SCC ‘shocked’ employment community

It’s been a big year for employment law at the Supreme Court of Canada. Four major cases have been putting legal brains to the test, resulting in clarification and controversy for employers with respect to their duty to accommodate disability, and for employees in their duty of good faith and duty to mitigate damages.

If there has been a theme for 2008, Jeffrey Goodman of Heenan Blaikie LLP’s Toronto office says that it has been very conservative decisions in favour of employers.

“This Supreme Court has shocked the employment community. Before this year, people saw it as a left-leaning court that savoured employees. This is not the Supreme Court that many people thought it was.”

In looking at the individual cases, his other comment is that “extreme facts lead to extreme law.” All of the decisions have outcomes applicable to a very narrow fact situation and it is impossible to foresee whether the jurisprudence they have generated will be relevant in less extreme situations.

First off the roster was Evans v. Teamsters Local Union No. 31, on May 1. This case came out of Whitehorse where Evans, a business agent with the union for 23 years, was dismissed without notice. He did not find other employment and after unsuccessful negotiations the union offered, or demanded, that he return to work for a 24-month notice period.

Evans demanded that certain conditions be met first, including that his wife got a particular position in the union, and the union refused to agree.

The trial judge in the Yukon Territory Supreme Court found that Evans had been wrongfully dismissed and the union had not proven that he had failed to mitigate his damages. The Court of Appeal set aside the damages of over $100,000 and found that he had not acted reasonably with respect to the job offer, and this constituted a failure to mitigate.

The majority of the Supreme Court agreed, applying an objective standard but adding: “It is extremely important that the non-tangible elements of the situation - including work atmosphere, stigma, and loss of dignity, as well as nature and conditions of employment, the tangible elements - be included in the evaluation.”

Goodman says although there has been authority for the proposition that an employee may be required to return to the same job to mitigate his or her damages, this is the first case where the employer has demonstrated that it was unreasonable to refuse to do so.

“It is easy for an employee where there have been changes made to the employment situation to make a viable argument that there is humiliation or the relationship has been destroyed. Evans was asked to return to his exact same job and had to admit that there was no humiliation. These are extraordinarily narrow circumstances.”

Goodman believes that on a going-forward basis, counsel will have difficulty finding another case that will satisfy all the factors which the Supreme Court confirmed as relevant. “This was the perfect storm-type case - the perfect facts to say you have to return.”

Next to hit the news was Honda Canada Inc. v. Keays. On June 27, the Supreme Court knocked down what had been the largest punitive damages award ever in employment law, finding that while Honda had wrongfully dismissed Kevin Keays, it had not acted with malicious intent requiring correction by punitive damages.

Goodman believes that the lower court’s calculation of damages was premised on the concept of a conspiracy by Honda to get rid of Keays by refusing to recognize his medical notes and forcing him to go to the doctor.

“The Supreme Court said, ‘No.’ When the absences exceeded the number predicted by the leading expert and the family doctor’s notes had become vague and self-reporting in nature, the employer had a right to challenge the notes. Ultimately that lead to his termination and didn’t give rise to damages because the skepticism turned out to be legitimate.”

Once again, the facts are germane to the outcome. “The problem the Supreme Court had with that self-reporting type of illness is that it is ripe for abuse,” says Goodman. “So they changed it from the most extraordinary decision in employment history to, not a run of the mill decision, but one where the employee received a slightly higher notice period than usual.”

Before the ripples caused by the Honda decision had settled, along came the court’s July 17 judgment in Hydro-Quebec v. Syndicat des employe-e-s de techniques professionnelles et de bureau d’Hydro-Quebec, section locale 2000, which addressed the test for undue hardship when an employer has to accommodate an employee’s disability in the face of non-culpable absenteeism.

That case was another extreme situation where the employee had missed approximately three years of her seven-and-a-half years of employment because of severe psychological problems.

The arbitrator who approved the termination found that the future was going to mirror the past no matter what steps the employer took. In that case it was the Court of Appeal that made a radical decision which effectively made it impossible for an employer to ever meet the threshold of undue hardship.

Counsel for Hydro-Quebec, Robert Bonhomme of Heenan Blaikie’s Montreal office, believes the judges came down on the side of common sense when they found that an employer is not required to prove that it is impossible to integrate an employee, but must prove undue hardship, assessed globally, starting from the beginning of the absences.

Bonhomme says people may ask why the court heard a case with such an obvious outcome. “The Court of Appeal in Quebec made a mistake that had to be corrected. C’est la vie.”

The most recent of the judgments, on Oct. 9, was RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc. dealing with an RBC branch manager in Cranbrook, B.C., who orchestrated the departure of all but two of the branch’s investment advisers and most of their clients to its competitor Merrill Lynch, causing the near collapse of the branch.

Stacey Ball of Toronto’s Ball and Alexander says it’s an important case. “The decision reconfirms a number of employment law tenets - that all ordinary employers have to give reasonable notice and that there is a duty not to misuse employer’s documents and confidential information. That’s not a surprise.”

The Supreme Court also reconfirmed the Court of Appeal’s view regarding competition in the notice period. “The employer was trying to create a notice period with no competition. The Supreme Court overturned the trial judge’s award of damages for post-employment competition.”

According to Ball, the controversial issue is the majority’s expansion of the duty of good faith. “Importantly, the branch manager, Delamont, was found not to have a fiduciary relationship,” says Ball.

“But the majority found he had a duty to try and retain the employees and not to organize their departure for the competition.” Justice Rosalie Abella, in her partial dissent, calls the expansion a “quasi-fiduciary duty” and raised serious concerns about its introduction, saying:

“Expanding the scope of the duty of good faith in this manner represents a novel and potentially enormous liability on employees.

This development, in my view, is not only unwelcome in its uncertainty and punitive in its impact, it also risks widening what this court has long recognized to be the imbalance of power in employment relationships, by further entrenching the inherent vulnerability of employees.”

Abella considered of the nature of the securities industry, which boasts a high level of poaching. Investment firms do not generally ask for restrictive covenants, as they are just as likely to be the poacher as the poachee.

Ball says this is also relevant in considering the damages for five years worth of lost profits that Delamont was ordered to pay. “I believe five years is too remote,” says Ball. “Was it reasonably in the contemplation of the parties that this guy would be hit for five years of damages?”

Overall, Ball classifies Abella’s concerns as real and valid. He is interested to see how the common law develops and his thoughts echo Bonhomme’s and Goodman’s when he says,

“The majority view appears to be very narrow, and if it is fact specific, you can ask the question, ‘Why did they hear it?’” Maybe to make employment law a more interesting place to practise.

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