Punitive Damages in Employment Law

An employer is obligated to act fairly and in good faith towards their employees. If an employer treats an employee maliciously, or intentionally breaks the law, Courts can punish that employer by awarding the employee what is called “punitive damages”.

In this article we will set out some of the circumstances under which punitive damages are awarded, the kinds of behaviour that warrant punitive damages, and how the courts determine whether punitive damages are appropriate.

What are Punitive Damages?

The Supreme Court of Canada defines the characteristics of punitive damage as follows:

Punitive damages may be awarded in situations where the [employer’s] misconduct is so malicious, oppressive and high-handed that it offends the court’s sense of decency… It is the means by which the judge expresses outrage at the egregious conduct of the [employer].

When are Punitive Damages Awarded?

Punitive damages are rarely awarded and when they are, it is only after careful and cautious consideration by the Court. Factors that the Court considers are meant to test how serious and egregious the employer’s conduct was.

For example:

  • Was the employer’s misconduct planned and deliberate?
  • Did it occur over a long period of time?
  • Did the employer try to hide, lie about, or cover up the misconduct?
  • Was there some ulterior inappropriate motive behind the misconduct, such as intimidation, an intent to harm the employee, or to otherwise extract some unfair unjust advantage?

What kinds of bad behaviour warrant punitive damages?

While there is no strict all inclusive list of misconduct that leads to awards of punitive damages, Courts have awarded punitive damages in a number of cases, including, where:

  1. an Employer terminates for just cause based on knowingly false or unsupportable allegations;
  2. an Employee is treated in a demeaning and/or humiliating manner;
  3. an Employer demands that an employee resign before it will provide a reference letter;
  4. an Employer threatens, extorts or intimidates an employee;
  5. an Employer intentionally lies to or misleads an employee; or
  6. an Employer intentionally violates the Employment Standards Act, 2000: see Altman v. Steve’s Music, 2011 ONSC 1480 (CanLII).

The Legal Test for Punitive Damages in the Employment Law Context

The Ontario Court of Appeal in Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419 (CanLII), summarizes the legal test that the Ontario Court follows in deciding to award punitive damages, as follows:

  1. The defendant’s conduct is reprehensible.
  2. The defendant committed an “actionable wrong” independent of the underlying claim for damages for breach of contract; and
  3. A punitive damages award, when added to any compensatory award, is rationally required to punish the defendant and meets the objectives of retribution, deterrence and denunciation.

There have been a number of court cases that have ruled on each of the above three factors. Let’s take a deeper review of some of the defining principles of law that have emerged.

1. Reprehensible Conduct

Reprehensible conduct has been explained in a couple of cases, as follows:

  • In Vorvis v. Insurance Corp. of British Columbia, [1989] 1 SCR 1085, the Supreme Court of Canada observed that conduct meriting punitive damages awards must be:

“harsh, vindictive, reprehensible and malicious”, as well as “extreme in its nature and such that by any reasonable standard it is deserving of full condemnation and punishment”.

… the impugned conduct must depart markedly from ordinary standards of decency—the exceptional case that can be described as malicious, oppressive or high-handed and that offends the court’s sense of decency

The test … limits [a punitive damages] award to misconduct that represents a marked departure from ordinary standards of decent behaviour. Because their objective is to punish the defendant rather than compensate a plaintiff (whose just compensation will already have been assessed), punitive damages straddle the frontier between civil law (compensation) and criminal law (punishment).

[P]unitive damages should be resorted to only in exceptional cases and with restraint.

2. Committed an Actionable Wrong

The law does not permit individuals to be punished simply because they do something that a Judge or the Court doesn’t like or approve of. The legal system isn’t there to punish unethical behaviour, only illegal behaviour. Therefore, punitive damages can only be awarded where the misconduct of the employer amounts to some wrong that could give rise to a lawsuit by itself.

In Royal Bank of Canada v. W. Got & Associates Electric Ltd. [1999] 3 SCR 408,  this Court confirmed that “the circumstances that would justify punitive damages for breach of contract in the absence of actions also constituting a tort are rare”. Rare they may be, but the clear message is that such cases do exist.  The Court has thus confirmed that punitive damages can be awarded in the absence of an accompanying tort.

Therefore, the requirement of an independent actionable wrong can be met by either an independent tort, a breach of fiduciary duty or a breach of a contractual duty such as the duty of good faith or fair dealing.

3. Rationally Required to Punish the Employer and Meets the Objectives of Retribution, Deterrence and Denunciation.

Ordinarily, a Court simply puts an employee back into the position they would have been in but for the conduct of the employer. This is called “compensatory” damages. Punitive damages are different. They are ordered on top of compensatory damages resulting in the employee getting more than he would normally be entitled to and is therefore actually in a better position as a result. Punitive damages are essentially legal recompense that a defendant found guilty of committing a wrong or offense is ordered to pay on top of compensatory damages. They are meant as punishment for behaviour that is considered abhorrent.

This principle is explained in Fidler v. Sun Life Assurance Co. of Canada, [2006] SCR 3, “[W]hile compensatory damages are awarded primarily for the purpose of compensating a plaintiff for pecuniary and non-pecuniary losses suffered as a result of a defendant’s conduct, punitive damages are designed to address the purposes of retribution, deterrence and denunciation.”

For this reason, the Courts have to consider whether an employer has been properly punished and whether a punitive damage would help achieve this objective.

Punitive Damages Are Not Available In Human Rights Tribunal Decisions

The Human Rights Tribunal does not have jurisdiction to award punitive damages.


Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

Federally Regulated Employers: Understanding what laws govern your workplace.

Approximately 90% of workplaces in Ontario are governed by the employment laws enacted by the Ontario government. However, some Canadians do not fall under that provincial jurisdiction, but instead are considered “federally regulated”. Federally regulated workplaces are governed by legislation enacted by the Government of Canada instead of the Province of Ontario.

Most Ontario employment law articles or publications focus on the law and issues applicable to the majority. However, if you are a federally regulation employee or employer, it is important to understand how these federal employment laws differ from the Ontario employment law.

What is a Federally Regulated Employer or Workplace?

The answer to this questions goes back to confederation. So you don’t fall asleep, I will keep it very brief. When Canada was formed, the provinces and the federal government divided up power and responsibilities into discrete buckets. Those areas which were assigned to the federal government, to this day, are the industries that are governed by the Government of Canada and it’s laws.

The industry sectors that are federally regulated, include:

  • Banks
  • Marine shipping, ferry and port services
  • Air transportation, including airports, aerodromes and airlines
  • Railway and road transportation that involves crossing provincial or international borders
  • Canals, pipelines, tunnels and bridges (crossing provincial borders)
  • Telephone, telegraph and cable systems
  • Radio and television broadcasting
  • Grain elevators, feed and seed mills
  • Uranium mining and processing
  • Businesses dealing with the protection of fisheries as a natural resource
  • Many First Nation activities
  • Most federal crown corporations, and
  • Private businesses necessary to the operation of a federal act

Is my Workplace Federally Regulated?

The Canadian Government keeps records of all Federally regulated corporations with 100 or more employees across Canada a copy of the most recently published list from 2017 can be searched through here:

List of Federally Regulated Employers

1456998 Alberta Ltd.

1507953 Ontario Inc. (Inactive)

1791949 Ontario

2635-8762 Québec Inc.

2701545 Canada Inc.

3903214 Canada Inc.

4Tracks Ltd.

591182 Ontario Ltd.

6240143 Canada Inc.

6422217 Canada Inc.

9007-6720 Québec Inc.

9064-4287 Québec Inc.

9736140 Canada Inc.

A. Beaumont Transport Inc.

A.J. Bus Lines Ltd.

Acadia Broadcasting Limited

Access Communications Co-operative Limited

Accessible Media Inc.

ADM Agri-Industries Ltd.

Administration portuaire de Montréal

Aéroport de Québec Inc.

Aéroports de Montréal

Aevitas Inc.

Agri-Marché Inc.

Agrifoods International Cooperative Ltd.

Agris Co-operative Ltd.

Air Canada

Air Canada Rouge LP

Air Creebec Inc.

Air Georgian Limited

Air Inuit Ltd/Ltée

Air North Charter & Training Ltd.

Air Tindi Ltd

Air Transat inc.

Airbus Helicopters Canada Limited

Airport Terminal Services Canadian Co.

AirSprint Inc.

Algoma Central Corporation

ALL Communications Network

All-Can Express Ltd.

Alliance Pipeline Ltd.

Alliance Pulse Processors Inc.

Alpine Aerotech LP

Alpine Helicopters Inc.

American Airlines, Inc.

Amex Bank of Canada

Andy Transport Inc. (90 employees in 2018)

Apex Motor Express Inc.

APPS Cargo Terminals Inc.

Archipelago Marine Research Ltd.

Ardent Mills

Armour Transport Inc.

Arnold Bros. Transport Ltd.

Association des employeurs maritimes

ATCO Structures & Logistics

ATI Telecom International Co.

Atlantic Towing Limited

ATS Andlauer Transportation Services LP.

ATS Services Ltd.

Autobus Campeau Inc.

Autobus Idéal Inc.

Aveda Transportation and Energy Services Inc.

Avex Flight Support Inc.

Avmax Aviation Services Inc.

AYR Motor Express Inc.

B&R Eckel’s Transport Ltd.

Bandstra Transportation Systems Ltd

Bank of America National Association, Canada Branch

Bank of Canada

Bank of Montreal

Banque Laurentienne du Canada

Banque Nationale du Canada

Bay Ferries Limited

Bearskin Lake Air Service LP.

Bell Canada

Bell Solutions Techniques Inc.

Bessette & Boudreau Inc.

Big Freight Systems Inc.

Bison Transport Inc.

Blackburn Radio Inc.

Blue Ant Media Inc.

BNP Paribas

Bradley Air Services Limited

Bragg Communications Inc.

Brasseur Transport Inc.

Brett-Young Seeds Limited

Brian Kurtz Trucking Ltd.

Bridgewater Bank

Brink’s Canada Limited

British Columbia Maritime Employers Association

Bruce Power LP

Bruce R. Smith Limited (Inactive)

Business Development Bank of Canada

BWXT Nuclear Energy Canada Inc. / BWXT ITG Canada, Inc.

C.A.T. Inc.

Calm Air International LP

Cam-Scott Transport Ltd.

Cameco Corporation

Can-Am West Carriers Inc.

Canada Cartage System Limited Partnership

Canada Council for the Arts

Canada Deposit Insurance Corporation / La Société d’assurance-dépôts du Canada

Canada Malting Company Ltd.

Canada Mortgage and Housing Corporation

Canada Pension Plan Investment Board

Canada Post Corporation

Canadian Air Transport Security Authority

Canadian Broadcasting Corporation / Société Radio-Canada

Canadian Commercial Corporation

Canadian Imperial Bank of Commerce

Canadian Light Source Inc.

Canadian Museum for Human Rights

Canadian Museum of History

Canadian Museum of Nature

Canadian National Railway Company

Canadian North Inc.

Canadian Nuclear Laboratories

Canadian Pacific Railway Limited

Canadian Payments Association

Canadian Press Enterprises Inc.

Canadian Tire Bank

Canadian Western Bank

Cancrew Enterprises Ltd.

Candu Energy Inc.

Canpar Express Inc.

Capital One Bank (Canada Branch)

Cardinal Couriers Ltd.

Cargair Ltd.

Cargill Limited

Cargo Airport Services Canada Inc.

CargoJet Airways Ltd.

Caron Transportation Systems Partnership

Cascade Aerospace Inc.

Cascade Energy Services LP

Cassens Transport ULC

Cassidy’s Transfer & Storage Limited

Cathay Pacific Airways Limited

Cavalier Transportation Services Inc.

Central Mountain Air Ltd.

CEVA Freight Canada Corp.

CEVA Logistics Canada, ULC

Challenger Motor Freight Inc.

Chartright Air Inc.

CHC Helicopter Group of Companies

Chemin de fer QNS&L

Citibank Canada

City of Ottawa

Clean Harbors Canada Inc.

Coastal Pacific Xpress Inc.

Cogeco Connexion Inc.

Cogeco Média Acquisitions Inc.

Colispro Inc.

Comwave Networks Inc.

Conair Group, Inc.

Concentra Bank

Connors Transfer Limited.

Consolidated Fastfrate Inc.

Contrans Flatbed Group LP

Contrans Services LP

Contrans Tank Group LP

Cooney Group Inc.

Corporation des Pilotes du Saint-Laurent Central inc.

Corporation du Fort St-Jean

Corus Entertainment Inc.

Cougar Helicopters Inc.

CWS Logistics Ltd.

D&W Forwarders Inc.

D.C.T. Chambers Trucking Ltd.

Day & Ross Inc.

Defence Construction (1951) Ltd.

Delta Air Lines, Inc.

Denny Bus Lines Ltd.

Desgagnés Marine Cargo Inc.

DHL Express (Canada), Ltd.

Dicom Transportation Group

Direct Limited Partnership

Distributel Communications Limited

Doug Coleman Trucking Ltd.

DP World (Canada) Inc

Dufferin Communications Inc.

Earl Paddock Transportation Inc

Eassons Transport Ltd.

ECL Carriers LP

Edmonton Regional Airports Authority

Elgin Motor Freight Inc.

Enbridge Employee Services Canada Inc.

ENTREC Corporation

Envoy Air Inc.

Equitable Bank

Erb Enterprises Inc.

Execaire, a division of I.M.P. Group

Execulink Telecom Inc.

Executive Flight Centre Fuel Services Ltd.

Expertech Network Installation Inc./Expertech Bâtisseur de reseaux Inc

Export Development Canada

F. Ménard Inc.

Fairchild Radio Group Ltd.

Fairchild Television Ltd.

Farm Credit Canada

Federal Express Canada Corporation

Fedex Freight Canada Corp.

FedEx Ground Package System, Ltd.

Fednav Limited

Ferus Inc.

Fibernetics Corporation

Field Aviation Company Inc.

First Canada ULC

First Team Transport Inc.

Floradale Feed Mill Limited

Flying Colours Corp

Formula Powell L.P.

Freshwater Fish Marketing Corporation

Fugro Canada Corporation (INACTIVE)

G. Zavitz Limited

G3 Canada Limited

Gardewine Group Limited Partnership

GCT Canada Limited Partnership

Gestion TForce Inc.

Gilbert M. Rioux et Fils Ltée.

Glen Tay Transportation (Inactive)

Golden West Broadcasting Ltd.

Grace Transport Inc.

Grain Millers Canada Corp.

Great Canadian Railtour Company Ltd.

Great Slave Helicopters Ltd.

Greater Toronto Airports Authority

Greyhound Canada Transportation ULC.

Grimshaw Trucking L.P.

Groupe Galland

Groupe Guilbault Ltée

Groupe Robert

Groupe Transport Morneau inc.

Groupe TVA Inc.

Groupe TYT Inc.

Groupe V Média

H & R Transport Limited

Halifax Employers Association

Halifax International Airport Authority

Hallcon Crew Transport Inc.

Hammond Transportation Ltd.

Hapag-Lloyd (Canada) Inc

Harvard Broadcasting Inc.

Hélicoptères Canadiens Limitée/Canadian Helicopters Limited

Helijet International Inc.

Henri Sicotte inc

Hensall District Co-operative Inc.

Highland Moving and Storage Ltd.

HomeEquity Bank

HSBC Bank Canada

Hudbay Minerals Inc.

Hudson Bay Railway Company

Hughson Trucking Inc. (Inactive)

Hutton Transport Limited

Hyndman Transport Limited

ICICI Bank Canada

ILTA Grain Inc.

IMP Group Limited – Aerospace Division

Industrial and Commercial Bank of China (Canada)

Information Communication Services

Inmarsat Solutions (Canada) Inc.

Innotech Aviation, a division of IMP Group Limited

Instech Télécommunication Inc.

Intek Communications Inc.

International Air Transport Association

International Development Research Centre

International Truckload Services Inc

Iron Range Bus Lines Inc.

Island Tug and Barge Ltd.

J & R Hall Transport Inc.

J & T. Murphy Limited

Jade Transport Ltd.

Jay’s Transportation Group Ltd.

Jazz Aviation L.P.

Jervis B. Webb Company of Canada, Ltd.

Jet Transport Ltd.

Jim Pattison Industries Ltd.

Jones Feed Mills Limited

JPMorgan Chase Bank, N.A.

KEB Hana Bank Canada

Keewatin Air LP

Keith Hall & Sons Transport Limited

Kelowna Flightcraft Group of Companies

Keltic Transportation Incorporated

Kenn Borek Air Ltd.

Kindersley Transport Ltd.

Kleysen Group Ltd.

Kriska Holdings Limited

Kunkel Bus Lines Ltd.

L. Bilodeau et Fils ltée

L. Hansen’s Forwarding Ltd.

L. Simard Transport Ltée

L3 Technologies MAS inc

Laidlaw Carriers Bulk LP

Laidlaw Carriers Van LP

Lakehead Freightways Inc.

Le Groupe de Sécurité Garda Inc

Le Groupe Océan Inc.

Ledcor Industries Inc.

Les Distributions Carl Beaulac Inc.

Les Investissements Nolinor Inc.

Les Services JAG Inc.

Linamar Transportation Inc.

Link-on Communications Inc.

Lockheed Martin Commercial Engine Solutions

Logistec Arrimage Inc.

Lomak Bulk Carriers Corp. (Inactive)

Louis Dreyfus Company Canada ULC.

Lower Lakes Towing Ltd.

Mackie Moving Systems Corporation

Maersk Supply Service Canada Ltd.

Mantei’s Transport Ltd.

Manulife Bank of Canada

Marine Atlantic Inc.

Maritime Broadcasting System Limited

Masterfeeds Inc.

McClay Group Ltd.

McKeil Marine Limited

McKevitt Trucking Limited

Mediterranean Shipping Company (Canada) Inc.

Menzies Aviation (Canada) Ltd.

Midland Transport Limited

Minimax Express Transportation Inc.

Moe’s Transport Trucking Inc.

Montship Inc.

Morningstar Air Express Inc.

MTU Maintenance Canada Ltd.

MUFG Bank, Ltd., Canada Branch

Mullen Oilfield Services L.P.

Mullen Trucking Corp.

Multiboard Communications Inc.

My Broadcasting Corporation

National Arts Centre Corporation

National Capital Commission

National Gallery of Canada

National Museum of Science and Technology / Musée national des sciences et de la technologie

NAV CANADA

New Hope Transport Ltd.

New United Goderich Inc.

New-Life Mills, a Division of Parrish & Heimbecker, Limited

Nordion (Canada) Inc.

Normandin Transit Inc.

North Cariboo Flying Services Ltd.

Northern Communications Services Inc.

Northumberland Ferries Limited

Northwestel Inc.

Nuclear Waste Management Organization

Oceanex Inc.

Oculus Transport Ltd.

Office d’investissement des régimes de pensions du secteur public

Offshore Recruiting Services Inc.

Ontario Potato Dist. (Alliston) Inc. 1991

Ontario Power Generation

OpsMobil

ORANO Canada Inc.

Ornge Global Air Inc.

Ottawa Macdonald-Cartier International Airport Authority

P&H Milling Group, a division of Parrish & Heimbecker, Ltd.

Pacific Coastal Airlines Ltd.

Pacific Western Transportation Ltd.

Papineau Int. S.E.C. (Transport Papineau International)

Parrish & Heimbecker, Limited

Paterson GlobalFoods Inc.

Paul’s Hauling Ltd.

Pe Ben Oilfield Services L.P.

Pelmorex Corp.

Pembina Pipeline Corporation

Penske Logistics LLC

Perimeter Aviation LP

Pioneer Hi-Bred Production Company

Plains Midstream Canada

Pole Star Transport Incorporated

Polymer Distribution Inc.

Portage Transport Inc.

Porter Airlines Inc.

Premier Aviation Quebec inc.

Presidents Choice Bank

Primus Management ULC.

Prince Rupert Grain Ltd.

Provincial Aerospace Ltd.

Purolator Inc.

Q-Line Trucking

Quik X Transportation Inc.

Radio-Onde Inc.

Rawlco Radio Ltd.

Raytheon Canada Limited (The North Warning System)

Remorquage St-Michel Inc.

Richardson International Limited

Ridley Terminals Inc.

Rigel Shipping Canada Inc.

Rio Tinto Alcan, Installations Portuaires

RNC MEDIA INC.

Rockwater Energy Solutions

Rogers Communications Inc.

Rogers Foods Ltd.

Rosedale Transport Limited

Rosenau Transport Ltd.

Roxborough Bus Lines Limited

Royal Bank of Canada

RSB Logistic Inc. (Inactive)

Ryder Truck Rental Canada Ltd.

S.G.T. 2000 Inc.

Safeco Driver Services Inc.

Sander Geophysics Limited

Sanimax EEI Inc.

Scamp Transport Ltd.

Schneider National Carriers Canada

Scoular Canada Ltd.

Seaboard Liquid Carriers Limited

Seaspan ULC

Secunda Canada LP

Securiguard Services Ltd.

Securitas Transport Aviation Security Ltd.

Sentrex Communications Co.

Serco Canada Inc.

Service Trans-West inc.

Shaw Communications Inc.

Sheffield Moving & Storage Inc

Sirius XM Canada Inc.

SITA Information Networking Computing Canada Inc.

Sky Regional Airlines

Skyservice Aviation Inc. and Sky Service F.B.O Inc.

Snowbird Aviation Services Limited Partnership

Société de transport de l’Outaouais

Société du Vieux-Port de Montréal inc.

Sogetel inc.

Spearing Service L.P.

Speedy Transport Group Inc.

Standard Aero Limited

Standard Aero Ltd.

State Street Bank & Trust Company – Canada Branch

Stericycle ULC.

Steve’s Livestock Transportation (Blumenort) Ltd

Stingray Radio Inc.

Strategic Aviation Services Ltd.

Sunbury Transport Limited

Sunwest Aviation Ltd.

Sunwing Airlines Inc.

Sutco Contracting Ltd.

Swissport Canada Inc.

Symcor Inc.

Systèmes Danfreight inc.

Systemex Communications (S.C.) Inc.

T&T Trucking Ltd.

Tangerine Bank

Tata Communications (Canada) Ltd

Tbaytel

Teekay Shipping (Canada) Ltd.

TekSavvy Solutions Inc.

Téléfilm Canada

Telesat Canada

TELUS Communications Company

Tenold Transportation Ltd

TeraGo Networks Inc.

TFI Transport 5 LP

TFI Transport 7 LP

TForce Final Mile Canada Inc.

The Bank of Nova Scotia

The Calgary Airport Authority

The CSL Group Inc.

The Jacques Cartier and Champlain Bridges Incorporated

The Royal Canadian Mint

The St. Lawrence Seaway Management Corporation

The Toronto Terminals Railway Company Limited

The Toronto-Dominion Bank

The Trimac Group of Companies

Thompsons Limited

Thompsons Moving Group Limited

Three Star Trucking Ltd.

Thunder Airlines Limited

Tier2 Technologist LTD

Titanium Transportation Group Inc.

Top Aces Inc.

Toronto Port Authority

Total Oilfield Rentals Ltd

Trailwood Transport Ltd.

Trans Mountain Canada Inc.

Trans-Frt. McNamara Inc.

TransCanada Pipelines Limited

Transit Windsor

Transport A. Laberge & Fils Inc.

Transport Bellemare International

Transport Bernières inc. (Groupe Bernières)

Transport Bourret inc.

Transport Couture

Transport Gilmyr inc

Transport Grayson Inc.

Transport Guilbault Inc.

Transport Guy Bourassa Inc.

Transport Hervé Lemieux (1975) Inc.

Transport Inter-Nord Inc.

Transport Jacques Auger Inc.

Transport Jocelyn Bourdeau Inc.

Transport Lyon Inc.

Transport Sylvester & Forget Inc.

Transport TFI 1, SEC

Transport TFI 15 S.E.C. (Transport Grégoire)

Transport TFI 16 SEC

Transport TFI 19 SEC (Durocher International)

Transport TFI 22, S.E.C.

Transport TFI 23, S.E.C./TFI

Transport TFI 4 SEC

Transport TFI 6 S.E.C. (Transport Besner)

Transport Transbo Inc.

Transwest Air Limited Partnership by its General Partner Transwest Management Ltd.

TransX Ltd.

Trappers Transport Ltd.

Travelers Transportation Services Inc.

Trentway-Wagar Inc.

Tri-Line Carriers LP

TRJ Telecom Inc.

Trouw Nutrition Canada Inc.

Troyer Ventures Ltd.

TST Solutions L.P.

Universal Coach Line Ltd.

UPS Canada

V.A. Inc.

V.T.L. Express Inc.

Van-Kam Freightways Ltd.

Vancouver Airport Authority

Vancouver Fraser Port Authority

Vector Aerospace Engine Services – Atlantic

Vedder Transport Ltd.

Verreault Navigation inc.

Verspeeten Cartage Ltd.

VIA Rail Canada Inc.

Vianet Inc.

Vidéotron ltée

Vista Radio Ltd.

Viterra Inc.

Voyageur Aviation Corp.

Wallenstein Feed & Supply Ltd.

Warren Gibson Limited

Wasaya Airways Limited Partnership

Wells Fargo Bank N.A., Canadian Branch

West Wind Aviation LP

Westcan Bulk Transport Ltd.

Westcoast Energy Inc.

Western Logistics Inc.

Western Stevedoring Company Limited

WestJet, an Alberta Partnership

Westman Media Cooperative Ltd.

Westower Communications Ltd.

Westshore Terminals Limited Partnership

Wills Transfer Limited

Wilson’s Transportation Ltd.

Windsor Disposal Services Ltd.

Winnipeg Airports Authority Inc.

WireComm Systems (2008), Inc.

Withers L.P.

XPO logistics Freight Canada, Inc.

XTL Transport Inc

Yellowhead Helicopters Ltd.

YRC Freight Canada Company

Zayo Canada Inc.

Zim Integrated Shipping Services (Canada) Co. Ltd.

What are the differences between Federally Regulated and Provincially Regulated workplaces?

The difference between federally regulated and provincially regulated workplaces comes down to the difference in the written laws (statutes) that govern. While most Ontario workplaces are governed by the Employment Standards Act, the Ontario Human Rights Code, and the Occupational Health and Safety Act, federally regulated workplaces are governed by the Canada Labour Code and the Canadian Human Rights Act.

Employment Standards Act vs the Canada Labour Code

While both the federal and provincial governments have established minimum employment standards to protect employees, the differences between the Employment Standards Act and the Canada Labour Code are significant, especially in the area of termination and wrongful dismissal.

In Ontario, under the Employment Standards Act, employers can fire employees at any time for any non-discriminatory reason. However, under the Canada Labour Code, employees in non-management positions cannot be terminated without just cause. In Wilson v Atomic Energy Canada, the  Supreme Court of Canada confirmed that a federally regulated employer cannot simply dismiss an employee on a “without cause” basis and provide severance arrangements.

In other words, most federally regulated employees cannot be fired unless they are guilty of serious misconduct (i.e. just cause) or if their position is legitimately no longer required (i.e. after the closure of a business). Unlike most Ontario employees, employees regulated by the Canada Labour Code have a right to keep their job.

As I discussed in more detail in my article on Termination of the Employment Relationship: “Termination for cause has been described by the Ontario courts as the “capital punishment” of the employment relationship. It is typically very difficult for an employer to prove willfull misconduct or cause.” Accordingly, federally regulated employees have much greater job protection than the majority of Ontario workers.

Human Rights

In terms of Human Rights law the difference between federal and provincial employers is minimal. All employers are entitled to work free from discrimination.


Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

Constructive Dismissal: A Good Reason to Quit

What is Constructive Dismissal?

“Constructive Dismissal” is defined as a substantial and unilateral change to the terms or working conditions of employment. In other words, a constructive dismissal describes situations where, although an employer has not directly fired an employee, its actions or its failure to address issues, leaves an employee feeling like they have no choice but to resign. Another way to think about constructive dismissal is that it arises when an employee has a good reason to quit their job.

A relocation of the workplace from Toronto to India is a clear example of a substantial change. The determination becomes more nuanced and complex, however, in less obvious situations. For example:

  • Where an employee is moved from a salaried position to one based on commission; or
  • Where an employee is being transferred from a non-customer facing role to one that requires them to interact with customers regularly, although at the same rate of pay.

What makes a change “substantial”?

As you may have guessed from the definition of constructive dismissal, when deciding whether an employee has been constructively dismissed, the Courts have to decide whether the change in employment was “substantial”.

Determining what is a substantial or fundamental change to an employment agreement depends on facts and circumstances. The burden to prove that the facts and circumstances amount to a substantial change in employment is on the employee.

To provide guidance on the meaning of substantial in the context of a constructive dismissal, this article will look at the three situations in which constructive dismissal can occur:

  1. Where there is a change to some or all of the terms of employment (i.e. salary, hours of work, location, role, responsibility, etc.);
  2. Where the workplace becomes unsafe, hostile or toxic (i.e. a change in working conditions); and
  3. Where multiple small changes taken together become a substantial change.

Constructive dismissal due to substantial changes to the terms of employment.

In the eyes of the Court, employers are generally entitled to make minor unilateral amendments to employment terms when those changes are reasonable and/or contemplated as part of the employment agreement. The Courts do recognize that employers should be allowed some flexibility in structuring jobs as part of their authority in managing the business.

In deciding whether the change is substantial, the Courts apply an objective legal analysis. This means it doesn’t matter what the employee believes happened. The Court looks at the facts and circumstances and asks if a reasonable person in the employee’s shoes would find that the terms of employment had been significantly altered by the employer. They consider the nature and extent of the changes with specific attention and consideration to the intention of the parties at the time the employment contract was formed.

To prove constructive dismissal, the key is to be able to demonstrate that the change(s) were severe enough that a fundamental part of the agreement was altered.

Examples of Changes to Employment Terms

Some of the “substantial” changes taken by employers might look like:

  • a demotion;
  • a change to the employee’s reporting structure or job responsibilities;
  • a reduction to an employee’s compensation of more than 10%;
  • a change to an employee’s hours of work from day shift to a night shift; or
  • relocating the employee’s workplace resulting in a drastically increased or unreasonable commute.

Another example of a substantial change could be an unpaid suspension or layoff. As I discussed in more detail in Temporary Layoffs: What Everyone Needs to Know, employers are not allowed to layoff employees when it isn’t a written term of their contract or a standard industry practice. Accordingly, being laid off in almost every instance is a constructive dismissal.

Constructive dismissal due to unsafe, hostile or toxic work environment.

Employers are required to provide a safe and healthy work environment and that obligation is legally regulated through Ontario occupational health and safety legislation. An unsafe or unhealthy work environment may result in an employee being constructively terminated.

In cases of poor work environments, the Court will consider the facts and circumstance and apply an objective test. Is the workplace so unsafe, hostile or toxic that a reasonable person would not be expected to return? If the answer is yes, then the employee was constructively dismissed.

The following are some of the factors that will be considered to determine if constructive dismissal has occurred:

  • The serious wrongful behaviour is evident and its nature is such that it renders continued employment impossible;
  • The serious wrongful behaviour has been persistent or repeated;
  • The test applied is objective – that is, it is confirmed that someone in the employee’s shoes would consider the environment poisoned

Examples of unsafe, hostile, or toxic workplaces.

A good example of a toxic work environment is one in which the employer fails to prevent workplace harassment or bullying. Other examples include workplaces where unjustified criticism or vague and unfounded accusations of poor performance (especially by persons of authority) exist, a culture where sexism or racism is tolerated (if not actively encouraged), or where an employee is subject to extreme stress and unreasonable expectations or demands.

Multiple Small Changes Overtime May Constitute A Substantial Change to Employment

Although minor changes will not amount to constructive dismissal, a series of small changes might. The key is that the extent of the changes made to the terms of employment must add to a total change that is substantial or makes the employee feel that the employer is trying to have them quit.

For example, an employer might make a minor reduction in salary in January, then reduce employee benefits in March, then a small reduction in hours in April, perhaps then a restructuring to change an employees role to have less overall responsibility in July.. The total effect of those changes may add up to a substantial change to the terms of employment.

Employee’s Options In the Face of Substantial Unilateral Changes in Employment

An employee’s options in the face of a potential constructive dismissal are set out by the Ontario Court of Appeal in a case called Wronko v. Western Inventory Service Ltd. (which I’ve written about before in How to Change Employment Contracts). Those options are:

  1. Accept the change in the terms of employment, either expressly or implicitly through apparent agreement, in which case the employment will continue under the altered terms;
  2. Reject the change and sue for constructive dismissal if the employer persists in treating the employment relationship as being subject to the varied term; or
  3. Make it clear to the employer that they are rejecting the new term and insisting on the original terms of employment.

If an employee decides to continue to work under changed conditions, they may not be able to bring the matter to the courts at a later date. This legal principle is called condonation. If an employee condones the change through conduct, then they have implicitly accepted the change.

Risks on Employees

Usually, to claim constructive dismissal the employee actually has to quit and then sue. In this respect there is always a risk to the employee who makes a claim for constructive dismissal. If the employee is not able to prove that they have been constructively dismissed, then they will be found to have resigned from their employment. Having resigned, the employee will not be entitled to any damages for wrongful dismissal.


Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

Temporary Layoffs: What Everyone Needs to Know

Temporary layoffs are an attractive option for employers facing economic downturn, business or financial troubles, or a global pandemic like COVID-19. While it may appear to be a good way to eliminate staff without paying termination pay or severance, there are many misconceptions that both employers and employees have.

This article aims to help you understand everything you need to know about temporary layoffs under Ontario employment law and should be used as a guide whether you are a business owner considering laying off staff or an employee who was laid off.

Temporary Layoffs Are Not Allowed for Most Employees

The first and most important thing to understand about temporary layoffs is that in most situations they are not allowed. There is no implied right to layoff an employee. Even though the ESA provides guidelines concerning the maximum length of a temporary layoff, the Ontario Courts do not permit an employer to layoff, or suspend an employee, without pay, unless:

  1. It is one of the written terms in the employment contract; or
  2. The layoff or suspension was agreed to by both employee and employer—this agreement can take the form of a written contract, a well-communicated policy or indirectly through a widely known practice within your employer’s organisation or industry (i.e. seasonal workers, construction industry, etc…).

Any layoff (even a temporary one) that doesn’t meet the above test is a constructive dismissal. The foundational case on this issue is Stolze v. Addario, 1997 CanLII 764, by the Ontario Court of Appeal, in which the Court wrote:

… the absence of evidence of a policy or practice within the employer company of laying off “key” employees, constitutes the lay-off a repudiation of a fundamental term of this employee’s contract. He was, therefore, constructively dismissed.

Read my earlier article Termination of the Employment Relationship in Ontario for more information.

Only if the employer makes it over this first and difficult hurdle, does the law concerning temporary layoffs become relevant.

What is a Temporary Layoff?

A temporary layoff is when a employee’s hours are reduced or eliminated on a short term basis with the intention that they will shortly be recalled. At the time an employee is laid off, an employer is not required to provide a specific recall date, however, if they do, they must generally comply with it.

The maximum length of a temporary layoff is specifically defined in the Employment Standards Act (“ESA”). If an employee’s layoff lasts even just one day longer than the specified time set out in the ESA, then the employee has been terminated retroactive to the first date of the layoff. As a result, that terminated employee is entitled to pay in lieu of notice and severance. 

The definition of temporary layoff according to the Employment Standards Act is as follows:

What constitutes termination
56 (1) An employer terminates the employment of an employee … if, …

(c) the employer lays the employee off for a period longer than the period of a temporary lay-off.

Temporary lay-off
(2) For the purpose of clause (1) (c), a temporary layoff is,

(a) a lay-off of not more than 13 weeks in any period of 20 consecutive weeks;

(b) a lay-off of more than 13 weeks in any period of 20 consecutive weeks, if the lay-off is less than 35 weeks in any period of 52 consecutive weeks and,

(i) the employee continues to receive substantial payments from the employer,

(ii) the employer continues to make payments for the benefit of the employee under a legitimate retirement or pension plan or a legitimate group or employee insurance plan,

(iii) the employee receives supplementary unemployment benefits,

(iv) the employee is employed elsewhere during the lay-off and would be entitled to receive supplementary unemployment benefits if that were not so,

(v) the employer recalls the employee within the time approved by the Director, or

(vi) in the case of an employee who is not represented by a trade union, the employer recalls the employee within the time set out in an agreement between the employer and the employee;

If the specific requirements for a layoff to be considered “temporary” are not met than that layoff is a termination. In a nutshell (and explained in more detail below), if your layoff lasts longer than the temporary layoff time periods or does not meet any of the conditions set out above, the employer is considered to have terminated the employee’s employment. The employee will therefore be entitled to termination pay, severance or damage for wrongful dismissal

Temporary Layoffs of More than 13 Weeks but less than 35 Weeks

A layoff more than 13 weeks but less than 35 weeks, can only be considered temporary where at least one of the following conditions are met:

  1. The employee continues to receive substantial payments from the employer;
  2. The employer continues to make RRSP, pension plan, or group health and/or dental insurance plan contributions;
  3. The employee receives supplementary unemployment benefits (or would be entitled to receive this benefits if not for the employee having alternative employment during this period); or
  4. the employer recalls the employee within the time approved by the Director.

Ongoing “Substantial Payments” or Benefit Plan Contributions by Employer

The payments contemplated under 1 and 2 need to have been made throughout the entire period of the temporary layoff in order to satisfy this condition. If the employer did not make regular and on going payments during the first 13 weeks of the temporary layoff or stopped making payments at any time, this condition is not satisfied.

The term “substantial payment” is not defined and will likely depend on any individuals particular employment circumstances. Employers and employees should consider getting legal advice on this requirement because it will be highly case specific.

With respect to benefit plans, specifically, the terms of the plans provided by the employer must be the same as before the layoff began (unless the employee specifically agreed to an amendment to the plan or the amendment was made for a legitimate cause such as a legislative change). Employers cannot drastically cut benefits and then continue making the reduced payment in an attempt to get around this requirement.

Supplementary Employment Benefit (SUB) Plans

The Government of Canada offers a program called the Supplementary Unemployment Benefit Plans (SUB Plans) that provides employers with the ability to set up and provide additional financial assistance to employees during a period of layoff due to temporary stoppage of work, training, or illness, injury or quarantine.

If an employer has a SUB plan, employees will likely already know about it. This plan provide to employees a top up of some amount over and above EI. For more details consider the Government of Canada’s Guide to Supplementary Employment Benefit Program.

Approval by Director of the Ministry of Labour

In special circumstances the Director of the Ministry of Labour can provide exceptions to certain employers. Employers would be obliged to inform their employees.

Other Frequently Asked Questions

How do employees recall temporarily laid off employees?

During a temporary layoff, an employer upon notice to their employee, can set a recall date requiring the employee to return. Typically, this is done by the employer providing a “recall notice” informing the employee of the return to work date.

What happens if an employee is recalled in a situation where the layoff was wrongful or not temporary?

If an employee is provided with a recall date that either (a) falls outside or afoul of the temporary layoff provisions in the ESA, or (b) in the course of a layoff that was never permitted in the first place, then the employee has two options:

  1. Return to work and abandon his claim to termination pay, severance pay and/or damages for wrongful dismissal; or
  2. Refuse to return to work and claim constructive dismissal,

Only in rare circumstances are both options available. If an employee refuses to return to work and claim constructive dismissal they would be obliged to comply with their Duty to Mitigate.

What happens if an employer is unable to recall an employee during a temporary layoff? 

If an employer is unable to recall the laid off employee for any reason, even if doing so was unintentional or through no fault of their own, the layoff becomes a termination and the employee is entitled to termination pay, severance pay and/or damages for wrongful dismissal.

What if an employee’s job is no longer available?

Generally, an employee should be recalled to the job they had before the layoff. However, if the job is no longer available, the employee must be given a similar or comparable position with the same or greater benefits and pay.

What if an employee refuses to return after a temporary layoff?

Employees are considered employed during a temporary layoff and, therefore, are required to return upon being recalled by their employer. A refusal to return may be considered job abandonment.

What about temporary layoffs for unionised workers?

The above legal information is generally applicable only to non-unionized employees. If you are in a union you need to speak with your union representatives.

What about temporary layoffs because of COVID-19?

The COVID-19 pandemic is novel and unprecedented. While it may not have an effect on the current law, it is important to understand that there is no way to know for certain how Ontario employment law might change or how the Courts may react. If you are facing a particular employment issue because of COVID-19, you should speak to a lawyer. 


Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

Accommodating Mental Health Illness

Mental health illnesses affect approximately 20% of Canadian workers and cost the country billions of dollars. According to the Centre for Addiction and Mental Health and the Canadian Mental Health Association, at least 500,000 employees are unable to work due to mental health issues in any given week.

The ability to engage in meaningful, paid work is a basic human right for every person.

In this article, we will discuss how employers are required to respond promptly and effectively when employees declare or display mental health issues. This response is referred to as the duty to accommodate and we will outline why accommodation is necessary, forms of accommodation, how to identify the need for accommodation and some solutions organizations can apply to ensure duty to accommodate can be met.

Why is accommodation necessary?

The goal of any accommodation is to ensure that any employee who is able to work yet who is experiencing some form of mental health issue or addiction issue has been offered options to be able to continue to work in a modified manner. It is an employer’s obligation under the Human Rights Code to respond immediately and appropriately when employees experience mental health problems. Proper support must be put in place to manage performance and productivity issues.

What is considered accommodation?

Mental health issues and the way they manifest themselves vary greatly. As a result, accommodations must be developed and applied on a case-by-case basis. The employer does not have a duty to change working conditions fundamentally but the employer must accommodate the employee in a way that will ensure that the employee can work as long as it does not provide undue hardship to the employer.

The standard of undue hardship is a very high standard for an employer to meet and it often means they are required to go to extreme lengths and even expense to accommodate.

Accommodation may include job restructuring, job bundling, reassignment to other positions, or retraining for other positions.

Examples of Duty to Accommodate

  • Providing stress leave for a person suffering depression or anxiety
  • Allowing a flexible work schedule to accommodate psychiatric or therapy appointments
  • Providing a quiet work environment with opportunity to work from home
  • Time off with pay to attend treatment programs for drug or alcohol dependency

How do employers identify the need to accommodate?

Often employers are afraid of saying or doing the wrong thing, so they say nothing. This can lead to poor productivity, lower morale, and conflict in the work environment.  However, employers should be aware that employees could be reluctant to disclose mental health issues. Where behaviour in the workplace makes it apparent that the employee is having mental health issues, the employer cannot simply terminate an employee who is not performing his or her job.  For example, a worker may be found to be crying at his desk and not completing his work or being repeatedly absent from work. This creates a duty to inquire on the part of the employer who must give the employee an opportunity to explain

Stigma around mental health often makes it difficult to identify needs to accommodate. Sometimes employees are unable to accurately pinpoint their disability needs, which make it difficult for employers to determine if a duty to accommodate exists.  Depending on the situation, the failure to accommodate an employee’s mental illness may constitute discrimination and give rise to human rights complaints or employment law claims. Employers must ensure that requests for accommodation are adequately addressed to avoid such claims.

Accommodating a disabled employee can cause frustrations both on the part of the employer and employee. Often they are suspicious of each other and do not understand their respective rights and obligations. Additionally, the employees are very vulnerable – financially, physically, and/or psychologically which complicates situations and raises the stakes for Human Rights Code violations. Potential liabilities can be significant if taken to court. 

The court has emphasized that employers need to act with empathy. What constitutes reasonable measures to meet the duty to accommodate is a question of fact and will vary with the circumstances of the case. The onus is on the employer to establish that it could not accommodate the employee without “undue hardship”.

What if accommodating an employee is too difficult for an employer? What is Undue Hardship?

There are no formal criteria for determining undue hardship. The courts will consider the context, health and safety of the employee, the cost to the employer in providing accommodations, collective agreements, workplace policies and procedures, the inter-changeability of the employer’s workforce and facilities and the operational requirements of the employer’s workplace. 

There is a reasonable limit to how far an employer or service provider has to go to accommodate an employee’s needs. They can claim undue hardship as the reason why certain policies or practices need to stay in place, even though they may have a negative effect on the employee. Although company policies and procedures may be robust, the need to go beyond them to accommodate an employee does not necessarily constitute undue hardship. For that reason, each case requires a tailored approach.  Sufficient evidence is necessary to assess claims for undue hardship. 

Generally, it will be more difficult for a larger organization with a large workforce to establish undue hardship.  This is because the cost of an individual accommodation will be proportionately less and because there are more alternative work opportunities if required in the accommodation plan. Conversely, a small employer may not be reasonably able to bear the financial burden of accommodation or may not have other employees who can do the work that the disabled employee is unable to complete.  Accommodation in such a case would more easily amount to undue hardship, which relieves the employer of having to accommodate the disability.

The Jurisprudence

The case of Harden v The Ottawa Hospital illustrates some interesting points regarding the collaborative nature of the duty to accommodate process such as an employer’s obligation to offer acceptable levels of duty to accommodate, be responsible to diligently investigate accommodation and propose job options, as well as an employee’s obligation to actively participate in the accommodation process by promptly providing medical information, be truly committed to seeking work that accommodates restrictions and make sincere efforts to secure positions. The duty to accommodate process demands active participation on the part of both the employer and employee.

In this case, the employee has a mental health condition that prevented her from working in her regular job as a registered nurse providing bedside nursing in a critical-care hospital setting. In the end, the employee resigned despite the fact that a reasonable offer of temporary accommodated employment by the hospital was available. She firmly believed she was discriminated against because her employer did not find a permanent job, which met her substantial restrictions, and because the hospital did not offer her several years of salary in exchange for her resignation from employment. The employee felt the hospital owed her more than it was prepared to offer by following its standard process of accommodation. She was seeking a financial package in exchange for her resignation as part of the duty to accommodate.

Ultimately, this position demonstrates a misunderstanding of the duty to accommodate. The duty to accommodate mandates that the employer to carefully consideration the individuals situation and provide meaningful attempts to find appropriate accommodations. It does not dictate that employer needs to provide new jobs or offer any sort of “buy-outs”.

The court concluded that the employer had discharged its duty to accommodate the employee to the point of undue hardship and dismissed the application.

Finding Solutions

Employers must engage in creative problem solving when asked to accommodate a mental health issue. Insurance benefit plans must treat disabilities equally and workplace policies and procedures must be flexible and adaptable to those having a mental disability. 

Organizations need to make sure they openly address stereotypes and make their organizational cultures more responsive to people with psychosocial disabilities. Under the Code, organizations are obliged to ensure they offer an inclusive work environments that meets the needs of people with mental health disabilities and addictions – thus promoting full inclusion and participation. 

Employers are not required to:

  • Continue to employ persons who are unable to fulfil basic employment obligations over the foreseeable future;
  • Create completely new positions or provide employees with meaningless work where the employee is incapable of anything else;
  • Cater to any specific form of accommodation preferred by the employee

Employees are required to cooperate and accept reasonable alternatives when presented and to provide all information requested by employers about the disability.

In summary

The costs and impact of disability and illness are very high:

  • For workers it translates into loss of income and impacts on self, family, and social environments;
  • For employers it translates into increased insurance premiums, loss of productivity by trained workers, and increased recruitment costs;
  • For society it translates into costs of social programs for individuals who may otherwise be productive and active members of the workforce.

Offering appropriate accommodations (temporary or permanent) to employees due to illness, injury or disability is a win-win for both employers and employees and is what the law in Ontario requires.


Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

The Duty to Mitigate

When employees are dismissed with cause or without just cause, they are obligated to make a reasonable effort to find comparable new employment within the period of reasonable notice. This obligation is referred to as their “Duty to Mitigate”. In other words, employees have an obligation to do what they can to limit the damage they may have suffered from their termination. They cannot sit back and do nothing to find another job throughout the notice period and just charge that to their former employer.

In this article, we will review what employees and employers need to know about the duty to mitigate, including factors to consider and how courts decide on whether or not it is met.

What is the Duty to Mitigate?

The duty to mitigate is engaged within a reasonable period of time after an employee is terminated. Employers may argue in court that damages are not owed because the employee could have been re-employed if they tried harder to find a comparable job. In these cases the courts make thorough assessments of effort and consider a broad range of factors, circumstances and evidence. Awards will be significantly reduced if the courts find that efforts are found to be insufficient or if the employee unreasonably refused alternate comparable employment. 

Employees are expected to take steps that any reasonable person in a similar situation would take to find comparable employment and to accept that employment if it becomes available. Of note, though, a dismissed employee is not expected to accept employment that isn’t comparable to their former position. For example, a senior executive at one company wouldn’t be expected to take on an entry-level or mid-management position elsewhere just for the sake of being employed.

What does comparable employment mean?

The Ontario Court of Appeal has emphasized that “comparable employment” does not mean “any employment”. In order to be “comparable”, offers of employment must be comprehensive of the status, hours, and remuneration of the employee’s employment with his/her former employer.

How to Mitigate?

There are different ways that employees can mitigate their damages from a wrongful or constructive dismissal. An employee can accept:

  1. Re-employment with the same employer
  2. Employment in a non-comparable job position, or
  3. Employment in a comparable job position

Re-employment with the same employer

In some cases, an employer may dismiss an employee from their job, but offer a different position within the company or the same position but at a reduced pay rate or reduced level of responsibility.

Several judges have concluded that an employee can refuse an offer of alternative employment with the same employer where the work environment the employee would be returning to is hostile or would cause loss of dignity or embarrassment. Courts look at the entire context including the employee’s relationships with individuals at the former workplace, salary, and similar work conditions and responsibilities.

Lets look at three legal cases that cover different decision outcomes.

Dussault v Imperial Oil Limited

The Ontario Court of Appeal found that two employees who refused offers of employment from the purchaser of their employer did not fail to mitigate their damages since the employment that was offered was not “comparable.” In the case, the plaintiffs received less favourable offers of employment — offers where their salaries would be reduced after a period of 18 months and their prior service with Imperial would not be recognised. As a result, they both rejected the offers and brought a wrongful dismissal action against Imperial. 

The case went before the Court of Appeal during which time Imperial Oil argued that the motion judge erred in failing to find that the employees had not mitigated their damages by accepting comparable employment with Mac’s (who had purchased the previous employer). The Court rejected that argument and agreed with the decision of the motion judge that the employment offered by Mac’s was not comparable and that it would have resulted in an immediate, substantial decrease in the plaintiffs’ benefits, as well as a material drop in their base salaries. As well, the Court found there was no reason to depart from the well-established principle that “comparable employment” does not mean “any employment,” and requires an offer with comparable status, hours, and pay.

Benjamin v. Cascades Canada ULC

In this case, an employee chose to retrain instead of accepting a comparable employment offer and the Court fund that the duty to mitigate was not met. The Judge wrote: “retraining on its own is not evidence of a failure to reasonably mitigate damages; rather, if an employer can establish that comparable work is available and the employee made a choice to retrain and not to seek comparable employment, retraining would not constitute reasonable mitigation.”

This case indicates that retraining can be considered reasonable mitigation in certain cases but employers will not be required to fund retraining through the payment of reasonable notice for employees that could have otherwise secured a similar position instead. Interestingly, participating in retraining as mitigation in cases where no comparable employment is available may be considered as “reasonable”.

Evans v. Teamsters Local Union No. 31

In the third case the employee rejected the comparable employment offer and the duty to mitigate was not met. The Supreme Court of Canada ruled that an employee has to accept alternate jobs offered by the employer as part of the duty to mitigate only if a “reasonable person would accept that opportunity”. Where a reasonable person would not return to work for the same employer then there is no need to return to the company that fired you just because it is offering a comparable job.

Re-employment with a Non-Comparable Job

There is no obligation to mitigate by taking a job that is not comparable and/or not in line with what the employees training, education and experience has prepared him for. As an easy example, a former CEO does not have to take a job at McDonalds after termination.

Employment in a comparable job position

Upon finding a new comparable job, an employee’s entitlements to reasonable notice end.

Conclusion

Employer tips:

  • Employers can reduce their potential liability by offering support to departing employees. Such measures can include career counselling, outplacement services, reference letters and notifications of comparable positions with their businesses or elsewhere. 
  • Offering positive references and making efforts to end things on good terms with employees will also reduce employer’s liability by making it easier for the employees to find a new position.
  • If the employee fails to take advantage of this assistance, the employer may be able to prove a failure to mitigate thus reducing company liability for wrongful dismissal damages.

Employee tips:

  • Employees should be aware that the onus is on them to make a reasonable efforts to seek comparable employment when dismissed.
  • Always create and keep a detailed log sheet of all efforts to find a new job. Keep dates and times listed for when you updated your resume, updated your Linked In or other social media platforms, join Indeed or Monster, saved jobs to consider, worked on cover letters. Keep a list of jobs you applied for and whether or not you got interviews. The more detail and effort included in your job  search logs the easier it will be to establish your attempts to mitigate.

Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

Employee Classification Risks

The way people view and perform work is changing and Canadians must be ready to respond. Short-term engagements, temporary contracts and independent contracting characterize this type of workforce. Organizations often rely on contractors to fill key positions, help maintain labour flexibility and keep overhead costs under control. However, any organization that uses independent contractors or is considering doing so, need to be aware of the associated risks and seek the advice of experienced legal counsel.

This article sets out to use a recent Uber class action, Uber v Heller, as a precedent to exemplify the legal and financial risks associated with how companies classify workers. We will look at how the courts make decisions on classification of workers, what protection is available to independent contract workers; and finally suggest some ways businesses can build practices to protect themselves.

Workers need to understand how they are classified, what it means; and take action when there is an issue. Employers need to understand how to create and maintain proper practices to accurately assess and classify their workforce.

Let’s look at Uber v Heller more closely.

In the Uber Class Action, the plaintiffs seek $400 million in damages as well as a declaration that Uber drivers are employees (not contractors) of Uber and therefore entitled to the benefits and protections afforded by the Employment Standards Act (ESA).

Uber brought a preliminary challenge to the proposed class action on the basis that its drivers, including Mr. Heller, were precluded from proceeding through the courts as they had instead agreed to resolve any disputes through private arbitration in the Netherlands. In the end, the action was stayed in favour of arbitration. For a more detailed review of this decision see my earlier article Arbitration Clause in Employment Contract puts the Breaks on the Uber Class Action in Ontario

Mr. Heller appealed the stay decision to the Court of Appeal claiming that the arbitration clause in Uber’s driver services agreement represents an unlawful contracting out of the ESA and that the clause is unconscionable and thus invalid at law. The Court of Appeal accepted both arguments and overturned the decision of the motion judge. I also wrote about this Court of Appeal decision: Uber Class Action Given the Green Light to Proceed by Ontario Court of Appeal

So, are Uber Drivers now classified as Employees?

The Ontario courts have yet to answer the question of classification — whether Uber drivers are classified as employees. The ruling on the classification is the larger issue in the Uber case litigation. However, at this time, the court is still determining the preliminary issues of jurisdiction and the enforceability of the arbitration clause. The Supreme Court of Canada – the highest court in our country – has granted to hear Uber’s appeal.

This case clearly demonstrates the significant impact of improper classification claims on a large company. Regardless of the outcome of the Uber case in terms of classification, the case demonstrates that clarity and enforceability of the classification system used by an employer is very instrumental in protecting employers against costly litigation such as what Uber is currently involved in.

Employers must become proactive in taking action to sharply review and assess workforce compositions and ensure that appropriate classifications are in place. Employers must also understand that a worker’s title does not determine whether they are an employee or independent contractor but that it is the nature of their employment relationship that determines the classification. As well, a worker’s actual classification may differ from what the contract specifies.

How do the courts determine worker classification?

In Sagaz Industries Canada Inc., the Supreme Court of Canada outlined some of the factors to consider in determining whether a worker is an employee or an independent contractor. In the decision, the Supreme Court of Canada makes the point that there is no single test that provides a clear answer to ever-changing variables of workforce relations (hence classification of employee versus independent contractor) and that people must examine all possible factors in the relationships to form a picture of the total relationship of the parties.

Canadian courts and tribunals have developed common law tests associated with the employment relationship to determine who is an employee and who is an independent contractor. The following are key factors considered in these tests:

  • Control
  • Ownership of tools
  • Chance of profit/risk of loss
  • Business integration
  • Payment
  • The factors are weighed and considered together in determining whether a person is an employee or independent contractor.

As an example, if the relationship looks like an employment relationship wherein the employer controls working conditions and the worker is economically dependent on the employer, the worker will likely be found to be an employee.

Worker Classification Example:

The case Fisher v Hirtz, 2016 ONSC 4768 details the scope of review and analysis necessary in determining the true legal nature of employment relationships and employee classifications therein and the impact of that classification on dismissal claims.

In this case, the plaintiff sues a company for wrongful dismissal. In the end, her claim was dismissed because the court determined she should be classified as an independent contractor not an employee. Had she been deemed an employee or dependent contractor, the court would have concluded, among other things, that she did not quit but was dismissed without cause and was entitled to pay in lieu of reasonable notice.

Employee versus contractor cases result in varying decisions on classification — there is no set formula to determine classifications. Decisions must be on a case-by-case basis involving close attention to the factors in each case. In the end, the true legal nature of the employment relationship must be identified and clarified.

In determining the true legal nature of relationships the courts look at:

  • The intentions of the parties
  • How the parties themselves regard the relationships
  • The behaviour of the parties toward each other
  • The manner of conducting their business with one another.

In Fisher v Hirtz, the court followed the tiered analysis and applied the above legal principles of established methodologies and criteria. In the end, the worker was deemed a contractor as her employer assigned the work, as it did to other trades persons, but she controlled whether she would accept the assignment.

The first stage of analysis will end once the worker is determined to be an employee. If the worker is determined to be a “contractor” the analysis will continue through a second stage to decide if they are a dependent contractor or an independent contractor.

In the case cited above, during the second stage of the analysis, the court determined she was an independent contractor as she had only provided varying amounts of services over a sixteen-month period during which she also carried on business as a sole proprietor. There was little evidence of any long-term dependency.

General Overview of Independent Contractors

Essentially, contractors are self-employed service providers who manage their own businesses.

An independent contractor has more freedom to choose how they complete work but are responsible for paying their own taxes, getting their own health insurance, and paying into unemployment and workers compensation funds. The most important factor is the level of control an employer has over the worker.

In contrast, an employee works under the control of an employer and has certain benefits provided by the employer including workers compensation, unemployment insurance, and health insurance.

Protection for Contract Employees

Canadian law has not yet caught up with changes in the labour market and contract workers are generally excluded from the protections and benefits that accompany traditional paid employment.

Gig workers are generally treated as independent contractors with none of the employment rights guarantees available in more regular jobs. The Employment Standards Act (ESA) does not apply to independent contractors, volunteers or other individuals who are not considered employees under the ESA.

How can businesses and employers protect themselves?

Practice development tips:

  • Take a proactive approach to reviewing the workforce and classifying employees accordingly. This can save a lot of headaches, potential penalties and even mitigate the risk of litigation.
  • Make sure employees are not misclassified as contractors when they should be recognized as regular staff with rights under the Employment Standards Act — contact an experienced employment lawyer for advice if necessary.
  • Regularly monitor the relationship to ensure the contractor’s independent status doesn’t change. For example, a company might hire an independent contractor who becomes more engaged in the company over years. If the company’s reliance on the individual’s services grows, the individual could be deemed an employee.

Workforce Tips:

  • If there are independent contractors who are actually being treated like employees, it may be time to change their classification.
  • At time of hiring, if a worker insists that they want to be an independent contractor and not an employee, it is advisable to investigate the situation and seek legal advice before agreeing.
  • In the event of a challenge, the practical reality will govern the classification and not what is written in a contract.

Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

Discipline at Work in Ontario

Being fired or getting terminated for “just cause” is only one form of discipline available to Ontario employers. Often, though, termination for cause is too harsh in the circumstances and therefore not available as an option. It is important for both employees and employers to understand what other types of discipline are available and how to act in accordance with the principles of “progressive discipline”.

This article will be focusing on discipline in the workplace aside from termination. For more information on termination see one of my earlier articles: Termination of the Employment Relationship in Ontario » Legally Speaking.

What is Progressive Discipline?

Progressive discipline is a process used to deal with any job-related behaviour that does not meet expected and communicated standards or policies regarding job performance, absenteeism or lateness, or other minor misconduct. The primary purpose of the progressive discipline doctrine is to help an employee understand that a performance problem exists and to offer opportunities for improvement. The concept behind progressive discipline is that where an employee repeatedly fails to meet the expectations of the job, the disciplinary action against him will begin with mild correction action and gradually move to more serious actions as each incident occurs — eventually permitting an employer to terminate for cause.

The law does not require employment contracts to include the employer’s approach to progressive discipline however, best practices suggest an employer should set out their approach to progressive discipline in a well-written and well-communicated policy. In this regard, they are able to refer to it specifically as necessary.

Levels of Disciplinary Action

Basic progressive discipline policy provides for four levels of discipline: verbal warning, written warning, suspension and termination. There is no one single approach applied — approaches vary depending on the company and collective bargaining agreement. For example, the discipline for a first offence may be counselling in one company yet a warning in another.

Overall, effective discipline helps to correct employee behavioural issues, increase productivity as well as help to protect a company against wrongful termination lawsuits.

Levels of disciplinary action are as follows:

  • Verbal warning
  • Written warning
  • Performance improvement plan
  • Temporary pay cut
  • Loss of privileges
  • Suspension
  • Demotion
  • Termination

Termination for cause should be considered as a last resort. It is challenging to prove terminations are justified and courts only do so in the clearest of circumstances. In exceptional circumstances, immediate termination for an act of significant or severe misconduct may be appropriate but in almost all cases, employers should be guided by the principle of progressive and corrective discipline.

Rather than straight dismissal, the goal of progressive discipline is correcting poor behaviour and creating a better and more productive employee.

What should employers do?

In instances where an employee’s performance or conduct is at issue, the employer should clearly provide the employee with the following:

  • A clear explanation of the problem
  • A list of steps that should be taken by the employee to address and correct the problem
  • Assistance to the employee to help him address and correct the problem
  • A reasonable time frame in which the problem is expected to be corrected

This process applies to any of the disciplinary action levels – i.e. Verbal or written warnings, performance improvement plans etc. Employers must give employees clear messages, actionable steps, assistance and reasonable time frames to show improvement during any stage of discipline.

What Forms of Discipline Are Not Appropriate?

Employee discipline is not about dominance or punishment. As a result, in most instances, discipline that is punitive is contrary to employment law. For example, withholding pay or suspending an employee without pay is not appropriate. Subjecting an employee to humiliation in front of coworkers, demotions or cuts in salary/pay are also considered inappropriate forms of discipline. Bullying usually involves repeated incidents or a pattern of behaviour that is intended to intimidate, offend, degrade or humiliate a particular person or group of people. It has also been described as the assertion of power through aggression. In this respect, it is punitive and not an appropriate form of discipline.

Suspension is a common form of punitive disciplinary action.

Unpaid Suspensions

According to the Ontario Court of Appeal, an unpaid administrative suspension generally triggers a constructive dismissal “unless it (is) an express or implied term of the contract that the employer (can) suspend an employee without pay.”

The Courts will assess unpaid suspensions with a higher level of scrutiny than paid suspensions. Accordingly, employers should not impose unpaid suspensions unless they are expressly permitted to do so by a contract of employment or the circumstances are such that an unpaid suspension is reasonable. In other words, if an employer imposes an administrative suspension that is neither expressly permitted by contract nor reasonable in the circumstances, they run the risk of liability for constructive dismissal damages.

Courts often look at whether the employee had the opportunity to challenge the suspension before the person who imposed the suspension in the first place. Failing to allow for this may render the suspension a constructive dismissal, wherein the employee may claim for notice for the termination of their employment and the potential for any unpaid wages during the suspension period.

A clear and well-drafted employment agreement or workplace policies and handbooks regarding suspensions will provide both the employer and employee with information on their rights.

How is the appropriate level of discipline determined?

Courts and tribunals expect employers to apply disciplinary measures fairly and consistently, taking into account any specific circumstances of the situation on a case-by-case basis.

Aside from the strict facts of the case, adjudicators consider both “aggravating” and “mitigating” factors in determining the most appropriate type and severity of disciplinary action — especially when an action as serious as dismissal is being considered. Arbitrators weigh the presence, or absence, of mitigating factors in deciding whether to uphold, reduce or rescind a disciplinary sanction.

  • Aggravating factors lead to a more substantial (harsher) penalty
  • Mitigating factors lead to a more lenient (lesser) penalty

Some examples of employee related factors that affect the level of disciplinary action taken include the following:

  • Clean employment record
  • No other disciplinary record on file
  • State of mind of employee when behaviour came into question (i.e. medical condition; emotional problems, harassment, violence etc.)
  • Whether an employee shows remorse during the investigation — i.e. admitting responsibility, offering an apology etc.
  • Wilful or Intentional insubordination and/or misconduct

Examples of some of the case related factors adjudicators consider are as follows:

  • Was the misconduct intentional?
  • Is the employee accepting responsibility for his/her actions?
  • Was the infraction an isolated incident?
  • Is this a long-term employee?
  • What is the work history of the employee?

From Policy to Practice

Policies communicate expectations to staff and guarantee that fair and consistent treatment is served to all. It is important for staff to know from the start what is expected and how their performance will be addressed should it fall short of workplace standards. Policies hold everyone accountable and need to be supported by accompanying procedures.

The following are procedures to support progressive discipline:

On-going operational procedures:

  • Hold regular manager training, and make progressive discipline policy review a prominent part of that training
  • Create a standardised form for all managers and departments to use when they write up an employee for a disciplinary infraction. Be sure they fill out the form in full.
  • Develop a system that allows easy review of disciplinary write-ups.
  • Practice early detection of issues with equal treatment of employees by different managers. Make it a point to ask about this issue during employee reviews.
  • Discipline managers if they fail to uphold company policies.

Procedures involving incompetence: Employee lacks the skills or ability to do the job.

  • Set out clear, reasonable job expectations in company policies
  • Clearly communicate job expectations to all employees
  • Bring unacceptable work to the attention of the employee promptly
  • Provide reasonable supervision, training and instruction
  • Give reasonable warning that failure to meet these expectations could result in dismissal
  • Allow for time and opportunity to meet the job expectations
  • If not improvement has emerged, dismiss the employee
  • Keep complete written records

Procedures involving misconduct: Employee breaks rules for keeping the work place efficient and safe.

Suggested steps:

  • Give the employee an opportunity to tell his/her story about the misconduct
  • Collect all the relevant facts surrounding the misconduct
  • Give a verbal warning
  • Give a written warning
  • Suspend the employee
  • As a final step in the process, dismiss the employee
  • Keep complete written records

Summary Comments

Termination of staff should be considered a last resort. The incorporation of progressive discipline in the form of policies, procedures and practices can provide effective corrective strategies to mitigate many behaviour issues and avoid disputes being taken to court. Progressive discipline is a doctrine upheld by Ontario courts, which should be part of a company policy and should be clearly communicated and adhered to.


Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

Employee, Independent Contractor or something in between?

As an employment law lawyer, one of the most common issues I face is confusion from clients over whether they are (or a particular worker is) an “employee,” or “independent contractor.” It is important to understand how workers are classified, and what that means for them in terms of rate of pay, benefits, and legal protections upon termination. Employers must be diligent in properly classifying their workers, as failure to do so can result in serious penalties and tax consequences.

Employees vs Independent Contractors

Strict definitions for the terms “employee,” “independent contractor,” and “dependent contractor” have not been very useful, so courts have relied upon various common law tests for determining the differences between them. Despite these tests, it is not always easy to determine the proper classification of any individual worker.

Employees

A worker may be an employee under the law even if they have agreed in writing to be classified as an independent contractor, submit invoices, or use their own vehicle while completing work tasks.

If having a contract or submitting invoices doesn’t make someone an independent contractor, what does?

In determining whether a worker is an employee, there is not one single overriding factor. Each worker’s situation will be viewed independently, and several different factors will be weighed. With that being said, a worker may be an employee if some of the following factors describe their work situation:

  • The employer provides all the tools and equipment needed to perform work duties;
  • Pay does not fluctuate according to how quickly or how well work is done. For example, the worker is not paid more if a task is finished by Wednesday, instead of Friday;
  • The employer can discipline or suspend;
  • The worker does not determine what job tasks need to be completed;
  • The worker does not set his own rate of pay for his services;
  • The employer determines the location where work is performed; or
  • The employer determines when tasks need to be completed by.

If a worker is an employee under the law, then she is entitled to all the employment rights and protections found in the Employment Standards Act. These rights and protections include:

  • Minimum wage;
  • Overtime pay;
  • Vacation pay;
  • Protected leave; and
  • Notice, or termination pay in-lieu-of notice.

Independent Contractors

Factors that the Court considers in deciding on the issue are similar, but opposite, to those considerations for employees, and include:

  • The worker owns or provides the tools and equipment needed to perform work duties;
  • The worker is in business for him/her self. This means the worker has the ability to make a profit (if the work is done quickly, efficiently, or inexpensively, for example) but also that their is a risk that he looses money (if, for example, the worker under estimated his costs, or circumstances arise that make the work more expensive than anticipated);
  • The worker may be paid more or less money depending on when the job tasks are completed;
  • The worker can subcontract the job tasks;
  • The employer cannot discipline the worker but he could cancel the contract;
  • The worker can work for multiple organizations at the same time; and
  • The worker exercises some control in where or when work is done and who performs that work.

An independent contractor will not have any of the rights outlined above for employees, unless such rights have been negotiated in a valid Independent Contractor Agreement.

What does the case law say?

In Belton et al. v. Liberty Insurance Company of Canada, the Ontario Court of Appeal heard a case where the classification of insurance agents as employees or independent contractors was the central issue. Mr. Belton, and similar workers, were commissioned sales agents, selling insurance for Liberty Insurance. Each agent had signed a written employment agreement with Liberty Insurance in which they acknowledged they were independent contractors. Liberty Insurance eventually presented the agents with new contracts, which reduced their commission rates and added minimum production levels. The agents refused to sign the new contracts, and Liberty Insurance terminated their employment. The agents sued their employer for wrongful termination. The trial judge concluded that the agents were employees under the law, not independent contractors.

In reviewing this case on appeal, the Ontario Court of Appeal noted that a written agreement stating workers will be classified as independent contractors is not determinative of the proper classification under the law. The Court also outlined the specific factors the trial judge had identified as factors she had weighed in reaching her conclusion:

  1. Whether or not the agent was limited exclusively to the service of the principal;
  2. Whether or not the agent is subject to the control of the principal, not only as to the product sold, but also as to when, where and how it is sold;
  3. Whether or not the agent has an investment or interest in what are characterized as the “tools” relating to his service;
  4. Whether or not the agent has undertaken any risk in the business sense or, alternatively, has any expectation of profit associated with the delivery of his service as distinct from a fixed commission;
  5. Whether or not the activity of the agent is part of the business organization of the principal for which he works. In other words, whose business is it?

The Court of Appeal acknowledged, as the Trial Court had, that there was no direct contact allowed between the agents and their customers regarding policy changes or renewals, all of the agents had Liberty Insurance managers, the agents were not permitted to advertise using Liberty Insurance’s name, and the agents did not have any ownership rights to their customers. Therefore, that the agents were employees of Liberty Insurance, not independent contractors.

Dependent Contractors

The courts have more recently recognized a middle ground between employee and independent contractor by the classification of some workers as “dependent contractors.”

It is important to note that the courts are not creating an entirely new third category of workers with this distinction. Instead, dependent contractors are considered a subset of “contractors,” who merit different treatment upon termination than independent contractors do.

In McKee v. Reid’s Heritage Homes Ltd., the Court of Appeal heard a case which illustrates this distinction. Heritage Homes, owned by Reid, entered into a written independent contractor agreement with Nu Home Consultant Services, which was operated by its owner McKee. McKee was to advertise and sell 69 homes for Reid, for a fee of $2,500 per home sold. Reid was to have sole use of McKee’s services until the relationship ended. The 69 homes were quickly sold, and the contractual relationship continued. The relationship even continued after Reid’s death, at which time his son-in-law, Blevins, succeeded him.

Blevins eventually decided that McKee and her sub-agents should have to work as direct employees. McKee requested the new employment agreement be put in writing, but the parties were never able to reach mutually agreeable terms. The employment relationship subsequently ended, and McKee sued for wrongful termination. After examining the relevant factors, the trial court found McKee to be an employee, and awarded her eighteen months of termination pay in lieu of notice.

In reviewing this case, the Court of Appeal looked at the classifications of employees, independent contractors and dependant contractors:

I conclude that an intermediate category exists, which consists, at least, of those non-employment work relationships that exhibit a certain minimum economic dependency, which may be demonstrated by complete or near-complete exclusivity. Workers in this category are known as “dependent contractors” and they are owed reasonable notice upon termination.

The Court of Appeal went on to explain that the first step “is to determine whether a worker is a contractor or an employee.” If the first step determines the worker to be a contractor, then step two “determines whether the contractor is independent or dependent, for which a worker’s exclusivity is determinative, as it demonstrates economic independence.”

The courts have made it clear that dependent contractors are entitled to reasonable notice, or termination pay in lieu of notice. The length of notice can be specified in an employment agreement. If there is not a valid employment agreement speaking to this issue, then the length of appropriate notice will vary on a case by case basis, determined by the weighing of several factors.

Final Thoughts

It can often be difficult to determine how a worker should be classified. There are great differences in these classifications, and those differences can have a huge impact on both employees and employers.

The fact is that that vase majority of workers classified by their employers as independent contractors are not. If you are a worker, you are probably not an independent contractor. If you are an employer, that person coming into your workplace everyday is probably an employee. Regardless of what your contract may say, a Court may decide that the worker is entitled to all the protections in the Employment Standards Act.

For employees, if you have concerns that you have been improperly classified, speak to a knowledgeable Ontario employment lawyer as soon as possible. The lawyer can go over the specific details of your employment situation and give you advice on which classification is the most appropriate for you. With this information, you will know what rights are due to you while still employed, and also at the end of the employment relationship.

For employers, I also recommend speaking to an employment lawyer if you have concerns about the proper classification of your workers. Failure to properly classify workers can result in serious penalties. You may be stuck with large severance payments because your improper classifications caused you to fail to meet the notice requirements. If workers are properly classified, these are issues that can be specified to in a written employment contract. This limits your overall exposure. A lawyer well-versed in such employment issues can help you make the best decisions for your business.


Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

Employment Law for Bartenders, Waiters and Waitresses

Bartenders, waiters and waitresses, or “Liquor Servers” as they are referred to in the Employment Standards Act (“ESA”), are given special treatment under the law and by the Ontario Courts. While many of the ESA’s provisions apply equally to all types of employees, there are some important distinctions for liquor servers that hospitality employees and employers should know. This article is meant to highlight some of those important differences.

Minimum Wage

As of January 1, 2018, minimum wage for most workers in Ontario was increased to $14.00 per hour. However, the ESA permits lower minimum wage rates for certain designated groups of workers who receive tips as a significant portion of their income. Liquor servers fall into this category. Since January of 2018, the minimum wage rate for liquor servers is $12.20 per hour.

While the terms “Liquor Server” or “Bartender” are not specifically defined in the ESA, the relevant section on minimum wage provides helpful insight into whether an employee’s minimum wage rate can legally be lowered to $12.20 per hour. The ESA states as follows:

Determination of Minimum Wage
23.1 (1) The minimum wage is the following:
1. On or after January 1, 2018, but before October 1, 2020, the amount set out below for the following classes of employees:
ii. For employees who, as a regular part of their employment, serve liquor directly to customers, guests, members or patrons in premises for which a licence or permit has been issued under the Liquor Licence Act and who regularly receive tips or other gratuities from their work, $12.20 per hour. [emphasis added]

Minimum Wage After October 2020

As suggested in the above section, after October of 2020, the minimum wage rate for liquor servers will increase in accordance with a formula based on the Consumer Price Index. This formula is as follows:

Previous Wage × (Index A/Index B) = Adjusted Wage

In which:

“Previous wage” is the minimum wage rate that applied immediately before October 1st of the year;

“Index A” is the Consumer Price Index for the previous calendar year;

“Index B” is the Consumer Price Index for the calendar year immediately preceding the calendar year mentioned in the description of “Index A;” and

“Adjusted wage” is the resulting new minimum wage rate.

Termination, Reasonable Notice, and Wages

Like all employees in Ontario, liquor servers are entitled to a certain amount of notice, or pay in lieu of notice, when their employment is terminated.

That being said, for liquor servers, more often than not a significant portion of their income comes in the form of tips. Therefore, the biggest question I get as a Toronto employment lawyer, from both employees and employers, is whether tips should be included as wages for the purpose of pay in lieu of reasonable notice. The answer to that questions depends significantly on whether the bartender or liquor server has a valid employment contract that limits notice only to those minimums under the ESA.

Under the ESA, Wages Do Not Include Tips

Under the ESA, generally when an employer terminates an employee who has been continuously employed for at least 3 months, the employer must provide the employee with notice, or pay in lieu of notice. This pay in lieu of notice is often referred to as “termination pay.” The amount of written notice required by the ESA is as follows:

Employment Period Notice Length
3 months – less than 1 year 1 Week
1 year – less than 3 years 2 Weeks
3 years – less than 4 years 3 Weeks
4 years – less than 5 years 4 Weeks
5 years – less than 6 years 5 Weeks
6 years – less than 7 years 6 Weeks
7 years – less than 8 years 7 Weeks
8 years or more 8 Weeks

If an employee, by an enforceable employment contract, is only entitled to the minimums under the ESA, then that worker may NOT be owed tips. Wages under the ESA are defined as:

“Wages” means:
(a) monetary remuneration payable by an employer to an employee under the terms of an employment contract, oral or written, express or implied,
(b) any payment required to be made by an employer to an employee under this Act, and
(c) any allowances for room or board under an employment contract or prescribed allowances,
but does not include,
(d) tips or other gratuities,
(e) any sums paid as gifts or bonuses that are dependent on the discretion of the employer and that are not related to hours, production or efficiency,
(f) expenses and travelling allowances, or
(g) subject to subsections 60 (3) or 62 (2), employer contributions to a benefit plan and payments to which an employee is entitled from a benefit plan. [emphasis added]

Without an Enforceable Termination Clause, Tips Are Owed as Part of Termination Pay

Without an enforceable clause in an employment contract which limits reasonable notice to only the ESA minimums, the Ontario Courts ignore the strict wording of the ESA and require employers to pay tips as part of wrongful termination pay.

We can see an example of this in the case of Giacomo Violo v. Delphi Communications, Incorporated. Violo had worked as a waiter and bartender for a small restaurant in Ontario for 29 years. At the time of his termination, he was 51 years old. The parties did not have an employment contract, and the restaurant contended that Violo had been legally terminated due to excessive tardiness, alcohol abuse, and discourteous behaviour. After examining the evidence, including work records from the defendant and testimony from current employees, the Court determined that “there was no cause for the plaintiff’s dismissal.” The Court then turned to the issue of determining the reasonable notice period Violo was due. After examining numerous factors, including Violo’s age and the availability of similar jobs at the time he was terminated, the Court determined Violo was entitled to a reasonable notice period of 15 months. The Court then addressed the issue of damages, noting that tips would be factored in as such wages constituted a significant portion of his overall income: “… in 2010 he claimed $9,025 in tip income, almost as much as his income from wages.” In total, Violo was awarded $45,250, representative of his base salary and tips over the course of the 15 month notice period.

Final Thoughts

For employers, it is important to have a valid written employment contract with all bartenders, waiters, and waitresses. While the amount of notice cannot be below the minimum amount required by the ESA, employers can fashion contracts which provide for less notice than the employee would otherwise be entitled to at common law. When it comes to employees who receive customary tips, this can mean a substantial difference in the amount of termination pay. If you need assistance drafting employment contracts, we strongly recommend that you speak to an experienced employment attorney for guidance and assistance.

For terminated employees who received tips as a significant portion of their overall income, it is crucial to remember that they likely have rights under the common law that are far greater than the rights afforded to them under the ESA. It may be best for liquor servers and waitresses to sue their former employer in court for “wrongful dismissal,” seeking additional damages which would include tips. If you have been recently terminated from a position where you received tips as part of your income, we suggest that you speak to an employment attorney to help you determine the best course of action for your situation.


Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.