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Discrimination during the Job Interview and Hiring Process

Discrimination in the course of a job interview or in the making of hiring decisions remains too common across Ontario. While the job interview is an opportunity for both employers and job seekers to learn about each other and to determine suitability or fit for the job at hand, attempts by an employer to solicit information that relate to the “protected grounds” (i.e. race, age, sex, gender, identity etc.) under the Ontario Human Rights Code is generally off limits.

Ontario workers are protected from discrimination even at the pre-hiring, interview or application stage of employment. It is important, therefore, for both employees and employers to understand what questions are appropriate and which are not.

This article will review some of guidelines around pre-employment screening during the interviewing and hiring process.

Job Interview Guidelines

Issues of human rights and discrimination need to be addressed by an employer in advance of the job hiring process. Hiring managers and human resources staff need to be provided with training and education to identify and eliminate discrimination in the workplace. The hiring process must be fair.

Best practices for employers in the course of job interviews include:

  1. Have a multi-person panel conduct formal interviews and have the panel reflect the diversity available in the organization.
  2. Develop a set of interview questions in advance and ask all applicants the same questions.
  3. Base the questions on the job’s essential duties and “bona fide” requirements.
  4. Make sure that any questions asked comply with the Human Rights Code and avoid questions requesting “sensitive information” unless necessary.
  5. Create an answer guide showing desired answers, along with a marking scheme, and have each panel member independently record and score each candidate.

Employers should avoid making hiring decisions based on informal or subjective assessments by the interviews because these “feelings” of suitability are more likely to lead to subconscious biased hiring decisions.

Requesting Sensitive Information in the Job Interview Process

Sometimes information, that could be seen to be related to a ground of discrimination under the Human Rights Code, is necessary because of the specific requirements of a job. Where this is the case, the Ontario Human Rights Commission recommends only requesting that information after an offer of employment is made that is conditional on the employee meeting the bona fide occupational requirements.

Types of information that is considered sensitive include:

  • Driver’s licence
  • Birth certificate
  • Work authorization issued by Immigration Canada
  • Educational or professional credentials
  • Social Insurance Number
  • Information about health or age necessary for pension, disability, superannuation, life insurance and benefit plans
  • Police record checks
  • Drug and Alcohol Testing
  • Psychological testing, if legitimately required for assessing ability to do the job
  • Next-of-kin or person to be notified in case of emergency
  • Insurance beneficiary
  • Accommodation needs

These documents and information are sensitive because they often reveal a person’s age, sex, gender, place of origin, date of arrival in Canada, residency status, gender identity, family status, marital status, sexual orientation or disability.

For example, considering hiring a truck driver. While they need to have a valid driver’s license, an employer should avoid asking to see their driver’s license until after a conditional offer of employment is made to avoid any claim of discrimination related to their gender identity, age or disability.

What is a Bona Fide Occupational Requirement?

As I have described briefly in my earlier article on Age Discrimination and Forced Retirement, the Courts consider a two-part test for determining whether a bona fide occupational requirement exists:

  1. The employer must establish that the retirement was imposed honestly, in good faith, and in the belief that the requirement is rationally connected to the performance of the job, and not for some ulterior motive; and
  2. The employer must establish that the job requirement is reasonably necessary to assure the efficient and economical performance of the job without endangering the employee, his fellow employees and the general public.

Any bona fide occupational requirement must be inclusive and must accommodate individual difference up to the point of undue hardship. It is important that each person be assessed against their own personal abilities instead of being judged against group characteristics.

Drug and Alcohol Testing and Discrimination during the Job Interview and Hiring Process

It is discrimination on the basis of disability to require job applicants to take a drug or alcohol test as a part of an application or interview screening process unless the employer can satisfy the Bona Fide Occupational Requirement (BFOR) test. Whether a drug or alcohol test is a BFOR is often the source of human rights litigation.

An excellent example of how a Human Rights Tribunal wrestles with this problem can be seen in the case of Dennis v Eskasoni Band Council, 2008 CHRT 38. In this case Dennis argued that the employers drug and alcohol testing discriminated against people with alcohol addiction and dependency. The employer argued that the testing was necessary to ensure the safety of its workers.

The Test followed by the Tribunal was as follows:

  1. Does the practice appear discriminatory?
  2. Has the Employer Established it to be a BFOR?

In terms of the first part of the test, the Tribunal held as follows:

[66] A drug testing policy that has the effect of depriving these individuals, who fall within the protected class of disabled persons, of employment opportunities, is thus prima facie discriminatory

It then went on to consider:

  1. Did the employer adopt its policy for a purpose rationally connected to the job being performed?
  2. Did the employer adopt the testing in good faith?
  3. Is the testing reasonably necessary to the accomplishment of the purpose or goal of safety in the workplace, including:
    • Is alcohol impairment a safety hazard?
    • Is the drug and alcohol screening an effective means to detect the presence of a hazard in the workplace?

Ultimately, the Tribunal concluded that the employer’s drug and alcohol testing policy was reasonably necessary for the accomplishment of the employer’s goals of protecting its employees from injury and its property from damage.

Criminal Background Checks and Discrimination during the Job Interview and Hiring Process

The Human Rights Code prohibits discrimiantion on the basis of “record of offences”. Further, crimnal background checks can uncover information about a candidate’s age, citizenship and other “protected grounds”. Therefore, like drug and alcohol testing, it is discrimination to require job applicants to subject to a criminal background check as a part of an application or interview screening process unless the employer can establish that it is requires as a Bona Fide Occupational Requirement (BFOR).

If an employer wants to conduct a criminal background check, they have to first establish that there is a valid occupational reason to do so. The job application and/or conditional offer must clearly specify the check is necessary as part of the position. Written consent is a required.

Any type of background check should be conducted in good faith. An employer should gather as much information as possible before hiring a candidate and be reasonable about the relevance of the information gathered as it relates to the candidate’s ability to perform the job.


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.

 

Understanding Restrictive Covenants: Non-Solicitation and Non-Compete

Non-solicitation and non-competition clauses are used to protect employers from losing customers or business as a result of a departing employee.

Over the course of their employment, employees may acquire specialized knowledge of a company’s trade secrets, expertise or other unique proprietary information about their employers. In many cases, particularly in sales, employees establish and maintain successful and close relationships with customers or clients. While these are positive elements of an employment relationship, when an employee changes jobs, the company intelligence they take with them and their subsisting relationship with company clients, can pose issues for employers.

As a result, employers often look for ways to protect their business interests, customer bases and other threats of competition. One way employers can do this is by imposing restrictive covenants on their employees in their employment contracts.

In this article, I will explain two of the most common restrictive covenants: non-solicitation and non-competition.

What are Restrictive Covenants?

Restrictive covenants are employment contract clauses that restrict, limit or prevent an employee from doing certain things following the end of their employment. Most often, these come in the form of a “non-solicitation” clause and/or a “non-competition” clause in the employment contract.

Non-Competition vs Non-Solicitation

The purpose of a non-competition clause is to limit a former employee’s ability to work for a competitor or open a competing business. These are generally only upheld in exceptional cases.

A non-solicitation clause prevents or limits an employee from “soliciting” clients (and often employees) of their former employer.

Soliciting has a very specific meaning. In the simplest of terms, it occurs when a person contacts a former customer or business contact, and asks them to keep giving them business at their new company. For example: a LinkedIn post about your change in role, wouldn’t count as soliciting, but sending a direct message, saying “Hey, I’ve moving to new company. Do you want to try out some of our products” probably would be.

The Court of Appeal in HJ Staebler Co v. Allan2008 ONCA 576, explains the difference between a non-solicitation clause and a non-competition clause as follows:

…A restrictive covenant may restrain either competition or solicitation. A noncompetition clause restrains the departing employee from conducting business with former clients and customers whereas a non-solicitation clause merely prohibits the departing employee from soliciting their business.

Whether a Restrictive Covenant is a Non-Competition or Non-Solicitation is Not Always Clear

In Donaldson Travel Inc. v. Murphy, 2016 ONCA 649, the parties had a dispute over whether a certain restrictive covenant was an enforceable non-solicitation clause or an unenforceable non-competition clause. The clause stated:

In the event of termination or resignation [the employee] will not solicit or accept business from any corporate accounts or customers [of the employer]

The Ontario Court of Appeal founded that the words “accept business” meant that the clause went beyond a mere non-solicitation agreement and was, therefore, unenforceable.

Enforcing Restrictive Covenants

Generally, Courts hesitate to uphold restrictive covenants on the basis that these types of clauses are often considered impediments to basic elements and principles of a healthy economy. Courts don’t like preventing people from using their skills, experiences and relationships with their next employer unless absolutely necessary.

Courts Prefer Non-Solicitation Clauses

In Lyons v Multari [2000] OJ No. 3462, the Ontario Court of Appeal reasoned that:

Generally speaking, the Courts will not enforce a non-competition clause if a non-solicitation clause would adequately protect an employer’s interests

Courts are more strict towards and less likely to enforce non-compete agreements because they limit an individual’s ability to earn a living or pursue a job for which they are qualified. Non-solicitation clauses, on the other hand, don’t go so far as totally limiting an individual from working in a certain industry all together, and therefore, are less restrictive and more likely to be enforceable.

The Legal Test: Reasonable and Necessary to Protect a Legitimate Interest

To be enforceable, both non-competition and non-solicitation clauses need to be reasonable to and necessary to protect a legitimate business interest. In addition, the language of the restrictive covenant must be clear and reasonable in terms of:

  1. It’s geographic scope;
  2. The length of time it is valid; and,
  3. The type of activities that it limits

If a restrictive covenant is ambiguous or excessive with regard to time, activity, or geography, it will probably be found to be unreasonable and unenforceable.

For example, consider a Life Insurance Salesman working for a brokerage in the High Park area of Toronto. If a non-solicitation clause limited him from soliciting clients anywhere in Ontario, that might be an unreasonably large geographical area. A clause limited in scope to only to the City of Toronto is more reasonable and more likely to be enforceable.

Implied Duty Not to Solicit

Without an explicit non-solicitation agreement, ordinary employees are free to contact customers and clients of their former employers for the purpose of soliciting their business. However, senior executives, directors, officers and other key members of a business may have “fiduciary” duties, which survive the end of the employment relationship, which may include a common law duty to not solicit customers for a reasonable time period after termination of employment.

Senior executives owe fiduciary duties to their employer because the employer has placed significant trust in them to exercise discretion in the best interests of that employer or where the employer is particularly vulnerable to the executive.

Canadian courts consider fiduciary duty in a broad and flexible manner to respond to the facts of each particular case.

Key Points to Take Away

  • Employers should consider what restrictions are appropriate on an employee by employee basis.
  • Restrictive Covenants should be as minimal as possible while still maintaining protection of the employer’s proprietary interests.
  • Courts are reluctant to enforce non-compete restrictive covenants as they are seen to obstruct basic economic activities including preventing individuals from working positively and achieving career aspirations. Hence, employers should consider omitting non-competition clauses when a non-solicitation clause would be adequate to protect their proprietary interests.
  • Non-solicitation clauses should identify which customers the employee cannot solicit.
  • Courts pay significant attention to the language of restrictive covenants and decisions to enforce are based on whether they are clear, specific and narrow in scope.
  • Employers should use plain and unambiguous language in their restrictive covenants.

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.

All Ontario Employers Need New Employment Contracts: Court of Appeal

Due to a very disruptive decision released by the Ontario Court of Appeal last week in Waksdale v Swegon North America Inc., 2020 ONCA 391, your employment contract is probably no longer enforceable.

Waksdale v Swegon North America Inc.

Waksdale v Swegon North America Inc. was a wrongful dismissal action by employee Benjamin Waksdale against his former employer Swegon North America Inc. Mr. Waksdale was terminated without cause after working only 8 months. He sued for 6 months pay in lieu of reasonable notice.

The plaintiff’s employment contract had the following “Termination Without Cause” provision:

You agree that in the event that your employment is terminated without cause, you shall receive one week notice or pay in lieu of such notice in addition to the minimum notice or pay in lieu of such notice and statutory severance pay as may be required under the Employment Standards Act 2000 as amended. All reimbursement for business expenses shall cease as of the date of termination of your employment, however, you shall be reimbursed for legitimate business expenses that have been incurred and submitted to the Company but not as yet paid you to that date. The terms of this section shall continue to apply notwithstanding any changes hereafter to the terms of your employment, including, but not limited to, your job title, duties and responsibilities, reporting structure, responsibilities, compensation or benefits.

The employment contract also had a “Termination for Cause” provision. It was conceded by the employer that the wording of this Termination for Cause provision breached the terms of the Employment Standards Act, 2000 (“ESA”) and was therefore void and unenforceable. In what is probably the most problematic portion of this decision, neither the Ontario Superior Court nor the Ontario Court of Appeal set out the wording of the Termination for Cause provision. Accordingly, we are all left to guess at what made it unenforceable.

At trial, the lawyer for Mr. Waksdale argued that the employment contract (or at the very least both of its termination provisions) was not enforceable because the Termination for Cause provision was void.

The Ontario Court of Appeal agreed and held as follows:

An employment agreement must be interpreted as a whole and not on a piecemeal basis. The correct analytical approach is to determine whether the termination provisions in an employment agreement read as a whole violate the ESA. Recognizing the power imbalance between employees and employers, as well as the remedial protections offered by the ESA, courts should focus on whether the employer has, in restricting an employee’s common law rights on termination, violated the employee’s ESA rights. While courts will permit an employer to enforce a rights-restricting contract, they will not enforce termination provisions that are in whole or in part illegal. In conducting this analysis, it is irrelevant whether the termination provisions are found in one place in the agreement or separated, or whether the provisions are by their terms otherwise linked.

What Makes a Termination for Cause Provision Void and Unenforceable?

As I have previously written about in my article “Termination of the Employment Relationship in Ontario”, where an employer has “just cause” for termination they can fire an employee without paying reasonable notice at common law (subject to the principles of Progressive Discipline).

Examples of “Just Cause” at common law include:

  • Repeated breaches of company policy
  • Repeated Truancy
  • Violence or Harassment
  • Dishonesty
  • Insubordination

When terminating for just cause, however, employers are still required to pay ESA Notice and Severance unless that employee “has been guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer”.

Unless your employment contract explicitly carves out a distinction between termination for Just Cause and termination for “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer”, it may be void and unenforceable, as was found by the Court of Appeal in the Waksdale decision. As a result, your employment contract’s “Termination Without Cause” provision might also be found unenforceable.

Employment Contracts Post-Waksdale

The existence of the Waksdale decision is a serious liability for Ontario employers. Previously, little attention had been paid to the enforceability of the “Just Cause” provisions. From now on, that will no longer be the case. In my experience, very few employment contracts that come across my desk draw the distinction between Just Cause and “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer”.

As a result, the majority of employment contracts in Ontario need to be amended and updated. Otherwise, employers risk their termination provisions being unenforceable, which means they will owe employees common law reasonable notice. Common law reasonable notice often works out to months or years of notice rather than weeks under the ESA.

Waksdale Raises More Questions

While the Ontario Court of Appeal has made up its mind on the effect of poorly drafted Without Cause provisions, the Waksdale decision raises other important questions concerning employment contract more generally: if other terms of an employment contract breach the ESA, what is the effect on the enforceability of the termination provisions? For example, what if your employment contract provides for less than the minimum vacation entitlements, does that invalidate your termination provision?

This is a problem because, in Waksdale, the Court of Appeal stated “the correct analytical approach is to determine whether the termination provisions in an employment agreement read as a whole violate the ESA”. The Court also explained that “an employment agreement must be interpreted as a whole and not on a piecemeal basis”.

Whatever the answer to that question is, there is no doubt that employees now have another arrow in their quiver when challenging employment contracts— and employers face yet another risk when terminating an employee.

Employers Need New Employment Contracts

In conclusion, employers need to update their employment contracts. Doing so is inexpensive and pays substantial dividends at termination time. As noted, the difference in notice period, for an employee with an enforceable termination provision versus one without, can be months or years of pay.

If you are interested in learning how to implement new or update employment contracts, read my article, How to Change Employment Contracts.


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.

Negotiating Maximum Termination Pay and Severance Pay

Often, people who lose their job assume that if they receive any termination pay, severance pay, or pay in lieu of notice then they must have been properly compensated for being fired. This is far from the case. There are many factors and considerations a person should be aware of when figuring out what their termination entitlements are and more often than not an employment lawyer can help them get what is fair.

Statutory Minimum Notice Periods VS Common Law Notice Periods

Upon being fired, an employee is entitled to receive either (1) working notice, or (2) pay-in-lieu of notice. Working notice is not unusual but more often than not an employee is unhappy about being fired and an employer is concerned that the employee may do something to hurt the employer’s business while working to the end of the notice period. For that reason, employers usually chooses to terminate the employee immediately and, provide pay in lieu of notice.

The Employment Standards Act contains only the minimum entitlements that employees must receive on termination. Likewise, the Canada Labour Code sets out the minimum notice periods and severance entitlements for federally regulated employees (i.e. banking and telecommunications). However, just like the minimum wage, most employees should get a lot more than the minimums.

Judge made law or otherwise the law made by the Courts is called the “common law”. It entitles most employees to “reasonable notice”. Reasonable notice is much greater than the statutory minimums. Employees default to getting common law reasonable notice, unless they have a written employment contract that says otherwise.

There is no set formula to calculate common law notice. Generally, it is accepted that the average short-term employee is owed three to six months of notice, a long-term employee in a senior position may be owed up to 24 months or more, and somewhere in the middle for the other lengths of employment. How senior the employee’s position is will also be a factor. For example, a vice president or manager may be entitled to higher pay in lieu of notice that an employee doing a low level job, even for the same length of time. The employee’s age and the availability of alternative employment are also factors the Courts consider.

You can learn more about ‘Reasonable Notice’ and what the appropriate length is for different employees in my earlier article on “How much notice/severance should I get after being fired?.”

Termination Clauses

A termination clause in an employment contract alters an employee’s entitlements to common law reasonable notice. While it could technically provide for more, more often than not, employers include termination clauses to limit what an employee would otherwise get after being fired. Termination clauses cannot limit entitlements to below the minimums.

Where there is a valid and enforceable termination clause, an employee would not be successful if they attempted to seek more in a wrongful dismissal action. Fortunately, the Courts are often persuaded to strike out termination provisions. There are a number of different reasons that a court might find a termination clause unenforceable, such as pressure being put on the employee at the time of signing of the contract or where the limits on the severance pay are less than the minimums. If the termination clause is successfully struck out common law notice applies.

An experienced employment lawyer can offer advice on options on how to deal with terminations — for example whether one should sue for wrongful dismissal or alternately file a claim for termination pay or severance pay with the Ministry of Labour. It should be noted that a person cannot do both – sue for wrongful dismissal and file a claim for termination or severance pay. Seeking legal advice on rights is recommended to make the right decision. An employment lawyer can also help ensure payments for common law notice are maximized either through court action or a negotiated settlement.

When are termination clauses unenforceable?

In Movati Athletic Group v Bergeron, an employee had worked for about 16 months before she was terminated without cause. Purporting to rely on the termination clause in her contract, the company gave her the minimum entitlements under Ontario’s Employment Standards Act, 2000 (ESA). The employee claimed damages for wrongful dismissal arguing that the termination clause in her employment contract was not clear enough to rebut the presumption that she was entitled to common law reasonable notice of termination.

The court found the termination clause not clear and as a result, the employee received three months’ pay in lieu of reasonable notice of termination instead of her statutory minimum entitlements. This case illustrates how important it is for employers to make all efforts to expertly craft termination clause wordings and how important it is for employees to have their employment contracts checked by a lawyer before deciding whether it is actually enforceable.

A court will not enforce a termination clause that excludes minimum statutory entitlements upon dismissal as set out in the ESA or Canada Labour Code. It is illegal for an employer to provide less than the minimum standards of the ESA or Code, even if the employee has voluntarily agreed to accept a lower amount. Additionally, a court will not enforce a termination clause if it has not been properly drafted. Poorly drafted clauses are very common and any ambiguity in the language in the termination clauses usually acts against the employer.

Termination Provisions must use the clearest possible language when trying to limit an employee’s rights upon termination. Failing to use explicit language leaves the door open for varying views and interpretations of intention and, therefore, the clause may be set aside by a court for ambiguity.  Courts resolve drafting ambiguities in favour of employees.

Laws on termination clauses continue to evolve. It is important to keep abreast of changes and consult with employment lawyers when employers are drafting clauses or when you, an employee, are terminated


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.