Bankrupt Employer ≠ Helpless Employee It has long been recognized by the courts that there is a power imbalance between employers and employees. Given the nature of the employer-employee relationship, one may be able to see why an employee may feel as though they are at the mercy of their employer. Luckily, there are statutory safeguards to place employees on an even playing field with their employer. An employee will often rely on a employer to be paid for the work they perform, as well as any benefits to which they were entitled under the employment contract. After working for an employer for an extended period time, it is not unusual for an employee to become heavily dependent on the steady stream of income and benefits from their employer. It would be understandable then that an employee, who showed up to work one day to find that their employer has gone bankrupt, would panic, and feel vulnerable and distraught. Such a scenario may evoke memories of the recent news that Target would be bowing out of the Canadian marketplace. Target, however, has not gone bankrupt in Canada – it has filed for creditor protection under the Companies’ Creditors Arrangement Act (CCAA), which is perhaps a topic for another blog. That being said, their current situation in Canada acts as a good starting point to discuss what employees can do in the case that their employer goes bankrupt. This was also recently discussed in another article in The Lawyers Weekly which you can find here. Employees of a bankrupt employer are not entirely without the means to try to recover unpaid wages or termination and severance pay. One of the means an employee can use is the Wage Earner Protection Program (“WEPP”). According to Service Canada, the WEPP “compensates eligible workers for unpaid wages, vacation, severance and termination pay they are owed when their employer declares bankruptcy or becomes subject to a receivership under the Bankruptcy and Insolvency Act.” WEPP is therefore an extremely valuable resource for an employee faced with a bankrupt employer. Employees’ claims for unpaid wages, termination pay etc., are equivalent to that of unsecured creditors. In other words, employees would be closer to the end of the line of creditors hoping to get whatever assets (liquidated or not) the company had remaining. This could mean that by the time it was the employees’ turn to collect on their unpaid wages or termination pay etc., the company may not have anything left to give. WEPP, however, is not paid out of the assets of the bankrupt company, but rather directly from Service Canada. This gives employees some certainty that, if they meet all the necessary criteria set out by WEPP, they will be able to recover some of the money their bankrupt employer owes them. If found to be eligible for WEPP, it appears that an individual can receive a maximum payment equaling up to four weeks of insurable Employment Insurance earning which in 2015 is $3,807.68. Another place employees can look to for help when their employer is felled by bankruptcy is the Employment Standards Act, 2000 (“ESA”). Under section 81 of the ESA, directors of an employer can be liable for wages in a few instances, one of which is if, “the employer is insolvent, the employee has caused a claim for unpaid wages to be filed with the receiver appointed by a court with respect to the employer or with the employer’s trustee in bankruptcy and the claim has not been paid.” (s.81(1)(a)) This acts as a remedy for employees to seek compensation from directors in the case that after bankruptcy they have been unsuccessful in recovering unpaid wages. It is important to note that this remedy only applies to wages, and not termination or severance pay. In short, while a bankrupt employer may mean the end of your employment, you are not entirely helpless and if you choose to avail yourself of some of the avenues explained above, you have a chance of recovering at least some of what you are owed. By Fauzan SiddiquiBlog, Employment LawJune 9, 2015December 3, 2020
Seasonal Employees May Be Eligible For Severance Pay The holiday rush has ended and financial reports are in and layoff notices have been issued to some employees, so what about severance pay for seasonal employees? In Snow Valley Resorts (1987) Ltd. v. Barton and Director of Employment Standards, 2013 CanLII 8963 (ON LRB), the Ontario Labour Relations Board upheld an Employment Standards Officer’s decision that granted entitlement to severance pay to a seasonal employee. The Board also affirmed a notice of contravention and fine against the employer for failing to pay severance pay. Barton was employed from 1990 to 2011 by Snow Valley during the winter season. His contracts clearly stated that his employment was seasonal in nature and was for the current ski season only. Over 11 years, Barton worked a total of 80 months (6.7 years). Section 65(2) of the Employment Standards Act, 2000 provides: All time spent by the employee in the employer’s employ, whether or not continuous and whether or not active, shall be included in determining whether he or she is eligible for severance pay under subsection 64 (1) and in calculating his or her severance pay under subsection (1). In Ontario, if an employee has been employed for five years or more and the employer has a payroll of $2.5 million or more, then the employee is generally entitled to severance pay The Ontario Labour Relations Board found that Barton was entitled to severance even if his employment was seasonal in nature. Barton had worked non-continuously for more than 5 years. Under section 65(2), Barton was eligible for severance because all periods of employment were taken into account in determining if he had five or more years of service. In the end, he was not awarded the severance pay because he filed his ESA claim outside the six-month limitation period. With respect to termination pay, the Board did not award termination pay as it was found that Barton’s employment was seasonal. The Board found that seasonal employment is for a definite duration even if the contract of employment did not specify an end date. Under the ESA Regulation 288/01, employees employed for a definite duration or defined task are not eligible for termination pay. The same exemption does not exist for severance pay. Employers that hire seasonal employees or rehire employees with prior service need to be aware they may owe severance pay if the employee’s total service equals five years or more. An employee need not be full-time or a permanent employee to trigger severance entitlements under the ESA. Further, when a lay off lasts more than 13 weeks in a 20 week period under the ESA (or 35 weeks in a 52-week period if certain conditions are met), the employer will trigger a termination and severance pay if the employee is eligible. Snow Valley Resorts (1987) Ltd. v. Barton and Director of Employment Standards, 2013 CanLII 8963 (ON LRB)https://www.canlii.org/en/on/onlrb/doc/2013/2013canlii8963/2013canlii8963.html By Fauzan SiddiquiBlog, Employment LawFebruary 28, 2014November 24, 2020
Can Employers Terminate Employees While They are on Leave? This blog post was written by employment lawyer, Carrie Kennedy in response to the question: “Can employers terminate the employment of an employee while that employee is on pregnancy leave, parental leave, or any other type of leave?” Of course they can. However, doing so may be a costly decision. The Employment Standards Act, 2000 (the “ESA”), similar to the Canada Labour Code, provides that “upon the conclusion of an employee’s leave under this Part, the employer shall reinstate the employee to the position the employee most recently held with the employer, if it still exists, or to a comparable position, if it does not”. Despite this obligation on an employer to reinstate an employee when a period of leave ends, an employer may terminate that employee’s employment for a number of reasons including: a) the position no longer exists and there are no comparable positions to offer to the employee; b) the employer terminates the employment in compliance with the termination and severance requirements in the applicable legislation; or c) the employer has grounds to dismiss the employee that are completely unrelated to the fact that the employee is on leave. Both the Canada Labour Code and the ESA both have case law decided under them that clearly state that, while the legislation is designed to protect employees on leave, they are not designed to provide greater rights to employees who go on leave than to other employees. Although an employer may terminate the employment of an employee on leave, employers must be sure not to treat employees who are on leave more poorly than those employees who are not on leave. Often, an employee on leave will believe their rights or protections have been violated if dismissed while on leave and they will seek further compensation from the employer. The termination, therefore, even if part of a corporate reorganization, might come at quite a cost to the employer. In the recent case of Moday v. Bell Mobility Inc. 2013 CarswellNat 393, Moday, an 11 year employee of Bell Mobility, received a termination letter from Bell Mobility while she was on maternity leave. Bell Mobility argued that, due to downsizing, it had eliminated Moday’s job and all comparable jobs, so there were no comparable positions to which she could return. In this case, Bell Mobility had eliminated about 220 jobs in its reorganization. Although Bell Mobility offered Moday a severance and termination package that exceeded the requirements of the Canada Labour Code, she brought an action against Bell Mobility for wrongful dismissal. The arbitrator dismissed Moday’s complaint. It found that an employer may dismiss someone on leave when the employee’s job is eliminated and there are no comparable jobs to be offered, the right to be reinstated does not trump an employer’s right to reorganize, and being on leave does not put an employee in a superior position to other employees who also lose their jobs during a corporate reorganization. The downside to an employee who is terminated while on leave is obvious: the employee loses his or her job. The downside to an employer who terminates the employment of an employee while he or she is on leave is that it might be a very costly decision. The employer will be required to pay, at a minimum, the amounts set out in the termination and severance provisions of the applicable legislation. It will also likely have to pay legal fees if that employee brings a civil action against it for wrongful termination or makes a complaint against it before the Human Rights Tribunal. It is likely that an employer will either have to voluntarily pay an employee an amount that exceeds the minimum legislated standards in order to avoid litigation or it will be ordered to do so if unsuccessful in litigation. What this means for an employer is that, while it may technically act within the bounds of the law in terminating the employment of an employee on leave in certain circumstances, it may cost much more to terminate that employment compared to terminating the employment of an employee who is not on leave. For more information on Canada Labour Code, Employment Standards Act and Notice and Termination of Employees for Employers or if you need an employment lawyer, contact Carrie Kennedy or one of the employment law lawyers of Devry Smith Frank LLP, listed on our website by clicking on their name. By Fauzan SiddiquiBlog, Employment LawJune 17, 2013July 28, 2021
(Canada) Attorney General v. Johnstone and Canadian Human Rights Commission This blog is written by our law summer student, Michelle Farb An employer’s failing to accommodate an employee’s childcare needs constitutes “family status” discrimination under the Canadian Human Rights Act. Fiona Johnstone, along with her husband, were both employed by the Canada Border Services Agency as border services officers at Toronto’s Pearson Airport since 1998. Fiona and her husband were both required to work rotating shifts. When Fiona returned to work after her maternity leave in January 2003, she was unable to secure childcare that would allow her to work her rotating shift schedule. She requested an accommodation in the form of three 13-hour fixed shifts per week. Her request was denied by the agency on the basis that they would not provide full-time employees with fixed shifts for child-rearing responsibilities, but they would provide them for medical or religious reasons. Due to her denial, she was given part-time hours, with less pay for overtime hours and a pro-rated pension and pro-rated benefits. After the birth of her second child in 2005, she made the same request, and was denied again. In April 2004, Fiona filed a complaint with the Canadian Human Rights Commission, on the basis that the agency discriminated against her on the prohibited ground of family status, contrary to s. 7(b) and 10 of the Canadian Human Rights Act. The Canadian Human Rights Tribunal agreed with Fiona and ruled that refusing to accommodate child-care obligations constituted discrimination on the basis of family status. In response, the federal government then filed an application for judicial review of the Tribunal’s decision. The Court ultimately dismissed the government’s request for judicial review, and upheld the Tribunal’s determination that the ground of “family status” includes child-rearing and parental obligations. The Tribunal’s conclusion was reasonable due to Fiona’s evidence of her unsuccessful attempts to find appropriate childcare, her failure to be accommodated by the agency, and the agency’s failure to demonstrate they would experience undue hardship if they accommodated her. Federal Court Judge Leonard Mandamin emphasized that the legislation should be given a liberal interpretation in order to fulfill its purpose, but noted that “not every tension that arises in the context of work-life balance can or should be addressed by human rights jurisprudence.” The judge rejected the “serious interference” test adopted in the B.C. case of Campbell River, which stated that childcare obligations arising out of discrimination claims based on family status have to be of substance and the complaint must have tried to be accommodated, and must have tried to be reconciled with family and work obligations. In this case, the judge endorsed a broader approach, and defined the test as “[A]ny significant interference with a substantial parental obligation is serious. Parental obligations to the child may be met in a number of different ways. It is when an employment rule or condition interferes with an employee’s ability to meet a substantial parental obligation in any realistic way that the case for prima facie discrimination based on family status is made out.” He emphasized that family status discrimination should be governed by the same broad criteria as other alleged grounds of discrimination. Full link to decision: www.canlii.org. If you have any questions about whether this applies to you, please contact one of the employment law lawyers at Devry Smith Frank LLP. For more information on the ongoing development of family status within the case law, or childcare obligations, as well as other dependency relationships which exist within families in relation to what the law says about developing &implementing policies, such as eldercare obligations, contact us to learn more about good faith obligations of both the employer and employee. The law offices of Devry Smith Frank LLP are located in the Lawrence and Don Mills location of Toronto and we have a lot of free parking. By Fauzan SiddiquiBlog, Employment Law, Human Rights LawJune 3, 2013November 24, 2020
What Breach Of Trust In An Employment Relationship Is Too Small To Justify Dismissal? Employee of 36 years dismissed after stealing a pack of cigarettes, discharge upheld at arbitration. By: Michelle Stephenson, our law summer student A pack of cigarettes may not be too small a cause for termination, according to a Manitoba arbitrator. The discharge of a cashier (“the grievor”) by Canada Safeway for stealing a pack of cigarettes was upheld, even after he claimed that he never intended to steal them. The arbitrator had to decide whether there was cause for discipline, which turned on whether the grievor was telling the truth, and whether termination was the appropriate penalty. The grievor’s co-worker had begun to suspect that he was stealing cigarettes from work and, after confirming her suspicions, reported it, which led to an “integrity shop” investigation. After being left with extra cigarettes by the undercover investigator, the grievor put some away but claims he forgot about the other pack his apron, which he left with. He said he did not notice the other pack as he had a lot in his pockets, had spilled tea on his hands, and when he reached into the apron, only found the one pack. He was fired the following Monday, and the Union filed a grievance, claiming he did not steal the cigarettes and should be reinstated with full back pay and seniority. The credibility of the witnesses was significant in determining whether theft had taken place. In this case, the arbitrator found that the grievor’s story was not credible. The arbitrator found that the employees were generally aware of the importance of honesty to the employer, that theft would result in their dismissal, and that consumable products were never to be put in aprons. In contrast, the grievor claimed that it was normal practice for employees to put these items in their aprons. The grievor’s story and behaviour was found to be illogical and inconsistent. On the other hand, the employee who noticed his behavior was found to be credible. The arbitrator determined that the employee intentionally stole the cigarettes; however, it was recognized that theft should not necessarily result in dismissal. In Canadian Office and Professional Employees Union and Yellow Pages Group Co. 2012 ONCA 448, determining whether dismissal was appropriate required the balancing of the severity of the conduct with the severity of the penalty. The analysis is contextual, determining whether the employee’s misconduct is reconcilable with sustaining the employment relationship. Using this test, the arbitrator balanced the grievor’s many years of service with the company and impact of losing his job against his past performance (which was not exemplary, but not poor enough on its own to justify dismissal), the impact of theft on the employer, the significance of trust in the retail industry, that it was known that theft would result in termination, the importance of deterring this behavior, and the grievor’s continued denials and dishonesty. The arbitrator found that the employment relationship was irreparably damaged and the Union’s grievance was therefore denied. While the significance of trust in an industry that depends on income from easy-to-steal products is clear, and the seriousness of the issue was not the value of the item stolen, the fact that this man lost his job of 36 years for stealing cigarettes may surprise some people. This decision shows that even apparently trivial transgressions can damage the employment relationship beyond repair, such that terminating the employee is justified at law.Full decision available at: Decisions Up Werier Safeway. For more details or assistance in relation to employment law, Just Cause for Termination, Theft, Breach of Trust, Employment Relationships, or advice on what are Just Cause For Termination, kindly contact one of our Employee lawyers at Devry Smith Frank LLP. To browse some others law videos pertaining to Employment law, kindly browse through our media page. By Fauzan SiddiquiBlog, Employment LawMay 28, 2013December 5, 2020
Tax Considerations in Wrongful Dismissal Settlements When employment litigation resolves in a wrongful dismissal settlement, an important issue for the employer and the employee is the tax considerations and how the settlement funds will be allocated. Employees should ensure that the settlement funds are allocated in order to minimize their tax liability. Employers may also be able to settle cases for less if they cooperate with employees in the allocation of the settlement funds. There are many different ways in which the payments can be allocated, such as wages, retiring allowance, general damages and legal fees. Any money allocated as wages will be subject to withholdings. The employer is required to withhold Canada Pension Plan (CPP) and Employment Insurance (EI) contributions, as well as income tax from settlement funds allocated as wages. The Canada Revenue Agency (CRA) defines “retiring allowance” as “an amount paid to officers or employees when or after they retire from an office or employment in recognition of long service or for the loss of office or employment.” Significantly, the employee does not have to be retiring in the colloquial sense in order to be entitled to a retirement allowance. In other words, an employee who is terminated from one job and starts a new one shortly thereafter could still be entitled to a retiring allowance. The employer is required to withhold money on retiring allowance payments at the following lump sum rates: 10% for amounts up to and including $5,000.00; 20% for amounts between $5,000.00 and $15,000.00; and 30% for amounts of $15,000.00 and over. No withholdings are required for CPP, EI and income on retiring allowance payments. General damages are monies awarded to a litigant as compensation for pain and suffering for bullying/harassment, breaches of human rights legislation and other torts. If settlement funds are allocated as general damages, and the payment relates to the loss of employment, it would be subject to withholdings at the lump sum rates. In other words, if the employee would not have been entitled to the payment but for the loss of employment, the money is subject to withholdings. On the other hand, if a payment of general damages is made as compensation for events that are unrelated to the loss of employment, the money would be non-taxable. Settlement funds allocated as legal fees are non-taxable. No withholdings are required and the employee will not pay tax on these amounts. This is dealt with in the Income Tax Act by way of an income inclusion and an offsetting deduction. Please talk to one of our employment lawyers to review your tax considerations and legal options before accepting a wrongful dismissal settlement. By Fauzan SiddiquiBlog, Employment Law, TaxApril 3, 2013November 24, 2020