necessarily create a duty in tort. By signing the contract, the security company do not immediately become responsible for all of the risks that materialize, especially from an intentional tortfeasor. Alternatively, the security company met the standard of reasonable care imposed. The miners could not reasonably expect that the security company would guarantee their safety, as previous incursions into the mines were well known.

42 Hanke v. Resurfice Corp., 2007 SCC 7

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• The Crown’s statutory duty to provide for safety of the mine did not automatically create a duty in tort. Statutory duties are generally public and do not create private liability.

• Local unions were separate legal entities from the national union, and the national union is not responsible. The union was not vicariously liable for the actions of the worker. The National Union did not take over or usurp the activities of the locals. The local union was not liable for the acts of the worker. The local union’s knowledge of inflammatory statements did not create vicarious liability on the part of the union. Furthermore, failure of the union to bargain in good faith was a strict statutory duty and did not create any tort liability.

• The mine did not owe a duty of care to the miners as the liability would be contrary to the concepts of personal autonomy, fault-based liability and personal liability and responsibility. The employer did not control the employee who set the bomb. It was not foreseeable.

Wronko v. Western Inventory Service Limited43

The issue in this case is whether an employer may make a unilateral change to an employment agreement, provided reasonable notice of the amendment is provided to the employee. The decision of the Ontario Court of Appeal is a troubling one. The employee worked for the company for 17 years. In his last four years he served as Vice-President of National Accounts and Marketing. After assuming that position, the employee signed an employment contract dated December, 2000 that included a clause providing for the payment of two years’ salary in the event that he was terminated. A new president joined the company in September, 2000. The new president sent the employee a different contract, purporting to reduce his entitlement on termination to a maximum of 30 weeks’ pay. After receiving legal advice, the employee refused to sign the new contract. The employer then took the position that the termination provision in the new contract would come into effect in two years time. The employee continued to object to the amended termination provision over the next two years. In September 2004, the president wrote to the employee, advising him that the amended termination provision was now in effect and that if he did not accept this, “then we do not have a job for you”. The employee replied that he understood his employment to be terminated and did not report to work. He sued for wrongful dismissal and claimed damages for breach of contract and bad faith, punitive and exemplary damages, and damages for unpaid vacation pay. The trial judge dismissed the action except for the vacation pay and costs. The Court of Appeal added damages of $67,795.00 (which in its addendum, was increased to $286,000.00).

In allowing the appeal, the Ontario Court of Appeal followed Hill v. Peter Gorman Ltd.44 In Wronko at para. 32 the court states:

43 2008 ONCA 327 Addendum 2008 ONCA 479 Leave to appeal to SCC dismissed October 9, 2008 (No. 32705) 44 (1957), 9 D.L.R. (2d) 124

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[32] On appeal, Mackay J.A. held that mere continuance by an employee in employment does not amount in law to an acceptance by an employee of a unilateral variation of his contract by his employer.[1] The employee is entitled to insist on the employer’s adherence to the terms of the contract. The employer could have terminated the employee’s contract and offered him employment on the new terms, but it did not do so. This was fatal to its position. Mackay J.A. stated at 132:

Where an employer attempts to vary the contractual terms, the position of the employee is this: He may accept the variation expressly or impliedly in which case there is a new contract. He may refuse to accept it and if the employer persists in the attempted variation the employee may treat this persistence as a breach of contract and sue the employer for damages, or while refusing to accept it he may continue in his employment and if the employer permits him to discharge his obligations and the employee makes it plain that he is not accepting the variation, then the employee is entitled to insist on the original terms.

…

If the plaintiff made it clear…that he did not agree to the change…the proper course for [the employer] to pursue was to terminate the contract by proper notice and to offer employment on the new terms. Until it was so terminated, the plaintiff was entitled to insist on performance of the original contract. [Emphasis added.]

[33] In the cited passage, Mackay J.A. identifies three options that are available to an employee when an employer attempts a unilateral amendment to a fundamental term of a contract of employment. They may be summarized as follows.

[34] First, the employee may accept the change in the terms of employment, either expressly or implicitly through apparent acquiescence, in which case the employment will continue under the altered terms.

[35] Second, the employee may reject the change and sue for damages if the employer persists in treating the relationship as subject to the varied term. This course of action would now be termed a “constructive dismissal”, as discussed in Farber, although this term was not in use when Hill was decided.

[36] Third, the employee may make it clear to the employer that he or she is rejecting the new term. The employer may respond to this rejection by terminating the employee with proper notice and offering re-

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employment on the new terms. If the employer does not take this course and permits the employee to continue to fulfill his or her job requirements, then the employee is entitled to insist on adherence to the terms of the original contract. In other words, if the employer permits the employee to discharge his obligations under the original employment contract, then – unless proper notice of termination is given – the employer is regarded as acquiescing to the employee’s position. As Mackay J.A. so aptly put it: “I cannot agree that an employer has any unilateral right to change a contract or that by attempting to make such a change he can force an employee to either accept it or quit.”

In the result, the Ontario Court of Appeal held that the trial judge erred in treating the case as though the employee had chosen to pursue the second option, an action for constructive dismissal, as discussed by the Supreme Court of Canada in Farber v. Royal Trust.45 The Ontario Court of Appeal concluded that “this error is understandable”.

In an addendum, following written submissions, the Ontario Court of Appeal amended the judgment to award damages equal to two years’ salary of $286,000.00 based on the wording of the original employment contract.

The Wronko decision is troubling. Surely if an employer may terminate the employment of an employee by providing two years’ notice, it can amend a fundamental term of the employment contract by providing two years’ notice of the amendment. Under the circumstances, it is hoped that the Wronko case will be confined to its facts. In the meantime, parties must be careful in crafting employment contracts to ensure that clear notice provisions are included for both termination of employment and amendment to the contract by either party. Alternatively, notice of any change to the employment contract must be contemporaneous with notice of termination of employment. Although this may seem like form over substance, or “splitting hairs”, that fine distinction resulted in a sizeable judgment against the employer in Wronko.

CAL_LAW\ 1450798\1

45 [1997] 1 S.C.R. 846