More than 25 years ago, the Supreme Court of Canada recognized the central importance of work to society and to individuals stating, “Work is one of the most fundamental aspects in a person’s life, providing the individual with a means of financial support and, as importantly, a contributory role in society. A person’s employment is an essential component of his or her sense of identity, self-worth and emotional well-being.”
This pivotal statement definitively distinguished employment contracts as unique. Employment contracts received different treatment than ordinary commercial contracts. The courts regularly use terms such as “relational” rather than “transactional” when describing employment contracts.
The importance of the distinction is that ordinary commercial contracts are presumed to represent bargains freely made. This legal presumption is a myth in most employment situations. The vast majority of employees know only too well, they didn’t bargain anything with the employer.
Once the legal fiction of freedom of contract was dispensed with, and the power imbalance between employer and employees recognized, various tools have been used by judges to provide redress to vulnerable employees, where the employer has unfairly exploited the power imbalance between employer and employee.
In the past, employers would have employees sign agreements, for example, that permitted employees to be terminated with either no advance notice, or with less notice than set out in employment standards legislation.
In such a case, the court will now void that contract and award the employee reasonable notice, having regard to factors such as age, length of service, character of employment and how quickly it will take that individual to secure alternate employment.
Even where employers may think they have incorporated statutory minimum standards into the employment contract, some employers still undercut the bare statutory minimum. This again has resulted in some termination clauses being too restrictive and ultimately unenforceable.
Given the “relational” nature of employment, our courts recognize that the relationship evolves and changes over time. They will, for example, be mindful when a long service employee has transitioned through many levels and different classifications with one employer over many years. An employer who tries to rely on a twenty-year old contract, signed when the employee was hired as a clerk, will likely be disappointed by a Court finding that the outdated contract has no applicability to the employee, who has now progressed up through the ranks to vice-president.
In conjunction with recognizing the importance of work to the individual, our courts also recognize that the way an employer brings the relationship to an end matters. Employees are most vulnerable at the point of termination, and the manner of dismissal has a profound effect on them. Accordingly, employers have a legal obligation of good faith and fair dealing in the manner of dismissal.
The precise ambit and elements of this obligation continue to be debated by employers and employees in the Courts. While it defies precise definition, at a minimum, it requires employers to be candid, reasonable, honest and forthright. When it was first introduced, the Courts extended or “bumped up” the notice period. The focus was on employer conduct.
In a case brought to the Supreme Court by Honda in 2008, the Court revisited how and when bad faith damages ought to be awarded by courts. As a result, employees must now prove and quantify bad faith damages, and they are awarded as aggravated damages for mental distress, flowing from the manner of dismissal.
The notion of “good faith and fair dealing” has become familiar and expanded to a more critical examination of other employer conduct in the employment relationship – from toxic work environments to mishandled workplace investigations, leading to high damage awards. Two recent jury awards are noteworthy in this regard.
An Ontario jury awarded former Walmart employee, Ms. Meredith Boucher, more than $1.4 million in a case involving workplace harassment. The punitive damages award against Walmart was recently substantially reduced by the Ontario Court of Appeal from $1 million to $100,000 on the basis that the other damages awarded were already high and the lower amount was all that was needed to sufficiently punish Walmart. The Court of Appeal’s intervention in the jury award is example of the shifting and balancing of interests between employees and employers by the courts.
Similarly in British Columbia, the buyer of a sawmill made life miserable for a long term, 34 year employee, Mr. Larry Higginson, trying to force him to quit. When he didn’t succumb, he was terminated for “cause.” Ultimately, a jury awarded Mr. Higginson more than $200,000 in compensatory damages, plus another $573,000 in punitive damages.
The take-away here underscores that employers who treat their employees fairly and reasonably are not only doing the right thing, they are making the right business decision and avoiding significant reputational harm and legal costs
Robert Monti is a Partner with the Ottawa law firm Nelligan O’Brien Payne LLP (www.nelligan.ca) and is the leader of the firm’s Employment Law Practice Group.