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Penalties & Employment Cases in 2016

2016 provided new developments in the law which employers ought to be aware of.  Here is a list of some of the key cases and takeaways. 

  1. PAINFUL LESSON ON THE PITFALLS OF FIXED TERM CONTRACTS
    In Howard v. Benson Group Inc., 2016 ONCA 256, the employee signed a 5-year contract but was dismissed after 23 months. The contract provided that the employee could be dismissed prior to the end of the term and any amounts paid would be “in accordance with the Employment Standards Act of Ontario.” The employer paid 2 weeks’ termination pay in accordance with the Employment Standards Act, 2000 (ESA), but the Court of Appeal awarded the employee 37 months’ pay, representing the balance of the 5-year term. The Court held that the early termination provision was unenforceable because: (i) it breached the ESA by failing to specify that the employee’s benefits would continue for the minimum period prescribed by the ESA, and (ii) it did not expressly provide that the employee would be disentitled to any payments beyond the ESA minimums. Furthermore, the Court made it clear that the employee was not obligated to attempt to mitigate his damages by seeking alternate employment because the fixed term contract did not specify the duty to mitigate.

    Lessons for Employers: Typically, employers should not enter into fixed term contracts that are longer than 1 year. If employers elect to enter into a fixed term contract, it is imperative that the contract include the following: (i) an early termination provision which at the very least complies with the ESA and stipulates that the employee will not receive more than what the early termination provision provides, and (ii) a provision stipulating that the employee has a duty to mitigate his/her damages in the event the contract is terminated early, and any income earned from mitigation will be set off against the payments owed by the employer.

  2. COSTLY PENALTY FOR FAILURE TO ACCOMMODATE
    It is common understanding that employers have an obligation to accommodate an employee’s disability to the point of undue hardship. The case of Hamilton-Wentworth District School Board v. Fair illustrates the potentially devastating ramifications to employers for failing to meet this obligation.

    In this case, the employee was on a medical leave from 2001 to 2003 due to post-traumatic stress disorder. Her doctor declared that she was able to return to work, albeit with some restrictions. Instead of accommodating her, the employer terminated her employment in July 2004. The case went before the Human Rights Tribunal of Ontario (HRTO) in 2012. The HRTO held that the employer breached the duty to accommodate by failing to investigate whether the employee could have been given a role that was in accordance with her medical restrictions. The remedies ordered included the following: (i) reinstatement of the employee to a position at the same level that she had in 2003; (ii) lost wages going back to 2003; and (iii) $30,000 as compensation for injury to her dignity, feelings and self-respect.

    The employer appealed the decision but the Court of Appeal upheld the HRTO’s findings and remedies. Although reinstatement is rarely ordered, the Court of Appeal confirmed that the HRTO has the authority to make such an order, and the length of time that elapsed after the employee’s termination did not bar the HRTO from ordering reinstatement.

    Lessons for Employers: The duty to accommodate requires employers to undertake a thorough investigation to determine whether employees can be accommodated through modified duties or alternate positions before giving up and saying that accommodation would cause undue hardship. It is important to remember that the failure to accommodate can lead to the employee being reinstated with back-pay even if a considerable time has elapsed after the termination, in addition to other remedies.

  3. PAYMENT OF BONUS UPON TERMINATION
    In the case of Paquette and TeraGo Networks Inc., 2016 ONCA 618, an appeal was filed following a summary judgment motion judge failing to award any bonus payment to Paquette after the termination of his employment. The terms of the bonus plan required active employment on the date the bonus was paid out. Other factors under the plan included individual and corporate objectives.

    The Court of Appeal held that it was not enough to limit the payment of a bonus on termination with language in a bonus plan that only referred to active employment. Instead, the wording of the bonus plan will need to limit an employee’s common law right for lost salary and bonus during the reasonable notice period.

    Lessons for Employers: Cases such as this reinforce the importance of having a written bonus plan, but more importantly a properly written bonus plan. Language addressing the payment of a bonus upon termination can also be added to an employment agreement. Depending on the circumstances, a company may also want to consider whether to pay out some type of bonus payment as part of the termination package, for example, a prorated bonus. Otherwise, an employee may be willing to commence litigation over the issue, especially where the company has not offered any payment for the bonus.

  4. COURT OF APPEAL UPHOLDS JUST CAUSE TERMINATION
    The Court of Appeal upheld a just cause termination where the employee misconduct “struck at the very heart of the employment relationship” in the case of Fernandes v. Peel Educational & Tutorial Services Limited, 2016 ONCA 468. In this case of academic fraud, a teacher of more than 10 years submitted inaccurate grades and then lied about it when questioned. The Court of Appeal found that the misconduct was incompatible with the teacher’s professional obligations and the essential terms of employment. The court focused on the severity of potential harm to the school instead of actual harm suffered.

    Lessons for Employers: While a just cause termination can be a high standard to meet, there are cases where the court will support just cause. Cases where an employee’s misconduct goes to a core obligation, there is a breach of trust and/or potential harm to the company may be sufficient for just cause.

  5. FINANCIAL CONSEQUENCES FOR EMPLOYEE MISTREATMENT
    The Court of Appeal sent another strong message to employers in the decision of Strudwick v. Applied Consumer & Clinical Evaluations Inc., 2016 ONCA 520. Strudwick was a long-term employee who became deaf likely due to a virus. A pattern of conduct by Applied Consumer followed, which included its refusal to accommodate Strudwick at all, including those accommodations she had agreed to pay for. The company then made the work environment more challenging in an effort to try and have Strudwick resign. The Court of Appeal found that Strudwick was subject to harassment, isolation and belittling in a public manner. As a result of the treatment in the workplace, Strudwick diagnosed with an adjustment disorder with mixed anxiety and depressed mood.

    In total, Strudwick was awarded $246,049.92 by the Court of Appeal, which was a significant increase from the amount at trial. The damages included 20 months for wrongful dismissal damages, $40,000.00 for damages for a breach of human rights, intentional infliction of mental suffering of $35,294.00, aggravated damages of $70,000.00 with a slight deduction to prevent an overlap from Wallace damages, and punitive damages of $55,000.00.

    ​We note that Applied Consumer failed to deliver a Statement of Defence, resulting in the court relying on the facts set out in the Claim. 

Lessons for Employers: Where the conduct of a company is particularly egregious, the court will compensate an employee. In this case, there were multiple types of damages awarded to Strudwick with the end result of a large amount of total damages awarded.

If you have a question about this article, or any employment matter, please contact a member of our Employment and Labour Group.
Megan Burkett,mburkett@kmblaw.com or 905-276-0420
Nav Bhandal,nbhandal@kmblaw.com or 905-276-0408

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This article is provided for general information purposes and should not be considered a legal opinion. Clients are advised to obtain legal advice on their specific situations.

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