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McCarthy Tétrault 2011 Labour & Employment Conference

May 12, 2011 Calgary, AB Conference Materials

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Table of Contents

Speaker Biographies

· · · · · · · Michael Droke, Partner, Dorsey & Whitney LLP Toni Eckes, Associate, McCarthy Tétrault LLP Michael Ford, Partner, McCarthy Tétrault LLP Tina Giesbrecht, Partner, McCarthy Tétrault LLP Earl Phillips, Partner, McCarthy Tétrault LLP Jacques Rousse, Partner, McCarthy Tétrault LLP Gregory Winfield, Partner, McCarthy Tétrault LLP

Conference Papers

· · · · · Since We Last Met: A Year in Review Southerly Winds of Change: US Labor & Employment Law Under Pressure: Pension & Benefit Trends It's a Complicated World: The Top 5 HR Law Issues We Dealt With Show Me The Money: Recent Trends With Respect To Damage Awards, Notice Periods, Stress Claims, Punitive Damages & More

Michael Droke

Speaker Profile

Partner, Labor and Employment Co-Department Head Dorsey & Whitney LLP Columbia Center 701 Fifth Avenue Suite 6100 Seattle, WA 98104-7043 (206) 903-8709 : phone (206) 260-9093 : fax [email protected]

Biography

Mr. Droke is a partner and the Labor and Employment Co-Department Head. He is also co-Chair of the Computer Fraud and Abuse Practice Group, and member of the Privacy Practice Group, Executive Compensation Team, and Electronic Discovery Practice Group. He is currently the Partner-in-Charge of LegalMine, Dorsey's state-of-the-art document review service. He was Dorsey & Whitney Partner of the Year in 2001. CAPABILITIES ¬ Litigation Defense And Dispute Resolution: defend technology, financial, manufacturing, agricultural, and other employers in litigation involving claims of wrongful discharge, discrimination, disability rights, harassment, wage and hour claims (including commission pay), non-competition violations and trade secret violations. Successfully resolve lawsuits effectively and efficiently, consistent with the employer's strategic objectives. Preventative Counseling: regularly advise employers on practical, thorough compliance with employment and labor law, with a focus on employers' operational and strategic needs. Provide strategic advice and operational expertise to clients in support of their strategic direction. Substantive legal issues include sexual and other harassment, employment termination, executive compensation, family and medical leaves of absence, and workplace restructuring (mergers, acquisitions and mass layoffs). Union-Management Relations: Chief negotiator for numerous collective bargaining agreements. Successfully obtained several mass picketing injunctions, defended arbitrations, and advised employers on NLRA compliance during strike to avoid 8(a)(5) and 8(a)(3) charges. Employment Law Training: provide management training on all aspects of employment law, including managing within the law, fundamentals of effective leadership, sexual harassment prevention and response, leaves of absence, and termination without liability.

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Michael Droke

Speaker Profile

REPRESENTATIVE LITIGATION ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ Lead counsel in wage and hour misclassification class action Successfully obtained summary judgment on appeal on all claims related to a Top Hat ERISA plan (Sznewajs v. U.S. Bancorp, Ninth Circuit Case #07-16489) Successfully defended former software company executive in non-competition claim Lead counsel in trade secrets and non-competition claim; successfully defended against preliminary injunction and TRO Lead counsel in multi-million dollar retaliation, public policy wrongful discharge and commission pay claim against large international professional services company Lead counsel in age discrimination lawsuit against national bank; summary judgment obtained Lead counsel in race and national origin claim against national bank; summary judgment obtained Lead counsel in disability discrimination lawsuit against national bank; coordinated settlement before discovery Lead counsel in multi-million dollar commission pay claim against financial services company; summary judgment affirmed on appeal Lead employment counsel for merger of two manufacturing companies Lead counsel for national retail chain in lawsuit alleging race and national origin harassment and discrimination; resolved before discovery Lead counsel for manufacturing company in lawsuit alleging disability discrimination and workers' compensation retaliation; resolved before answer filed Lead counsel for national services company in lawsuit alleging graphic sexual harassment and discrimination on the basis of gender; resolved before answer filed Lead counsel for manufacturing company in lawsuit alleging race and national origin harassment and discrimination; summary judgment obtained Lead counsel for telecommunications company in significant commission pay claim; successfully resolved before answer filed Lead counsel for services company in contractual binding arbitration brought by terminated employee claiming wrongful termination and discrimination; successfully resolved on eve of trial

ADMISSIONS ¬ ¬ ¬ ¬ ¬ Washington California U.S. District Court for the Western District of Washington U.S. District Court for the Northern District of California U.S. Court of Appeals for the Ninth Circuit

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Michael Droke

Speaker Profile

HONORS

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Named one of "America's Leading Business Lawyers" by Chambers USA, 2009-2010 "The Best Lawyers in America" (2007-2011, peer rated) Peer-Rated AV (highest possible for legal skills and ethics) by Martindale Hubbell Named a "Super Lawyer" by Washington Law & Politics, 2003-present Named "Who's Who Among American Professionals" by Madison, 2006-present

EDUCATION Santa Clara University School of Law J.D., 1992 summa cum laude Editor-In-Chief, Santa Clara Law Review University of California, Berkeley A.B., 1986 PROFESSIONAL ACTIVITIES ¬ ¬ ¬ ¬ Founding Member, The CHO Group, 2002-Present Founding Member and President, 1999 to Present, Association for Corporate Growth Founding Member, Board Member, President Elect, 2002-2009, Bainbridge Public Schools Trust Member, National Society of Human Resource Management and Northwest Human Resource Management Association

PRESENTATIONS ¬ ¬ ¬ ¬ ¬ National Speaker: California Dreaming: Wage & Hour Pitfalls in the Gold Rush State, Upper Midwest Employment Law Institute, 2010 Securing Electronic Business Information: Do You Know What You May Be Missing?, Dorsey Symposium for Corporate Leaders, 2009 Keynote speaker, Society for Human Resource Management, Washington State Council, Legislative & Employment Law Conference, 2000-2006 Employment Law for Managers, 2005 Human Resources Training Electronic Privacy and the Sarbanes Oxley Act, April 2004

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Michael Droke

Speaker Profile

¬ ¬ ¬ Executive Agreements In Uncertain Times, American Corporate Counsel Association and PricewaterhouseCoopers LLP General Counsel Forum, June 2003 Anatomy of An Employment Lawsuit and Keynote Speaker, 2002 Legislative & Employment Law Conference, NHRMA, March 2002 Dorsey & Whitney Breakfast Briefings: ¬ ¬ ¬ ¬ Preventing Wage and Hour Class Actions The Law of Unfair Competition and Trade Secrets Alternative Dispute Resolution: Pros and Cons Managing the Risk of Class Actions

ATTORNEY ARTICLES ¬ ¬ ¬ ¬ ¬ Contractor or Employee: Washington Court Expands Rule , December 22, 2010 Employee vs. Independent Contractor : Understanding Labour Laws Can Help Companies to Make the Most of Labour Forces , November 9, 2010 Independent Contractor or Employee: Getting It Right Is More Important Now Than Ever Before , May 10, 2010 "Choosing an e-Discovery Vendor: Ten Points to Consider", October 30, 2008 "Lowering the Data Risks Portability Poses," Law.com Legal Technology , January 16, 2007

Toni L. Eckes

Lawyer Profile

TITLE OFFICE LAW SCHOOL

Associate

Calgary

DIRECT LINE

University of Saskatchewan, LLB, 2009

BAR ADMISSIONS

403-260-3570

E-MAIL

Alberta, 2010

[email protected]

Biography

Toni Eckes is an associate in our Labour and Employment Group in Calgary. She has a general managementside labour and employment practice. Ms. Eckes represents management in a variety of labour and employment issues including wrongful dismissal, labour arbitrations, employment standards, occupational health and safety, human rights, and labour and employment issues arising in corporate transactions. Ms. Eckes received her Bachelor of Justice Studies from Mount Royal College in 2006 and her LLB (with Distinction) from the University of Saskatchewan in 2009. Ms. Eckes was the recipient of an award from the American College of Trial Lawyers recognizing an essay that she authored in law school entitled "Finding the Right Balance: Judicial Accommodation of Freedom of Religion in Canada". Ms. Eckes is a member of the Law Society of Alberta and the Canadian Bar Association, and was called to the Alberta Bar in 2010.

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Michael D.A. Ford

Lawyer Profile

TITLE OFFICE LAW SCHOOL

Partner

Calgary

DIRECT LINE

University of Alberta, LLB, 1984

BAR ADMISSIONS

403-260-3619

E-MAIL

Alberta, 1986

[email protected]

Biography

Michael Ford is a partner in our Labour and Employment Group in Calgary. Mr. Ford combines a labour law background with an extensive knowledge of human resources. Mr. Ford represents unionized employers in collective bargaining, arbitrations, strikes and contract administration, advising non-union employers on dealing with union organizational activity, counselling employers regarding employee discipline and termination, privacy issues, employment agreements, harassment/discrimination, drug testing policies, ill employees, and occupational and health matters. Mr. Ford counsels clients in the energy, manufacturing, warehousing, communications, retail, financial, transportation and high-tech industries, as well as major public sector institutions in the health and education fields. Mr. Ford has defended many employers in significant labour and employment cases involving provincially and federally regulated workplaces. Mr. Ford has been recognized by the 2010 Canadian Legal Lexpert Directory, a guide to the leading law firms and practitioners in Canada, in the area of labour law. He is also listed in the 2010 edition of Chamber's Global: The World's Leading Lawyers for Business, as a leading lawyer in the area of Employment Law. The Canadian HR Reporter has also acknowledged him as one of Canada's top employment lawyers. Mr. Ford is a past President of the Human Resources Institute of Alberta and has been a sessional Instructor of the University of Lethbridge, Faculty of Management (Labour Relations). He is a member of the Canadian Industrial Relations Association, the Canadian Pensions and Benefits Institute, the Human Resources Committee of the Calgary Chamber of Commerce. Mr. Ford is a frequent speaker on topics including privacy, accommodation, grievances, wrongful dismissal, mergers and acquisitions and harassment at: The Canadian Institute, The Canadian Pensions & Benefits Institute, Infonex, Petroleum Services Association of Canada, Labour Arbitration Conference, Legal Education Society of Alberta, Insight Educational Services, Human Resources Association of Calgary and CBA Labour Law subsection.

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Michael D.A. Ford

Lawyer Profile

Mr. Ford is a member of the Law Society of Alberta and the Canadian and Calgary Bar Associations. He is a member and former Chair of the Labour Law Subsection of the Calgary Bar Association (Southern Alberta) as well as the former Chairman of the Hospital Privileges Appeal Board of Alberta. Mr. Ford received his B.Comm. (Labour Relations) and LLB from the University of Alberta in 1984, and has been a Certified Human Resources Professional since 1992. He was called to the Alberta bar in 1986.

Tina Giesbrecht

Lawyer Profile

TITLE OFFICE LAW SCHOOL

Partner

Calgary

DIRECT LINE

University of Manitoba, LLB, 1993

BAR ADMISSIONS

403-260-3582

E-MAIL

Manitoba, 1994 Alberta, 2001

[email protected]

Biography

Tina Giesbrecht is a partner in our Labour and Employment Group in Calgary. Ms. Giesbrecht advises a wide spectrum of both federally and provincially regulated clients on labour and employment matters including grievance arbitration, human rights complaints, executive compensation employment contracts, personnel policies, fiduciary obligations, non-competition and non-solicitation agreements. She also advises clients on employment issues arising from the purchase and sale of businesses including group terminations and successorship rights. In addition, Ms. Giesbrecht advises employers on privacy, workers' compensation, occupational health and safety matters and termination of employment. Prior to joining McCarthy Tétrault, Ms. Giesbrecht practised in Winnipeg and taught employment law at the University of Manitoba. She regularly writes articles and presents seminars on a variety of labour and employment law issues. Ms. Giesbrecht is past Chair of the CBA Labour and Employment Subsection, Alberta Bar Association and a member of the Canadian Bar Association, the Law Society of Alberta, the Law Society of Manitoba, the Manitoba Bar Association, the Canadian Association of Counsel to Employers and the Human Resource Association of Calgary. She received her BA in 1990 and her LLB in 1993 from the University of Manitoba. Ms. Giesbrecht was called to the Manitoba bar in 1994 and to the Alberta bar in 2001.

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Earl G. Phillips

Lawyer Profile

TITLE OFFICE LAW SCHOOL

Partner

Vancouver

DIRECT LINE

University of Victoria, LLB, 1980

BAR ADMISSIONS

604-643-7975

E-MAIL

British Columbia, 1981

[email protected]

Biography

Earl Phillips is a partner in the firm's Vancouver office practising in the Labour and Employment Group. His recent experience includes:

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labour arbitrations regarding substance abuse, collective agreement interpretation, medical information, privacy, attendance management, surveillance and theft; labour board hearings regarding unfair labour practice complaints, true employer, successor and common employer issues, and certification and decertification applications; labour and employment issues in restructurings and reorganizations; human rights issues regarding attendance management, religious rights, substance abuse, disability, and the duty to accommodate; and negotiating and drafting executive employment contracts.

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Mr. Phillips regularly appears before federal and provincial tribunals and arbitration boards and the courts of British Columbia. He is a frequent writer and speaker on various topics including, most recently, significant Supreme Court of Canada decisions, mandatory retirement, employment privacy, disability management, whistle-blowing, substance abuse in the workplace and general employment practices. Mr. Phillips is recognized in the 2010 Canadian Legal Lexpert Directory, a guide to the leading law firms and practitioners in Canada, as a leading lawyer in the area of employment law. Mr. Phillips is a member of the Human Resources Management Association of British Columbia and of the BC Labour and Employment Sections of the Canadian Bar Association. He also serves as a director of the Regent College 2000 Foundation and The Children's Foundation.

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Jacques Rousse

Lawyer Profile

TITLE OFFICE LAW SCHOOL

Partner

Montréal

DIRECT LINE

Université de Montréal, LLL, 1981

BAR ADMISSIONS

514-397-4103

Québec, 1982

E-MAIL

[email protected]

Biography

Jacques Rousse is the firm-wide Practice Group Leader of our Labour and Employment Group. He is a partner practising in Montréal. He advises management in all matters with respect to human resources and executive compensation. In the event of litigation, he acts before arbitration boards, administrative tribunals and the civil courts in matters related to grievance arbitration, employment contracts, wrongful dismissals and human rights complaints. Mr. Rousse also appears before tribunals in matters concerning workers' compensation, occupational health and safety, and privacy law. Furthermore, he has acquired considerable experience in collective bargaining, as well as in labour and employment matters related to restructurings and mergers and acquisitions. He represents a wide number of private and public sector employers both unionized and non-unionized, including companies and organizations in the manufacturing, health, financial, hospitality and service sectors. Mr. Rousse is a member of the Ordre des CRHA et CRIA du Québec. He has spoken at numerous conferences and seminars related to labour relations, human rights, and occupational health and safety. He received his LLL from the Université de Montréal in 1981 and was called to the Québec bar in 1982.

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Gregory Winfield

Lawyer Profile

TITLE OFFICE LAW SCHOOL

Partner

Toronto

DIRECT LINE

Queen's University, LL.B., 1986

BAR ADMISSIONS

416-601-7907

E-MAIL

Ontario, 1988 [email protected]

Biography

Gregory Winfield is a partner in our Pensions, Benefits and Executive Compensation Group. Since joining the group in 1990, he has provided strategic legal advice to employers with respect to pension plans, profit sharing plans, registered retirement savings plans, welfare benefits plans, retirement compensation arrangements and other areas of executive compensation. Mr. Winfield has over 20 years experience in connection with the administration, operation and taxation of pension plans and with respect to legislation governing taxation and administration of plans. In addition, he as broad experience with respect to the treatment of plans on purchase or sale of a business and corporate reorganizations (including CCAA) and provides advice as to entitlement to use of surplus assets. Mr. Winfield has been involved in many of the leading pension and benefits matters of the past 20 years including the first decisions relating to contested partial wind ups of pension plans and the deemed trust provisions of the Pensions Benefits Act (Ontario). He acted as lead pension counsel for Algoma Steel in its pension restructuring under CCAA in 2001 and has participated in a number of other restructurings (most recently Chrysler Canada Inc.) with key benefits issues. He is currently working on the first Employee Life and Health Trust to be established in Canada. Mr. Winfield frequently acts on pension investment matters for the largest pension plans in Canada and has a particular expertise in dealing with public sector pension plans, including structuring of investments and debt offerings. Mr. Winfield was the lead lawyer among the McCarthy team that contributed the Canadian research and analysis in the seminal ESG work "A legal framework for the integration of environmental, social and governance issues into institutional investment" produced for the Asset Management Working Group of the UNEP (United Nations Environmental Program) Finance Initiative, October 2005. He has written and spoken at numerous industry conferences in virtually all areas of pension law, including obligations of administrators and other fiduciaries, governance, communication and legal liability, mergers and acquisitions, insolvencies, investments, executive pensions and risk management.

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Gregory Winfield

Lawyer Profile

Prior to joining McCarthy Tétrault, he worked for the Pensions Commission of Ontario ("PCO") (predecessor to the Financial Services Commission of Ontario ("FSCO")) in its policy branch and for an international pension consulting firm. Mr. Winfield has acted as special advisor to the PCO in respect of pension reform matters. Mr. Winfield has been rated as a leading lawyer in the area of pensions and benefits in Chambers Global 2011 and Martindale Hubbell. He currently serves on the Legal Advisory Committee to the FSCO and on the editorial board of the Federal Press journal "Taxation of Executive Compensation and Retirement". He also instructs directors in a certified directors program in matters of pension governance. Mr. Winfield received his BA from the University of Toronto in 1982 and his LLB from Queen's University in 1986. He was called to the Ontario bar in 1988.

SINCE WE LAST MET: A YEAR IN REVIEW

YOU WIN SOME, YOU LOSE SOME... BUT THE GAME MUST GO ON

Earl Phillips Tina Giesbrecht

May 12, 2011

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The Year in Review

Introduction

The past year has seen an interesting combination of "wins" and "losses" for employers in terms of labour and employment decisions in Alberta and across the country. Accordingly, this paper was designed to "level the playing field" and provide employers with a strategic overview of hot topics and new developments in the areas of wrongful dismissal, human rights, family status accommodation, privacy, labour law, drug testing in the workplace, confidential information, definitions of "employer", common law torts in the workplace, immigration, class actions and key legislative changes in the labour and employment arena.

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Historic Damage Awards

It has been a historical year in terms of wrongful dismissal damages in Canada. From one of the most significant damage awards ever granted by a human rights tribunal in Canada, to a $1.6 million "correction" by the Alberta Court of Appeal that resulted in a sigh of relief from employers and counsel all across the country, this year has been full of legal "thrills and spills" in the arena of wrongful dismissal damages. In our paper titled "Show me the Money", we have provided a comprehensive overview of the major wrongful dismissal decisions that caused employers and their legal counsel to sit up and take notice in 2010. It's definitely a must read for all employers!

B.

Human Rights Update

Shimp v. Livingstone Range School Division #681 THE FACTS The complainant, Paula Shimp, was hired as a teacher's assistant at J.T. Foster High School, which falls under the Livingstone Range School Division in Nanton, Alberta. Ms. Shimp began a series of fixed-term positions at the J.T. Foster High School starting in December of 2006. On August 28, 2007, Ms. Shimp began a new contract with a 1.0 FTE. This probationary contract was set to terminate on June 27, 2008, but Ms. Shimp was terminated without cause on September 20, 2007 on the basis that she simply wasn't a good "fit" within the school and had contributed to a very negative atmosphere in the school by inappropriately expressing dissatisfaction with scheduling and breaks. On March 3, 2008, Ms. Shimp filed a human rights complaint against the respondent alleging that she had been discriminated against on the basis of physical disability.

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Alberta Human Rights Decision, S2008/03/02383 (Decision Date: October 19, 2010).

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During her employment, Ms. Shimp had provided some very vague information about a suspected illness and complained about being "tired" on several occasions, but she did not provide her employer with any substantive medical documentation to support her requests for accommodation in terms of scheduling and breaks. Ms. Shimp did not receive a medical diagnosis until more than two years following the termination of her employment. In January of 2010, Ms. Shimp was diagnosed with mitochondrial myopathy, a multi-system disorder that causes severe fatigue and weakness. THE DECISION The Tribunal held that although Ms. Shimp was suffering from health concerns during her employment with the respondent in 2006-2007, the symptom of fatigue, she had no medical diagnosis and did not provide her employer with any medical information when seeking accommodation in terms of scheduling. The onus was upon Ms. Shimp to provide her employer with relevant medical information from a recognized medical practitioner outlining her physical disability in order to offer some guidance as to what, if any, accommodations were necessary. She failed to do so, and therefore her employer had no reason to suspect that she had a disability or required any accommodation. In the end, the Tribunal was satisfied that Ms. Shimp's termination from J.T. Foster High School was not related directly or indirectly to her yet undiagnosed medical condition, and therefore it was fully within the respondent's discretion to choose to terminate her employment and there was no prima facie case of discrimination in the circumstances. Burgess v. Stephen W. Huk Professional Corp.2 THE FACTS This case was an appeal from an Alberta Human Rights Tribunal's decision to dismiss a discrimination complaint by Jennifer Burgess against the respondent, her former employer. Ms. Burgess was employed as a dental assistant in the respondent's clinic. She was terminated on May 11, 2006 after failing to call in about missing work and missing a staff meeting on Sunday. Ms. Burgess complained to the Tribunal that her dismissal was based on discrimination due to pregnancy or religious beliefs. She claimed that the fact that she was absent from work due to pregnancy-related issues and the fact that she missed a staff meeting scheduled on a Sunday due to her Mormon practice of Sunday observance were factors in her termination. The Tribunal dismissed her case after finding that the complainant failed to establish a prima facie case of discrimination. The appellant asserted that the Tribunal applied the wrong legal test in concluding that Ms. Burgess had failed to establish a prima facie case of discrimination based on her gender and religious beliefs. The issue was whether the complainant was required to establish as part of a prima facie case of discrimination the employer's knowledge or imputed knowledge of the complainant's protected characteristics giving rise to a claim of discrimination. THE DECISION The Alberta Court of Queen's Bench dismissed the appeal and held that the Tribunal applied the correct test and the respondent's knowledge or imputed knowledge of the circumstances giving rise to the claim of

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2010 ABQB 424.

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discrimination were required to be established by the complainant as part of its prima facie case. Therefore, it was for the complainant to establish on a balance of probabilities that her pregnancy and/or her religious observances were known to the respondent and that they were among the factors in its decision to terminate her. There was no doubt that Ms. Burgess was pregnant at the relevant time. However, she did not advise her employer of her pregnancy or her Sunday observance obligations, and therefore the Tribunal reasonably held that these were not factors in her termination and therefore there was no prima facie discrimination on these grounds. Noel v. 375850 Alberta Ltd.3 THE FACTS On April 4, 2006, Ms. Beverly Noel filed a complaint against 375850 Alberta Ltd., Wiebe Construction and Hamburg Open Camp on the ground of gender and sexual harassment. In February 2006, the complainant was employed and living at the Hamburg Open camp facility operated by the respondent. On February 21, 2006, she stepped out of the shower in her room and discovered a male camp maintenance employee standing in the doorway watching her. She yelled at him, telling him to get out of the room, but he did not do so and advised her that she had left her keys in the door to her room. A day or two later, she awoke to find the same man standing beside her bed. The intruder was subsequently charged under the Criminal Code of Canada in Provincial Court on January 25, 2007, but the complainant filed a human rights complaint on the basis of sexual harassment in the workplace as she was unable to return to work after these incidents and suffered from significant psychological problems such as depression, feelings of fear and violation, problems with her appetite and sleep and trouble establishing relationships and finding new employment. THE DECISION The Tribunal held that these intrusions were discrimination on the basis of sexual harassment, and stated that the respondent was responsible for this harassment even though the intruder was not a direct employee of the company. The respondent had knowledge and awareness of the complainant's adverse reaction after the first intrusion, but they did not take any steps to address this incident or the effect it had on Ms. Noel. In the end, the Tribunal held that relying on the criminal justice system, without any action on the part of the respondent to rectify the situation, was insufficient, and therefore the complainant was awarded damages for injury to her self-respect and dignity in the amount of $5,000 to compensate her for the trauma, pain and suffering she experienced as a result of the sexual harassment that occurred at the Hamburg Camp. In addition, the Tribunal recognized that the complainant could not remain in her place of work and that she was unable to return to work for a period of time. As a result, the Tribunal awarded the complainant 12 months of lost wages to put her back in the position she would have been in had she not been discriminated against.

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Alberta Human Rights Decision, N2006/08/0134 (Decision Date: September 16, 2010).

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Kelly, Vilven v. Air Canada ­ Mandatory Retirement In a recent decision released November 8, 2010, the Canadian Human Rights Tribunal ("CHRT") reinstated two Air Canada pilots initially forced into early retirement, and ordered that they receive compensation for lost income arising from their forced retirement: Vilven v. Air Canada, 2010 CHRT 27. In their previous decision, the CHRT agreed with pilots Robert Kelly and George Vilven that the mandatory retirement provisions of their collective agreement were discriminatory and contrary to the Charter of Rights and Freedoms: Vilven v. Air Canada, 2009 CHRT 24. In its latest decision, the CHRT concluded that Kelly and Vilven should be reinstated with appropriate seniority and compensated for some of their lost wages. However, the CHRT declined to award damages for pain and suffering or to order that the respondents pay damages for wilfully and recklessly engaging in a discriminatory practice. The long term effect of the CHRT's decision remains to be seen, as the CHRT refused to order that the mandatory retirement provisions in the Air Canada pilots' collective agreement be struck down. In its view, a public interest remedy of that nature would be overreaching as administrative tribunals do not have the jurisdiction to make formal declarations of invalidity. However, unless reviewed by the Federal Court, the CHRT's decisions in Vilven v. Air Canada has opened the door for unionized employees to challenge mandatory retirement provisions in their collective agreements through complaints to the CHRT or provincial human rights tribunals. FAMILY STATUS ACCOMMODATION Whyte, Seeley and Richards v. Canadian National Railway4 The Canadian Human Rights Tribunal sided with three Jasper women who lost their position with the Canadian National Railway ("CN Railway") in 2005 after they refused to accept transfers to British Columbia, citing family reasons. In three separate rulings, the CHRT determined that all three women should be reinstated and reimbursed for lost pay and benefits incurred since their dismissal. CN Railway has also been ordered to grant them an additional $35,000 each in compensation ($15,000 for pain and suffering and $20,000 for the wilful and discriminatory conduct of the respondent). In the respective decisions, the CHRT noted that CN Railway managers never met with these women, never allowed them the opportunity to present and explain their childcare needs, nor did they ask any questions to fully understand their requests. In other words, they did not prove that they did everything they reasonably could do to accommodate these women on the basis of family status. These rulings of the CHRT are in contrast to the leading appellate authority of Health Sciences Association of B.C. v. Campbell River and North Island Transition Society, 2004 BCCA 460 ("Campbell River"). In that decision, the British Columbia Court of Appeal held that a term or condition of employment must result in a

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Whyte v. Canadian National Railway, 2010 CHRT 22; Seeley v. Canadian National Railway, 2010 CHRT 23; Richards v. Canadian National Railway, 2010 CHRT 24.

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serious interference with a substantial parental or other family duty or obligation in order to be found prima facie discriminatory. In the recent CN Railways decisions, the CHRT rejected the additional burden imposed by the Campbell River case with respect to a "serious interference with a substantial parental or other family duty or obligation", and stated that a prima facie case for discrimination on the basis of family status can be established solely on the basis that an employee cannot satisfy a condition of employment because doing so would conflict with a family obligation. Because of the difference in opinion between judicial and administrative authorities in this area, the law remains unclear on the legal test to be applied when evaluating claims for family status discrimination. Employers will obviously continue to rely upon the Campbell River decision, but employees can now counter with the CN Railways decisions to argue that the tried and true prima facie threshold applies and that it would be inappropriate to establish a higher onus where family status discrimination is alleged. Despite these different approaches, the following general principles still apply: · · Interference with a parent's subjective preferences is not enough to ground a finding of discrimination. Parents must take active steps to balance the competing obligations of workplace demands and family obligations, and have a responsibility to explore all available solutions and alternatives through "self-accommodation". Employers must be fair and honest when determining whether accommodation would result in undue hardship and must be open to and consider alternatives proposed by employees. Accommodation is more likely to be required where a child is ill or has medical or behavioural issues that require a higher level of parental care.

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Johnstone v. Canada Border Services5 In another show of support for employees, the Canadian Human Rights Tribunal sided with a female Canada Border Services Officer in holding that her employer failed to accommodate her with respect to childcare issues. The respondent runs a 24-hour operation with rotating, irregular shifts and unpredictable overtime. The complainant alleged that the Canada Border Service Agency ("CBSA") engaged in a discriminatory practice on the basis of family status, and the practices complained of included failure to accommodate and adverse differential treatment based on family status, which in this case meant the raising of two young children. The complainant had requested fixed shifts on days that she could arrange childcare. Following an unwritten policy, CBSA indicated it was willing to accommodate Ms. Johnstone, but to the extent only of a static shift of 3 days per week up to a maximum of 10 hours per day, plus a further 4 hours on a fourth day. This unwritten policy does not allow employees to have static shifts with full-time hours if the reason for the request is childcare responsibilities, and so Ms. Johnstone alleged that this effectively forced her into part-time status upon her return to work after having each of her two children, resulting in her being given fewer hours of work

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2010 CHRT 20.

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than she was willing and able to work, with an attendant loss of benefits that are available to full-time employees. In their decision, the CHRT stated that the CBSA had failed to establish a bona fide occupational requirement, present a reasonable explanation for, or otherwise justify the unwritten policy that subjected the complainant to adverse differential treatment on the basis of family status. The CBSA was ordered to establish written policies satisfactory to Ms. Johnstone and the Canadian Human Rights Commission to address family status accommodation requests. In addition, Ms. Johnstone was compensated for her lost wages and benefits, including overtime that she would have received and pension contributions that would have been made had she been able to work on a full-time basis, and was awarded another $35,000 in additional compensation ($15,000 for pain and suffering and $20,000 for the wilful and discriminatory conduct of the respondent). Accommodation as a result of family status can be complex and requires employers to balance several competing interests. The legal parameters of family status discrimination continue to evolve, and so be sure to stay tuned for more interesting developments in this area!

C.

Privacy Law Update

Employers operating in the Alberta private sector now have to comply with more stringent privacy legislation as a result of amendments to the province's Personal Information Protection Act ("PIPA"), which came into force on May 1, 2010. What follows is a brief outline of the most significant amendments under PIPA relating to: (a) (b) (c) (d) transferring personal information to service providers outside Canada; collecting, using or disclosing employee information; personal information that is lost, or that is accessed or disclosed, without authorization; and personal information that is no longer reasonably required.

CHANGES TO PRIVATE SECTOR PRIVACY LEGISLATION

TRANSFERRING PERSONAL INFORMATION OUTSIDE CANADA The amendments have imposed additional obligations on organizations that use service providers outside of Canada to collect, use, disclose or store personal information. Changes are also relevant for those organizations that are controlled by a foreign parent company and transfer personal information to that parent company. If your organization uses foreign service providers you now have to: (a) Include in your privacy policies and practices information about the countries of those service providers, and the purposes for authorizing them to handle the personal information. Notify individuals, orally or in writing, before or at the time their personal information is transferred to, or collected by, the foreign service provider. This notification must indicate: (i) how to obtain written information about the organization's privacy policies and practices relating to its service providers outside Canada, and

(b)

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(ii)

who within the organization can answer questions about the handling of the personal information by the foreign service provider.

COLLECTING, USING OR DISCLOSING EMPLOYEE INFORMATION The definition of "personal employee information" has been expanded to include information about a former employee as well as information used for managing a post-employment relationship. This will provide more consistent standards for handling the personal information of employees post employment. Employers are often concerned about what information is appropriate to disclose during reference checks, and the new legislation provides some direction about communications that will not require a former employee's consent. Specifically, a reference can only include personal information that the employer collected for the purposes of establishing, managing or terminating the employment relationship between the organization and the individual, and the disclosure must be reasonable for the purpose of assisting the potential or current employer to determine the individual's eligibility or suitability for the position with that employer. PERSONAL INFORMATION LOST, ACCESSED OR DISCLOSED, WITHOUT AUTHORIZATION The new legislation also requires organizations to notify the Privacy Commissioner of Alberta if personal information under their control is lost, accessed or disclosed without authorization. This reporting requirement arises when the loss or breach could pose a real risk of significant harm to an individual. DESTRUCTION OF PERSONAL INFORMATION AS A POSITIVE OBLIGATION Where consent was not an issue, PIPA used to allow organizations to keep personal information as long as it was reasonable to do so for legal or business purposes. As a result of the recent changes to PIPA, organizations now have a positive obligation to either destroy personal information or make it such that it can no longer be used to identify an individual. Personal information must be destroyed, within a reasonable time, once the organization no longer reasonably requires it. In an employment setting, this may include deleting reference to particular individuals from investigation reports and records that an employer wishes to keep on file for policy reasons beyond the length of time usually recommended for legal protection. PENALTIES AND OFFENCES The recent amendments to PIPA have also removed the "wilful" requirement for committing certain offences (e.g., collecting, using and disclosing personal information without consent). So, an organization could commit an offence under PIPA by breaching certain PIPA obligations, even if unintentionally. Employers should take careful note of this risk. In addition, several time periods and offence provisions were also changed.

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TIPS FOR EMPLOYERS To comply with the recent amendments, your organization should: (c) Consider whether a foreign entity receives personal information, or personal employee information. If so, review the policies and practices surrounding the transfer of information and update them to incorporate the requisite information and notification requirements. Review current policies with respect to collecting, using or disclosing employee personal information after the employee leaves the organization, in light of the new changes. Revise record retention and destruction policies and procedures, so that personal information is destroyed or "anonymized" once no longer required. Incorporate in its privacy breach protocol a step to notify the Privacy Commissioner of any serious security breach.

(d)

(e)

(f)

RECENT CASE LAW Leon's Furniture Limited v. The Information and Privacy Commissioner of Alberta6 The issue in this case ­ that we are proud to note was another victory for McCarthy Tétrault as counsel for the appellant - was a practice followed by Leon's Furniture Limited ("Leon's") of recording driver's licence and licence plate information when a customer takes delivery of merchandise some time after the date of purchase. The objective of this practice was to have that information available to give to the police in the event that a fraudster has picked up the furniture claiming to be the purchaser. DECISION OF THE PRIVACY COMMISSION The Privacy Commissioner held that this practice was unlawful under Alberta's Personal Information Protection Act ("PIPA"), and noted that although preventing fraud and theft is a reasonable purpose for collecting personal information, recording the driver's licence and licence plate numbers of customers went beyond what was necessary for preventing fraudulent pickup. The Privacy adjudicator concluded that Leon's was in violation of s. 7(2) of PIPA which prevents making it a condition of "supplying a product or service" that the customer provide personal information beyond what is necessary to supply the product or service, and was also in violation of s. 13 because it did not explain to the complainant the reason for the collection of the personal information, except that it was "store policy". As a remedy, the adjudicator ordered that Leon's cease recording driver's licence and licence plate numbers when an individual is picking up merchandise and directed that all existing records of driver's licence and licence plate numbers be destroyed. The appellant's application for judicial review was dismissed, as the Court of Queen's Bench judge held that the Privacy Commission had appropriately balanced the interests of the appellant and its customers, as required by PIPA. COURT OF APPEAL DECISION There was a significant disagreement between the majority and the dissent over the proper interpretation of PIPA, but in the end the Court accepted Leon's argument that there must be a balance between: (i) the right

6

2011 ABCA 94.

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of an individual to have his or her personal information protected; and (ii) the need of organizations to collect, use or disclose personal information for purposes that are reasonable. In their decision, the majority made the following strong statements about the balancing exercise: "The statute does not give predominance to either of the two competing values, and any interpretation which holds that one must always prevail over the other is likely to be unreasonable. A balancing is called for." (para. 34) "But their admitted importance [the importance of privacy rights] does not mean that privacy rights must predominate over all other societal needs, values and interests. Because the customer's interests are important does not mean that the retailer's are not. Our society is complex and increasingly information based, and many organizations, businesses and individuals must use personal information for legitimate reasons on a daily basis." (para. 35) "While protecting Albertans from invasions of privacy, intrusive marketing practices, and identity theft are laudable objectives, it is unreasonable to place restrictions on the use of driver's licences that seriously undermine their usefulness as forms of identification. Section 3 of the Act specifically recognizes that individuals and organizations all have legitimate reasons to use personal information in this way." (para. 41) "... the reasonableness of the adjudicator's decision is undermined by her failure to recognize that the appellant needed to show only that its policies were `reasonable', not that they were the `best' or `least intrusive' approaches... [the] standard does not require the organization to defer in all instances to the interests of individual privacy. The respondent [Privacy Commissioner] is not empowered to direct an organization to change the way it does business, just because the respondent thinks he has identified a better way. So long as the business is being conducted reasonably, it does not matter that there might also be other reasonable ways of conducting the business." (para. 57) This is obviously a very important decision for employers in Alberta, as it limits the power of privacy commissioners to interfere with reasonable business decisions and recognizes that there is a limit to individual privacy rights in some circumstances. Lougheed Imports Ltd. (c.o.b. West Coast Mazda) and UFCW, Local 15187 This case deals with the ever-increasing implications of social media in the workplace, and warns that discipline may be justified if there is a real connection between the workplace and comments posted on sites such as Facebook or Twitter. FACTS In this case, the employer operated an automotive detailing and accessory shop in Pitt Meadows, British Columbia. On August 26, 2010, the Union applied for certification of a bargaining unit of employees at this location and was certified on September 8, 2010.

7

[2010] B.C.L.R.B.D. No. 190.

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J.T. was employed as a detailer at West Coast Mazda for approximately four years. He was one of the key inside organizers during the organizing campaign, and was a vocal and visible supporter of the Union. A.P. was employed as an installer at West Coast Mazda for approximately two years, and was also known to the employer to be a Union supporter. J.T. began making negative and derogatory posts about his place of employment on Facebook that came to the attention of management. After receiving a written warning for confrontational and disruptive behaviour at a meeting with a representative of WorkSafe BC, J.T.'s postings began to intensify. He continued to post negative comments about his work, supervisors, managers and employer, and made violent, vulgar, and derogatory comments about management and undermined his employer's products on several occasions. Similar posts were allegedly made by A.P. after having been sent home early from work one day. The nature of A.P.'s posts were along the lines that the employer is a "scumbag" and "crook" and urging people not to spend money on the employer's products and services. A.P. deleted the postings almost immediately and closed the Facebook account the next day. However, in an investigative meeting with the employer, he denied that he was the one that posted these comments and stated that he'd had problems with other people hacking into his Facebook account and that he had left it logged on at work. Both J.T. and A.P. were terminated for cause when these postings came to the attention of the employer, and the union filed a grievance asserting anti-union animus. THE DECISION The British Columbia Labour Relations Board dismissed the Union's argument that there was anti-union animus and held that there was proper cause for the termination of J.T. and A.P. In their decision, the Board stated that there is no expectation of privacy when postings were read by the employee's Facebook "friends". Furthermore, the Board noted that the comments were particularly damaging to the employer's business and were "very offensive, insulting and disrespectful" to their employer, supervisors and manager. The Board also stated that since J.T. and A.P.'s Facebook friends included employees and former employees, the derogatory comments were "akin to comments made on the shop floor". As a result, there was a real connection between the workplace and the posted comments and termination was justified on this basis. Furthermore, although A.P.'s termination was based on only one isolated event, the Board held that his dishonesty in the investigation meeting compounded his misconduct and justified termination for cause. Teamsters Canada Rail Conference v. Canadian Pacific Railway Company8 FACTS After a number of serious collisions in the railway industry in North America, the Canadian Pacific Railway Company ("CPR") adopted a policy of asking employees to provide copies of their personal wireless telephone records as a routine part of investigations where a significant accident or incident remained unexplained.

8

Canadian Railway Office of Arbitration & Dispute Resolution, Case No. 3900 (Decision Date: June 23, 2010).

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The Teamsters Canada Rail Conference (the "Union") grieved the policy on the basis that it was a violation of employees' privacy rights as well as their rights under the collective agreement. With respect to its privacy submission, the Union relied upon Section 5(3) of the Personal Information Protection and Electronic Documents Act ("PIPEDA") which provides that "an organization may collect, use or disclose personal information only for purposes that a reasonable person would consider are appropriate in the circumstances". Furthermore, the Union pointed to a 2002 decision in which the Privacy Commissioner of Canada determined that telephone records are "personal information" within the meaning of PIPEDA. In its submissions, the Union asserted that the policy with respect to telephone records was unreasonably intrusive and violated employee privacy rights. THE DECISION Arbitrator Michel Picher dismissed the grievance, and noted that given the particular nature of railway operations, "there must be an inevitable balancing of interests between the privacy rights of employees and the interests of a railway employer to ensure safe operations". This is another positive decision for employers, as it recognizes the right of management to ensure safe operations in a safety-sensitive industry despite the fact that there might be an intrusion into personal privacy in some circumstances. Two factors appear to have influenced the arbitrator's decision in this case: the very narrow infringement on the employees' privacy rights and the safety-sensitive nature of the railway industry in North America. Specifically, Picher noted that "the mere act of making a telephone call or sending an electronic message is of substantially lower sensitivity and value from a privacy standpoint than the actual content of a telephone call or other form of electronic... communication." There was no attempt to go "behind the privacy" into the contents of any wireless communication, and therefore the intrusion was very narrow in the circumstances and was justified by the seriousness of an accident or incident in the railway industry and the importance of ensuring safe operations. Credit Checks The Office of the Information and Privacy Commissioner of Alberta has ruled that collecting credit information from prospective sales associates in a retail store was a violation of the Alberta Personal Information Protection Act ("PIPA").9 The employer, Mark's Work Wearhouse, justified the collection as a way to assess the applicant's handling of financial responsibility and to identify risk of in-store theft or fraud. The employer did have a problem with theft and fraud, but also had close, onsite supervision and computer systems in place to manage the risk. The officer ruled that collecting personal credit information was not reasonably necessary to assess an applicant's suitability for the job. She was particularly concerned that there could be a negative impact on the applicant's credit report, and noted that "[t]here must be a direct relationship between the duties and responsibilities of the position and the collection of personal information, including personal credit information".

9

Investigation Report P2010-IR-001, OIPC, Alberta.

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Monitoring Devices in Company Vehicles In a recent British Columbia decision, an arbitrator dismissed a privacy grievance that challenged the implementation of a fleet telematics program to monitor the performance of employees while on the job.10 The devices that were installed in company vehicles were designed to track start and stop times, duration of trips, idle time and stop time. The devices did not have GPS capability, but management could "connect the dots" with other information and figure out where a vehicle was or had been. In a surprising decision, the arbitrator ruled that the information collected was not personal information within the meaning of the British Columbia Personal Information Protection Act ("PIPA"). The arbitrator reasoned that the information was really about the vehicle, and the fact that the individual driver of the vehicle was identified did not convert that into "personal information". However, this decision might not be as positive for employers as it appears at first glance, it seems inconsistent with the arbitrator's suggestion that the information, that is supposedly about the vehicle and not the employee, could be used to discipline the employee if it indicated a breach of company policy. The Alberta and BC privacy statutes are very similar, and therefore this decision will be carefully considered in our own province as well. R. v. Cole11 FACTS In R. v. Cole, the Ontario Court of Appeal held that a teacher had a reasonable expectation of privacy in the personal use of his work laptop, and ultimately excluded certain electronic evidence obtained by the police through a warrantless search. While this was a criminal case involving the Canadian Charter of Rights and Freedoms, it has implications for privacy rights in other contexts and has considerably strengthened the electronic privacy rights of employees. The Court declared that in the absence of a clearly worded employer policy, the appellant had a reasonable expectation of privacy in the personal use of his work laptop. Specifically, Justice Karakatsanis reasoned that: Although this was a work computer owned by the school board and issued for employment purposes with access to the school network, the school board gave the teachers possession of the laptops, explicit permission to use the laptops for personal use and permission to take the computers home on evenings, weekends and summer vacation. The teachers used their computers for personal use, they employed passwords to exclude others from their laptops, and they stored personal information on their hard drives. There was no clear and unambiguous policy to monitor, search or police the teachers' use of their laptops. (para. 45)

10 11

Otis Canada Inc., [2010] B.C.C.A.A.A. No. 121 (Steeves). 2011 ONCA 218.

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LESSON FOR EMPLOYERS The lesson coming out of the Cole decision is that employers must have clear and unambiguous information technology and privacy policies in place that expressly state that email, Internet usage, hard drives of company computers and other uses of company technology systems may be monitored by the employer. These policies should clarify that employees should have no expectation of privacy when using company equipment or information technology systems. However, this statement alone may no longer be sufficient to provide unlimited monitoring privileges and the ability to disclose the information collected to third parties. As a result, employers should notify employees of the purposes for which monitoring will be conducted and the uses that will be made of information collected. For example, a company policy that permits personal use of work computers should also make it clear that the employer may access the computer to monitor for illegal, obscene or otherwise inappropriate content, and that information may be turned over to the police if the commission of a crime is suspected. This will impact the scope of an employee's reasonable expectation of privacy, and will help mitigate the impact that the Cole decision will have on electronic privacy rights in the workplace.

D.

Drug Testing in the Workplace

In a recent case from the New Brunswick Court of Queen's Bench, an employer's alcohol testing policy was upheld given the dangerous nature of the workplace and the minimally intrusive method of testing.

Communications, Energy and Paperworkers Union of Canada, Local 30 v. Irving Pulp & Paper Ltd.12

FACTS The grievor in this case was a 34-year-old millwright in the maintenance department at a draft paper mill operated by Irving Pulp and Paper Ltd. in Saint John, New Brunswick. He was randomly selected by his employer to take an immediate breathalyser test on March 13, 2006 pursuant to the company's policy on alcohol and other drug use. This policy provides that employees in safety-sensitive positions will be subjected to random tests for alcohol, and must pass an alcohol and/or drug test before entry to the position or re-entry to the position where they have participated in a treatment program. Although the employee passed the test he filed a grievance alleging that there were no reasonable grounds to test or a significant accident or incident that would justify such a measure. ARBITRATION DECISION In a decision dated November 16, 2009, a three-member arbitration board allowed the grievance. In assessing the risk posed by drug and alcohol use in the workplace, the Chair held that the grievor did not work in an "ultra-dangerous industry", since the mill was not "in the same category of risk as a nuclear plant, an airline, a railroad or a chemical plant, or other like industries." The Chair also determined that the evidence did not establish "a significant problem with alcohol-related impaired performance at the plant", and he did not accept that plant management perceived a significant increase in risk due to alcohol abuse in safety-sensitive positions.

12

[2010] N.B.J. No. 331.

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Although the arbitration board held that the employer chose a reasonable method of testing since the breathalyser could provide immediate results and provide a real-time connection between impairment and safety-sensitive work, the Chair weighed the employer's benefit from its random alcohol testing policy against the harm done to the employees' privacy rights and concluded that the policy was not justified in the circumstances. COURT OF QUEEN'S BENCH DECISION On judicial review to the New Brunswick Court of Queen's Bench, the employer argued that it was reasonable for the company to set a policy that permitted random alcohol testing of employees who worked in safety-sensitive positions because the mill was a dangerous workplace. The union submitted that the reasonableness of the company's policy depended on there being a history of accidents in a dangerous workplace and that the mill did not reach the required threshold to implement a random alcohol testing policy in the circumstances. In upholding the application for judicial review, the Court acknowledged that the mill is a dangerous workplace and noted that it is not reasonable to require a history of accidents in order to justify a policy of random alcohol testing. The Court also found that it was not reasonable to establish that a threshold above the level of a dangerous workplace (i.e., the "ultra-dangerous" standard established by the arbitration board) in order to implement such a policy. According to the judge, once the board found that the mill was a dangerous workplace, the only issue to be determined was "whether or not the employer's policy was a proportionate response to the potential danger." The judge also noted that it was contradictory for the board to find that, on the one hand, breathalyser testing is minimally intrusive yet, on the other hand, it is a significant intrusion into employees' privacy. In the end, the Court quashed the board's decision and concluded that the policy was justified in the circumstances. However, the Union has appealed to the New Brunswick Court of Appeal, and so stay tuned for further development in this area. National Automobile, Aerospace, Transportation and General Workers Union of Canada (CAW-Canada), Local 504 v. Navistar Canada, Inc.13 In a recent case from the New Brunswick Court of Queen's Bench, an employer's reasonable cause and postincident drug and alcohol testing policy was upheld. FACTS Navistar Canada, Inc. adopted a Substance Abuse Prevention Policy across its Canadian operations, authorizing reasonable cause and post-incident drug and alcohol testing of employees in safety-sensitive positions. By characterizing the entire bargaining unit at it Burlington, Ontario facility as occupying "safety-sensitive" positions, Navistar subjected all unionized employees at the facility to drug and alcohol testing where justified by the policy.

13

[2010] O.L.A.A. No. 27.

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The union filed a grievance and maintained that the implementation of this policy was neither a valid exercise of management rights nor reasonable, given that the warehouse was not part of an inherently safety-sensitive industry and based on the facility's exemplary safety record and culture. The union asserted that the employer was not justified in introducing the policy as it had failed to present any evidence of an existing drug and alcohol policy at the facility. ARBITRATION DECISION The Arbitrator noted that a determination of the legitimacy of a drug and alcohol testing policy requires a balancing of interests between the employer's legitimate interest in providing a safe workplace and the privacy and dignity interests of employees. In her decision, the Arbitrator acknowledged that employers are entitled to take a proactive approach to drug and alcohol testing without the need to demonstrate the existence of accidents or of a drug or alcohol problem in the workplace. Given that the work performed in the warehouse included the operation of mechanized equipment weighing up to 8,000 pounds in the retrieval of heavy parts from heights in high-traffic areas, the Arbitrator found that the facility was "far enough along the continuum of safety sensitivities" to permit it to be proactive in adopting a reasonable cause and post-incident drug and alcohol testing policy. As a result, the grievance was dismissed. COMMENTS The Arbitrator's ruling permits reasonable cause and post-incident drug and alcohol testing in operations that can fit themselves sufficiently within the "continuum of safety sensitivities" in the context of a comprehensive approach to workplace safety. CURRENT STATE OF THE LAW WITH RESPECT TO WORKPLACE DRUG AND ALCOHOL TESTING With respect to the issue of requiring employees in safety-sensitive positions to subject to random alcohol tests, the Canadian Human Rights Commission has relied upon the Ontario Court of Appeal's decision in Entrop v. Imperial Oil Limited, [2000] O.J. No. 2689 to state that as long as employees are notified that alcohol testing is a condition of employment, random alcohol testing of employees in safety-sensitive positions may be permissible, but only if the employer accommodates the needs of those who test positive and are determined to be dependent on alcohol: See the Canadian Human Rights Commission's Policy on Alcohol and Drug Testing (revised in October 2009). However, the debate surrounding the permissibility of random alcohol testing continues in Canada. In Public Service Alliance of Canada, Local 0004 v. Greater Toronto Airports Authority, [2007] C.L.A.D. No. 243, Arbitrator Devlin reviewed the case law and concluded "Arbitrators have found that the safety-sensitive nature of a particular industry was not, in itself, sufficient to outweigh the privacy interests of individual employees and to support a regime of random testing... Arbitrators have required evidence of a drug and/or alcohol problem in the workplace which cannot be addressed by less invasive means." Also contrary to the Court's view in the Irving Pulp & Paper decision that breathalyser tests are minimally intrusive, the Quebec Court of Appeal declared in Local 143 of the Communications, Energy and Paperworkers Union of Canada v. Goodyear Canada Inc., [2007] Q.J. No. 13701 that "[t]he results of hair, urine or breath analysis represent a significant intrusion into the private lives of employees. They could reveal

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consumption that occurred weeks before the sample was taken. Thus, employers could intrude into the private lives of its employees, outside of work hours. Similarly, confidential information about the condition and state of health of employees could be revealed through sample analysis." In the end, the Quebec Court of Appeal held that random drug and alcohol testing of employees in designated safety-sensitive positions would be unduly privacy-intrusive and contrary to Quebec's Charter of Human Rights and Freedoms. The Ontario Court of Appeal has also rejected mandatory, random and unannounced drug testing for all employees in a safety sensitive workplace as being an implied right of management: Communications, Energy & Paperworkers Union of Canada, Local 900 v. Imperial Oil Ltd., 2009 ONCA 420. In contrast, in Alberta (Human Rights & Citizenship Commission) v. Kellogg Brown & Root (Canada) Co., [2007] A.J. No. 1460, the Alberta Court of Appeal upheld a mandatory drug testing policy in a safety-sensitive oil sands project and noted that the employer's policy legitimately "perceive[d] that persons who use drugs at all are a safety risk in an already dangerous workplace". The law is a little more consistent with respect to reasonable cause or post-incident drug and alcohol testing, and this type of testing has generally been upheld where employers operate in a safety-sensitive industry and utilize a comprehensive approach to workplace safety. SUMMARY Drug and alcohol testing remains a highly controversial workplace issue, and the courts are still not taking a consistent approach to these issues, with divergent views emanating from Alberta, Ontario and now the New Brunswick courts. In addition, testing methodology continues to change and therefore we anticipate that the case law will evolve along with industry standards as this issue continues to play itself out in the courts over time. In any event, employers contemplating the adoption of testing as part of a drug and alcohol policy must be mindful of their obligation to demonstrate the reasonableness of each testing standard and must be aware of their duty to accommodate employees suffering from drug abuse or addiction problems (including alcoholism) to the point of undue hardship.

E.

Defining the Employment Relationship

Lockerbie & Hole Industrial Inc. v. Alberta (Human Rights Commission)14 THE FACTS The complainant in this case, Mr. Donald Luka ("Luka"), was employed by Lockerbie & Hole Industrial Inc. ("Lockerbie") and was requested to transfer to the Syncrude Canada Ltd. ("Syncrude") project site in order to help expand the Genesee Power Plant. The Syncrude site involved oil recovery and facility construction. Before Luka could be transferred, he had to pass pre-alcohol and drug testing that Syncrude insisted all contractors require of their employees. Luka did not pass the test and Lockerbie decided not to use him on the Syncrude site.

14

2011 ABCA 3.

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As a result, Luka filed a complaint pursuant to the Human Rights, Citizenship and Multiculturalism Act (now referred to simply as the Human Rights Act). The Human Rights Panel (the "panel") held that, while Syncrude was not Luka's employer in the conventional sense, it was an employer because it was utilizing Luka's services indirectly through Lockerbie. The panel went on to find there had been no discrimination. Luka was not an addict, but a recreational marijuana user. His claim of discrimination, based on him being perceived as disabled, was not made out. Lockerbie and Syncrude, while successful on the discrimination issue, appealed from the finding that Syncrude was an employer. The Court of Queen's Bench concluded that it was not. While the Queen's Bench judge agreed that "employer" in the human rights context need not be the same as the traditional common law definition. The judge concluded that it was not wide enough to cover the relationship between the owner of an industrial site and the employees of arm's length contractors working on the site. The Director of the Human Rights Commission appealed to the Alberta Court of Appeal with respect to the "employment" issue. COURT OF APPEAL DECISION The Alberta Court of Appeal held that it is possible for a person to have more than one "employer" under the Human Rights Act, but this will be very rare. In determining whether a relationship qualifies as an "employment relationship" under human rights legislation, the Court of Appeal stated that the following factors must be taken into consideration: · · · · · · · · · · · Whether there is a more obvious employer; Source of the employee's remuneration; Indicia of employment (employment agreements, collective agreements, payroll deductions, T4 slips, etc.); Who directs the activities of the employee and has the power to hire, dismiss and discipline; Who has the direct benefit of, or directly utilizes the employee's services; The extent to which the employee is part of the employer's organization; Perceptions of the parties about who is the employer; Whether the arrangement has been deliberately structured to avoid statutory responsibilities; Nexus between employee and the co-employer, including whether there is a direct contractual relationship; Independence of any alleged co-employer from the primary employer, and the relationship (if any) between the two; The Extent to which the co-employer directs the performance of the work.

In this case, Mr. Luka was admittedly employed by Lockerbie & Hole, he provided his services to it, he was directed and paid by it, and Lockerbie & Hole was his employer within the meaning of the statute. He had no contractual relationship with Syncrude, he was not functionally a part of its organization, he did not report to it, and Syncrude did not direct his work.

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As a result, the Court of Appeal held that his relationship with Syncrude was too remote to justify a finding of employment, even under the expanded meaning given to that term in human rights legislation. Consequently, Mr. Luka was not co-employed by Syncrude and the appeal was dismissed. McCormick v. Fasken Martineau Dumoulin LLP15 THE FACTS When the law firm Fasken Martineau Dumoulin LLP in Vancouver, British Columbia tried to force John McCormick, one of its equity partners in the firm, to retire at age 65 in accordance with the terms of the firm's Partnership Agreement, McCormick refused and filed a complaint with the British Columbia Human Rights Tribunal alleging discrimination on the basis of age contrary to s. 13(1) of the British Columbia Human Rights Code. Fasken disputed the Tribunal's jurisdiction to hear the complaint, maintaining that it had no jurisdiction as McCormick was not in an employment relationship. DECISION Tribunal member Murray Geiger-Adams dismissed Fasken's application, ruling that McCormick was an employee of the firm within the meaning of the Code. While noting that some relationships will not be subject to scrutiny under human rights legislation, Geiger-Adams relied upon various Supreme Court of Canada decisions to find that human rights legislation is to be given a broad, liberal and purposive interpretation. Although McCormick was not an employee at common law, or for a variety of other statutory purposes, Geiger-Adams indicated that this was not the end of the inquiry. Instead, the term "employment" is to be interpreted expansively so as to ensure that the person or entity committing the discrimination does not escape accountability for the discriminatory act. Grieger identified four factors relevant to a determination of employment status under the Code: (i) utilization; (ii) control; (iii) financial burden; and (iv) remedial purpose. Addressing the factor of utilization, Geiger-Adams held that Fasken utilized McCormick to provide legal services to clients and to generate intellectual property over which it claimed ownership. Although McCormick also received some benefit from the firm, the Tribunal held that the factor of utilization did not exclude situations in which there were mutual benefits. The factor of control was also indicative of the existence of an employment relationship, as McCormick's work was controlled by the firm in a multitude of ways as a result of the Partnership Agreement and various firm policies. In addition, the factor of financial burden favoured treating McCormick as an "employee", as the firm had the financial burden of determining and administering compensation practices affecting McCormick's income and for paying McCormick's compensation. Turning to consider the factor of remedial purpose, the Tribunal noted that the firm treated McCormick differently from others in the workplace based on his age and this engaged the remedial purposes of the Code.

15

[2010] B.C.H.R.T. No. 347.

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Based on these findings, the Tribunal ruled that it had jurisdiction over McCormick's complaint and denied Fasken's application to dismiss the complaint without a hearing. However, the Tribunal was careful to note that this decision does not stand for the proposition that every partner in every partnership is an employee of the partnership for the purposes of the Code. Rather, the particular circumstances of each relationship must be examined in light of the four factors identified above.

F.

The End of the Employment Relationship

RECENT CASE LAW Teck Coal (Cardinal River Operations) v. United Mine Workers of America, Local 165616 In another good decision for employers, an Alberta arbitrator has dismissed a grievance by an "irresponsible and immature" employee who was alleging unjust dismissal. FACTS The grievor was dismissed from his position as an Equipment Operator at the employer's Cardinal River Operations on the basis of improper absences from work and dishonesty about these absences. The employer argued that termination was the appropriate response and that the employment relationship had been irretrievably broken, but the union took the position that the grievor's alleged misconduct was caused by a mental disability and that the employer had failed in its duty to accommodate. THE DECISION In a scolding decision, the arbitrator held that the evidence did not establish that the grievor suffered from a mental disorder. The grievor falsely and frantically claimed to be an alcoholic, but the medical evidence conclusively proved that he was not addicted to alcohol and he simply preferred the company of his friends, drinking and parties to working. Furthermore, the grievor manipulated his doctors to write notes based on subjective complaints and he took sick leave benefits when he should have been working. In the opinion of the arbitrator, the grievor was an irresponsible and immature adult who chose a lifestyle that did not include regular attendance at work. Specifically, the arbitrator stated that "[w]e all have personality traits and characteristics that get in the way [of work]. These cannot be laid at the feet of employers. Employers cannot be expected to be responsible for character flaws." The arbitrator concluded that the grievor was dismissed for just and reasonable cause and there were no grounds for interfering with the employer's decision. The grievor abused sick leave benefits and had an appalling record of unpredictable leaves of absence and dishonesty, and the union failed to make out a case of prima facie discrimination as the evidence did not establish that the grievor suffered from a mental disorder. As a result, the grievance was denied.

16

[2010] A.G.A.A. No. 37.

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Power v. Celadon Canada Inc.17 In this decision, an arbitrator held that frustration of an employment contract does not constitute "just cause" for termination of employment. FACTS In the early 1980s, the complainant was convicted of several criminal offences relating to illegal drugs and theft. Although he received a pardon in 1993, his criminal past resulted in him being barred from entering the United States almost 30 years later. This affected his ability to perform the job he'd been hired for. The employer operated a fleet of trucks out of Kitchener, Ontario, and prepared a recruiting brochure that stated, among other things, that applicants must be "eligible to cross the U.S. border and willing to apply for a FAST card". The FAST card refers to the Free and Secure Trade certificate issued by U.S. Customers and Border Protection that expedites border crossings for professional truck drivers. On his application form, the complainant indicated that he was legally able to cross the border into the United States. In May of 2008, the employer hired the complainant to drive routes to and from the United States. After completing his training, the employee commenced driving to and from the United States and completed his routes without a FAST card for almost eight months. However, it was still a condition of employment that he obtain a FAST card, and therefore the complainant attended an interview with a U.S. Customers and Border Protection Officer in January of 2009. When the employee reported his criminal convictions, he was immediately barred from entering the United States until he received an exemption, a process that could take several months. After notifying the employer of the officer's decision, the complainant requested that he be reassigned to routes in Canada until he received an exemption. However, the employer refused to do so since this would involve displacing a more senior driver. As a result, the employer took the position that the employment contract had become "frustrated" when the complainant was denied entry to the U.S. and this constituted just cause for terminating his employment. The employer also contended that the complainant was dishonest in filling out the application form and during his interview since he did not disclose his past criminal convictions that would affect his ability to obtain a FAST card, and that this lack of candour also constituted "just cause". The complainant argued that he never lied to his employer and that the employer did not have just cause to terminate his employment. As a result, the complainant asserted that the employer should have provided him with two weeks' notice of termination or payment in lieu of notice as required by s. 230(1) of the Canada Labour Code. THE DECISION Referee Gordon Luborsky held that, for the purposes of the Canada Labour Code, frustration of the employment contract was not "just cause" for terminating employment. According to Luborsky, the notions of "just cause" and "frustration of contract" for the purposes of the Code are different; the former imports a culpability factor while the latter denotes a non-culpable situation.

17

[2010] C.L.A.D. No. 247.

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In dealing with the employer's argument that the employee showed a lack of candour by not disclosing his criminal convictions during the application and interview process Luborsky relied upon the Canadian Human Rights Act that prohibits discriminatory hiring practices on the basis of a conviction that a pardon has been granted. The effect of a pardon is to place an employee in the same position as any other citizen with a clear criminal record, and therefore there was no culpable conduct on the part of the complainant in terms of the rejection of his FAST card application. Moreover, the employer assumed the risk of liability for statutory notice and/or termination pay when it permitted the complainant to remain in its employ without a FAST card that could have been refused on any number of potential grounds having nothing to do with the complainant's past criminal convictions, based on the discretion of the U.S. Customers and Border Protection authorities. As a result, despite the fact that the employment contract was frustrated, this did not constitute just cause and therefore the employee was still entitled to the statutory minimum in terms of termination notice or pay in lieu of notice. Hamilton Health Sciences Corp. v. Ontario Nurses Association18 THE FACTS In this Ontario decision, an arbitrator held that the grievor had been made to suffer unnecessarily by the bad faith conduct of her employer, the Hamilton Health Sciences Corporation (the "Hospital") and that she was entitled to damages for that unnecessary suffering. The grievor went on sick leave in October of 2005 following a period where she worked with restrictions due to a chronic bladder disorder and back discomfort. Three weeks later she sought to return to work and applied for short-term disability benefits for the period of her illness. In November of 2005, the grievor's family doctor sent a medical certificate to Cowan Wright Beauchamp ("Cowan"), the agent hired by the Hospital to assess claims and advise on employee's early and safe return to work. In this medical certificate, the family physician recommended that the grievor be returned to work with modified duties. Cowan suspected the grievor of fraud, as she had been on LTD for more than a year due to back problems and had been back at work for only four months which was the period of time required to begin a new claim for short-term disability. Dr. Tessier, the Cowan Medical Director, refused to assess the grievor's claim until Cowan had determined whether she was eligible for LTD benefits, despite the fact that both Cowan and the Hospital knew that she was not eligible and this determination was irrelevant to the grievor's return to work. Furthermore, the Hospital made no material attempts to determine whether the grievor could safely return to work and ignored the recommendations of the grievor's family physician that the grievor could return to work with modified duties. On January 6, 2006, the grievor's family physician provided the grievor with another note clearing her to perform modified duties upon returning to work. Dr. Tessier reviewed the grievor's LTD file and determined that the grievor could return to work, but the return-to-work plan that had been put in place came to a halt two weeks later when Dr. Tessier claimed that Cowan had received a contradictory medical opinion in the interim and therefore changed the report to state that the grievor was permanently incapable of returning to work as a nurse with the Hospital. When the grievor received this news, she submitted yet another medical form from

18

[2009] O.L.A.A. No. 493.

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her family physician clearing her to return to work. When she was still not returned to duty, the grievor filed grievances in both February and May of 2006. The Ontario Labour Arbitration Board held that the insurer had an obligation to treat the grievor in good faith, and this included acting promptly and fairly in investigating the medical evidence and the ability of the grievor to return to the workplace. When confronted with Cowan's about-face, the Hospital had a duty to seek independent medical advice, to independently consider the application to return to work and to give the grievor an opportunity to respond. Instead, the Hospital had "simply delegated the tasks to Cowan and took no steps to independently assess and make the decisions required of it" until very late in the process of setting up an independent medical evaluation. The effect of the Hospital's delay in deciding on the grievor's eligibility for STD was to leave the grievor in a position where she did not know if she would ultimately be denied benefits and be liable for their repayment, and this contributed to the financial and emotional detriment of the grievor in addition to the failure to return her to work. As a result, the Board awarded the grievor both compensatory and punitive damages. Lesson for employers: · · Employers must take material steps to independently assess and make decisions with respect to employees who require accommodation in the workplace. Employers cannot escape liability by delegating responsibility to third party insurers with respect to the investigation, assessment and resolution of disability claims and accommodation in the workplace.

POST-TERMINATION CONFIDENTIALITY OBLIGATIONS Stonetile (Canada) Ltd. v. Castcon Ltd.19 FACTS This was an action by Stonetile (Canada) Ltd. against the defendant Castcon Ltd. and its major shareholder, Robert Will. Will had formerly been an executive employee of Stonetile. Stonetile claimed that Will had taken its production process ­ namely a cement exterior moulding system - and used that confidential information to create a competing business in Castcon. As a result, Stonetile sued for breach of confidence, breach of contract and breach of fiduciary duty. The essential issue was whether Stonetile had a unique, confidential production process, and if so, whether it was guarded sufficiently to maintain its confidential nature. The trial judge held that none of the individual processes used by Stonetile were trade secrets or confidential. As a result, the question of confidentiality was whether Stonetile had combined these processes in such a way to create a confidential process. THE DECISION Overall, the Court held that although there was some public disclosure of aspects of the Stonetile system, there was insufficient disclosure of details of the overall production process to say that the process was in the

19

2010 ABQB 392.

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public domain or that it had lost its confidential nature. Although the information itself was not confidential, the way in which Stonetile combined this information led to the creation of a confidential process. In other words, the Court employed the "alphabet argument" - although the letters themselves are not confidential, the way they are put together and the final product is. Castcon was found to have breached the test for confidentiality, as the Court held that the production process was confidential, that it was communicated in confidence (as Will signed a confidentiality agreement), and that the information was misused as it had been utilized by Castcon to "springboard" it into an advantageous position. However, the Court struck down the claims for breach of contract and breach of fiduciary duty, as the confidentiality agreement that Will signed was too vague to be enforceable and he did not have any powers of discretion related to the interests of the company while employed at Stonetile. SUMMARY The disappointing news for employers is that, in determining the damage award for breach of confidence, the trial judge only awarded $110,000, one year's average profits since Castcon started in 2003. In coming up with this amount, the judge decided that the misuse of the confidential information had given Castcon a one year head start as compared to where it would have been had it not misused Stonetile's confidential information. As a result, this award highlights the need for a properly worded confidentiality agreement that is clear and enforceable.

G.

Fall of the Torts

NO MORE CLAIMS FOR NEGLIGENT INFLICTION OF MENTAL SUFFERING IN THE WORKPLACE Piresferreira v. Bell Mobility Inc.20 The Ontario Court of Appeal has ruled that the tort of negligent infliction of mental suffering is not necessary or appropriate in an employment context. In our paper titled "Show me the Money", we have provided a comprehensive overview of this decision and what it means for employers. Don't miss this re-cap of a victory for employers! NO COMMON LAW TORT OF INVASION OF PRIVACY Jones v. Tsige21 This case, which is on its way to the Ontario Court of Appeal, addresses one of the oldest issues with respect to common law torts: Is there a free standing common law right of privacy? THE FACTS Winnie Tsige, an employee of the Bank of Montreal ("BMO"), was caught accessing the private banking records of a BMO customer, Sandra Jones. Ms. Tsige admitted to calling up the records 174 times between August 2006 and July 2009, even though her job at the bank gave her no legitimate work related reason to

20 21

2010 ONCA 384. 2011 ONSC 1475.

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pry into Ms. Jones' affairs. The evidence revealed that Ms. Tsige was at the time in a financial dispute with a common-law spouse who had previously been married to Ms. Jones. Ms. Tsige was spying on Ms. Jones' financial records to see how much money her common-law spouse might have been paying to Ms. Jones for child support. Although she viewed the records on the computer, Ms. Tsige never printed the material or shared the information with anyone. Ms. Tsige admitted to the wrongdoing and apologized, and she was disciplined by the bank. Instead of bringing an action against BMO under the Personal Information Protection and Electronic Documents Act ("PIPEDA"), Ms. Jones sought legal recourse against Ms. Tsige personally under the common law tort of invasion of privacy, as Ms. Jones was also an employee of BMO and didn't want to jeopardize her career by suing her employer. THE DECISION Ontario Superior Court Justice Kevin Whitaker concluded that there is no common law tort of invasion of privacy in Ontario. In his brief and succinct decision, Justice Whitaker noted that most Canadian jurisdictions have statutory administrative schemes that govern and regulate privacy issues and disputes (specifically, Newfoundland and Labrador, British Columbia, Saskatchewan and Manitoba, and Quebec provides for the tort of invasion of privacy in art. 35 of the Civil Code). Although there is no similar statutory administrative scheme in Ontario, Justice Whitaker stated that "it cannot be said that there is a legal vacuum that permits wrongs to go un-righted ­ requiring judicial intervention". Specifically, PIPEDA applies to the banking sector and Ms. Jones had the right to initiate a complaint to the Commissioner under that statute with eventual recourse to the Federal Court. For this reason, the Court did not accept the suggestion that Ms. Jones would be without any remedy for a wrong if it was held that there is no tort for the invasion of privacy. Justice Whitaker also noted that this is not an area of the law that requires "judge-made" rights and obligations. In his words, "[s]tatutory schemes that govern privacy issues are, for the most part, carefully nuanced and designed to balance practical concerns and needs in an industry-specific fashion." As a result, he ruled that there is no tort of invasion of privacy in Ontario. IMPACT OF THIS DECISION IN ALBERTA This decision will likely have implications in Alberta as well, for employees in this province have similar recourse to statutory schemes governing privacy such as PIPEDA, the Alberta Personal Information Protection Act ("PIPA"), and the provincial Freedom of Information and Protection of Privacy Act ("FOIP"). As a result, the reasoning of Justice Whitaker in Ontario will likely be applied in Alberta on a similar basis to rule that there is no common law tort of invasion of privacy in this province. However, Ms. Jones has instructed her lawyer to take this matter to the Ontario Court of Appeal, and so we will be waiting in anticipation for a more determinative ruling on this issue. Stay tuned!

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H.

Immigration

The federal government has introduced new rules to regulate temporary foreign workers in Canada. The rules seek to both protect foreign workers and emphasize the "temporary" nature of their status in Canada. Citizenship and Immigration Canada ("CIC"), together with Human Resources and Skills Development Canada ("HRSDC") and the Canada Border Services Agency ("CBSA"), implemented the following changes effective April 1, 2011. New Four-Year Limitation on Work Permits Temporary foreign workers will be permitted a maximum of four years work at one time, and will be required to leave Canada for a full four years before being eligible to reapply for a Canadian work permit. Even foreign workers who are waiting for their permanent resident status to be approved will have to leave Canada when the four-year period is reached. Added Requirements for Labour Market Opinions ("LMOs") All LMOs issued by HRSDC will have a validity period that will expire ­ usually after six months. If a foreign national does not apply for a work permit prior to expiry of the LMO, the employer will need to obtain a new LMO. It also appears that LMOs may be issued for shorter periods than previously granted. Offers of Employment Will Be Subject to Greater Scrutiny Immigration officers will now be paying greater and specific attention to the genuineness of all offers of employment made to foreign workers. Two-Year Prohibition for Violators Employers who are found to have violated the immigration or legislative requirements, or their commitments to foreign workers, will be barred from employing foreign workers for two years. This penalty is over and above the existing penalties of up to $50,000 in fines and/or imprisonment. What Do the New Rules Mean? Generally, the new rules will not negatively affect the majority of employers. They likely will, however, require most employers to ensure that applications are more carefully reviewed and that records are kept accurate and up-to-date. Employers with foreign workers will need to determine whether the foreign worker is a good long-term prospect and decide whether to support an application for permanent resident status. Equally, the foreign worker will need to make a decision about their long-term immigration status sooner than is now the case. Work permits will no longer be able to be extended indefinitely or easily. And with wait times for work permit extensions and permanent resident applications ever increasing and a four-year cap soon to be in place, it is very important for employers and foreign workers to start thinking about the long-term sooner. More New Rules? CIC recently announced it is consulting with stakeholders about changing aspects of the Federal Skilled Worker Program. It is considering changing the number of points awarded in three of the six selection categories, and is also proposing changes to educational requirements to boost selection points. The objective is intended to better align the current needs of the Canadian economy and the interests of immigrant attempting to integrate into the economy.

New Rules for Foreign Workers

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I.

Class Action Overtime Claims Update

The first case to be decided with respect to class action overtime claims in Canada is the 2009 decision of Fresco v. Canadian Imperial Bank of Commerce.22 In this case, an Ontario Court denied certification on the basis that the case did not raise common issues that would justify one proceeding in place of multiple lawsuits by individual claimant. In addition, the Court held that CIBC's policy requiring pre-approval for overtime did not violate the Canada Labour Code. The decision to deny certification was upheld by the Ontario Divisional Court on appeal on September 10, 2010.23 In February of 2010, a similar class action proceeding was brought against the Bank of Nova Scotia ("BNS"). In this case, the Ontario Court granted class certification and held that the employer's policy of putting the onus on employees to obtain pre-approval of overtime did not relieve the employer of liability when completion of the work assigned to employees required that they perform services after regularly scheduled working hours.24 In August of 2010, yet another judge in Ontario certified a class proceeding against the Canadian National Railway Company ("CNR") and held that a company policy requiring pre-approval for overtime violated the Canada Labour Code with respect to the alleged inappropriate classification of 1500 employees as managers to avoid paying them overtime.25 Appeals have been filed but not yet heard in the BNS and CNR cases. As a result, this will likely end up before the Ontario Court of Appeal. Whatever the decision there, an application for leave to appeal to the Supreme Court of Canada is almost assured.

22 23

(2009) 71 C.P.C. (6th) 97. 2010 ONSC 4724. 24 Fulawka v. Bank of Nova Scotia, 2010 ONSC 1148. 25 McCaracken v. Canadian National Railway Company, 2010 ONSC 4520.

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CONCLUSION The past year has seen many significant decisions with respect to wrongful dismissal, human rights, labour law, privacy, and other labour and employment developments both within the province and across the Canadian legal landscape. From historic damage awards, to the recognition of management rights in the privacy sector, to the "fall of the torts", this has been a year of significant ups and downs for employers. While the courts have provided clarity with respect to issues such as the definition of an "employer" and the scope of confidential information generated in the workplace, other areas continue to evolve such as family status accommodation and drug testing in the workplace. Given the increasing complexity and often contradictory nature of the law, some would argue that being an employer is more difficult than ever. However, we believe that it's not whether you "win" or "lose", but how you play the game and how quickly employers can adapt to significant and ongoing changes in the legal landscape. In any event, in Alberta and across the country, it is certainly an exciting and defining time in labour and employment law, and we look forward to "checking the score" next year and providing you with another set of legal rules to play by. Thanks for joining us!

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SOUTHERLY WINDS OF CHANGE: US Labor & Employment Law

Presented by: Michael Droke Global Employment & Labor Practice Group Co-Head Dorsey & Whitney LLP

701 Fifth Ave., Suite 6100 Seattle, WA 98104-7043 [email protected] Phone: (206) 903-8709

The Basics

· · The Three Essential Things To Know About U.S. Employment Laws Today's Focus: Trends in: Discrimination Retaliation Wage and Hour Labor Law (Union-Management Relations) Arbitration enforcement

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Trends: Discrimination

Record Number of EEOC Discrimination Charges Filed in 2010 Disability Protections Expanded New Issues Regarding Drug Use (Medical Marijuana)

3

ADAAA

Americans With Disabilities Act Amendments Act of 2008 Definition of disability should be construed in favor of broad coverage of individuals Mitigating measures (other than glasses or contact lenses) not to be considered in assessing whether an individual has a disability Impairment that is episodic or in remission is a disability if it would substantially limit a major life activity when active Key issue is becoming "reasonable accommodation"

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Looking Ahead ­ US Supreme Court

Wal-Mart v. Dukes (argued Dec. 7, 2010) ­ Largest certified class ever

5

Trends: Retaliation

Retaliation Protections On The Rise Retaliation (36,258) surpassed race claims (35,890) for first time ever

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Whistleblower Protections

Dodd-Frank Act Large bounty for supplying "original information" to SEC If information results in SEC sanctions exceeding $1,000,000, whistleblower will receive award of 10 - 30% of sanctions Employee protected from retaliation for providing information and may bring federal court action to enforce Big incentive for employee whistleblowing

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Retaliation: "Related To" Protections

Thompson v. N. Am. Stainless, LP, 2011 WL 197638 (U.S.S.C.) Title VII prohibits retaliation against employees who have made a Title VII charge Plaintiff was fired shortly after fiancé filed EEOC discrimination claim against employer Title VII anti-retaliation provisions should be construed to cover a wide range of conduct Court found unlawful retaliation because a reasonable worker would be dissuaded from engaging in protected activity if they knew their fiancé would be fired Court declined to issue a bright line test

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Trends: Wage and Hour

Continued Increase in Wage and Hour Litigation 25% of Largest US Employers Report Increase In Last 2 Years Increased focus on independent contractor status

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Trends: Labor Law

Labor Law Issues On The Rise Union Certification (new contracts) Labor arbitrations

10

Labor Law

Expansion into social media realm ­ NLRB issued complaint against an employer for terminating an employee who criticized her supervisor on her Facebook page ­ Settled in February 2010

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Trends: Arbitration Agreements

Increased reliance on arbitration agreements Regularly coming under attack California's unique approach questioned

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Arbitration Agreements Win In Supreme Court

Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772 ­ Arbitrator properly addressed challenge to validity of arbitration agreement when a provision in the agreement expressly delegates such authority to the arbitrator, not the court Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758 ­ Under FAA, there must be a contractual basis for concluding that parties agreed to submit to class arbitration AT&T Mobility v. Concepcion, No. 09-893 ­ California law preempted to the extent it refused to enforce arbitration agreement that disallowed class-wide arbitration.

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Questions?

Thank you!

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UNDER PRESSURE: Pension and Benefit Trends

RANDY BAUSLAUGH DONOVAN PLOMP MARK FIRMAN

(Updated by Greg Winfield May 2011)

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Status of Pension Reform and Trends in Collective Bargaining

Pension Reform In a Nutshell

After two decades of inaction on pension reform (except Quebec), it appeared several Canadian governments were finally prepared to move forward aggressively on meaningful changes to the rules governing private and public pension plans. In 2008 and 2009 expert commissions in Alberta, British Columbia, Ontario and Nova Scotia released reports recommending substantial revisions to pension standards legislation. While Ontario and the federal government have been forging ahead on many initiatives, the energy and enthusiasm in other provinces seems to be waning. The report of the Alberta and British Columbia Joint Expert Panel on Pension Standards was released on November 28, 2008. The Panel was then dissolved, and a public response period followed, ending March 1, 2009. No legislative steps have been taken since the report or public consultation ended, although in 2010 the Government of British Columbia released a consultation paper seeking submissions on expanding pension coverage and seeking submissions by April 2010. The paper, entitled "Mechanisms for Expanding Pension Coverage and Retirement Income Adequacy in Canada," seeks views on how best to address anticipated future shortfalls in Canada's retirement income system (RIS). The paper asks for comment on 5 potential options, as follows: ¬ Expansion of the existing CPP program; ¬ Creation of a voluntary defined contribution supplement to the CPP; ¬ Modernization of pension standards to improve flexibility in pension plan design; ¬ Tax reform ­ changes to the Income Tax Act, and ¬ A blend of options. Clearly, pension legislation is politically sensitive. It is unlikely the current political turmoil in Alberta and British Columbia will result in swift action. Indeed, Alberta's Finance Minister has suggested that governments should wait a decade before deciding on major changes, and has argued for an incremental approach. Similarly, British Columbia's Finance Minister urges caution. Meanwhile Ontario and the federal government also acknowledge that caution is necessary, but they are proceeding with more substantial reform of pension standards applicable to registered pension plans, and Ontario's minister has been more robust in his calls for meaningful change to address coverage issues. There is obvious recognition that too many people are not covered by company pension plans and most are likely to have insufficient retirement savings. Everyone seems to understand that delaying reforms to expand coverage will take decades to implement. Nonetheless the debate over whether to introduce another public plan, expand the CPP or do something else is clearly an area where all governments seem to be taking a very cautious approach. But not so cautious -- all three major political parties in Canada have indicated pension coverage will be a major issue in upcoming elections.

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Pension Reforms in Alberta and British Columbia

The only truly meaningful changes in British Columbia and Alberta were the solvency relief measures to provide financial relief. They were the first off the mark with these, but they are only temporary measures, introduced during the "Great Recession" of 2008. A checklist of other reforms follows. ALBERTA February 18, 2009, the Employment Pension Plans Amendment Regulation, 2009 was amended to do the following: ¬ Housekeeping change, to clarify that both a valuation report and cost certificate are required in instances where a valuation report is required; ¬ 3 year extension of original Specified Multi Employer Pension Plans (SMEPP) solvency moratorium beyond 2008; the new subsection provides an automatic further three year exemption from making solvency deficiency payments, until the end of 2011. ¬ SMEPPS currently under the solvency moratorium whose initial solvency exemption period ends after December 31, 2008 OR for SMEPPS that had not previously applied for an exemption, the new section permits those plans to reapply/apply at any time prior to 2010 for a 3 year exemption from making solvency deficiency payments. It also sets out requirements for the application. ¬ 3 year Non-SMEPP Solvency moratorium, allowing administrators of such plans to apply at any time prior to 2010 for a 3 year exemption from making solvency deficiency special payments. ¬ To allow the administrator of a DB plan to apply to the Superintendent on a one time basis to extend the amortization period of any newly established solvency deficiency over 10 years (rather than 5) but had to apply prior to Jan 1, 2010. November 1, 2010: the Employment Pension Plans Act was amended by making a variety of what appear to be procedural and housekeeping wording changes to various sections of the Act. BRITISH COLUMBIA There have been no amendments to the Pension Benefits Standards Act in the last 18 months; however there are 2 Bills that have been passed but have not been brought into force. They may be brought into force by regulation, but have not as of this date. The bills are: ¬ 2009-The Pension Benefits Standards Amendment Act 2009 makes changes to the definition of "administrator", "employee", "employment" "pension plan", and some other minor amendments which would come into force by regulation. ¬ 1999-The Pension Benefits Standards Amendment Act 1999 would make various minor changes. There were some minor amendments made to the Pension Benefits Standards Act Regulation on December 11, 2009 and March 25, 2010.

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Pension And Benefit Trends In Collective Bargaining

Employers beginning collective bargaining are, for the most part, seeking pension and benefit-related concessions in response to the lingering financial impact of the recent economic downturn. The "Great Recession" is now acknowledged as the worst economic downturn since the Great Depression (the Dow Jones industrial average dropped US$1.2 trillion in a single day on September 29, 2008, its biggest single-day loss in history).1 At the same time, interest rates fell to record lows, which reduced the long-term yields of many benchmark debt investments used to value and fund pension plan obligations. As a result, many public and private pension funds suffered unprecedented losses over a very short period of time. One U.S. report indicates that the funded ratio of U.S. defined benefit ("DB") pension plans collectively dropped by a record 20 to 30 percent in 2008,2 and Canada appears to have fared little better. While markets (and pension funds with them) have begun to recover, the disastrous effects of the initial downturn continue to have what looks to be a long-lasting impact. And, of course, future market performance and interest rates (which remain at record lows) are uncertain. Canadian sponsors of pension and benefit plans accordingly continue to face increased costs, unless relief is achieved.

Pension Plans

Recent rounds of collective bargaining show that there is a wide spectrum of possible resolutions to the problem of unsustainable pension funding obligations. At one end of the spectrum is the somewhat drastic step of terminating a pension plan entirely, without establishing a replacement retirement plan. Despite the recent economic turmoil, most employers are not (and many bargaining agents would likely not fathom) putting this option on the table. At the other end of the spectrum is the maintenance of the pension plan's status quo with perhaps only minor changes to ancillary benefit levels or benefit formulas. For many employers, the status quo option is neither ideal nor economically feasible, at least without significant concessions in other areas. The results have therefore usually fallen between the two extremes, with common outcomes involving the closure of a DB plan to future accruals and the introduction of a defined contribution ("DC") plan for future service, the introduction of a DC plan for new hires only, reductions to future benefits and/or the election of statutory solvency funding relief. Each of these items is briefly discussed in turn.

1

2

Alexandra Twin, "Stocks Crushed" (29 September 2008), online: CNNMoney.com <http://money.cnn.com/2008/09/29/markets/markets_newyork/index.htm>. Towers Perrin, Capital Market Update (December 2008), online: Towers Watson <http://www.towersperrin.com/tp/getwebcachedoc?country=usa&webc=USA/2009/200901/CMU_EOY_2008.pdf>.

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MOVE TO DC ARRANGEMENTS In the past two decades, there has been a broader trend towards DC plans, which provide fixed costs for employers and more predictable pension liabilities in financial statements. The recent economic turmoil appears, anecdotally, to have accelerated this ongoing trend. In fact, even employers who sponsor or formerly sponsored large, long-established DB plans are currently proposing or have already made the transition to a DC arrangement for either new hires or for all employees. In contrast, bargaining agents largely continue to prefer DB plans, and have often been prepared to fight to keep them even when employers propose relatively generous DC arrangements in their place, although that is now changing. For example, in at least two recent rounds of negotiations, employees voted to accept a new DC plan despite their respective unions' continuing recommendation to keep the existing DB plan (highlighting the strength of unions' philosophical preference for a DB arrangement even when employees themselves are willing to make concessions). Indeed, the preservation of a DB plan has in a few recent highprofile cases become the central basis for a lockout or strike, including a twelve-month strike involving Vale Ltd. (formerly Inco Ltd.) in Sudbury, Ontario.3 REDUCTIONS TO PENSION BENEFITS Employers are also seeking to curtail rising pension costs by reducing pension benefits on a going-forward basis. In this regard, many employers have recently negotiated the elimination of ancillary benefits, such as early retirement enhancements, bridge benefits and ad hoc indexing, from their pension plans. Some employers have also proposed and achieved reductions to their plans' basic benefit formulas (e.g., from a DB formula of 2.0% of final average earnings to 1.5%). Finally, whether in conjunction with or in lieu of benefit reductions, employers have sought to increase employee contributions for contributory plans or to introduce a member contribution requirement in previously non-contributory plans. TEMPORARY SOLVENCY FUNDING RELIEF Employers continue to raise temporary solvency relief measures that have been made available in almost every Canadian jurisdiction, although in some cases the time periods in which such relief could be elected have now passed ­ including Alberta. In British Columbia, a plan administrator has historically been able to apply for extensions in the time required to make up a DB plan's solvency shortfall under section 6 of the Pension Benefits Standards Act ("BC PBSA").4 As part of the introduction of broader solvency relief federally and in other provinces, however, the BC Superintendent of Pensions (the "BC Superintendent") released additional guidelines governing how she will treat applications for relief.5 Neither the BC PBSA nor the guidelines require bargaining agent consent for solvency relief, though application for such relief may well require consultation with bargaining agents in and outside of negotiations, especially to the extent that the pension plan in issue forms part of the collective agreement.

3

4 5

Andy Hoffman and Josh Wingrove, "Historic strike nears end with Vale deal" (5 July 2010) Globe & Mail, online: GlobeAdvisor.com <https://secure.globeadvisor.com/servlet/ArticleNews/story/gam/20100705/VALE05ATL>. R.S.B.C. 1996, c. 352 BC Superintendent, "Guidelines for Requests for Solvency Extensions for Defined Benefit Pension Plans" (January 2009) Bulletin No. PEN-09-001, online: Financial Institutions Commission <http://www.fic.gov.bc.ca/pdf/Pensions/bulletins/PENS-09-001.pdf>.

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Additionally, as a measure of more targeted relief, BC recently amended the Regulation under the BC PBSA6 to allow administrators of DB multi-employer negotiated cost pension plans to make a one-time application to the BC Superintendent on or before December 31, 2013 to suspend "special payments" in respect of a solvency deficiency for up to three years. Other Canadian jurisdictions have required a certain threshold of member consent for some measures of solvency relief, with unions generally empowered to consent or object on behalf of the members they represent. For example, under the Ontario Pension Benefits Act ("Ontario PBA"),7 a plan administrator has a time-limited option to elect to extend the statutory period over which to amortize payments to make up a solvency funding shortfall from five to ten years.8 This option requires member and retiree "consent", which the Regulation defines to mean that no more than one third of active members and retirees, taken as a single class, can object to the extension. "Collective bargaining agents" (which curiously has not been defined to include non-trade union bargaining agents operating outside labour relations legislation, like faculty associations) representing active members must consent or object on behalf of all of the plan members that they represent. In recent Ontario negotiations, unions have required employers to extend the amortization period by less than the allowed maximum in exchange for their consent (for example, to seven rather than ten years). MULTI-EMPLOYER PENSION PLANS Different trends have arisen for employers who contribute to multi-employer pension plans ("MEPPs"), for which employer contributions are fixed and members and retirees employed outside Québec often bear the risk of reduced benefits due to plan funding shortfalls. Because MEPP investments have been subject to the same adverse markets as single-employer plans ("SEPPs"), unions have recently pressed for increased fixed contributions or, in the case of the Canadian Commercial Workers Industry Pension Plan ("CCWIPP"), contributions to a "stabilization fund" established by the union to improve the plan's funding levels. In many cases, unions are pressing employers not in a MEPP to contribute to that particular union's MEPP and tout it as a less financially volatile DB alternative to the employer's existing plan. Of course, given the wellpublicized troubles of some MEPPs, the potential pressure for additional contributions to outside stabilization funds and additional restrictions that may be set out in the MEPP's governing text, employers must carefully weigh all of the advantages and disadvantages and do their "due diligence" before agreeing to contribute to a particular MEPP. ADDITIONAL MATTERS TO CONSIDER Legal restrictions may constrain an employer's ability to change the terms of the pension plan even if the union agrees. For example, a recent case considering the Alberta Employment Pension Plan Act ("EPPA") may have implications for some plans on the ability to make amendments freezing final average earnings to be taken in consideration in computing pensions. The decision is one of the Alberta Court of Appeal in Halliburton Group Canada Ltd. v. Alberta and it may or may not signal a significant change in the application of the EPPA. In short, while the court decision itself may be viewed as less about the interpretation of the

6 7 8

B.C. Reg. 433/93, Sch. 1.1 R.S.O. 1990, c. P.8 R.R.O. 1990, Reg. 909, s. 5.6(3). The relief is only available in respect of the first actuarial report filed with an effective date of between September 30, 2008 and before September 30, 2011 inclusive.

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EPPA and more about procedure and jurisdiction, it did deal with facts in which the Superintendent of Pensions determined that a pension plan amendment which "froze" the earnings to be used to compute DB pensions was ineffective because it was in breach of subsection 81(1)(a) of the EPPA. The decision does not really critique the EPPA provisions and largely identifies that the effect of that subsection is to require a careful review of plan provisions and largely identifies that the effect of that subsection is to require a careful review of plan provisions before attempting a "hard freeze" on pension accruals as had been undertaken when Halliburton converted its plan from DB to DC and sought to freeze earnings. The decisions did not explore in any detail earlier court decisions on the meaning of "accrued benefits" and the case noted that the EPPA provisions require consideration of the specific plan terms. See also, subsection 59(1) of the BC PBSA ("PBA") which prevents sponsors of plans that are not negotiated cost plans from reducing the value of benefits already accrued. Addition legal restrictions could also come into play, including under human rights or income tax legislation. It is recommended that employers seek professional advice as to whether any legal impediments exist before tabling a proposal to the union and vice versa. EXPANSION OF "GROW-IN" RIGHTS IN ONTARIO On May 18, 2010, Bill 236, the Pension Benefits Amendment Act, 2010 ("Bill 236"),9 received Royal Assent. Bill 236 made substantial amendments to the Ontario PBA. One such amendment of particular note to employers with plan members employed in Ontario is the expansion of so-called "grow-in" rights, which have, until now, generally allowed a plan member whose age and years of continuous employment or plan membership equal at least 55 to become eligible for any early retirement subsidies available under the plan as if he or she remained employed to the date that she would otherwise become entitled to them in the normal course. Section 74 of the Ontario PBA currently provides that such grow-in rights become available on the full or partial wind up of a pension plan.10 In this regard, the policy underlying such benefits has been to soften the effect of a plant closure or other downsizing on older plan members who typically have more difficulty finding alternative employment. Depending on the early retirement subsidies offered under the plan, such benefits have the potential to be very costly to employers, with amounts in the hundreds of thousands of dollars per employee not unheard of. Bill 236 amended the Ontario PBA to extend grow-in rights to all plan members whose employment is terminated effective on or after July 1, 2012, other than as a result of wilful misconduct, disobedience or wilful neglect of duty by the member that is not trivial and has not been condoned by the employer, or if the termination occurs in such other circumstances as may be prescribed (no draft Regulations have prescribed further circumstances). These expanded rights will apply to most DB plans with Ontario members, although MEPPs and "jointly-sponsored pension plans" will be able to file an election to exempt themselves from the new rules. The expansion of grow-in rights has affected and will affect into the near future collective bargaining involving DB plans. Employers have sought to reduce costs by negotiating the reduction to or elimination of early retirement subsidies that can be grown into in advance of the July 1, 2012 effective date. In practice, the authors are not aware of any situation in which this has successfully occurred. In addition, it is important for

9 10

S.O. 2010, c.9 Note that Bill 236 amended the Ontario PBA to eliminate partial wind ups with an effective date to be determined by future proclamation. According to a technical backgrounder, that date is intended to be July 1, 2012.

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employers to note that the expansion of grow-in rights may affect terminated members' entitlements under closed DB plans or DB components of plans that have converted to DC arrangements. It will therefore not be possible for many employers to mitigate the effect of these new rules by simply closing their DB plans entirely (so long as early retirement subsidies remain available under the closed arrangement). DISTRESSED PENSION PLAN WORKOUT SCHEME FOR FEDERALLY-REGISTERED PLANS On July 12, 2011, the federal Budget bill, Bill C-9,11 received Royal Assent and made a number of revisions to the federal Pension Benefits Standards Act ("PBSA").12 One set of amendments that will be of particular note to labour and employment practitioners is the introduction of what the PBSA calls a "Distressed Pension Plan Workout Scheme" (the "Workout Scheme"). The Workout Scheme will essentially allow an employer to elect to enter into a statutory negotiation process whereby the employer can negotiate a "workout agreement" and "funding schedule" that together will allow the employer to defer future minimum special payments that would otherwise be required by the PBSA. The employer must reach an agreement with the bargaining agents for collectively bargained plan members and with court-appointed representatives for non-bargaining plan members and other "beneficiaries" (defined as non-members with entitlements under the plan). The Workout Scheme will not apply to multi-employer plans, plans sponsored by Crown agencies, terminated plans or plans whose sponsors are bankrupt or in liquidation. The provisions governing the Workout Scheme are, as of writing, not yet in force. They will be declared in force at a future date when, it is presumed, Regulations complementing the provisions are finalized. In this regard, the Department of Finance released draft Regulations on December 14, 2010 for stakeholder comment until January 17, 2011.13 Since the comment period is now over, it is expected that the Regulations will be finalized and the Workout Scheme will come into force shortly. More specifically, eligible employers will have to file an election with the Superintendent of Financial Institutions (the "federal Superintendent"), with a copy to the Minister of Finance, that includes a declaration that the employer is not able to make the special payments that will become due, or is restructuring under the Companies' Creditors Arrangement Act ("CCAA")14 or under Part III (proposals) of the Bankruptcy and Insolvency Act ("BIA").15 The employer must then apply to have a court appoint representatives to act on behalf of non-bargained plan members and other plan beneficiaries. In the normal course, the process will be governed by the Federal Court; however, if the employer is under CCAA or BIA protection, the court overseeing the restructuring will have jurisdiction. The cost of the application and the representatives' reasonable fees must be paid by the employer, not from the pension fund. The employer will also have certain obligations to provide prescribed information to members and beneficiaries throughout the process.

11 12 13

14 15

Jobs and Economic Growth Act, 2010, c. 12. R.S.C. 1985, c. 32 (2nd Supp.). Regulations Amending Certain Regulations Made Under the Pension Benefits Standards Act, 1985, online: <http://www.fin.gc.ca/drleg-apl/pbsr-rnpp-eng.asp>. R.S.C. 1985, c. C-36. R.S.C. 1985, c. B-3.

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After an employer files an election, a "negotiation period" begins to run. During this period, the federal Superintendent is prohibited from ordering the plan to be terminated, and special payments falling due are deferred (unless the plan is otherwise terminated, proceedings against the employer commence under the CCAA or BIA or the parties fail to negotiate a satisfactory workout agreement). The Workout Scheme permits bargaining agents to consent on behalf of plan members they represent. Court-appointed representatives will be permitted to negotiate on behalf of the plan members and beneficiaries they represent. Non-bargained members and beneficiaries will have an opportunity to object to the proposed workout agreement once reached; however, provided that less than one third of members and one third of beneficiaries object, the court-appointed representatives will be able to consent on their collective behalf. Once the parties reach an agreement, it must be approved by the federal Superintendent and the Minister of Finance, according to prescribed criteria. Once it comes into force, the Workout Scheme will provide employers with another tool to structure pension funding relief, albeit with substantial bargaining agent and other stakeholder input and involvement. Outside insolvencies, when unions may be more willing to consent to postponing employer funding obligations to preserve what remains of an underfunded pension plan, it is unclear how co-operative unions, non-bargained members and retirees will be.

Non-Pension Benefits

Many employers are also seeking cost-savings in respect of other employer-funded benefits. Recently, employers have negotiated additional eligibility restrictions for sick leave benefits to reduce costs associated with the abuse of sick leave arrangements. Such costs are particularly high when employers self-insure their short term disability plans. There have also been a number of recent cases in which employers have negotiated benefit caps and/or higher employee co-payments. One common proposal in this regard is to cap coverage for a pharmacist's dispensing fees for prescription medication. The effects of the economic recession have not been lost on many bargaining agents. Many have moved away from proposing large increases in benefits and have instead been proposing that the employer provide or increase the level of benefits that have been removed by provincially-funded insurance. These benefit proposals tend to include provisions for paramedical transport, vision and eye examinations. Although employee demands have begun to take into account the effects of the recent economic downturn, bargaining agents appear to have remained steadfast in cases in which they have received a "no concessions" mandate. In particular, employees have exercised their right to strike in the past two years most often where the union has perceived that it was being asked to concede language or benefits it had achieved during previous rounds of bargaining. Strikes appear to have been less frequent in cases in which the bargaining impasse has been over an employer refusal not to accept a proposal that exceeds the industry norm.

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EMPLOYEE LIFE AND HEALTH TRUSTS Finally, recent amendments to the Income Tax Act,16 which came into force on December 15, 2010, now contemplate "employee life and health trusts" or "ELHTs" to provide designated benefits to employees (benefits provided under a group sickness and accident insurance plan, a group life insurance policy or a private health services plan). Essentially, the amendments codify the rules governing "health and welfare trusts", which have, until now, been governed by administrative policies of the Canada Revenue Agency. Because of their novelty, ELHTs have not yet been widely proposed in collective bargaining, but may become more common topics for bargaining in the future. A detailed description of the new rules is beyond the scope of this paper; however, the new ELHT rules have the potential to allow some employers to make a one time payment (or series of payments) to settle an ELHT and shift their existing health and welfare benefit obligations for both employees and retirees to a new union or employee-administered arrangement. If structured correctly, such an arrangement could significantly reduce the benefit obligations reported on employer financial statements (which would lead, it is hoped, to corresponding positive effects on share price and interest rates on borrowing). McCarthy Tétrault is currently assisting in the creation of Canada's first such ELHT.

EMPLOYER STRATEGIES IN COLLECTIVE BARGAINING

The relationship between a given employer and its bargaining agent(s) is, of course, unique. In some cases, bargaining agents may be more amenable to pension changes than others. That said, all employers can benefit from the following broad strategies and considerations leading up to and during negotiations. ADVANCE PREPARATION Though trite, it bears emphasis that employers need to set a clear plan and be prepared to discuss and debate the details. For example, when the employer is proposing a new DC arrangement, it should prepare in advance all of the details regarding the design, terms and treatment of existing accrued DB benefits, including any potential option to convert to a DC benefit, the new employer and, if applicable, employee DC contribution rate, and whether different employer contribution rates will apply to existing employees and new hires or among existing employees based on their different age plus years of service. EXPLAIN REASONS FOR CONCESSIONS Seeking concessions will often be an exercise in advocacy. In the majority of cases, employers must make their case in order to receive union support for proposed changes. In the past few years, union support has been unnecessary to secure ratification most often in the cases of long strikes, the high costs of which affect both employers and employees. Generally speaking, if employers can show evidence that employees risk future lay-offs, terminations or the total shutdown of the employer's business unless pension (or benefit) costs can be controlled, a union may be more open to accepting changes to a long-standing DB plan that in prior years would not have been open for discussion.

16

R.S.C. 1985, c. 1 (5th Supp.), section 144.1.

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Clear communication will help to close the gap between the parties and establish up front those matters on which the parties agree. As well, meaningful talks can only be achieved if union representatives fully understand the employer's proposal. For example, in light of many unions' philosophical preference for DB plans (not to mention recurring stories in the popular press promoting DB over DC arrangements), the employer must ensure that the union understands the implications of any proposed change to DC. With the assistance of an actuary, employers should develop readily understandable examples of the impact of DC proposals on employees' future benefits without "overselling" the results, which could lead to future grievances or litigation. If the employer is seeking solvency relief (especially in those jurisdictions that require union consent), employers should consider preparing a detailed explanation of the process and the rational for union consumption. Such a document could summarize the relevant plan terms, the "normal course" pension funding rules, the plan's current and historic funded status, the pension fund's current investment holdings and their impact on the plan's funded status. AVOID EXPANDING THE SCOPE OF FUTURE NEGOTIATIONS Unlike MEPPs, employers typically do not negotiate funding requirements for DB SEPPs during negotiations (frequently, the parties simply negotiate benefit levels, and the employer proceeds to fund the plan based on the projected costs of existing benefits and negotiated improvements). By raising temporary solvency funding relief in negotiations, the employer risks placing DB funding on the table in future negotiations. Care must therefore be taken to limit the scope of such discussions to the immediate purpose of one-time solvency relief.

Conclusion

Now that the recent economic turmoil has put pension concessions into play, it appears that they will form part of the collective bargaining environment for some time to come. In many cases, the recession has only accelerated structural trends in the global pension and benefit environment, including the shift to DC arrangements. While no employer can guarantee pension concessions going into collective bargaining, the trends and general strategies set out above should provide it with the basis to frame and address pension and benefit-related proposals at the bargaining table. Additionally, employers should consider to monitor the process of pension reform ­ both in terms of changes to pension standards legislation and in terms of the possible expansion of public coverage.

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CALGARY

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TORONTO

Box 48, Suite 5300 Toronto Dominion Tower Toronto ON M5K 1E6 Tel: 416-362-1812 Fax: 416-868-0673

OTTAWA

Suite 200, 440 Laurier Avenue West Ottawa ON K1R 7X6 Tel: 613-238-2000 Fax: 613-563-9386

MONTRÉAL

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QUÉBEC

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UNITED KINGDOM & EUROPE

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It's a Complicated World:

THE TOP 5 HR LAW ISSUES WE DEALT WITH

Earl Phillips Tina Giesbrecht

May 12, 2011

It's a Complicated World

Introduction

From key legislative changes in the privacy sector to rapidly evolving issues such as harassment and social media in the workplace, it's been a busy year for human resources professionals and their legal counsel. This presentation is designed to provide employers with a summary of the Top 5 HR Issues that we dealt with in 2010.

A.

Privacy (When HR Files go Missing)

It seems we can't turn on the television or radio without hearing about a new privacy breach in the news that affects employers. On April 19, 2011, personal information such as names, birthdates and some credit card data was stolen from user's of Sony's PlayStation Network in what may be one of the biggest data breaches ever. More than 75 million accounts worldwide, including more than one million in Canada, are registered with the network that suffered the massive data breach. This breach is one of the "top five ever", as reported by Alan Paller, director of research for the SANS institute, a cyber-security training and research institute in Bethseda, Md. Sony announced the data breach on its PlayStation blog May 26, 2011, six days after it shut down both services after learning of the "external intrusion". The company said it did not inform users of the breach earlier because it took until Monday, April 25, 2011 to "understand the scope of the breach". Stories like this are becoming all too common, and therefore it is imperative that employers be familiar with privacy legislation and their obligations in the event of a privacy breach ­ no matter how big or small.

Question 1: What must employers do in the event of a privacy breach? Employers operating in the Alberta private sector now have to comply with more stringent privacy legislation as a result of recent amendments to the province's Personal Information Protection Act ("PIPA") that came into force on May 1, 2010. Section 34.1 of PIPA now requires organizations, without unreasonable delay, to notify the Privacy Commissioner of certain significant privacy breaches. The Commissioner can then order an organization to notify any individuals affected by the breach if the Commissioner thinks that the breach puts them at "real risk of significant harm." A breach only needs to be reported if a "reasonable person" would consider it as involving a "real risk of significant harm" to an individual. Significant harm includes the risk of financial loss, identity theft, physical harm, humiliation or damage to personal or professional reputation. The Commissioner must be notified in writing and this notification must include: a description of the circumstances of disclosure, the date or time it occurred, a description of the information involved, an assessment of the risk of harm to individuals and an estimate of how many individuals are at risk, the steps taken to reduce the risk of harm and notify the individuals involved, and the name of a contact person at the organization that the Commissioner can direct questions to.

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Notice must also be given directly to all individuals involved and must include: a description of the circumstances of disclosure, the date or time it occurred, a description of the information involved, the steps taken to reduce the risk of harm, and the name of a contact person at the organization that the individual can direct questions to. The legislation does not define "unreasonable delay", but organizations can take time to gather information about the breach before notifying the Privacy Commissioner and those individuals who may be affected. Question 2: What privacy considerations should employers keep in mind when conducting background and reference checks? It is recommended that employers give the applicant advance notice that they intend to contact previous employers or conduct background checks, and get consent from the applicant to do so. In addition, employers should explain to the applicant in advance the purpose for collecting, using or disclosing the information (i.e., to make a hiring decision), and make certain that the collection and use of the information is "reasonably required" for the establishment of the employment relationship. In terms of determining what is "reasonably required", employers should limit the collection of information to that which is required to assess the candidate's ability to perform the job rather as opposed to conducting broad "fishing expeditions" about a candidate's background or character. Question 3: How long can an organization retain personnel files? It used to be that organizations could keep personal information as long as it was reasonable to do so for legal or business purposes, but the legislation has recently changed and organizations now have a positive obligation to either destroy personal information or make it such that it can no longer be used to identify an individual (ie. de-identification). In other words, personal information must be destroyed or rendered anonymous, within a reasonable time, once the organization no longer reasonably requires it. The courts have not provided us with any clear definition of "reasonable". However, keep in mind that an organization may keep personal information for legal purposes. This includes any contractual obligation or any statutory requirement (e.g. the Income Tax Act) that requires the information to be retained for a certain period of time. An organization may also need to keep personal information for a legal proceeding it is involved in or has a reasonable expectation of being involved in. Question 4: What privacy considerations must a company keep in mind when using service providers outside of Canada? Section 13.1 of the Personal Information Protection Act (Alberta) requires organizations to notify individuals, orally or in writing, before or at the time their personal information is transferred to, or collected by, a foreign service provider. This notification must indicate: · · how to obtain written information about the organization's privacy policies and practices relating to its service providers outside Canada, and the name or position/title of the individual within the organization who can answer questions about the handling of the personal information by the foreign service provider.

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Question 5: What should be included in a company's privacy policy? In order to comply with current privacy legislation, a company's privacy policy should: · · · · Advise employees why their personal information is being collected, how it is being used, and the reason for any disclosure; Inform employees about how the company handles personal information and explain the consequences of failing to safeguard personal information; Outline record retention and/or destruction practices; Advise employees of their right to access their personal information and request corrections; and

In response to the increasing use of social media sites such as Facebook and Twitter in the workplace, employers should also consider adding a social networking policy to existing internet and email policies.

B.

Medical Issues

Disability management is an increasingly complex process. When faced with an employee who is unable to perform his or her duties because of a disability, employers can find it difficult to know what to do and when. Employers are often frustrated by the uncertain parameters that surround a request for an employee's medical information. This frustration is heightened by the knowledge that an improper request for medical information may expose an employer to claims of discrimination on the basis of disability, breach of privacy laws or breach of the terms of an employment contract or collective agreement.

Question 1: When is an employer entitled to ask for medical information from employees? An employer is entitled to inquire into an employee's absence to determine if the absence from work is justified on the basis of illness of injury. In addition, an employer is entitled to request medical information from an employee in order to determine whether or not the reason for the absence meets the eligibility criteria for sick leave benefits and disability programs. In addition to verifying an absence and administering employer disability benefit programs, an employer is entitled to request medical information from an employee in order to determine whether an employee is fit to work. This arises from the employer's duty to ensure that its working environment is safe and does not risk the health and well-being of either the returning employee or his or her colleagues. However, there must be reasonable grounds for questioning the fitness of an employee, and the employer must be able to demonstrate a business interest arising out of a health and safety concern before they can demand better documentation. Employers are also entitled to request medical information in order to determine the estimated duration of an employee's absence of work (to manage operational needs), and to determine whether or not there is a disability within the meaning of human rights legislation so as to trigger the duty to accommodate to the point of undue hardship. It should be noted that once an employee has provided medical information to substantiate an absence from work or to request accommodation, an employer requires reasonable grounds to question the completeness or accuracy of the information before seeking further clarification.

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Question 2: What medical information is an employer entitled to ask for? An employer is only entitled to information that is "reasonable in the circumstances". What is "reasonable" depends on the purpose for which the information is required. For example, a brief medical note will almost always be sufficient in order to justify a short absence, while a full functional assessment will likely be required to accommodate a disability. As a general rule, an employer can request medical information that speaks directly to the fitness or limitations of the employee, the accommodation process and the nature of appropriate accommodative measures. Employers generally do not need to know the actual diagnosis or treatment plan of an employee. According to the case law in this area, the only circumstances that this level of information may be appropriate involve situations where an employer has a reasonable concern about sick leave abuse, where the employer is required to deal with complicated return to work issues, or where a communicable disease is involved. However, the onus for an employer to demonstrate the need for disclosure of diagnosis or treatment plans is very high. An employer has a right to seek further information beyond an initial medical certificate, but only where the employer has reasonable grounds to doubt the accuracy or completeness of the certificate or if they require additional information to manage the absence or return to work. In such cases, the employer must clearly indicate the limitations of the initial medical certificate, or provide the basis for requesting additional information. Question 3: How should an employer go about obtaining medical information from employees? Employers should confine requests for medical information to information that is reasonably necessary to manage an employee's absence from work, their return to work and the health and safety of the workplace. The safest way to obtain medical information is to ask the employee for it directly and obtain their consent to the collection, use and disclosure of the information that is provided. If an employer requires more information than the employee is able to provide, they may consider asking the employee to authorize their physician to release additional medical information to the employer. Once an employer has obtained consent from the employee, they may ask the physician to provide the specific information that they require and explain why they need it. Question 4: Can an employer request an examination by the employer or insurer's chosen doctor? In the absence of specific authority under statute or a collective agreement, an employer has no right to demand that an employee submit to a medical examination unless the purpose is to ensure that the employee is physically fit to perform his or her work safely and efficiently, and there are reasonable and probable grounds for questioning the employee's capacity or to doubt the veracity of the medical information supplied by the employee. As may be expected, the more invasive the nature of the examination that is demanded, the stronger the employer's reasons for the demand will need to be. In addition, employers should keep in mind that the employee will have to consent to the disclosure of any information following a medical examination. Question 5: How may the employer use medical information that is received? Employers should confine the collection, use and disclosure of personal medical information to that authorized by the collective agreement, the employment contract, statute or the employee's consent. Furthermore, the

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employer must protect the employee's privacy by ensuring that the information is only disclosed to those who need to have it on a "need to know" basis. In addition, employers must ensure that this information is stored securely and that all employees who are given access understand the obligation to keep the information confidential. The security measures who are employed should reflect the sensitivity of the information. Remember that under personal information protection legislation, any information that is collected from an employee or his or her physician may only be used or disclosed for the purpose for which it was collected, and may not be used for another purpose (i.e. insurance purposes) without notifying the employee or obtaining his or her consent. Question 6: To what extent must an employer accommodate employees in the workplace? An employer must accommodate disability in the workplace. Accommodation is the process whereby an employer considers adaptations in the workplace which may permit an employee with a disability to perform a job. In order to accommodate employees with disabilities in the workplace, an employer must look at the key functions of the job and determine whether an employee could perform the functions with accommodation. However, the employer's duty to accommodate ends where the employee is no longer able to fulfill the basic obligations associated with the employment relationship in the foreseeable future. The duty to accommodate includes letting employees who are on disability leave return to the same position that they held before their leave or a similar one. Thus, it might be necessary for the employer to hold a position open until the employee is once more capable of fulfilling its essential duties (with accommodations, if necessary). Of course, employers don't have to hold an employee's position open forever. If an employer can show that continuing to hold an employee's position open would be an undue hardship, it may terminate the employee. In determining whether undue hardship has been established, an employer must consider each employee's unique circumstances, including: · · · The nature of the employee's disability, including whether the condition is temporary or permanent, and the employee's prognosis; How long the employee has already been on leave--and how much longer he's expected to be out; and The employee's position--for example, an employer may have to hold a receptionist's position open longer than, say, the head of a specific department or research team.

In the recent decision of Brewer v. Fraser Milner Casgrain LLP1, the Alberta Court of Appeal held that a law firm had accommodated an employee to the point of undue hardship. The respondent in that case, a legal secretary, developed multiple environmental sensitivities or allergies with serious health effects such as laboured breathing, chest tightness, light-headedness, headache, rashes, dizziness and disorientation. Specific triggers included scents, perfumes and chemical smells.

1

[2009] 306 D.L.R. (4th) 171 (Alta C.A.).

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The law firm took steps to accommodate the respondent. Specifically, it asked other staff to refrain from the use of perfumes and fragrances and permitted the respondent to use a washroom in the office sick room, rather than the public washroom. Air cleaners were placed in the area in which the respondent worked, and she was allowed to use charcoal filtered disposable air masks when necessary. In addition, her work hours were changed slightly so that she would arrive at and leave the office later than most of the other employees and thereby avoid contact with crowds. These measures were somewhat effective, but following renovations to the 30th floor the respondent was moved to this floor where the law firm maintained its premises. This removed her access to the sick room washroom, and exposed her to some chemicals leftover from the renovation. Shortly following this relocation, the respondent left work and went on short term disability. The law firm continued to consider accommodation measures, and advised the respondent that when she returned to work she would no longer work with a particular lawyer but would be assigned to do word processing at a work station where (as requested) she would have reduced contact with other people. It would not be possible to continue to washroom accommodation as the only washroom on the 30th floor was the public washroom, but the law firm advised that the respondent's ability to work in the new 30th floor environment would continue to be monitored. She never returned to work. In their decision, the Court of Appeal noted that the willingness of a complainant to try the accommodation proposed by the employer is a factor to be taken into consideration. A complainant is not entitled to dictate the accommodation that he or she will accept. There is a duty on the complainant to assist in securing an appropriate accommodation, and when an employer has suggested a proposal that is reasonable and would, if implemented, fulfill the duty to accommodate, the complainant has a duty to facilitate the implementation of the proposal. In the Brewer decision, the Court of Appeal held that it was reasonable to expect that the respondent would at least test the new work environment on the 30th floor before filing a complaint, and that it was reasonable to infer that the law firm would have followed through on its expressed intention to continue to seek an appropriate level of accommodation for her. The respondent failed to cooperate with the law firm in its accommodation efforts, and therefore the Court held that there was no evidence to show that the law firm had failed in its duty to reasonably accommodate Ms. Brewer to the point of undue hardship. As a result, the duty to accommodate had been discharged and the complaint was dismissed.

C.

Harassing/Bullying Co-Workers

The terms harassment and bullying conjure up images in most people's minds of an elementary playground or high school locker room. However, workplace bullying and harassment is starting to become one of the more common issues faced by human resource practitioners, and the legal and statutory landscape in Canada is starting to change in light of recent tragic incidents that have taken place in the workplace. For instance, who can forget what took place on March 12, 2010 when a disgruntled employee walked into his place of employment, an Alberta car dealership, and opened fire on management and co-workers with a saw-off shotgun. Recently suspended for engaging in behaviour contrary to his employer's harassment policy, the employee shot two people, immediately killing one, before taking his own life. Unfortunately, stories like this are becoming more common in the Canadian workplace, and therefore the law has responded by imposing additional obligations on employers in terms of preventing and responding to harassment and bullying in the workplace.

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Question 1: What is harassment? Harassment is any unwelcome conduct based on prohibited grounds that is unacceptable in the workplace. It can be intentional or unintentional, and can relate to one incident or a series of incidents. Conduct constituting harassment can include jokes, slurs, ridicule, insults, degrading cartoons or pictures, derogatory names, and abuse of power. Harassment does not extend to the exercise of management rights, including the right to assign tasks and manage the workplace or the imposition of discipline or other corrective action that is justified. In addition, harassment does not extend to situations where employees are working under pressure, difficult working conditions or professional time constraints. Sexual harassment is any unwelcome behaviour, sexual in nature, which adversely affects, or threatens to affect, directly or indirectly, a person's job scrutiny, working conditions or prospects for promotion or earnings, or prevents a person from getting a job. Bullying is any behaviour that is offensive and that endangers an individual's job, undermines their performance or threatens their economic livelihood. Examples of bullying include: · · · · · · · · · repetitive name calling, belittling and/or swearing; inappropriate comments and gestures; using insinuation, intimidation and threats in order to dominate and control; pointing out someone's weakness for the purpose of humiliating them; excluding employees from workplace social events or activities; making decisions and acting in a way that undermines an employee's competency and credibility, diffusing false information about their capabilities, and attacking their reputation; interfering with another's work or work sabotage; refusing to work or co-operate with others; and interfering with or vandalizing personal property.

The important thing to remember is that the test for harassment and bullying is objective rather than subjective. In other words, the facts must prove that a "reasonable person" would find the comments or conduct to be discriminatory or offensive. Another important point for employers to note is that the "workplace" includes any place where the company conducts business or where company functions occur. As a result, the obligation on employers with respect to preventing and responding to workplace harassment and bullying extends to social functions such as Christmas or Stampede parties. Question 2: What are the recent legal trends with respect to bullying and workplace violence? Quebec was the first jurisdiction in North America to adopt psychological harassment legislation. In An Act respecting labour standards, R.S.Q., c. N-1.1, "psychological harassment" has been defined to refer to any vexatious behaviour taking the form of repeated, hostile and unwanted conduct, comments, actions, or gestures that affects an employee's dignity or psychological or physical integrity and results in a harmful work

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environment. The definition of "psychological harassment" in Quebec includes workplace violence, since it includes behaviour that affects physical integrity. Saskatchewan also has legislation against workplace violence and personal harassment. According to the Occupational Health and Safety Act, 1993 S.S. 1993, c. O-1.1, personal harassment or "bullying" includes any inappropriate conduct, comment, display, action or gesture by a person that has a lasting, harmful effect on workers, and that: (a) (b) adversely affects a worker's psychological or physical well being; and the perpetrator knows or ought to reasonably know would cause the worker to be humiliated or intimidated.

Personal harassment must involve repeated conduct or a single, serious incident that causes a lasting harmful effect on the worker. On June 15, 2010, Ontario also amended its Occupational Health and Safety Act, R.S.O. 1990, c. O.1 to include provisions against workplace harassment including psychological harassment. Employers in that province are now required to devise workplace violence and harassment policies, develop programs to implement such policies, and engage in assessment to measure workplace violence risks. On February 1, 2011, Manitoba made changes to its Workplace Safety and Health Regulation, Man. Reg. 217/2006 to define harassment as: (a) objectionable conduct that creates a risk to the health of a worker, or (b) severe conduct that adversely affects a worker's psychological or physical well-being. Harassment is considered "severe conduct" in Manitoba if it could reasonably cause a worker to be humiliated or intimidated and is repeated, or in the case of a single occurrence, has a lasting, harmful effect on a worker. As of yet there is no specific legislation dealing with psychological harassment or bullying in Alberta, but given the trend in other provinces this is surely on the way. However, Alberta's occupational health and safety legislation ­ like most other jurisdictions in Canada ­requires employers to have a workplace violence prevention program and policies in place. In addition, employers should take note of the fact that violence includes threatened as well as attempted or actual conduct that causes or is likely to cause physical injury. With four of Canada's largest provinces already having laws in place with respect to workplace bullying, it is expected that the rest of the country will soon follow suit and so employers are advised to turn their minds to best practices in terms of preventing and responding to harassment and bullying in the workplace. Question 3: What are the responsibilities of employers and managers? Employers have an obligation to ensure that the workplace is free from unlawful discrimination and harassment, is inclusive, and supports the needs of all employees. As part of this obligation, employers should: · · · Create written policies that clearly prohibit harassment and discrimination in the workplace and provide clear definition and/or examples of the prohibited conduct. Educate and train all managers and employees about the policy. Undertake risk assessments to determine the possibility and/or prevalence of workplace violence or workplace harassment.

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· · · · ·

Provide a confidential complaint mechanism that allows employees to report instances or risks of workplace harassment and/or workplace violence. Investigate complaints and take them seriously. Discipline where justified, and protect employees from retaliation for filing complaints. Consider offering a confidential employee assistance program to allow employees subject to workplace violence or workplace harassment to seek help. Keep detailed records of any workplace violence or harassment, investigation or work refusal.

Question 4: Can an employer discipline for harassment and bullying in the workplace? Employers can impose discipline for harassment and bullying in the workplace, but only after carrying out a careful investigation to determine whether or not the complaint has merit. Employers are advised to carefully document every step they take during an investigation in order to be able to support their decision if they conclude that there was in fact harassment in the circumstances. In addition, employers must remember that the test to establish harassment is an objective one and therefore the facts must prove that a "reasonable person" would find the comments or conduct in question to be discriminatory or offensive. Any discipline that is imposed should be consistent with the employer's progressive discipline policy, and employers might consider offering EAP assistance in the form of anger management training or counselling for those who are engaging in harassing behaviour in the workplace (as well as those who have been subjected to harassment or bullying). Question 5: What should a company include in a workplace harassment policy? An effective workplace harassment policy should contain a statement that every worker is entitled to work free of harassment and that the employer will ensure, so far as is reasonably practicable, that no worker is subjected to harassment in the workplace. In addition, a harassment policy should contain a statement that employees are expected to immediately report instances of workplace harassment or violence, and a corresponding commitment by management to immediately respond to complaints, carry out investigations and impose appropriate discipline where justified. Along with the statements outlined above, a harassment policy should contain detailed information on how to make a harassment complaint, how complaints will be investigated, and how the complainant and alleged harasser will be informed of the results of the investigation. Finally, depending on the jurisdiction, employers are either required or encouraged to include a statement in their harassment policy indicating that workers also have the right to file a human rights complaint, and that the harassment policy is not intended to discourage or prevent a complainant from exercising any other legal rights pursuant to any other law.

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D.

Social Media/Networking in the Workplace

Issues raised by computer usage, the Internet, e-mail, blogging and other forms of social media are continually raising new challenges for employers. Whether you "like" it or not, social networking is blurring the boundaries between work and play and is creating an increasingly more complex world for human resource professionals in terms of managing the online activities of employees in the workplace.

Question 1: What can an employer do when current and former employees post negative comments about the employer on social networking sites such as Facebook or via personal blogs on the internet? These situations give rise to a number of potential responses on the part of the employer: (a) (b) (c) (d) The company could impose discipline, such as warnings, suspensions or terminations; The employer could make a claim on the basis of defamation; Non-disciplinary warnings; or Non-disciplinary terminations without cause, with pay in lieu of notice.

The last actions are relatively straightforward, and so for the purposes of this question we will focus on #1 and #2 as possible responses on the part of the employer in this situation. DISCIPLINE All employees have a general duty of fidelity to their employer. The duty of fidelity is an implied duty to act faithfully in the service of the employer. All disciplinary responses must of course be proportional to the misconduct in question. Depending on the facts, a proportional response may be a verbal warning, written warning, suspension or termination for cause. The factors that arbitrators and the courts take into account in assessing the appropriate level of discipline include the following: · · Is the misconduct serious? (i.e. what is the nature of the comments, who made the comments, was the target of the comments a manager or co-worker). Was there wilful and deliberate disobedience of an order? (i.e. had the employee been previously advised not to access the website; was the website accessed during working hours; had the employee been warned about the nature of their "posts" about the company). Were work rules and policies made known to the employee? (i.e. is blogging covered by the employee code of conduct/handbook). Was there any reasonable excuse for the misconduct? Is there a history of misconduct?

· · ·

The general rule regarding discipline for off-duty conduct is that an employer is not the custodian of their employees' private lives. However, exceptions are made when the posts irreparably harm the employment relationship. This can include conduct that: · prevents employees from performing their duties satisfactorily;

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· · · · ·

interferes with an employee's ability to work effectively with fellow co-workers; breaks confidentiality policies or employees' duty of fidelity to the employer; harasses or defames management or fellow employees; deliberately attempts to undermine management's ability to direct its workforce; or harms the company's reputation.

Social networking and blogging often takes the form of casual conversation, and so naturally, many people will talk about work. Unfortunately, employees are often unaware that this type of conduct can affect their careers and lead to disciplinary action on the part of the employer. As a result, having a discussion with employees about company policies and expectations can save both the employer and employees a lot of grief down the road. DEFAMATION As an employer no longer has the ability to impose discipline on a former employee, they are limited in how they can handle situations where an ex-employee is posting negative comments about the employer on social networking sites such as Facebook. However, an action based on defamation may be one possibility in these circumstances. In addition, an employer can also bring a defamation claim against current employees if they decide that the other options are not effective in the circumstances. The elements of defamation are: (a) a statement has been made that tends to lower the plaintiff's reputation in the estimation of reasonable members of the community; (b) the statement must have been published about or concerning the plaintiff; and (c) the statement must have been "published" to a person other than the plaintiff either intentionally or negligently. The Plaintiff could be the employer itself, or managers or employees about whom the statements are made. "Publication" in the context of Internet defamation means that the statements must have been read or downloaded by a third-party to constitute a tort. Relevant defences to the defamatory statements include: (a) truth (a complete defence to defamation, whereby the courts focus on the content of the statement itself, rather than the defendant's reasonable belief) and (b) fair comment (in which the statement concerns a matter of public interest; based on a true fact; recognizable as a comment; and not malicious). The onus is on the defendant to prove the truth of the statement, or that it constituted fair comment. Question 2: What should an employer do if an employee is sick or on disability leave and it comes to the employer's attention that there are pictures on Facebook showing the employee on vacation, participating in sports or leisure activities, etc.? An employer needs to be very careful in these situations. Although they may have a valid concern, an employer needs to be cognizant of the fact that they are not a doctor and that a picture on Facebook does not necessarily represent an accurate or complete picture of an employee's health or well-being. For example, the employee's doctor might have recommended light physical activity or a vacation in order to facilitate their recovery and return to work. Employers who react prematurely by imposing disciplinary measures up to and including termination could find themselves liable for damages for wrongful dismissal, and therefore it is very important to proceed cautiously when relying on information from social media websites.

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E.

Dealing with Departing Employee

Departing employees are a reality of the workplace. As employee mobility increases, employers have sought to restrict the competitive activities of their "dearly departed" employees and to safeguard their intellectual property and other proprietary information. It can be very difficult to enforce these restrictions (known as restrictive covenants), however, they are arguably becoming more important than ever. We all know that "breaking up is hard to do", and therefore this section is designed to provide insight into the practical steps that employers can take the minimize risk and potential harm from competition by former employees.

Question 1: What are the common law obligations of departing employees? Departing employees owe their employer certain duties even in the absence of a written employment agreement. These "common law duties" are implied in any employment agreement and include the duty of confidentiality and the duty of loyalty and good faith. 1. The Duty of Confidentiality

Employees are obliged pursuant to the common law duty of confidence not to make use of or disclose the confidential business information of their employer. This duty exists during employment and continues after termination for so long as the information of the former employer remains confidential. It is important to remember that this restriction will only apply to information that truly is confidential. The determination of what information is confidential will be influenced by: · · · · · · · the extent to which the information is known outside the business; the extent to which the information is known by employees and others involved in the business; the extent of measures taken to guard the secrecy of the information; the value of the information to the business and to its competitors; the amount of money expended in developing the information; the ease or difficulty that the information can be properly acquired or duplicated by others; and whether the confider and the confidee treat the information as confidential.

Any ambiguity as to scope or categories of information that an employer considers confidential ought to be addressed by including express confidentiality provisions, including comprehensive definitions of what constitutes confidential business information in the employment contract. 2. The Duty of Loyalty and Good Faith

All employees are subject to the common law duty of loyalty and good faith. They are obliged to be honest in their dealings with their employer and avoid any activity that puts them in a conflict of interest. It is a breach of the duty of loyalty and good faith for an employee to compete with the employer, whether by working for a competitor or developing a competing business, at any time during the currency of the employment relationship.

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The duty of loyalty and good faith requires employees to provide reasonable notice of their intention to resign, just as employers must provide reasonable notice of termination. What is "reasonable" depends on the particular circumstances of the case. This duty does not survive the termination of the employment relationship. Without an enforceable restrictive covenant against post-employment competition, departing employees are free to compete with their former employer so long as they don't breach any common law duties owed to the former employer. 3. Additional Duties of Fiduciary Employees

Fiduciary employees are those employees who hold positions of trust and, because of their responsibility, duties and/or access to information they can owe extensive duties to their employer, with or without a written contract. The duties and responsibilities of a fiduciary include those applicable to all employees, as well as additional duties that relate to the avoidance of conflict and placing the interests of the Company above personal interests. Post-employment, fiduciaries have a duty not to solicit clients of the former employer with whom the fiduciary enjoys a special relationship and a duty not to take any maturing business opportunities of the former employer. Question 2: What are restrictive covenants and when will they be enforced? A restrictive covenant, in the employment context, is a category of clause that may be included in a written agreement seeking to limit the ability of an employee to solicit the other employees or customers following the termination of the employment relationship. A restrictive covenant may extend as far as attempting to prohibit an employee from competing with the former employer for a certain period of time. The three main types of restrictive covenants are: 1. Non-Competition Clause - intended to limit the departing employee's ability to engage in competitive activities. This is the broadest form of restrictive covenant. Courts will generally only uphold a non-competition clause where a non-solicitation clause would be insufficient to provide the proper protection. These clauses are typically applicable to senior employees, in positions of trust who are the "face of the business". Non-Solicitation of Employees - this covenant is designed to prevent a departing employee from influencing or coercing other employees to resign as well. Its aim is to prevent the departing employee from taking advantage of his or her relationships with other employees to the detriment of the former employer. Non-Solicitation of Clients - this type of covenant is designed to limit the ability of a departing employee to lure away the customers (or in other cases, suppliers) of the former employer for a period of time following the termination of employment. This provides important protection designed to afford the employer time to re-staff and to cement the relationship with the client.

2.

3.

A restrictive covenant will be enforceable only if it meets the following criteria: 1. It protects a legitimate business interest of the former employer, such as the former employer's relationships with its employees, customer or suppliers or its trade secrets or goodwill;

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2.

The restraint imposed by operation of the restrictive covenant is reasonable and does not go beyond what is necessary to protect the former employer's business interests in terms of: (a) its duration or length (anything longer than six months will have to be supported by solid evidence that the nature of the business, or the sales cycle, or the product development process, is such that a longer restriction is necessary); its geographic scope (should not exceed the geographic area that the former employee can be expected to effect and must be a recognizable geographic area, for example the Courts have held that the "Metropolitan City of Vancouver" is not a recognizable location and thus, the clause containing it was unenforceable); the activities which it seeks to restrain (should not exceed the scope of the activity that the former employee can be expected to effect); and overall fairness;

(b)

(c)

(d) 3.

The language of the restrictive covenant must be clear as the Courts will not allow any ambiguity in an employment contract to be corrected. In a recent decision, the Supreme Court of Canada confirmed that notional severance (i.e. the concept that allows a Court to rewrite an ambiguous clause in order to provide clarity) is not applicable in the employment context; and The restrictions are as minimal as possible.

4.

Question 3: How can an employer enforce the duties owed by departing employees? An employer has a number of options to choose from when enforcing a restrictive covenant, depending on the outcome that the former employer is seeking. · If the former employer is seeking compensation for losses suffered as a result of the wrongful conduct of a departing employee, the former employer may start a lawsuit or, if the employment agreement includes an arbitration clause, arbitral proceedings before a private third party arbitrator. If the former employer wishes to stop the employee from actions being taken, the former employer may issue a cease-and-desist letter demanding compliance and/or apply for a court order or "injunction" requiring the departing employee to stop all wrongful conduct. Finally, an employer may seek an injunction in order to restrain the particular activity. The burden of proof on an application for an interim injunction rests with the former employer, and they must be able to show that the issue is substantial and that unless an interim injunction is granted, it will be exposed to "irreparable harm" that cannot be compensated by monetary damages. It is this last prong of the test that frequently poses the most difficulty for employers, and their counsel, when attempting to obtain injunctive relief. The employer must show some form of damage that cannot be quantified. Damage that could lead to the insolvency of the business, perhaps by a drastic and irretrievable loss of market share, would be the clearest example.

·

·

A former employer seeking an interim injunction from the court should also be prepared to provide an undertaking to compensate the departing employee for any damages that he or she suffers as a result of the injunction should it be subsequently determined, at trial or otherwise, that the injunction ought not to have been issued in the first place.

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Question 4: What are our "best tips" in terms of advising employers how to minimize risk and potential harm by departing employees? Employers must ensure that restrictive covenants are clearly drafted to reflect the unique circumstances of the employment relationship and the employee's particular responsibilities, and they should be as minimally restrictive as possible in order to protect the employer's interests. Employers are encouraged to seek legal advice if ever in doubt as to the necessity or reasonableness of any restrictive covenant, and may consider creating systems for the periodic review of restrictive covenants in their employment agreements to ensure that they are suitable and likely to be enforced. In addition, we encourage employers to adopt business practices that minimize the risk of loss. For example, maintain a broad interface of client connections (i.e. don't make one key individual responsible for all client relationships) and distribute confidential information on a need-to-know basis only.

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SHOW ME THE MONEY!

RECENT TRENDS WITH RESPECT TO DAMAGE AWARDS, NOTICE PERIODS, STRESS CLAIMS, PUNITIVE DAMAGES & MORE

Michael Ford Toni Eckes

Show Me the Money!

Introduction

We have sifted through the recent cases with respect to wrongful dismissal damages in order to provide employers with a current snapshot of the law with respect to reasonable notice periods, bad faith damages, punitive damages and more. This paper provides an overview of the major decisions that caused employers and their legal counsel to sit up and take notice in 2010.

A.

Historic Damage Awards

Greater Toronto Airports Authority v. Public Service Alliance Canada, Local 00041 THE FACTS The employer, the Greater Toronto Airports Authority (GTAA) closely monitored employees on sick leave after a rash of costly fraudulent sick leave absences were discovered within the company. The grievor had been employed by the GTAA for over 23 years with no record of discipline. Months after a work-related injury, she underwent knee surgery and was given an expected recovery time of four weeks. Unbeknownst to the company, the grievor was living with another GTAA employee who was under surveillance watch at the time for an unrelated disciplinary issue. The surveillance obtained by the company raised suspicions as to the legitimacy of the grievor's absence. The grievor was seen driving and walking through stores without any obvious indications of her alleged recovery process. The GTAA requested medical documentation to verify the grievor's condition, and the grievor ended up returning to work earlier than the 4-four recovery period prescribed by her surgeon due to the fear that she would lose her job otherwise. The GTAA believed that the limp she displayed during her first day back at work was further evidence of fraud and called a meeting with the grievor. During the course of this meeting, the GTAA concluded that the grievor exhibited inconsistent behaviour and insincerity about her injury and absence, and confronted the grievor with surveillance videos and aggressive questioning about her injury. The grievor tried to explain that there was a difference between exerting herself for brief periods of time (as she had been doing while shopping on the surveillance video) and walking and driving all day at work, and she also explained that she had been taking painkillers at home but not at work. The GTAA was not satisfied with her explanation and the grievor's employment was terminated on the basis that she "could not satisfactorily answer questions concerning [her] activities and the inconsistencies between what [she] said she was capable of doing and the information [the GTAA] had". The GTAA also alleged dishonesty and breach of trust as their reason for terminating the grievor.

1

2011 ONSC 487.

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ARBITRATOR'S DECISION The Arbitrator held that the employer has an obligation to act in good faith with respect to the administration of the collective agreement. The GTAA was found to have acted egregiously and in bad faith by acting prematurely and not conducting a full investigation of the situation. The arbitration decision strongly criticized the employer for not obtaining medical corroboration before proceeding with the penalty. Moreover, the employer was penalized for not considering a lesser penalty given the grievor's history. The following remedies were awarded at arbitration: · · · · · all record of the incident to be removed from the grievor's file; GTAA prohibited from discussing the matter; a positive letter of reference to be provided; lost wages to the date of the award; future economic loss damages for loss of seniority, pension and other benefits reflecting years of service and the likelihood that the grievor would have retired from the company; mental distress: award of $50,000.00; and punitive damages: award of $50,000.00.

Reinstatement was not considered appropriate due to the employer's "high-handed, arbitrary and capricious" conduct. ONTARIO SUPERIOR COURT DECISION The GTAA applied for a judicial review of the arbitrator's decision. The Court agreed with the arbitrator that reinstatement was not an appropriate remedy given the employer's treatment of the grievor and the deleterious impact on her, and upheld the award of damages for loss of past income and future earnings. In the Court's view, it was reasonable to conclude that the conduct of the employer had resulted in a loss of trust that would prevent a viable employment relationship. The grievor was an honest and diligent employee who was only following her doctor's instructions, and the video surveillance did not establish on a balance of probabilities that she was medically fit to return to work to perform modified duties. The GTAA did not independently assess the grievor's situation on its own merits and acted unreasonably and in bad faith, both in its investigation and in its ultimate determination. However, although the Court agreed that it was reasonable for the arbitrator to award damages for mental distress, they took issue with the fact that the arbitrator also awarded damages for pain and suffering associated with the grievor's knee injury and did not separate these damages from the global award of $50,000 for mental distress. In the Court's view, the award of damages for pain and suffering as a result of the grievor's knee injury was not supported by the evidence, and therefore the issue of damages for mental distress was sent back to the arbitrator to determine the appropriate quantum of such damages. In addition, the Court took issue with the fact that the arbitrator did not identify an independent actionable wrong when awarding punitive damages of $50,000, and also failed to explain why compensatory damages were inadequate in the circumstances. The Court noted that the arbitrator had given a very significant award of damages for past and future economic loss, amounting to about 8 years of salary, and had also awarded damages for mental distress. The Court stated that one would expect such an award to have a significant deterrent effect on an employer, and set aside the award of punitive damages on the basis that the arbitrator's decision did not address proportionality in any meaningful way and did not meet the requirements of justification, transparency and intelligibility.

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WHAT THIS MEANS FOR EMPLOYERS Despite the fact that the Court struck down the award of punitive damages on judicial review and sent the issue of mental distress damages back to the arbitrator to determine an appropriate quantum, this is still a historic award with respect to bad faith damages and the decision reads as a cautionary tale for employers when executing disciplinary measures subject to the applicable collective agreement: · · · · Employers should verify any suspicions and corroborate with professional opinions where possible. Video can be very useful evidence but it is seldom determinative and like any other evidence it must be interpreted. Employers must apply progressive discipline and carefully consider an employee's history before making decisions about discipline -- particularly termination, which should be a last resort. Management rights must be applied in a good faith manner.

Walsh v. Mobil Oil Canada2 An Alberta Human Rights Tribunal awarded Mobil Oil Canada's first female land agent over $650,000 in damages 19 years after she filed a human rights complaint alleging workplace discrimination on the basis of gender. THE FACTS The case of Walsh v. Mobil Oil Canada began almost two decades ago. Delorie Walsh began working for Mobil Oil Canada ("Mobil") in 1984. She was the first female employee to became a land agent at Mobil and felt she was a victim of gender-based discrimination with respect to her pay and job designation and on August 14, 1991, she filed a human rights complaint. Shortly after filing her complaint, Ms. Walsh was put on a three-month performance improvement plan. On February 21, 1995, the same day that Ms. Walsh's human rights complaint was dismissed, Mobil terminated her employment. In response, Ms. Walsh filed a second human rights complaint in August of 1995, alleging that her dismissal was retaliation for her first complaint. After slowly making its way through the Alberta Human Rights process and the Court of Queen's Bench, this case ended up before the Alberta Court of Appeal in August of 2008. Justice Keith Ritter, writing on behalf of the majority, held that Mobil had engaged in discrimination and that Ms. Walsh had been subjected to retaliation as a result of her human rights complaint against the company. The matter was remitted back to the Tribunal to proceed with a hearing regarding remedy. THE DECISION In a landmark decision, Tribunal Chair Beth Bryant of the Alberta Human Rights Tribunal awarded Ms. Walsh over $650,000 in damages on the following basis: · General damages of $10,000 were awarded for the suffering that Ms. Walsh endured as a result of the actions of Mobil in subjecting her to gender discrimination. Another $25,000 was awarded in general damages for the suffering caused by Mobil's retaliatory actions. The Tribunal recognized that this amount exceeds the $5,000 to $10,000 awards normally awarded in Alberta, but their decision was

2

2010 AHRC 9.

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based on the exceedingly "insensitive" and "cruel" manner in which Ms. Walsh was treated by her supervisors after filing the human rights complaint. · Loss of income damages of $472,766 for the period of August 14, 1989 to December 31, 2000. The cut-off point for assessing Mobil's liability was set at December 31, 2000, as the Tribunal noted that Ms. Walsh's inability to work after this date was due to significant health issues which were not contributed to by the company. Loss of pension benefits of $139,154 for the period August 14, 1989 to December 30, 2000. Future treatment/counselling damages of $10,000 to assist Ms. Walsh with the future impact of the case on her.

· ·

CAUTION FOR EMPLOYERS This is one of the most significant damage awards ever granted by a human rights tribunal in Canada. However, it is not out of step with general principles relating to damage awards. In the 2007 decision of Reverend Gael Matheson v. Presbytery of Prince Edward Island, the Prince Edward Island Human Rights Panel applied very similar reasoning when awarding a female employee over $500,000 in damages relating to a claim of workplace discrimination on the basis of gender. This award included general damages and compensation for loss of past income, educational allowances, medical and out-of-pocket expenses and lost pension contributions, and took into account the fact that the complainant endured discrimination over a long period of time and was still being affected by the consequences of trying to seek resolution of the matter. Significantly, the Panel in Matheson noted that although the damages appear to be large, it is important to recognize that they flow across a long period of time. Specifically, the Panel stated that "it is not a windfall, regardless of the amount, when a complainant is fairly compensated for proven losses which have accumulated over a period of years". The Walsh v. Mobil Oil Canada decision spanned almost two full decades, and therefore a damage award of $650,000 is not surprising. Employers should be cautious and care should be exercised when handling human rights complaints as the consequences of discriminatory and retaliatory actions can result in a lengthy litigation process and significant damages awards. Soost v. Merrill Lynch Canada Inc.3 THE FACTS Merrill Lynch successfully recruited Soost from RBC Dominion Security in August of 2008. When Soost moved over to Merrill Lynch, he brought his team with him as well as his personal client database. He was successful in having between 70 and 80 per cent of his clients transfer their accounts over to Merrill Lynch. The value of his book of business when he started with Merrill Lynch was between $70 and $80 million. During his time at Merrill Lynch, Soost continued to obtain new clients and add to his book of business. By the time of his dismissal, his book of business was in the range of $150 million. His efforts were acknowledged by the Defendant in a number of ways, including being recognized as one of the firm's top performers resulting in

3

2010 ABCA 251.

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his being chosen as one of five individuals in Canada to be part of the "Ultra High Net Worth Program" of Merrill Lynch. Despite his otherwise successful career with the company, Soost participated in private placements without the approval of Merrill Lynch. As a result, Soost was terminated for just cause in May of 2001 for allegedly having violated trading policies. Following his termination, Soost made efforts to find other employment in the industry. He was eventually successful, joining another firm about three weeks after his termination. However, only about $10 million of his book of business followed him over to the new company and he had a major drop in income such that he could no longer afford to remain in the industry. As a result, he left the financial industry on December 31, 2001 and brought an action for damages for wrongful dismissal, defamation and intentional interference in economic relations. LOWER COURT RULING: "THEY GIVETH" In the recent decision of Honda v. Keays ("Honda"), the Supreme Court of Canada stated that damages for the manner of dismissal are only appropriate where the damages are within the contemplation of the parties at the time of contract, and where the Plaintiff can demonstrate actual damage.4 While the Honda decision dealt with damages for mental distress, the Court in Soost extended the analysis to Soost's lost book of business. Specifically, the Court held that the manner of dismissal of Soost by Merrill Lynch was unfair and insensitive and undermined his ability to retain his book of business. Moreover, the Court determined that Merrill Lynch must have known that terminating Soost with no notice would severely affect his ability to compete in the financial business and add greatly to his loss. Given Soost's position and years of service in the industry, the Court held that Merrill Lynch should have given him specific warning to fix defaults by a certain date, failing which he would be terminated. The Court was of the opinion that to terminate for cause someone in Soost's position in the financial industry would foreseeably have the effect of mortally wounding that individual's ability to successfully carry on as an investment advisor, and there was no good reason why, once Merrill Lynch had decided to let Soost go, it could not have done so with some minimal notice or allowed Soost to resign of his own accord. In the end, Soost was awarded $600,000 as compensation for 12 months reasonable notice. In addition, given the size of Soost's book of business and the value of such books in the financial industry, the Court awarded him an additional $1.6 million for the consequential damages flowing from the termination without notice. COURT OF APPEAL: "AND THEY TAKETH AWAY" The appeal in this case centered on the award of the $1.6 million for Soost's book of business. Before considering that matter, however, the Court of Appeal reviewed the basic principles of wrongful dismissal law and the basis for calculating damages associated with a reasonable notice period. The Court of Appeal noted that the term "wrongful dismissal" is misleading, as there is nothing "wrongful" about dismissal provided that the employee is provided with reasonable notice or pay in lieu of notice. It is implied in the contract of employment that the party terminating the contract without cause will give notice of a reasonable length, and all that needs to be "reasonable" is the amount of time that the terminating party provides the other.

4

2008 SCC 39.

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As a result, in ordinary circumstances, damages for dismissal are limited to what reasonable pay in lieu of notice would have been. The Court of Appeal acknowledged that the Honda decision provides an exception to that rule where employers use methods that are unduly unfair or insensitive when dismissing an employee. However, the unfairness or insensitivity must be in the methods used, and not in the mere fact that an employee was dismissed. In other words, Honda damages are not an automatic enhancement of all "wrongful dismissal" damages. They are confined to a bad manner of dismissal - not for the dismissal itself ­ and they are limited to compensating loss as opposed to being punitive in nature. In their decision, the Court of Appeal made the following memorable comment with respect to Honda damages: What if courts imposed heavy and almost automatic penalties on any defendant who alleged cause in good faith, but then failed to convince a judge or jury that it was bad enough? That would be most unfair to employers. It would deter alleging cause, so that employers with cause would instead have to give pay in lieu of notice (to avoid a second set of damages). This would be the slacker's charter. It would significantly increase the expenses of hiring staff, and hence increase prices charged to innocent customers.5 Soost argued that damages were necessary to compensate him for the stigma of dismissal. However, the Court of Appeal noted that as dismissal is never a breach of contract in an indefinite hiring, then a dismissed employee cannot be awarded damages for any prejudicial effect (even on reputation) of the dismissal itself. It is arguable that some significant part of Soost's loss of customers came from his dismissal, but as the dismissal itself was not wrong, there can be no compensation for it. By making a separate damage award for the lost book of business, the Court of Queen's Bench effectively compensated Soost twice by awarding lost future income (i.e., normal wrongful dismissal damages) and the present capital value of future income (i.e., the value of the book of business). The Court of Appeal held that the second item is effectively the same as the first, as both items determine how much Soost would have earned had he worked during the reasonable notice period. As Soost had already been fully compensated for the employer's failure to provide reasonable notice, the Court of Appeal overturned the trial judge's award of $1.6 million for the lost book of business (and triggered a huge sigh of relief from employers and their legal counsel!). Piresferreira v. Bell Mobility Inc.6 In a resounding victory for employers, the Ontario Court of Appeal has ruled that employers cannot be held liable in tort for the negligent infliction of mental suffering of employees. This decision is similar to the Alberta Court of Appeal decision in Soost, as it can be seen as reigning in large damage awards by lower courts. THE FACTS The plaintiff in this case was a 60-year-old employee who had worked for Bell Mobility Inc. for ten years as an account manager. She typically received excellent performance reviews. However, her supervisor was an aggressive manager who often used temper and profanity in managing his workers. In 2004, the supervisor gave the plaintiff a critical performance appraisal, and in 2005 he criticized the plaintiff for failing to arrange a client meeting and pushed her forcefully when she attempted to show him an email justifying her attempts to

5 6

2010 ABCA 251 at para. 24. 2010 ONCA 384.

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schedule the meeting. The plaintiff took time off after this encounter, and when she returned the supervisor refused to apologize for the incident and presented her with a performance improvement plan. The plaintiff never returned to work after this, and was diagnosed with post-traumatic stress disorder and a major depressive disorder. The plaintiff made a formal complaint to human resources and the supervisor received a written warning, but management ultimately accepted the supervisor's version of events. The plaintiff commenced litigation against her supervisor and Bell Mobility on August 11, 2005 claiming general and punitive damages. DECISION AT TRIAL The trial judge found the supervisor personally liable for battery and intentional and negligent infliction of mental suffering. Bell Mobility was found vicariously liable for the torts committed by the supervisor and directly liable for negligence and constructive dismissal. Specifically, the trial judge held Bell Mobility directly liable for negligent infliction of mental suffering, holding that as her employer they owed her "the duty to ensure that [she] was working in a safe and harassment-free environment... all in accordance with Bell Mobility's Code of Business Conduct". The plaintiff was awarded 12 months' pay in lieu of reasonable notice plus $40,000 in general damages and additional damages for lost wages and loss of future income. Her damages totalled $500,955, and the supervisor and Bell Mobility were jointly and severally liable for the damages. ONTARIO COURT OF APPEAL The Ontario Court of Appeal ruled that the tort of negligent infliction of mental suffering does not exist in the employment context and that the tort of intentional infliction of mental suffering was not made out in this case, with the result that the plaintiff was entitled only to damages for battery, constructive dismissal, and mental distress from the manner of dismissal. Accepting that Bell Mobility's Code of Business Conduct was part of the employment contract, the Court of Appeal held that a breach of a contractual duty cannot be the basis for the recognition of a common law tort. For concurrent tort liability to be available, there must be a common law duty of care that would exist even in the absence of the specific contractual term that created the corresponding contractual obligation. Here, the trial judge erred in basing the standard of care on the contractual obligation set out in Bell Mobility's Code of Business Conduct. The Court of Appeal also considered whether the trial judge could have rested her conclusion on a tort duty of care, even though no Canadian appellate court has recognized a free standing cause of action tort against an employer for negligent infliction of mental suffering by an employee. While the employment relationship puts the parties in a relationship of proximity, and while the Court of Appeal could see no reason to resist the finding of the trial judge that it was reasonably foreseeable that the plaintiff would experience mental suffering from the abusive conduct of her supervisor, policy considerations foreclose the recognition of a duty of care in these circumstances. Specifically, the Court of Appeal stated that a general duty to take care to shield an employee during the entire course of his or her employment from acts in the workplace that might cause mental suffering is far too expansive a duty for a court to impose upon employers. Furthermore, in a case in which an employer's allegedly tortuous behaviour includes the termination of the employee, compensation for mental distress is available under the framework the Supreme Court of Canada has set out in the Honda v. Keays, [2008] 2 S.C.R. 362 decision. Even in a case where the employer does not terminate the employee, the employee

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who is caused mental distress by the employer's abusive conduct can claim constructive dismissal and still have recourse to damages under the Honda v. Keays framework. As a result, the law already provides a remedy in respect of the loss complained of here and the recognition of the tort of negligent infliction of mental suffering is not necessary or appropriate in an employment context. Employees can still sue their employers or supervisors for the intentional infliction of mental suffering, but the Court of Appeal held that the necessary elements of that particular tort were not made out in this case. The Supreme Court of Canada denied leave to hear this appeal, and so this case stands in Ontario and will influence courts in other provinces if employers are faced with a claim for negligent infliction of mental suffering in the workplace. Elgert v. Home Hardware Stores Limited7 This case is a bit of an anomaly in that it was a jury trial, but the multiple procedural rulings coming out of this decision and the Charge to the Jury given by the judge provide a good summary of the principles relating to punitive and aggravated damages. THE FACTS The Plaintiff in Elgert had been with the company for approximately sixteen years when two other employees alleged that he had sexually assaulted them. The Plaintiff continued to maintain his innocence throughout the investigation, but management ultimately determined that the employees were being truthful and terminated Elgert for cause. DECISION AT TRIAL In the thirteenth written decision in this case, the judge laid out his Charge to the Jury on the issue of punitive damages at paragraph 61: On the issue of punitive damages, the Charge to the Jury followed the specific guidelines set by the Supreme Court of Canada in Whiten v. Pilot Insurance Co. The Guidelines and Restrictions were stated painstakingly with many warnings given to the Jury. My Charge to the Jury at pages 20-21 reads as follows: 72. You may also choose to award Dan Elgert punitive damages if you find that Home Hardware's conduct in dismissing him was harsh, vindictive, reprehensible, and malicious; that is, deserving of full condemnation and punishment. Punitive damages should only be awarded in exceptional cases where the employer's conduct was egregious or outrageous, and where the compensatory damages already awarded do not carry the necessary element of deterrence. These facts must be kept in mind in deciding whether to award punitive damages: (a) (b) Punitive damages are the exception, not the rule; There must be a marked departure from the ordinary standards of decent behaviour by the defendant;

7

2010 ABQB 220; 2011 ABCA 112.

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(c)

If punitive damages are awarded, they should be proportionate to the harm caused by the defendant, the degree of misconduct, the degree of vulnerability of the plaintiff, and any advantage gained by the defendant; Whether or not the Defendant has paid any other fines or penalties; Whether other penalties are available, and if so, are they adequate? The purpose of punitive damages is not to compensate the plaintiff; But, the purpose is to punish the defendant's conduct so as to act as a deterrent and a mark of the community's condemnation; They should only be awarded where compensatory damages cannot accomplish these objectives; The amount must not be greater than what was needed to accomplish its purpose; The State normally receives these fines, but in this case, punitive damages will be a windfall to Dan Elgert; and Moderate damages are usually sufficient because of the stigma an award of punitive damages creates in the community.

(d) (e) (f) (g)

(h)

(i)

(j)

(k)

73. You must be cautious to avoid unnecessary duplication in the award of damages. If you find that Home Hardware is liable for punitive damages, any award you make should be fair and reasonable to both Dan Elgert and Home Hardware. The amount of damages is for you to decide, but must fall within the range of $0 to $400,000. The judge also recited his Charge to the Jury on the issue of aggravated damages at paragraph 62: On aggravated damages, the Charge to the Jury reflected an employer's obligation of good faith and fair dealing and the recognition that when an employment relationship ruptures, the employee is at his most vulnerable and in most need of protection. This was described in my Charge to the Jury at pages 19-20 which reads: 69. As stated earlier, an employer has a duty of good faith and fair dealing to its employee, both during employment and during termination. An employer also has a duty to be candid, reasonable, honest and forthright in the course of dismissal and refrain from untruthful, misleading or unduly insensitive behaviour. If the employer engages in bad faith conduct during the course of employment or during dismissal, that may entitle the employee to additional damages. These damages are known as aggravated damages. 70. The law also recognizes that employees are to be treated with dignity and respect because employment relationships help define an individual employee's self worth. If an employee suffers humiliation, embarrassment or damage to self esteem over and above the usual hurt feelings any employee would feel when dismissed, that employee may be entitled to additional damages over and above the notice period. Note that an employee's normal distress and hurt feelings resulting from dismissal are not compensable by aggravated damages.

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Aggravated damages are meant to address tangible and intangible losses flowing from bad faith acts of the employer or unduly insensitive dealing by the employer. 71. If you find that Home Hardware is liable for aggravated damages, any award you make should be fair and reasonable to both Dan Elgert and Home Hardware. The amount of damages is for you to decide, but must fall within the range of $0 to $200,000. In the end, the jury determined that the Plaintiff was innocent of the charges of sexual assault and awarded him: 24 months of notice; $200,000 in aggravated damages as a result of the employer's bad faith in investigating and terminating the employee; and $300,000 in punitive damages. Damages in defamation were also awarded against the two individual complainants in the amount of $60,000. With costs and interest, the total award was over $1,000,000. ALBERTA COURT OF APPEAL Not surprisingly, Home Hardware appealed on a number of grounds. In particular, they submitted that the trial judge erred by leaving the issue of aggravated and punitive damages with the jury, and argued strenuously that there was no basis for such an inordinately high damage award. The appeal was allowed in part. With respect to aggravated damages, the Court of Appeal noted that although a plaintiff does not necessarily have to provide medical evidence to show that he has suffered actual damages as a result of the manner in which he was terminated, there must be more than a mere scintilla of evidence. The Court held that the record was simply inadequate in terms of evidence, and therefore there was no basis for leaving the issue of aggravated damages with the jury and the award of $200,000 was set aside. With respect to punitive damages, the Court of Appeal made the following comments: In the context of a wrongful dismissal action, punitive damages are recoverable when the employer's conduct gives rise to an independent actionable wrong... Punitive damages "are restricted to advertent wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own": Honda at para 62. (para. 79) Punitive damages require careful consideration and the discretion to award them should be exercised sparingly. Courts should only "resort to punitive damages in exceptional cases": Honda at para 68. Courts "must focus on the defendant's misconduct, no on the plaintiff's loss": Honda at para 69. (para. 80) As to quantum of punitive damages, courts should be alert to the fact that compensatory damages already awarded carry an element of deterrence: Honda at para 69. (para. 81) In their decision, the Court of Appeal noted that although the jury could have concluded from the evidence that punitive damages were justified (because, for example, Elgert's termination resulted from bias and Home Hardware's treatment of him was high-handed and vindictive), the award was inordinately high, disproportionate and unnecessary to convey the message intended. As a result, the award for punitive damages was reduced from $300,000 to $75,000.

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B.

Wrongful Dismissal Damages: Where Are We Now?

Despite headline-grabbing decisions such as Walsh v. Mobil Oil and Greater Toronto Airports Authority, recent case law suggests that huge damage awards for employees claiming wrongful dismissal damages is being reined in by upper courts. Appellate courts continue to cut down lower court awards and eliminate "bad faith" types of compensation in circumstances where these damages are not warranted. Although the damages awarded in some of the recent decisions appear to be large, it is important to recognize that they flow across a long period of time and are still in step with general principles relating to damage awards. Overall, courts appear to be applying the principles set out in the Honda decision with increased rigour, and are limiting awards of mental distress and aggravated and punitive damages to instances where the conduct of the employer is truly unfair, malicious, misleading or unduly insensitive. Notably, the court in Greater Toronto Airports Authority placed significant emphasis on the fact that the arbitrator had failed to explain why compensatory damages over a significant period of time were inadequate in the circumstances, and stated that one would expect that an award of past and future economic loss amounting to over 8 years of salary would have a sufficient deterrent effect on an employer without also entitling the employee to punitive damages.

DAMAGES AFTER HONDA As noted by the Alberta Court of Appeal in the Soost decision, the Supreme Court of Canada re-wrote much of the law of damages in wrongful dismissal in the Honda case. Our highest court made the following points clear with respect to damages for wrongful dismissal: 1. 2. Normal distress and hurt feelings from dismissal are not compensable. But, if an employee proves the manner of dismissal caused mental distress within the contemplation of the parties, the actual damages suffered are recoverable. Such damages must be compensatory, not punitive. Punitive damages will be rare and confined to exceptional circumstances.

3. 4.

The Honda case is definitely an improvement for employers, but there is still liability lurking when a termination of employment is not handled with care. Further, not all courts seem to be applying the Honda case in a consistent manner: there are still judges that are extending the reasonable notice period due to dissatisfaction with the employer's conduct towards the employee. Consequential, But No Punitive Damages An important case in British Columbia involved an apprentice who was terminated without cause because he was wrongly suspected of being involved with his brother's criminal activity. The loss of the opportunity to complete his apprenticeship generated damages beyond a normal dismissal claim. Meanwhile, the employer was also found to have misled the trial court about the reasons for the termination and punitive damages were awarded. The Court of Appeal reviewed Honda and asked itself: 5. 6. What did the contract promise? What was in the reasonable contemplation of the parties if what was promised was not provided?

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The court decided that the wrongful dismissal during the plaintiff's apprenticeship supported a finding of $25,000 in consequential damages. But it overturned the award of punitive damages. While the employer's conduct in the trial was blameworthy, its conduct at the time of termination was not unfair, malicious, misleading or unduly insensitive.8 No Mental Distress Damages The new rigour required by Honda is evident in another appellate decision coming out of British Columbia. The former employee lost her home in a fire. After the fire, she told her employer she would not be in to work, but without explanation. The employer tried to contact her a few times over the next week but found that her phone was disconnected. After an absence of about one month with no contact from the employee, the employer assumed she had left her job and issued a Record of Employment indicating she had "quit". At about the same time, the employee made contact with the employer, but again without clear communication of her intentions and expectations. She came in and picked up her ROE, thinking she would be coming back to work soon. She was shocked to see that she had "quit". At trial, she was awarded damages for the lack of good faith and fair dealing by the employer in the manner of dismissal. The Court of Appeal resisted the pleas of the sympathetic plaintiff and took a more careful look at the facts. It determined that both parties and their respective lawyers had failed to communicate clearly. The termination, and the eventual destruction of the employment relationship, was really the result of a misunderstanding and a "confrontational exchange of communications between the lawyers". The Court of Appeal ruled that the trial judge had erred in relying solely on the employee's evidence to find bad faith on the part of the employer. It also decided that the medical evidence did not establish a link between the manner of her dismissal and her subsequent anxiety and depression.9 Whiting v. First Data Canada Merchant Solutions ULC10 THE FACTS The employee in Whiting was hired as Director of Corporate Sales with the company. In the four years that he was employed by the company, his annual earnings from salary and commissions fluctuated widely. For example, in 2006 he earned $117,632, and in 2009 he earned $311,871. On November 6, 2009, the company announced that the product that Mr. Whiting had been responsible for selling would no longer be in existence. As a result, Mr. Whiting's position with the company would no longer be viable. In response to this change, the company offered Mr. Whiting a full-time position as a Sales Manager, but he turned this down as he viewed it to be a demotion with a significant decrease in earning potential. Based on his failure to accept this position, the company viewed Mr. Whiting as having resigned from his employment. In response, Mr. Whiting brought a wrongful dismissal claim.

8 9

Marchen v. Dams Ford Lincoln Sales Ltd., 2010 BCCA 29 Beggs v. Westport Foods Ltd., 2011 BCCA 76 10 2011 BCCA 84

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BRITISH COLUMBIA SUPREME COURT The trial judge concluded that Mr. Whiting had been effectively dismissed without reasonable notice when his job disappeared, and that his refusal of the company's offer of a new position did not constitute a failure to mitigate his loss as the position was not comparable. However, the trial judge found that Mr. Whiting failed to mitigate by refusing a subsequent offer by TD Bank as he would have earned "substantially the same money" in that position. BRITISH COLUMBIA COURT OF APPEAL The British Columbia Court of Appeal agreed that Mr. Whiting had been terminated without reasonable notice, and held that 8 months would have been reasonable in the circumstances. However, the Court of Appeal held that the reasoning of the trial judge with respect to mitigation was faulty, as she failed to determine the amount that Mr. Whiting would have earned during the reasonable notice period had he taken the TD Bank offer. Rather, she compared Mr. Whiting's average earnings over four years with his potential maximum earnings under the TD Bank offer and concluded they amounted to "substantially the same amount of money". The Court of Appeal held that by comparing a maximum to an average is essentially the same as comparing apples to oranges. Had the trial judge compared maximums, she would have compared Mr. Whiting's potential maximum of $182,852 annually at TD Bank with his maximum past earnings of in excess of $300,000 in 2009. Based on the faulty reasoning of the trial judge, the matter was sent back for a new hearing to determine whether Mr. Whiting had in fact failed to mitigate his damages by declining the position with TD Bank.

C.

Reasonable Notice Periods

We have not identified any significant change in reasonable notice periods being awarded by the courts, and the general rule still appears to one month of notice per year of service to a maximum of 24 months. Of course this is subject to the unique circumstances of every case and the factors outlined in Bardal v. The Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 where it was noted at paragraph 21 that: There can be no catalogue laid down as to what is reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant. However, a relatively recent decision from the British Columbia Supreme Court indicates that judges are not necessarily constrained by the Bardal factors and will consider any extenuating circumstances when determining a reasonable notice period.

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Chapell v. Canadian National Railway Company11 THE FACTS The plaintiff in Chapell was a fourth generation rail road man, and had spent his entire working life since he graduated from high school working for CPR. Mr. Chapell was summarily dismissed in September 1999 after 27 years of service. CPR claims it dismissed Mr. Chapell for just cause because he had defrauded the company by submitting expense accounts containing duplicate line items. Mr. Chapell argued that this was done in error because he had to reconstruct expense reports weeks, and sometimes months, after the fact. THE DECISION The Court found that Mr. Chapell did not intend to defraud CPR but, in fact, erroneously submitted duplicate expenses. As a result, he was wrongfully dismissed from his employment without notice or pay in lieu of notice. While the sloppiness of the expense reports were evident, the Court noted that Mr. Chapell was working under a heavily encumbered work environment and CPR had other options that dismissal for cause. The Court looked at the following factors when determining what would have been a reasonable notice period in the circumstances: · · · · He was 45 years of age terminated, and his entire working life had been at CPR. He served CPR for 27 years and held management positions. He had six promotions through his years of employment, and was regularly rewarded with kudos and bonuses. He had a leadership role in the company and was credited with the success of many programs.

The Court also noted that there were few options available to Mr. Chapell to obtain the same or similar work. This was demonstrated by Mr. Chapell's unsuccessful efforts to find other rail road work, and at the time of trial he had been forced to take a job as a truck driver in order to pay his bills. Based on this and the other factors identified above, the Court awarded Mr. Chapell 24 months of pay in lieu of reasonable notice of termination. Nelson v. Champion Feed Services Inc.12 THE FACTS Mr. Nelson worked for the employer in various capacities for nearly 25 years. When his employment was terminated in June of 2007, he was Plant Supervisor for Champion's Westlock, Alberta feed mill.

11 12

2010 ABQB 441 2010 ABQB 409

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He was not terminated for cause at the time of his dismissal, although Champion did allege after-acquired cause for improper record-keeping after the termination. At the time, Mr. Nelson was paid severance of $12,246.70 or 58 days of basic salary. Mr. Nelson brought a wrongful dismissal claim for two years pay in lieu of notice. THE DECISION In their decision, the Court held that there is no particular force to a "month per year of service" rule of thumb. Although it can be useful in some cases as a measuring stick for checking purposes, it becomes less helpful as the length of service increases and therefore the unique circumstance of every case must be taken into account. The Court also acknowledged that there is a practical ceiling of 24 months pay in lieu of notice in Alberta. It takes exceptional circumstances to go beyond that level, and these circumstances were not present in the current case. The cases cited by both parties in the decision demonstrated a range of 15 to 24 months for employees with similar factors to that of Mr. Nelson with respect to age, length of service, nature of the position, and the availability of suitable similar employment. The Court held that the majority of these cases were ones where 18 months was found to be appropriate. However, Mr. Nelson was younger by at least 10 years than the plaintiffs in these cases, and therefore the Court held that 15 months would have been a reasonable notice period in the circumstances. In their decision, the Court noted that an employee's length of service cuts both ways. Although it generally suggests longer notice periods, this factor ties in with the likelihood of finding similar employment. As opposed to the employee in the Chapell decision, the Court held that there was nothing in Mr. Nelson's length of service with Champion that could be characterized as a negative factor in finding alternate employment. Although Mr. Nelson had nearly 25 years of service, he was only 45 years at the time of dismissal and had not reached an age where this was likely to be a significant factor in his ability to find a new job. As a result, the Court held that 15 months was reasonable in the circumstances. Mackie v. West Coast Engineering Group Ltd.13 THE FACTS In Mackie, the plaintiff was a mid-level manager with 21 months' service who earned a salary of $60,375 per year at the time of his dismissal. The manner of his dismissal clearly played a role in the Court's decision to assess a lengthy notice period, despite the fact that the plaintiff did not specifically make a claim for bad faith damages. In particular, the Court commented on the fact that: · On March 25, 2009, the plaintiff was summoned to a meeting, handed an envelope and told he was being terminated. When he asked why, he was told that it was company policy not to provide a reason.

13

[2009] B.C.J. No. 2581 (B.C.S.C.)

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·

Despite the fact that the plaintiff's employment was terminated without cause, he was required to leave the premises immediately and was escorted out of the building by a superior without being given the opportunity to collect any of his personal belongings. The letter of reference provided by the employer was of little assistance to the plaintiff because it inaccurately described his position with the employer.

·

The Court found that the dismissal and the manner of dismissal "had a devastating impact" on the plaintiff. He began to smoke and drink heavily, and eventually became suicidal and underwent treatment for depression. Despite doing everything reasonably possible to find suitable alternative employment, the plaintiff remained unemployed at the time of trial some seven months later and ended up selling his home and returning to Germany. The Court rejected the employer's suggestion that it provide one months' notice per year of service as a "rule of thumb", and instead focused on the extenuating circumstances faced by the plaintiff to justify the imposition of a lengthy nine-month notice period. In this case, the plaintiff's wife had quit her job in Germany and had moved to Canada on the basis of what the couple thought were strong job prospects with the employer. In addition, the wife had enrolled in a six month training course in Ottawa that would enable her to obtain similar work in Canada. Her training costs and loss of income were assessed at approximately $150,000.

COMMENTS Despite the Court's attempt to justify the nine-month notice period on the basis of the four Bardal factors rather than the impact the dismissal had on the plaintiff and his family, it is unlikely that an employee with only 21 months' service would be awarded such a lengthy notice period in the absence of the extenuating circumstances involving the relocation of the plaintiff's wife from Germany to Canada. As a result, it is unlikely that this decision will be viewed as an increase in reasonable notice periods for employees who have been wrongfully dismissed from their employment. Rather, courts will continue to apply the factors outlined in the Bardal decision and will consider each case on its own merits.

D.

The Duty to Mitigate

The law with respect to mitigation has not changed, and employees are still required to take all reasonable steps to mitigate their damages by finding new employment, commencing self-employment, or in some instances accepting work offered by a former employer. In other words, discharging the duty to mitigate may in some circumstances involve getting back together with an "ex".

Evans v. Teamsters Local Union No. 3114 THE FACTS In Evans, an employee who worked as a business agent for 23 years was dismissed without cause. The employee then hired legal counsel and demanded 12 months of continued employment and 12 months of pay

14

2008 SCC 20

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in lieu of notice. Following receipt of the employee's demand, the parties attempted to negotiate a resolution. In the interim, the employer continued to pay the employee his salary and benefits. Several months later, the employee received a letter from the employer asking him to return to work and serve out the remainder of his 24 months notice period. The letter stated that if the employee refused to return, the employer would treat that refusal as cause for dismissal. The employee stated that he would return to work, provided that the employer rescinds his original termination letter. The employer refused to do so and the employee commenced litigation. At trial the judge concluded that the employee had been wrongfully dismissed and disagreed with the employer that, by failing to return to work, the employee had failed to mitigate his damages. The trial judge awarded $100,000 in damages to the employee. On appeal, the Court of Appeal overturned the decision. The Court of Appeal held that the employee acted unreasonably in refusing to return to work, which constituted a failure to mitigate damages. On that basis, the Court of Appeal concluded that the employee was not entitled to damages in lieu of notice. The issue before the SCC was whether or not an employee's duty to mitigate damages requires him to accept a job offer from his former employer. WHAT EVANS MEANS FOR EMPLOYERS The Court held that, in some circumstances, an employee will be required to return to work for a former employer as part of his duty to mitigate the damages caused by a wrongful dismissal. This means that employers are no longer confined to simply continuing to pay damages in lieu of notice. The SCC recognized that an employer has the initial option of offering either working notice or pay in lieu of notice. To deny the later re-selection of working notice would essentially create an artificial distinction between the two forms of compensation that is not justified in law. Whether or not an employee will be required to accept that offer of re-employment, however, depends on the facts. The overarching concern is that an employee not be obliged to mitigate his damages by working in an atmosphere of hostility, embarrassment or humiliation. This will be assessed on an objective standard based upon what a reasonable person would do in the employee's position. Factors that will be taken into account include whether the salary offered to the employee is the same, the working conditions are not substantially different or demeaning, the personal relationships involved are not acrimonious and litigation has not yet been commenced. If an employee refuses an offer that would have been accepted by a reasonable person, doing so will amount to a failure to mitigate damages that, in turn, will cause the employee to lose any entitlement to damages in lieu of notice from the employer. In Evans, the SCC held that the employee's refusal to accept his employer's offer of employment for the remainder of the notice period was unreasonable. The relationship had not been seriously damaged and there was no evidence that the employee would not be able to perform his duties upon returning to work. The employee's refusal to return to work constituted a failure to mitigate his damages such that he forfeited those damages in lieu of notice.

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Russo v. Kerr Bros. Ltd15 THE FACTS In a recent decision, an Ontario judge has ruled that a long-serving employee who claimed constructive dismissal when his salary was drastically cut, but remained on the job to mitigate his losses for the 18 months until his wrongful dismissal action came to trial, did not thereby condone or accept the reduced terms and waive his constructive dismissal claim. The employer did not dispute that the compensation reduction from $115,000 to $60,000 per year imposed on Russo could have constituted constructive dismissal, but it argued that, by remaining on the job for so long, Russo had condoned or accepted the reduced terms and had therefore waived the right to claim constructive dismissal and seek any compensation. It maintained that Russo had only two options once he rejected the new terms of employed: either to decide to remain and accept the terms within a reasonable time or to leave his employment and sue for constructive dismissal. THE DECISION The Ontario Superior Court held that Russo had not waived or abandoned the right to sue for constructive dismissal, and awarded him 22 months' pay in lieu of notice, less mitigation earnings. Justice Douglas Gray rejected the employer's argument that Russo had only two options in the circumstances, and noted that Russo's letter to his employer dated July 27, 2009 made two things clear: first, that the unilateral change in the terms and conditions of his employment constituted constructive dismissal; and second, that he did not consent to these changes. As a result, the employee clearly communicated acceptance of the repudiation of the contract to the company. Justice Gray indicated that once Russo had notified the employer that he did not accept the changes and considered himself constructively dismissed, it was the employer who had two options: (1) The employer could have told Russo to leave the workplace; or (2) The employer could have kept the old terms and conditions in place for the period of reasonable notice. The employer chose to do nothing, and therefore the Court concluded that in the circumstances, the employer must be taken to have understood that Russo was remaining in the workplace, but not under the acceptance of any changed terms and conditions of employment. There is no reason in principle why Russo could not be considered to be mitigating his losses by doing so. However, Justice Gray noted that an employee is entitled to remain in the workplace under the changed terms as a means of mitigating his losses for the period of reasonable notice only and would be deemed to have accept the new contract if he or she remained beyond that period.

15

[2010] O.J. No. 4654

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CONCLUSION As a general rule, it seems that huge damage awards for employees claiming wrongful dismissal are on the decline. Recent appellate decisions are cutting down lower court awards and eliminating "bad faith" types of compensation where these claims are not justified, and courts appear to be applying the principles of the Honda decision with increased rigour. In addition, mental distress damages and awards for aggravated and punitive damages have come under increased scrutiny by the courts and have been struck down when the facts don't support the claim an independently actionable wrong on the part of the employer. However, as this year has demonstrated, "justice will prevail" in terms of compensatory damages ­ even if these damages extend over a significant period of time and lead to historical damage awards such as the ones heralded in the Walsh v. Mobil Oil and Greater Toronto Airport Authority decisions. Based on recent cases with respect to damage awards in Alberta, employers should keep the following in mind when putting together a severance package for employees: · · · · Consider factors such length of service, age, salary, availability of suitable similar work, and any extenuating circumstances of the employee; One month per year of service can be used as a general "rule of thumb", but it should not be the only thing that employers rely upon when determining a reasonable notice period; Consider seeking legal advice with respect to reasonable notice periods, and be sure to have the employee sign a full release; and Consider tax implications of the severance package for the employee (ie. consider classifying the severance package as a "retiring allowance" in order to provide the employee with specific tax advantages).

Keeping these tips in mind, employers should be able to avoid the dreaded call from a former employee stating "Show Me the Money!".

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