Currie Law – Employment Law, Criminal Law, Civil Litigation in Mississauga, Oakville, Milton, Campbellville, Georgetown, Hamilton, Burlington and the Niagara Region

Mitigating Damages

What is an employee’s obligations upon termination to find a new job?

An employee who has been terminated is required to reasonably seek out alternate and comparable employment in a timely way.

What if I feel I am constructively dismissed or I am terminated but am later offered a job at the same company that terminated me?

The question occasionally arises as to whether that employee is required to work for the same employer who terminated the employment contract.  This issue comes up when dealing with constructive dismissal situations or situations where there is a subsequent opportunity with the same employer.  The Courts have determined that the following factors are relevant:

1. In the absence of conditions rendering the return to work unreasonable, an employee can be expected to mitigate damages by returning to work for the dismissing employer;
2. The question is whether it is reasonable to accept such an opportunity. If the salary offered is the same and the working conditions are not substantially different or the work is not demeaning and where the personal relationships involved are not acrimonious, the Courts have found that an employee should accept such a position;
3. The Courts will consider the history and nature of the employment and all other factors surrounding whether re-employment is reasonable;
4. An employee will not be obliged to accept employment by working or continue to work in an atmosphere of hostility, embarrassment or humiliation;
5. If an employee has been dismissed or has been required to change positions by virtue of legitimate business needs – rather than concerns about their performance, they will often be required to mitigate by maintaining this position or returning to the same employer.

VERBAL WARNING OF PERFORMANCE NOT ENOUGH TO JUSTIFY TERMINATION

In a recently released case from British Columbia, A 55 year old tugboat captain who had been employed for 8 years and 2 months prior to his dismissal sued after his employer dismissed him for cause after giving him repeated, but  undocumented, verbal warnings regarding incompetent acts.  The Court found that he was wrongfully dismissed and provided him with 10 months’ compensation in lieu of notice, given that his position was an important one requiring specialized training and his management role.

The employer told his employee verbally and  that his work was unsatisfactory or inadequate and threatened dismissal.  The employer, however, never gave the employee any timeframe within which to improve.  The Court found that to dismiss an employee summarily in such circumstances where the employer believes the employee’s performance is substandard, the employer must provide the employee with clear warnings which specifically informs the employee that his or her job is in jeopardy.  Simply warning that an employee’s job is at stake if performance does not improve is not in and of itself sufficient to satisfy the requirement to warn.  The Court in this instance found that a warning could only be sufficient as to the requirements in the law if the employer meaningfully assisted the employee to improve (Bomford v Waddon Transportation Systems Inc., 2010).

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Can an employee criticize a superior with reprisal?

When does it become justification for the termination of the employee for cause?

Not all comments made by an employee about the Company or their boss that are critical in nature justify termination.  Here are some of the considerations that Courts use and Human Resources professionals should consider when analyzing this issue.

1. Exactly what was the actual comment and the circumstances and tone in which it was said. When Courts have addressed this issue they have considered the following:

• Threats – Threatening violence is usually a fast track to termination
• Criticizing a boss’ decision is not necessarily a disciplinary matter.  There are some situations where superiors act improperly and criticism may be warranted.  However:
  • Making unfounded accusations of dishonesty
  • Making unfounded accusations of incompetence
  • Making comments about a superior’s ethnicity, family religion, and other personal matters

will usually be determined to be intolerable

2. To Whom did the employee relay the criticism:

• Employees have been terminated for criticizing the superior to the boss’ superiors.  Again it depends on the circumstances of the case but if an employee sends an email or a letter, in the hope of embarrassing management, in the eyes of shareholders or a superior in the Company, the Courts have determined that this may justify termination.  There was a situation in British Columbia where a campus radio manager was fired for doing this – even when his language was respectful and his criticisms had merit. [McCabe v Simon Fraser Campus Radio Society]

3. Was it legitimate criticism or strictly insubordination, vindictiveness or insolence. Posting criticism on-line where a blog is readable to anyone in the world with access to the Internet may well justify dismissal

4. Was there provocation?  Did the employee make a regrettable, verbal outburst? In cases like this the Courts will often be more lenient and find that termination is too harsh.  The Courts have recognized that “many things are said and done in the heat of the moment that, on reflection, are regretted.”

It’s fairly difficult to prove that an employee’s criticism of management constitutes just cause for termination.  If the employee puts a criticism in writing or goes over the boss’ head rather than confronting his or her superior directly, and uses language or tone that is disrespectful, inflammatory and potentially harmful to the business, the company may be more prone to terminate.

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Not every improper or unfortunate action by an employee merits termination. Courts consider a number of factors to determine if a termination is warranted for an employee’s behaviour, including criticizing the boss. This includes:

• Whether it’s a first offence:
  • While there isn’t a hard and fast rule, the Courts have often determined that it takes at least two incidents to fire an employee for insubordination or insolence and an employee should first be warned. There are, however, cases where an employee was terminated at first instance
• Whether the employee was provoked
• How long the employee had worked for the company:
  • The longer, more distinguished the service record, the harder it is to prove cause
• The employee’s position (employees in positions of responsibility are generally expected to demonstrate more discretion than lower level employees)
• Remorse – taking responsibility and expressing regret can diminish the seriousness of an offence and the penalty it carries. Lack of these actions can have the opposite effect

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It is stressful to be fired!  If the employee can show that the dismissal was not only wrongful but was carried out in bad faith, an employee may be entitled to additional damages upon termination apart from the requirement of reasonable notice.  Usual damages for wrongful dismissal include compensation in lieu of notice, vacation pay, statutory holidays and other lost benefits.  But when the way the employee is treated during the dismissal is particularly reprehensibly,  harsh, disrespectful or, to use a Court’s term – “egregiously”, employees can collect additional or extraordinary damages called aggravated punitive or other damages. These are often referred to as Wallace or, now, Honda damages – arising from the Supreme Court of Canada decisions where such damages were discussed.

The basic premise is that employers must be “candid, honest, reasonable and forthright” with their employees, especially at termination when their employees are most vulnerable.  So if an employer shows bad faith in the termination process, it must pay additional damages.

In Wallace,  these damages resulted in a few additional months of termination being tacked on to the notice.  But the Supreme Court of Canada in June 2009 in a case called Honda v Keays stated that Courts could no longer arbitrarily extend the notice period by a few months without a correlation or a reason to do so.  Such damages are now only properly awarded if the employee can show that they have suffered mental distress going beyond the normal stress and hurt feelings that naturally arise from being terminated.  Bad faith means inflicting humiliation, embarrassment and damage to an employee’s self-esteem during the employment process.  It is “something akin to intent, malice or blatant disregard for the employee.”  It is conduct that can be characterized as callous and insensitive, or “playing hardball” [Gismondi v Toronto City].  The kinds of “callous treatment” surrounding termination that constitute bad faith include:

• Making false accusations

• Damaging the employee’s prospects for finding another job

• Misrepresenting the reasons for termination

• Firing the employee to deprive her or him of a benefit

• Firing the employee in front of co-workers

No one is entitled to a job for life and sometimes employers must legitimately terminate an employee.  They cannot, however, rub salt in the wound.   Companies that behave with decency and show respect for employee’s feelings during termination will not incur these damages.

Websites such as Twitter, MySpace, Facebook and LinkedIn have become a part of many people’s personal lives. The public nature of these Internet communications can have an effect on both employers and employees where an employee makes a negative or disparaging comment on-line about an employer.

In E V Logistics v. Retail Wholesale Union [2008], an employer terminated an employee after it discovered that his blog contained racist and offensive comments glorifying Nazi Germany. The employee had mentioned his employer and had posted pictures of himself at work. Since the blog postings were not directed at his employer or co-workers, and since the employee had apologized and removed the hateful comments, the termination which had been initially instituted by the company was substituted for a temporary suspension.

In another case, the termination of a government employee who had made negative comments about her employer and co-worker, including posting confidential information and referring to her co-workers as “aliens” and her workplace as “a lunatic asylum” was upheld.

Employers are well advised to have policies that directly address social networking and blogs. Such policies should include provisions that:

• Expressly warn employees that any breach of the policy may result in discipline up to and including termination
• Advise employees that if they refer to any aspect of a company’s business, they must clearly identify themselves as an employee of the company, and include a disclaimer that their views are their own and not their employer’s
• Prohibit employees from:
  • Using company-owned resources for social networking or blog activities at work
  • Disclosing any confidential information, including information relating to other employees or customers
  • Posting information that may violate the privacy rights of other employees, including photographs or videos taken at work or company social events
  • Publishing any negative comments about the employer or other employees, or any comments that may negatively affect the employer’s reputation
• Reiterate the employee’s duty of loyalty to the employer, and applicable policies concerning harassment, IT computer use, conflicts of interest and privacy
• Remind employees that on-line communications can be read by anyone (including their employer and co-workers)
• If you are an employee, remember that anything you post on a public website can be read and used as a basis for termination – even if an employer has not issued such a policy. Given the extraordinary breadth of the Internet, an employer is able to argue that significant and immediate damage to an employer’s reputation as a result of inappropriate postings can result.

Bill 168 Violence and Harassment in the Workplace

The Ontario Health and Safety Act impose new duties on employers to address violence and harassment in the workplace in the form of programs, policies, the provision of information to workers (where a person has a history with respect to violence) and harassment.

Here is the five step checklist that should be complied with in anticipation of these amendments:

1. Prepare and finalize the workplace violence and workplace harassment policies.
   

These policies need to be signed and dated by the highest level of management at the workplace.

2. Conduct an assessment of risks for workplace violence.

Consider:

• The nature of the workplace;
• The type of work;
• The conditions of work;
• The circumstances common to similar workplaces; and
• The circumstances specific to your workplace.

The results of this assessment must be reported to the joint occupational health and safety committee or representative.

3. Create violence and harassment programs necessary to implement the policy and the recommendations from the assessment.
• Reporting and investigation procedures for complaints or incidents of workplace violence and harassment;
• Measures and procedures to control the risks of violence identified in the assessment;
• Measures and procedures for the summoning of immediate assistance when workplace violence occurs or is imminent.

This must include:

These policies need to be signed and dated by the highest level of management at the workplace.

4. Provide information and instruction/training to all staff on the employer’s policies and programs.
   • Are aware of the policies and programs that have been developed to address harassment and violence;
   • Are aware of the measures and procedures for summoning immediate assistance and controlling identified risks;
   • Know how to report incidents of harassment and violence and how the employer will investigate such reports.
   • Post policies in the workplace.
5. Post policies in the workplace.

Are you thinking of leaving your employer and hope to take your clients with you? Sometimes such behaviour can result in a legal action. Nothing infuriates a company more than a former employee taking away its most important asset.

In some proposed employment contracts and in many termination proposals, there is a clause prohibiting an employee from working for certain alternate Companies in the industry for a certain period of time in a certain geographical location. These are called non-competition clauses.

Many lawyers and some judges for the Courts look at these kinds of covenants as generally void, except in exceptional circumstances. Many lawyers will counsel an employee to sign such a clause at the time of employment or termination stating that “they’re not worth the paper they’re written on”.

BEWARE!

While Courts were predisposed to throw out many of these cases stating it was unfair to preclude an employee from making a living and citing public policy against such a restraint of trade, it may be that the tide is turning on whether or not a Court will enforce these clauses. This is particularly so when the employee has sophisticated business acumen and has negotiated the contract prior to his employment or in the context of the termination.

Therefore when such a contract is presented at the termination of an employment relationship and has not previously been part of the employment contract, I would strongly counsel the employee to seriously consider the ramifications of signing such a clause and its impact on future job prospects.

A recent Nova Scotia Court of Appeal case found a 12 month restrictive covenant not to compete with the company or solicit their customers in mainland Nova Scotia, to be unenforceable for being a restraint of trade. While the Court found the geographical and temporal restrictions of the covenant to be reasonable, it struck down the clause because the facts did not justify “the most drastic weapon of a non-competition clause reasonably necessary to protect the interests” of the company in its trade connections.

In a more recently released Ontario case involving two insurance brokers working for an insurance company, the Court upheld the non-competition clause the employees had signed when starting with the Company that provided that for a period of two years following their termination, they wouldn’t conduct business with any clients of the agency they had serviced. Upon a change of management, the brokers became unhappy and resigned, moving to a new agency. Many of the insured clients transferred their business to this new agency. Their former employer was successful in its action to prevent them from approaching any customer and was also successful in an action against the new Company for inducing the breach of contract. The Court found that the restrictive covenants were reasonable in the circumstances and that because of the nature of the relationship between an insured client and his insurance agent, a simple non-solicitation clause would not have been sufficient to protect the company because the clients would be likely to follow their insurance agent without any solicitation. The Court further found that the restrictive clause was not contrary to public interest as it did not prevent them from earning a living in their chosen field and that the two year duration of the clause was reasonable.

ADVICE FOR EMPLOYERS

An employer, who has been damaged by an employee who has thwarted such an agreement, should consider taking action to prevent any further loss of business and to obtain damages for the loss as a result of the employee’s breach of contract.
An Employer should also seriously consider the ramifications of offering employment to a competitor’s former employee who is under a non compete agreement. It may be wise and save you legal costs in the future to ask applicants about the existence of any such agreement at the first interview and document the answers accordingly.

ADVICE FOR EMPLOYEES

Therefore, an employee should give serious consideration to the implications of signing an agreement that limits the options for re-employment following termination.

It is crucial to analyze any employment contract that you signed during the course of your employment or to consider the particulars of your position and situation to determine your rights. It is common to find any combination of non-solicitation, non-competition and confidentiality clauses restricting your ability to work for the competition or to solicit your previous clients in your new position.

Some of the considerations we’ll explore in an analysis of any restrictions which may govern when you leave employment include:

an analysis of any employment contract (written or implied) that governs your employment
whether any employment contract restrictions were drafted unreasonably or imposed on you improperly according to the law
Even if there is no formal contract in place, an employee may be prevented from soliciting prior clients to his new place of business. All employees have an unwritten duty of good faith and fidelity. This duty prohibits taking confidential information to use in competition against an employer and could continue to exist as long as that information remains confidential. Employees who have considerable control and responsibility in the Company and were likely in a management position may be viewed as fiduciaries. Such fiduciaries are under a very strict obligation to act only in the best interests of the company and not to compete unfairly after leaving.

RESIGNING EMPLOYEES

If you are considering leaving your position, you must provide reasonable notice of your resignation or face being sued for damages. By way of example, in a recent case, ( RBC Dominion Securities) in Cranbrook, British Columbia, a large group of employees left their position and took their client lists and financial records to Merrill Lynch and began soliciting business away from RBC. While RBC was unsuccessful in arguing that they had competed unfairly, it was able to recover some damages because the brokers had resigned without advance notice.

A case was recently released by the Ontario Court which provides an important message for an employee when presented with a severance offer by a company.

In this case, the employee relied on the advice of the Human Resources individual in the company that was severing him that the company was offering “a good deal”. Accordingly, because he had faced considerable legal expenses through a divorce, he signed the release without first consulting a lawyer. When he later discovered that he could have obtained a much better package, he sued the company, claiming the agreement he signed was substantially one-sided and should be set aside. The Court disagreed with the plaintiff, stating that he could have refused Human Resources’ advice and obtained legal representation, which would have confirmed that the available severance the Court may have awarded was considerably higher than that offered. While the Court recognized that the severance was less than what he could have received and was “unfortunate”, the Court relied upon the plaintiff’s signature on the release and dismissed his case.

The message is clear:

• A preliminary severance package is usually negotiable. It is important therefore to seek legal advice before signing your name on any release
• If your company has given you a limited time in which to seek legal advice, ask for more time or the opportunity to consult with a lawyer, or if the terms of the offer or release are unclear
• It is not easy to prove that your signature on a document has been coerced or that you have signed a document under duress or difficult circumstances.