breakfast for the mind: employment and labour autumn 2015

Breakfast for the MindEmployment and Labour Autumn 2015 Seminar

Cristina Wendel, Emcee

Speakers

Cristina WendelPartnerD + 1 780 423 [email protected]

Fausto FranceschiPartnerD + 1 780 423 [email protected]

Adrian C. ElmsliePartnerD + 1 780 423 [email protected]

Alison WalshAssociateD + 1 780 423 [email protected]

mailto:[email protected]





Adrian Elmslie

Stewart v. Elk Valley Coal Corporation, 2015 ABCA 225

Disciplining employees with drug dependency issues

IntroductionStewart v. Elk Valley Coal Corporation, 2015 ABCA 225

• Decision from the Alberta Court of Appeal upholding a decision of the Alberta Human Rights Tribunal.

• Provides some clarity and direction on the disciplinary measures that can be imposed on an employee who violates a drug and alcohol policy but who also is identified as suffering from a drug or alcohol dependency.

• Addresses both the legal test for discrimination and balancing the burden of accommodation with site safety.

Facts - background

• Stewart employed in a mine operated by Elk Valley Coal Corporation.

• The mine was a safety sensitive workplace and Stewart’s position was a safety sensitive (he operated large pieces of heavy equipment including a 260 ton truck).

• Elk Valley had an “Alcohol, Illegal Drugs & Medications Policy”.

• The Policy was well known to employees - all employees, including Stewart were required to attend an education session with respect to the Policy and sign off indicating that they had read and understood the policy.

The drug and alcohol policy• Policy contained the normal prohibitions and testing standards

(reasonable cause, post incident).

• Major focus of the case was on the rehabilitative elements of the policy, which consisted of the following:

• The Company offered assistance to employees with dependency, or addiction through its Employee Assistance Program.

• Employees with a dependency or addiction could seek assistance with rehabilitation without fear of discipline.

• No employee with a dependency or addiction would be disciplined or involuntarily terminated because of their involvement in a rehabilitation effort.

The drug and alcohol policy• Rehabilitative elements (continued)

• Involvement in a rehabilitative effort or seeking rehabilitative help for a dependency or addiction problem after a Significant Event had occurred, or after a demand had been made for the employee to undergo testing for reasonable cause, would not prevent an employee from being disciplined or terminated.

• The employee’s use of the Employee Assistance Program or other rehabilitation efforts did not eliminate the requirement of meeting satisfactory performance levels or compliance with the Policy.

The incident

• On October 18, 2005 Stewart was involved in a workplace accident where he he struck another truck with a loader truck he was operating.

• Stewart underwent post incident testing and tested positive for cocaine.

• During a meeting with company officials Mr. Stewart admitted to use of crack cocaine on his days off, as well as to prior use of both crystal methamphetamine and marijuana, both of which he said he ceased using some months prior to this incident.

The incident• Stewart acknowledged that he was feeling sleepy at the time of the

accident as a result of his consumption of cocaine the night before.

• Stewart’s ability to operate the vehicle was affected by his drug use at the time.

• Stewart was terminated.

• Stewart was terminated by letter on November 3, 2005, but was offered reemployment on the terms reviewed earlier.

The issuesAs a result of his termination Stewart filed a Human Rights Complaint alleging that:

1) Elk Valley had discriminated against him based on his disability (drug addition) and

2) Elk Valley had failed to take adequate steps to accommodate his disability before terminating his employment.

The issues• The Alberta Human Rights Tribunal rejected Stewart’s complaint, so he

sought judicial review at the Court of Queen’s Bench.

• The Court of Queen’s Bench also rejected Stewart’s appeal on the issue of discrimination, but disagreed with the Tribunal’s analysis regarding accommodation finding that assistance upon self reporting was not sufficient accommodation due to Stewart’s alleged state of denial regarding the drug dependency.

• Both Elk Valley and Stewart appealed the Queen’s Bench decision to the Court of Appeal.

The issues

• The Court of Appeal had to consider 2 matters:

1) Was the termination discriminatory?

2) Did Elk Valley take adequate steps to accommodate Stewart’s disability?

Discrimination

The Court of Appeal - discrimination3 part test to establish discrimination:

1) The Complainant has a characteristic protected from discrimination under the Act;

2) The Complainant experienced an adverse impact; and

3) The protected characteristic was a factor in the adverse impact.

The Court of Appeal - discrimination

• Elk Valley acknowledged that the first two requirements had been met.

• Stewart had a disability recognized under the Alberta Human Rights Act (cocaine addiction); and

• Stewart had suffered an adverse effect (he had lost his job).

• Crux of the issue – Was Stewart’s cocaine addiction a factor in his termination?

The Court of Appeal - discriminationStewart’s position on appeal:

• His employment was terminated for violating the Policy.

• But for his cocaine addiction, he would not have voided the Policy.

• Therefore his addiction was a factor in the decision to terminate.

The Court of Appeal - discriminationElk Valley’s position

• The adverse effect of the Policy came about, not because of Stewart’s disability, but because of his failure to stop using drugs and his failure to disclose his dependency prior to the accident.

• Stewart was capable of choosing to continue to use drugs in violation of the Policy or to seek help under the terms of the Policy without consequence.

• Stewart chose to continue to violate the Policy.

• Stewart’s addiction was not a factor in his termination.

The Court of Appeal - discriminationCourt of Appeal

• Agreed with Elk Valley.

• Stewart’s addiction was not a factor in the termination.

• Stewart’s argument confuses the question of whether Stewart’s addiction was a factor in his breach of the policy with the question of whether Stewart’s addiction was a factor in his termination.

The Court of Appeal - discrimination1) Stewart’s argument, if accepted, would make all policies that attempt to balance addiction / dependency and work place safety discriminatory:

To say Stewart’s disability was a factor in the [termination] because the [termination] arose from the breach of Policy and the disability was a factor in the breach of the Policy -- is essentially to say that any adverse impact arising from any breach of the Policy is prima facie discrimination. In turn, therefore, it means that any employer resort to any such Policy that attempts to balance drug addiction / dependency and work place safety will necessarily always be prima facie discrimination.

The Court of Appeal - discrimination2) The Policy did not single out people with addictions:

Obviously Elk Valley or any employer would not want a person whose job is to operate loaders or 170 ton vehicles to be under the influence of alcohol at work, even if they have no problem with alcohol or drugs whatsoever. To the extent the Policy singles out the subset of employees who have or believe they may have alcohol or drug addiction or dependency, of whom perhaps a smaller subset are people who have such a disability, the Policy provides for a protected route to assistance, and not for “rigid and inflexible discipline”.

The decision - discrimination3) Confirms the Court’s view that there is risk to safety from mere use of drugs:

The Policy allows for disciplinary response (adverse impact) arising from a significant event or from a positive drug test done on sufficient grounds. In Kellogg Brown & Root, referred to above, this Court accepted that there is risk to safety from mere use of drugs, so the fact that the person was refused employment as he was a ‘recreational’ marijuana user was not discrimination on grounds of disability.

The Court of Appeal - discrimination4) The adverse impact (termination) was not related to Stewart’s disability, but his failure to report it:

[A]n employee with an addiction disability may be caught by the Policy, but so could people without any disability. The fact of disability or not is, at that stage, irrelevant as long as the material facts for the breach of the Policy are present.

Further, since the disability would have been addressed without discipline risk had the employee come forward under the Policy prior to an incident or failed drug test; one can logically eliminate the fact of disability from the factors leading to the adverse impact. Disability revealed voluntarily would not have led to adverse impact. The breach of the Policy can happen without disability. Finally, as the Tribunal observed, there was no difficulty for Stewart complying with the Policy despite his disability. Disability was not a real factor in the enforcement of the Policy.

Accommodation

The Court of Appeal - accommodation• Stewart argued (successfully at the QB level) that Elk Valley

had failed to take adequate steps to accommodate his disability.

• Claimed that even if the employer policy accommodated employees with drug dependencies, the specific employee must appreciate he has such a drug dependency in order to take advantage of the accommodation offered.

• Since Stewart subjectively opined in 2006 that he did not think he was subject to such a dependency*, the accommodation aspect of the policy was not realistically open to him because he was in denial and therefore the Policy did not accommodate his disability.

• The Court of Appeal rejects these arguments.

The Court of Appeal - accommodation1) Employers should not be required to wait for a flagrant demonstration of addiction disability before offering accommodation::

The objective of accommodation is to remove the barriers of arbitrariness or stereotypical assumptions or attitudes about disability and to replace them with a mindset of inclusion.

To accept an onus on employers to wait for a flagrant demonstration of an addiction disability on the part of employees - to which an accommodate response is mandated - cannot be reconciled with such a philosophy.

The Court of Appeal - accommodation2) Replacing discipline with accommodation in these circumstances would create an incentive to disregard safety policies:

To say that, instead of discipline, accommodation is demanded after a serious incident at a dangerous workplace would not engender confidence in co-workers about their safety. Indeed, it would create almost a perverse incentive for disregard of policies.

Reporting for work in a hazardous work site should not involve a suspicion lottery by each worker about the possible condition of co-workers.

The Court of Appeal - accommodation3) Addiction disabilities are not an excuse to ignore or to breach safety policies without consequence. All employees with disabilities that require accommodation should bring those disabilities forward:

Creating a situation where, post-incident, claims of denial might be treated as a potential vaccine against discipline hardly advances the effort to create and maintain a safe workplace.

There is a convolution of logic in using ‘denial’ as a basis for excusing the employee who needs accommodation from bringing that up to the employer as other persons are expected to do.

The movement towards treating drug addiction or dependency as a physical disability was grounded in the recognition that there were stereotypical attitudes about the capacity of people to control their addictions.

The Court of Appeal - accommodation4) Using denial to excuse a breach of policy is to apply discriminatory reasoning:

Denial, indeed, is arguably part of that phenomenon. To use denial as a basis for excusing the need to make the employer aware of the need for accommodation would in a sense give drug addiction or dependency a sort of ‘most favored nation’ status for an employee subject to that form of disability. There are many forms of disability. None should be trivialized.

Takeaways

Drug dependency is no longer a get out of jail free card.

• So long as the employer has provided the appropriate support for its employees to accommodate any addiction issues before a policy breach, employees may be disciplined for the violation of a drug and alcohol policy regardless of their addiction status.

Takeaways

Employers should ensure that their drug and alcohol policies are current and include the right accommodation language.

• Ability for the employee to self report without fear of negative consequence.

• The greater the support mechanisms, the stronger the policy.

• A clear indication that employees may be disciplined for policy breaches.

Takeaways

Employers should ensure that their drug and alcohol policies are well known to their employees and be able to prove it.

• Conduct mandatory education sessions

• Have signed and dated acknowledgements from all employees confirming that the employees have read and understood the Drug and Alcohol Policy.

• Have refresher courses and retraining just like any other kind of safety program.

Takeaways

Get legal advice before you make a decision

• Cases can still be fact specific.

• The more aggressive the employer wants to be, the more careful the employer has to be.

Alison Walsh

SMS Equipment Inc. v Communications, Energy and Paperworkers Union, Local 707, 2015 ABQB 162

SMS case Walsh v. Mobil Oil Canada, 2013 ABCA 238

Family status and trends in damage awards

Competing demands of the workplace vs. caregiving responsibilities• Child care absences:

• In 2014 69% of couple families with at least one child under the age of 16 years had two working parents (up 36% from 1976);

• In 2014 one quarter of dual earning families had 2 parents working on a full time basis

(Statistics Canada – Study: Employment Patterns of families with children, 1976 to 2014 (June 24, 2015)

• “The presence of preschool-age children exerts a strong influence on work absences for personal or family responsibilities. In 2011, full-time employees in families with at least one preschool-age child lost an average of 3.0 days, compared with only 1.4 for those in families without children.”

(Statistics Canada – Work Absences in 2011)

Competing demands of the workplace vs. caregiving responsibilities

• Parent or eldercare absences:

• Aging population:• By 2030 1 in 4 persons will be 65 years or older;• By 2063 the number of Canadians aged 80 years and older will reach 5 million

vs. 1.4 million in 2013Statistics Canada – Population Projections (September 17, 2014)

• As more families struggle to balance the competing demands of the workplace and caregiving responsibilities, human rights claims for family status have risen.

What is “family status”?

• Alberta Human Rights Act, Section 44(1)(f):

“family status” means the status

of being related to another person

by blood, marriage or adoption.

What does “family status” protect?• Human rights legislation in most provinces protects employees from

discrimination on the basis of “family status”.

• Protects:

• Childcare obligations;• Canada (Attorney General) v. Johnston, 2014 FCA 110;• Canadian National Railway Company v. Seeley, 2014 FCA 111• SMS Equipment Inc. v Communications, Energy and Paperworkers Union, Local 707, 2015 ABQB

162

• Parent or eldercare obligations;• Devaney v. ZRV Holdings Limited, 2012 HRTO 1590

• How a family is formed• Adkayode v. Halifax (Regional Municipality), 2015 CanLII 13866 (NSHRC)

• Complainant wanted to split parental leave with his wife.• Under the collective agreement, the complaint was not entitled to any financial top up of EI as a biological father;

however, the collective agreement provided adoptive parents with a supplementary unemployment benefit.• Complaint was allowed. The collective agreement imposed disadvantages on biological parents or denied them

access to benefits because of the method by which they became parents, which was a violation of the Human Rights Act.

When do employers have to accommodate “family

status”?

SMS Equipment Inc. v Communications, Energy and Paperworkers Union, Local 707, 2015 ABQB 162

Facts

• Grievance based on the provisions of the Alberta Human Rights Act on grounds of “family status” for refusing to accommodate childcare needs through work scheduling arrangements.

• Grievor was a single mother of two children working the night and day shifts as a welder on a rotating basis at SMS Equipment Inc.

• Grievor asked to be placed on straight day shifts because she had no extended family members who could assist her with childcare.

• The Grievor explained that she had childcare, but that when she worked nights, it was too expensive to pay for childcare both during the nights while she worked and during the days while she slept. As a result, she looked after the children during the those days and got “very little sleep before her next night shift”.

• Employer refused the request for straight time.

Judicial review

• Confirmed the Arbitrator’s determination that family status includes childcare responsibilities.

• No degree of discrimination is to be tolerated. There is no threshold of discrimination that parents must accept before seeking accommodation from their employers.

• It is in the interests of society to share the burden of family responsibilities to the extent that the burdens are borne disproportionately by working parents in a way that impedes their full participation in the workforce.

Judicial reviewTest

In order to establish discrimination on the basis of family status in Alberta:

1) A claimant must show that a child is under his or her care and supervision.

2) A claimant must show that the childcare obligation at issue engages the individual’s legal responsibility for that child, as opposed to a personal choice.

3) That the workplace rule has an adverse effect on the Complainant related to the Complainant’s childcare obligations.

• There is no requirement for the Complainant to show that he or she has made reasonable efforts to find other reasonable alternatives or that the interference is more than trivial or insubstantial in order to establish a claim for discrimination (which are requirements under the test laid out by the Federal Court) .

Takeaways

• Employers should consider requests for accommodation based on family status seriously.

• First consider whether there is a legitimate need for accommodation.

• Only if the request is clearly based on the employee’s personal choices as opposed to a family obligation can the employer consider refusing to consider accommodation options.

• Employers should treat requests for family status accommodation as they would accommodation requests based on other grounds (ex. disability, religion).

• Employers should document their steps in the accommodation process.

• Open communication with the employee will be important.

Increasing damages in human rights cases

General principles of remedy under the Alberta Human Rights Act

Walsh v. Mobil Oil Canada, 2013 ABCA 238

• Tribunal’s authority to provide remedies for discrimination is set out in Sections 32 and 34 of the Alberta Human Rights Act.

• In addition to awarding general damages the Tribunal has the ability to make awards for all or any part of wages lost.

• Court noted the fundamental purpose of human rights legislation: to recognize and affirm that all persons are equal and to protect against and compensate for discrimination.

• Also acts as a deterrent and an educational tool.

• Inadequate rewards undermine this mandate and can perpetuate discriminatory conduct.

Walsh v. Mobil Oil Canada, 2013 ABCA 238

• Upheld the Tribunal’s assessed total damages of $656,920:

$10,000 general damages for the first complaint;

$25,000 general damages for the second complaint;

$472,766 for loss of income from the date of termination to December 31, 2000;

$139,154 for loss of pension benefits; and

$10,000 for future treatment and counselling.

Subsequent cases following Walsh• Trend towards higher general damages awards.

• Amir and Nazar v. Webber Academy Foundation, 2015 AHRC 8 (currently under appeal): Not undue hardship to allow Muslim students to pray during school day in a secular private school; damages of $12,000 and $14,000 awarded to each complainant.

• Mortland and VanRootselaar v. Peace Wapiti School Division No. 76, 2015 AHRC 9: Mandatory retirement requiring school bus drivers to retire at age 65 not justified and found to be a contravention of the AHRA; damages of $10,000 per complainant awarded in addition to lost wages.

• Andric v. 585105 Alberta Ltd. o/a Spasation Salon & Day Spa, 2015 AHRC 14: The employer changed the complainant’s position and work location (of 10 years) after she was assaulted by a co-worker. The Tribunal found that the changes were not justified and the shared religious beliefs between the co-worker and the employer were a factor in the respondent’s decision to transfer the non-Muslim complainant. The Complainant was awarded general damages of $15,000 and lost wages for a 24 month period.

Takeaways• General damages awards moving away from $10,000 “cap”.

• Likelihood that awards for human rights damages will increase in the future:

Expect to see larger awards both for loss of income and general damages.

New “range” appears to be $10,000 to $15,000.

However, there is no statutory limit in Alberta on general damages

• Risk of significant awards for loss of income.

• Remember standard of review from Tribunal decisions will usually be reasonableness:

Very hard to succeed on judicial review.

• Do not discount the risks and exposure of human rights complaints.

Coffee BreakEmployment and LabourAutumn 2015 Seminar

Breakfast for the MindEmployment and LabourAutumn 2015 Seminar

Cristina WendelDiscipline for off-duty conduct: How far is too far?

1. When will off-duty conduct constitute just cause for termination?• Non-union versus union workplaces• Tests and key principles

2. Examples• Non-union – Whitehouse v. RBC Dominion Securities Inc.• Union – Alberta Union of Provincial Employees v. Alberta (Grievance of “R”)

3. Takeaways• Responding to and managing off-duty conduct

Overview

• Off-duty misconduct may be serious enough to justify termination in rare cases.

• It is an implied term of employment that the employee will not act in such a way that will be, or is likely to be, prejudicial to the employer’s interests or reputation.

• The test for just cause - from R. v. Arthurs, ExP. Port Arthur Shipbuilding Company (1967 Ont. CA):

• “If an employee has been guilty of serious misconduct, habitual neglect of duty, incompetence or conduct incompatible with his duties or prejudicial to the employer’s business, or if he has been guilty of wilful disobedience to the employer’s orders in a matter of substance, the law recognizes the employer’s right to summarily dismiss the delinquent employee.”

Off-duty misconduct – non-union workplaces

• No single test or rule for the degree of off-duty misconduct that will justify summary dismissal (McKinley v. B.C. Tel, 2001 SCC).

• requires a contextual analysis.

• cannot be said that a certain kind of off-duty misconduct will always constitute just cause.


• Courts will not consider the off-duty conduct in isolation. They will consider all of the circumstances, focusing on:

• Employment nexus:

• Is there a connection between the off-duty conduct and the employment relationship?

• Proportionate response

• Is summary dismissal appropriate for the off-duty misconduct


• 51 year old Vice President and Investment Advisor with 16 years’ service.

• One of the top ranked investment advisors in the country.

• During a night of heavy drinking invited a prostitute “Cassandra” up to his office for a “romantic” interlude.

• Escorted Cassandra into the secure reception area (which contained client files) and through an additional security door to the office area.

• Dispute arose regarding payment and the Plaintiff abandoned Cassandra in RBC’s reception area.

• When he returned he searched for her, but was unable to find her so he went home.

• Cassandra attended the office the next day explaining what the Plaintiff had done and demanding her money.

Off-duty misconduct – case comment: Whitehouse v. RBC Dominion Securities Inc., 2006 ABQB 372

• RBC investigated and reviewed passcard activity and security videos.

• Upon being confronted with the accusations, the Plaintiff denied that he had brought Cassandra into the office and did not admit to his actions until he was informed that there was video evidence.

• RBC terminated his employment for just cause.

• Although the case was not publicized, the investment industry quickly learned of the Plaintiff's escapades.

• Plaintiff sued for wrongful dismissal.

• RBC counterclaimed for defamation and damages to its reputation.

• Both claims were dismissed.

Whitehouse v. RBC Dominion Securities Inc.

• The court applied the contextual approach:

• Examined the employment relationship.

• Both the Plaintiff’s and RBC’s reputations were important to the Plaintiff’s position and success in his position. Honesty, integrity and confidentiality were essential.

• RBC’s code of conduct emphasized upholding the law, integrity and the importance of clients’ privacy and confidentiality. It addressed off-duty conduct:

• “You are to avoid any conduct or association – either inside or outside of work – which could bring your honesty, integrity or trustworthiness into question, or which could be detrimental to RBC’s security or to its reputation within the community.”

• He was a senior employee and RBC was justified in requiring strict compliance with its code of conduct.


• Considered the nature and seriousness of the Plaintiff’s conduct.

• Lack of integrity, deficient judgment, dishonesty, untrustworthiness and a careless disregard for client and corporate confidentiality.

• Considered the impact of the conduct on RBC’s business and reputation.

• No evidence of specific damage.

• Tolerating this type of conduct would have seriously impacted the working relationship in the office and management had to act quickly to restore order and redefine the permissible limits on employee conduct.

• Court concluded that the Plaintiff’s off-duty misconduct justified summary dismissal.


• To justify termination for cause, based on off-duty conduct, the employer must show:

1. the grievor’s conduct harms the employer’s reputation or product;

2. the grievor’s behaviour renders the grievor unable to perform his/her duties satisfactorily;

3. the grievor’s behaviour leads to refusal, reluctance or inability of the other employees to work with the grievor;

4. the grievor is guilty of a serious breach of the Criminal Code, causing injury to the general reputation of the employer and its employees; or

5. the grievor’s conduct makes it difficult for the employer to properly carry out its functions of efficiently managing its work and efficiently directing its workforce.

(Millhaven Fibres, 1967 Ont. Arb.)

Off-duty misconduct – unionized workplace

• Grievor had been an administrative employee for the Employer since 2000.

• In 2006, the Employer become aware of the contents of the grievor’s personal blog site.

• Blogs contained unflattering comments about her co-workers and management mixed in with her personal postings.

• Although she used pseudonyms, the individuals were easily recognizable by the employees.

• Employer interviewed the grievor and perceived her as unrepentant.

• Terminated her employment for cause.

• The union grieved the dismissal.

Off-duty misconduct – case comment: AUPE v. Alberta (Grievance of “R”), 2008 CanLII 88488

• Grievance was dismissed.

• The grievor engaged in serious misconduct that irreparably severed the employment relationship.

• While an employee has a right to create blogs, publicly displaying opinions may have consequences at work.

• The postings were seen as public attacks on identifiable colleagues with whom the grievor interacted on a daily basis.

• The material was inherently destructive to workplace relationships.

• Other postings were inappropriate, unprofessional, reflected poorly on the grievor and the employer and violated the Employer’s trust.

• The attitude she displayed at the interview continued up to and including her testimony at the hearing.

AUPE v. Alberta

• Judicial review - the court set aside the arbitration decision and referred the matter back to the Arbitration Board.

• Found that the grievor’s fundamental rights under the collective agreement had been violated as she had not been notified in advance that the meeting was disciplinary in nature. Her conduct at the meeting may have been different had she known.

• Court of Appeal - dismissed the appeal.

• Grievor was deprived of any meaningful resort to her representation rights in the collective agreement by the Employer’s failure to give notice.

• Arbitration Board’s assumption the breach did not affect her demeanor throughout the process was unreasonable.

AUPE v. Alberta - subsequent judicial history

• Arbitration Board had to determine the appropriate remedy which flowed from the Employer’s breach of the grievor’s representational rights under the collective agreement – reinstatement or damages.

• Grievor’s conduct and testimony at the hearing showed that she still did not appreciate what she had written – even after hearing her colleagues testify about the impact it had on them.

• Board could not infer that she would have acted sufficiently different at the interview to avoid dismissal if her representation rights had not been violated.

• Reinstatement was not an appropriate remedy.

• Awarded damages equal to 8 months’ salary.

AUPE v. Alberta – reconsideration, 2011 CanLII 95004

• Responding to off-duty misconduct

• Regardless of whether the issue arises in a union or non-union workplace, there must be:

• A real causal connection between the off-duty misconduct and the employer’s business;

• A balance between the employer’s interests and the employee’s interests; and

• Proportional interference with the employee’s private affairs relative to the employer’s interests at stake.

• Managing off-duty conduct

• Implementing (and enforcing) proper policies

• Code of Conduct, social media, harassment, etc.

Takeaways

Fausto FranceschiHow to handle employee benefits on termination: risks and strategies

• To put the employee in the same position he or she would have been in had the employee worked during the notice period

• Madam Justice J.H. Goss in Hansen v. Altus Energy Services Partnership, 2010 A.B.Q.B. 820 @ para. 36 said this:

“In assessing damages for breach of contract, the employee must be placed in the same position he would have been in if the contract had been performed, assessed as of the date of breach. For wrongful dismissal, where reasonable notice is not provided on termination, the losses flowing from the lack of reasonable notice are compensated (Merrill Lynch v. Soost 2010 A.J. No. 955 (Alta C.A.)). The measure of damages is the loss of income and benefits that the employee would have received from the employer during the notice period.” [emphasis added]

General rule

• Integral to an employee’s overall compensation plan

• Had employee worked during the notice period, would the employee continue to have participated in the benefit plans?

• If so, what would the employee have received or become entitled to had he or she continued to participate in the employer’s benefit plans?

Benefits

• Can be significant

• Pension can vest during the notice period

• Significant bonuses could have been earned during the notice period

• Stock options can vest during the notice period

• Terminated employee could become disabled during the notice period

Risks to the employer

(a) Bonus/profit sharing plans

“… the court must determine from the evidence the intention of the parties regarding the entitlement to any bonus. A bonus scheme that has historically become an integral part of an employee’s wage or salary structure gives rise to a reasonable expectation of a bonus. Such a bonus is a benefit that has a value and should form part of the calculation of the employee’s damages. In the case of quasi or non-formula bonuses, if they are routinely awarded in a certain amount or in a certain range, they should be included in the assessment of damages, just like any other fringe benefit. Hansen had received bonuses in all but 2-4 of his 23 years of employment and therefore the bonuses could be considered as routinely awarded. On the basis of this history, the plaintiff has a reasonable expectation of a yearly bonus” [emphasis added]

[Hansen v. Altus Energy Services Partnership, 2010 ABQB 820 @ para. 30]

Types of benefits

Bonus/profit sharing plans (continued)

• Past performance and past bonus payments will be considered in determining entitlement to bonus during the notice period

• Employer may lead evidence to demonstrate that past performance and past bonus payments should not be relied on

• Wording of bonus plan is key and may relieve employer of payment obligations

• But, recent decision in Alberta creates uncertainty for employers even where wording in a bonus plan is clear.

Types of benefits

Bonus/profit sharing plans (continued)• In Styles v. AIMCo 2015 ABQB 621 the LTIP wording was clear. Unless

the employee was employed at the time of the LTIP payout no LTIP would be provided. The contract of employment also permitted termination without cause on notice or payment of base salary only. AIMCo complied with its contractual obligation and provided its Vice-President of Relationship Investments with 3 months’ pay as required by the employment contract.

• Given the wording of the LTIP, the Plaintiff forfeited any outstanding LTIP that had previously been awarded to him.

• Court found a common law duty which requires that discretionary powers granted under a contract must be exercised “fairly and reasonably and not in a manner that is ‘capricious’ or ‘arbitrary’”.

Types of benefits

Bonus/profit sharing plans (continued)• The Court went on to say the following:

In some situations, where the termination deprives an employee of the right to receive earned performance bonuses, grants, or awards, then the exercise of the discretion to terminate without cause becomes arbitrary or capricious when the employer creates circumstances under which the employee would be unable to receive the bonuses or other benefits and provides no reasonable or meaningful explanation for such deprivation. [para. 66] (emphasis added)

Types of benefits


Given the Plaintiff’s record of exemplary performances, and in the absence of evidence to the contrary, I conclude that although the Defendant employer had the right to terminate without cause under the contract, its decision to exercise that right and the corresponding refusal to pay the Plaintiff any of his earned LTIP grants amounts to an unfair and unreasonable exercise of the employer’s discretionary powers under the terms of the contract. [para. 119]

Types of benefits


In the factual circumstances of the present case, the Defendant AIMCo’s action, in my opinion, raises the spectre of the pertinent question of whether the “looming bonus entitlement date might serve as an unwarranted factor in [the employer’s] decisions about the dismissal of its [employee]” [para. 120] (emphasis added)

Types of benefits


When an employment contract includes a condition for the receipt by an employee of a benefit under the contract and the employer has the discretion, pursuant to the terms of the contract, to frustrate the satisfaction of that condition, it becomes even more important for that discretion to be exercised fairly, reasonably and not arbitrarily. When one focuses on the unique nature of the relationship here, and the reality that there has accrued to the Plaintiff some earned entitlements from the subject LTIP, then the unfair or arbitrary exercise of discretion in a manner that takes away those earned entitlements is more serious. [para.123] (emphasis added)

Types of benefits


The Employer’s contractual discretionary powers were not exercised fairly and reasonably in the circumstances, in my view. [para. 128]Accordingly, I find that, in this case, it was the Defendant AIMCo’s unreasonable and arbitrary exercise of its discretionary contractual powers that impeded the Plaintiff in the performance of his obligations under the contract of employment and the LTIP Agreement. AIMCo’s action made it impossible for the Plaintiff Styles to meet the LTIP eligibility condition that “participants [in the LTIP] must be actively employed by AIMCo, without regard to whether the Participant is receiving, or will receive, any compensatory payments or salary in lieu of notice of termination on the date of payout, in order to be eligible to receive any payment”. [para. 129]

Types of benefits


I find that the Defendant AIMCo breached the employment contract and the incorporated LTIP Agreement when it failed to exercise its contractual discretionary powers reasonably in dismissing the Plaintiff while at the same time refusing to pay the Plaintiff any of his earned, awarded and approved LTIP grants. I also find that the Plaintiff suffered damages as a result of that breach. [para. 134]

• The Court awarded the Plaintiff damages of $444K.

• Introduces uncertainty even in the case of clearly worded agreements.

• Court will look at reason for termination.

Types of benefits

(b) Stock options

• Plan wording is critical

Types of benefits

Stock options (continued)

• Wording which resulted in a damages award for stock option loss during the notice period:

“If the option holder’s employment … is terminated for any reason … whether such termination be voluntary or involuntary, without his having fully exercised his option, the option shall be cancelled and he shall have no further rights to exercise his option or any part thereof and all of his rights hereunder shall terminate as of the effective date of such termination.”

• “Termination” means “lawful termination” or “termination according to law”. [Veer v. Dover Corp (Canada) Ltd. 2 BLR (3rd) 206; [1997] OJ No. 3821 (ON SC), aff’d by the Ontario Court of Appeal in [1999] OJ No. 1727]

Types of benefits

Stock options (continued)

• Wording which did NOT result in a damage award for stock option loss during the notice period:

“Upon the Employee ceasing to be an employee … the option … shall forthwith cease and terminate and shall be of no further force or effect whatsoever … provided that where the Employee is dismissed by the Corporation, the Employee shall have 15 days from the date notice of dismissal is given in which to exercise the option hereby granted …” [emphasis added] [Brock v. Matthews Group Ltd. (1991) 43 OAC 369 (Ont. CA)]

• In Brock, the stock plan was clear that it was the day on which the employee received notice of dismissal that mattered, irrespective of whether the dismissal was lawful or unlawful.

Types of benefits

(c) Group health & dental plans

• Three main ways to calculate the loss of these benefits if they are not continued during the notice period:

• Actual costs incurred following termination (premiums of new plan and additional expenses incurred by former employee which would ordinarily have been covered by the former employer’s plan)

• Employer’s premium cost

• Percentage of base salary

Types of benefits

(d) Group life insurance

• Inform the terminated employee of conversion privileges

Types of benefits

(e) Automobile allowance

• “If the primary purpose of providing an employee with an automobile allowance is to assist in the performance of his job functions, no damages should be provided for its loss.” [Hansen v. Altus Energy Services Partnership, 2010 ABQB 820 @ para. 57]

• If incidental personal use is allowed, the terminated employee may pursue this loss

Types of benefits

(f) Disability

• Providing disability coverage during the notice period can be difficult

• Most insurers will not accept the risk – risk of claims from terminated employees is substantial and when claims do occur it’s more difficult to assess a claimant’s ability to work and to successfully return the claimant to work

• There are some insurers that will provide transition LTD coverage during the notice period – but it is expensive!

Types of benefits

Disability (continued)

• If disability coverage is not extended and the severance offer is not accepted and the required release is not obtained, there is potential significant risk to the employer if disability occurs during the notice period

• Risk is that the employer is liable to the disabled former employee for what the former employee would have received under the terms of the former employer’s LTD policy [Prince v. T. Eaton Co. Limited, [1992] BCJ No 1191 (BCCA)]

Types of benefits

(g) Pension

• May need expert actuarial evidence to determine the value of a pension claim

• Pension claim for older long serving employee could be significant

• Determine your pension exposure before you terminate

Types of benefits

• Terminated employee has a duty to mitigate losses

• Means that when constructing a severance offer you have the ability to structure an offer that does not necessarily take into account all lost benefits

Mitigation obligations

• Make severance offer conditional on obtaining a Release of all claims

• Release should specifically indicate that it applies to the loss of all benefits

Release

• Over and above base salary, the value of other forms of compensation and benefits can be significant

• These must be taken into account when assessing your exposure on a without cause termination

• Have well drafted benefit plans that reduce your exposure, particularly as it relates to bonuses and stock options

• AIMCo decision introduces some uncertainty – reason for termination should not be to deprive employee of bonus award

• Have termination provisions in your offer letters and employment agreements which precisely outline what a terminated employee is entitled to upon termination

• Strategy on benefits to be determined on a case by case basis

• Get a Release!

Takeaways

Thank you

Dentons Canada LLP2900 Manulife Place10180 - 101 StreetEdmonton, Alberta T5J 3V5Canada

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

© 2015 Dentons. Dentons is a global legal practice providing client services worldwide through its member firms and affiliates. This document is not designed to provide legal or other advice and you should not take, or refrain from taking, action based on its content. We are providing information to you on the basis you agree to keep it confidential. If you give us confidential information but do not instruct or retain us, we may act for another client on any matter to which that confidential information may be relevant. Please see dentons.com for Legal Notices.

Cristina Wendel, EmceeQ & A

Thank you

Dentons Canada LLP2900 Manulife Place10180 - 101 StreetEdmonton, Alberta T5J 3V5Canada

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

© 2015 Dentons. Dentons is a global legal practice providing client services worldwide through its member firms and affiliates. This document is not designed to provide legal or other advice and you should not take, or refrain from taking, action based on its content. We are providing information to you on the basis you agree to keep it confidential. If you give us confidential information but do not instruct or retain us, we may act for another client on any matter to which that confidential information may be relevant. Please see dentons.com for Legal Notices.

Speakers

Cristina WendelPartnerD + 1 780 423 [email protected]

Fausto FranceschiPartnerD + 1 780 423 [email protected]

Adrian C. ElmsliePartnerD + 1 780 423 [email protected]

Alison WalshAssociateD + 1 780 423 [email protected]






breakfast for the mind: employment and labour autumn 2015

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