June 14, 2018

1. Recent Developments in Employment and Labour Law June 14, 2018

2. Dismissal Law Update Andrea York

3. On the Agenda • Termination provisions in employment contracts • Mass termination class action • Extraordinary damages • Bonuses and LTI on termination

4. 1 Termination Provisions

5. North v. Metaswitch Networks (ONCA) • Bullet points • Use bold forimportant information • Use bold forimportant information • Use bold forimportant information • Use bold forimportant information The Company may terminate your employment at any time in its sole discretion for any reason, without cause, upon by [sic] providing you with notice and severance, if applicable, in accordance with the provisions of the Ontario Employment Standards Act (the “Act”). In addition, the Company will continue to pay its share all [sic] of your employee benefits, if any, and only for that period required by the Act. The reference to notice in paragraphs 9(b) and (c) can, at the Company’s option, be satisfied by our provision to you of pay in lieu of such notice. The decision to provide actual notice or pay in lieu, or any combination thereof, shall be in the sole discretion of the Company. All pay in lieu of notice will be subject to all required tax withholdings and statutory deductions. In the event of the termination of your employment, any payments owing to you shall be based on your Base Salary, as defined in the Agreement. [Emphasis added]

6. Nemeth v. Hatch (ONCA) • Bullet points • Use bold forimportant information • Use bold forimportant information • Use bold forimportant information • Use bold forimportant information The Company’s policy with respect to termination is that employment may be terminated by either party with notice in writing. The notice period shall amount to one week per year of service with a minimum of four weeks or the notice required by the applicable labour legislation. [Emphasis added]

7. Holm v. AGAT (ABCA) • Bullet points • Use bold forimportant information • Use bold forimportant information • Use bold forimportant information • Use bold forimportant information In the event we wish to terminate your employment without just cause, we agree that we will give you notice of the termination of your employment, or at our absolute discretion, we will pay you, in lieu of such notice, a severance payment equal to the wages only that you would have received during the applicable notice period. This will be in accordance with the provincial legislation for the province of employment. [Emphasis added]

8. Key takeaways: Case law clear as mud • Courts can be unpredictable • Regularly update your employment agreement templates • Don’t inadvertently contract out of the ESA • Use “minimum requirements” vs. “in accordance with” • Consider providing more than the ESA minimums • Employment agreements are treated differently from commercial agreements; ambiguity will be read in favour of the employee

9. “ Termination clauses should be interpreted in a way that encourages employers to draft agreements that comply with the ESA. If the only consequence employers suffer for drafting a termination clause that fails to comply with the ESA  is an order that they comply, then they will have little or no incentive to draft a lawful termination clause at the beginning of the employment relationship. ” Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158; North v. Metaswitch Networks Corp., 2017 ONCA 790

10. 2 Mass Terminations

11. Wood v. CTS (ONSC) Timeline

12. Court invalidated 14 months’ working notice • Statutory interpretation – Form 1 should be filed at front end • ESA interpretation that gives the greater benefit to the employee should be preferred • Excessive overtime during working notice can invalidate a working notice period as well Wood v. CTS

13. Key takeaway: The ESA is remedial legislation, intended to protect the interests of employees. Courts should thus favour an interpretation of the ESA  that “encourages employers to comply with the minimum requirements of the Act” and “extends its protections to as many employees as possible”, over an interpretation that does not do so. “ ”

14. 3 Extraordinary Damages

15. 3 Extraordinary damages on the rise • Moral, aggravated, mental distress damages • Punitive damages

16. Galea v. Wal-Mart (ONSC) • VP Merchandising, 8 years • Restructure; promise to find her other role ultimately not kept • Change in performance rating • 9 months with no comparable position; a “long goodbye” • Paid 11.5 months following termination (although her contract included 2 year severance provision) Award: • $915,897 = balance of 2 years • $200,000 moral damages for pre-term conduct, manner of dismissal (no medical evidence required) • $50,000 moral damages for post-termination conduct • $500,000 punitive damages (“Wal-Mart built her up, only to let her down that much more…conduct was not just unduly sensitive, it was mean”)

17. Lau v. RBC (BCCA) • CSR, 5 years’ service • Client complaint led to investigation finding that he had mis-tracked mutual fund sales and then “lied” about it • Termination with cause Trial court: • Misconduct not cause • 9 months, plus $30,000 in moral damages based on flawed investigation Court of appeal: • Reversed moral damages award • The demeanor of the plaintiff on witness stand not sufficient evidence. There must be an evidentiary foundation such as a “serious and prolonged disruption that transcended ordinary emotional upset or distress”

18. Ensign v. Price’s Alarm Systems (BCSC) • Medical alert advisor • 12 years’ service • 63 years old, $30K per yr. • Offers of alternative re-employment made, but on changed terms (different position, fixed-term, limited notice) • Rejected offers due to lack of trust Award: • 12 months • No failure to mitigate – could not be faulted for rejecting the offers • $25,000 aggravated damages. No medical evidence; subjective evidence of anxiety sufficient. Employer not truthful regarding reasons for termination. Offers of employment disingenuous • No punitive damages

19. Key takeaways • Obligation of good faith and fair dealing in the manner of dismissal • Be candid, reasonable and honest throughout • Awards of aggravated/moral damages possible based on the subjective evidence of the employee alone • Punitive damages award can be based on the same facts as moral damages

20. 4 Incentive Compensation

21. Want to save money on termination? Plan text to be avoided: • Kenny v. Weatherhaven Global • “The Executive will be eligible to receive a minimum of 20% and up to 60%... based on the achievement of … objectives” • Fulmer v. Nordstrong Equipment • No plan text; only “unofficial policy” that no bonuses paid following termination • Bonus for year of termination payable. However, Court held that no bonus awarded for the period of notice (although little analysis, and see Singer) • Singer v. Nordstrong Equipment • “The bonus pool for each division is calculated using this formula, and there is no discretion involved”

22. Key takeaways: • Refer to notice period in plan, agreement or preferably both • Use specific waiver language • Consider adding “subject only to the express requirements of applicable employment standards legislation” • Build in discretion, but this won’t be determinative

23. Weed and the Workplace Daryl Cukierman

24. On the Agenda • Status of Legislation (Federal and Ontario) • Cannabis Use at Work • Workplace Policies • Medical vs. Recreational Cannabis • Disciplinary Action • Drug Testing

25. Cannabis Act (Bill C-45) • Legalize and regulate recreational use of cannabis • June 7, 2018 – Senate passed Bill C-45….with amendments • Bill returning to House of Commons • House has already rejected many of the Senate’s amendments • Legalization by end of summer 2018??

26. Ontario – Cannabis Act, 2017 (Bill 174) • September 2017: Ontario became first province/territory to announce its plan re: recreational cannabis • December 12, 2017: Royal Assent • Currently awaiting proclamation by L.G. • Minimum age for use, purchase, possession and consumption will be 19 • Aligns with Ontario minimum age on alcohol and tobacco use

27. Ontario – Cannabis Act, 2017 (Bill 174) • Recreational use will be prohibited in public places, workplaces,and inside motor vehicles or boats • “Workplace” as defined in OHSA • Exception for medical cannabis users (who are only subject to restrictions in the Smoke-Free Ontario Act, 2017)

28. Ontario – Cannabis Act, 2017 (Bill 174) • Only one legal retail distributor: Ontario Cannabis Retail Corporation (OCRC) • “Ontario Cannabis Stores” (and online order service) overseen by LCBO • Online distribution expected to be available shortly after legal retail commences • Introduction of “designated establishments” where recreational cannabis can be consumed?

29. Cannabis Use at Work • Myth: Recreational cannabis use will be permitted at work upon passage of the legislation • Fact: Employers have the ability to prohibit the use of intoxicants such as cannabis and alcohol in the workplace • Clearly communicate expectations to employees about cannabis use in the workplace and being impaired at work • Fitness for work

30. Workplace Policies • Review and update employment policies to ensure they clearly set employer expectations • Advise employees of these updated policies • Consider any policy “loopholes”

31. Workplace Policies • In particular, employers should review: • Policies related to possession and use of alcohol and drugs at work • Policies related to reporting use of drugs for medical purposes that could lead to potential impairment • Drug and alcohol testing policies • Occupational health and safety policies related to both smoking at work and workplace impairment • Vehicle use policies • Client entertainment and social host policies

32. Medical vs. Recreational Cannabis • Medical: The Access to Cannabis for Medical Purposes Regulation (enacted under the Controlled Drugs and Substances Act) will remain in effect to ensure access to medical cannabis for authorized users • The use of cannabis for medical purposes has been permitted in Canada since 2001 • Proponents: Effective in treating a number of medical conditions including chronic pain, nausea, arthritis, multiple sclerosis, etc.

33. Medical vs. Recreational Cannabis • Workplace Safety • Employers have an obligation to ensure a safe workplace • This obligation includes ensuring employees do not endanger themselves or others due to impairment by alcohol or drugs • Workplace safety as a consideration in whether an employee can use medical cannabis at work (accommodation analysis) • Balancing of medical need vs. workplace safety does not apply to recreational use

34. Medical vs. Recreational Cannabis • Aitchison v. L & L Painting and Decorating Ltd., 2018 HRTO 238 • “The applicant does not have an absolute right to smoke marijuana at work regardless of whether it is used for medicinal purposes.” • “His actions represented a genuine health and safety risk given the safety sensitive nature of the job site.” • “Given the health and safety risks inherent to this worksite, I accept that the applicant was dismissed for a serious health and safety violation.”

35. Disciplinary Action • Prior to the Cannabis Act, employers could rely on the fact that cannabis was illegal when disciplining employees for possession or use of cannabis at work

36. Disciplinary Action • Illegality of the substance will no longer be a factor in determining the seriousness of the infraction or the proportionality of the discipline imposed • The change in legal status will impact: • The proportionality of the offence vs. the discipline imposed in unionized workplaces; and • The contextual analysis used to determine “just cause” in non-union workplaces

37. Drug Testing • The legalization of recreational cannabis does not on its own change the law as it relates to drug testing in the workplace • However, the issues raised by increased availability to recreational cannabis may cause some employers to re-examine the scope of drug testing laws in Canada • Rapidly developing area of the law

38. Current State of Drug Testing Methods • Difficult to determine recentness of consumption and level of impairment • Length of time cannabis remains in the body and level of impairment can vary based on: • Quantity consumed • Mode of consumption • Frequency of use • Metabolism (and other individual characteristics)

39. Current State of Drug Testing Methods • Types of testing • Blood tests • Urinalysis • Oral fluid testing • New technologies • High interest in improving testing technologies in the run-up to legalization

40. Balancing Competing Interests • Drug testing raises a complicated balancing of: • The privacy rights of employees; • The employer’s obligation to provide a safe workplace; and • In some cases, an employer’s obligation to accommodate an employee disabled from addiction • E.g., Irving; TTC

41. Conclusion • Issues related to the use of drugs in the workplace was rapidly evolving prior to the introduction of the Cannabis Act • The legalization of recreational cannabis will likely present further issues for employers that will lead to greater clarification from courts and arbitrators • Employers need to carefully consider their current policies and procedures in light of the changing regulatory regime regarding cannabis • Effective communication of those policies and procedures will be imperative to avoiding workplace problems

42. Restrictive Covenants Dos and Don’ts Jordan Schubert

43. On the Agenda • Types of Restricted Covenants • Why Use Restricted Covenants? • Considerations Before Drafting • Drafting Considerations • They’re Drafted – Now What? • Takeaways

44. Types of Restrictive Covenants • We will discuss the following post-employment restrictive covenants: • Non-Solicitation: typically prohibits a former employee from soliciting the clients or employees of his or her former employer • Non-Competition: typically prohibits a former employee from becoming engaged or employed in a business that competes with the business of his or her former employer

45. Context Matters: Employment vs. Commercial “ The scope of a restrictive covenant depends on the context . . . For example, the legal framework applicable to contracts of employment takes account of the imbalance of power that generally characterizes an employer-employee relationship, and it is designed to protect employees. In relationships between vendors and purchasers in the commercial context, on the other hand, there is ordinarily . . . no such imbalance. In such cases, much more flexibility and latitude is required in interpreting restrictive covenants in order to protect freedom of trade and promote the stability of commercial agreements. ” Guay inc. c. Payette

46. Difficult to Enforce • Presumed to be unreasonable restraint of trade and unenforceable (onus on employer to rebut) • Only enforceable if it is no broader than is reasonably necessary to protect the employer's legitimate proprietary rights and does not unduly restrain employee from earning a living • Non-competes are particularly difficult to enforce and will only be upheld in “exceptional” circumstances • Courts will not will not “read down” a restrictive covenant and will strike entire clause if ambiguous or goes beyond what is reasonable

47. Why Use Post-Employment Restrictive Covenants? • Without contractual restrictive covenants, former employees are generally free to compete with former employers and solicit clients and employees so long as they do not use confidential information (exception is a fiduciary, but…) • Post-employment restrictive covenants can prevent or mitigate harm by former employees to an employer’s legitimate business interests

48. Before You Start Drafting Ask yourself: • What proprietary interests are you trying to protect? • How does the employee represent a threat to those proprietary interests after termination? • Are post-employment confidentiality obligations sufficient to protect the proprietary interests? If not, is a non-solicit alone sufficient or is a non-compete also required? • When are you introducing the restrictive covenant(s)? • Consideration?

49. Drafting Considerations • To be reasonable (and therefore enforceable), the restrictive covenant must be all of the following: • Free from ambiguity • Linked to protection of employer's legitimate proprietary interest • Reasonable in terms of: • geographic scope; • temporal scope; and • the activities restricted

50. Ambiguity “ [If] the covenant is ambiguous, in the sense that what is prohibited is not clear as to activity, time, or geography, it is not possible to demonstrate that it is reasonable. Thus, an ambiguous restrictive covenant is, by definition, prima facie unreasonable and unenforceable. ” KRG Insurance Brokers (Western) Inc. v. Shafron