Employment Law - Winter 2008
Transcription
Employment Law - Winter 2008
bãéäçóãÉåí=i~ï [ LEGAL ISSUES OF INTEREST TO EMPLOYERS AND EMPLOYEES ]= Volume 18, No. 1 Winter 2008 Employer's promise of severance pay at Town Hall meeting is a contract Pages 62-66 Plaintiffs argued that the meeting constituted a unilateral offer that they had accepted by remaining in the Employer's employ. The terms of the contract were found in the past practice establishing that severance was paid to employees based on one month for each year of service, payable when they finished working, and separate and apart of their common law rights and of any working notice. Two employees at an aerospace firm attended a Town Hall meeting organized by the company to address employee concerns about job security and severance packages. Because the Employer feared that various key employees might decide to leave, it held the meeting to assure the employees that the company's past practice of paying one month's salary for each year of service would continue to apply to employees who were laid off in the future. The plan in effect at that time was to pay out severance as a lump sum, with no working notice beyond a few days for employees to finish up work. A company produced summary of the meeting noted numerous employee questions about the possibility that the severance policy might change in the future, and that management replied that "[w]e have been assured that the package will not change." The Court agreed. It held that the Employer had entered into a binding contract to pay severance in accordance with past practice and that this contract applied to the shutdown of the plant. However only one of the Plaintiffs was eligible for the payment because the other had voluntarily left prior to his termination date. The Court found that: "In this context it is reasonable to infer that the Defendant promised the employees, including the plaintiffs that the policy of paying severance equal to one month's salary for each year of service would continue to apply to any future layoff as an incentive for them to continue working for the company” However, the Employer subsequently announced that the plant would be closing and that employees would be provided with working notice, the length of which would depend on the projects they were working on. The employees sued the Employer in the British Columbia Supreme Court, seeking lump sum severance payments based on their years of service in accordance with the assurances given by the employer at the Town Hall meeting. The Consequently, the Court stated that the assurances given at the Town Hall meeting were intended to create legal relations and were not merely informational. The employees accepted the offer by continuing to work for the company 62 Nelligan O’Brien Payne LLP www.nelligan.ca [ OTTAWA ] 66 Slater, Suite 1900, Ottawa, ON K1P 5H1, Tel: (613) 238 8080, Fax: (613) 238 2098, TDD/ATS: (613) 563 4960 [ KINGSTON ] The Woolen Mill, 4 Cataraqui, Suite 202, Kingston, ON K7K 1Z7, Tel: (613) 531 7905, Fax: (613) 531 0857 [ VANKLEEK HILL ] 86 High Street, Vankleek Hill, ON K0B 1R0, Tel: (613) 678 2490, Toll Free: (877) 678 2490, Fax: (613) 678 3762 [ ALEXANDRIA ] 139 Main South, Alexandria, ON K0C 1A0, Tel: (613) 525 2396, Fax: (613) 525 2752 Nelligan O'Brien Payne – Employment Law Newsletter Winter 2008 Cette décision est l’objet de l’appel à la Cour d’appel fédérale. and by neither terminating their employment or accepting voluntary layoffs. As such, so long as the employees stayed during the working notice period, they were entitled to receive the promised severance package. The moral of the story is beware of what you say at a meeting, it may just become a contract! La question en litige devant l’arbitre et la Cour fédérale était la suivante : Est-ce que l’employeur, en imposant les mesures disciplinaires, a commis une faute civile distincte ouvrant droit à des dommages-intérêts? Kornerup et al. v. Raytheon Canada Ltd., 2007 B.C.S.C. 584. Dans sa décision, la Cour d’appel fédérale tire son appui des principes énoncés par la Cour suprême du Canada (« CSC ») dans Vorvis c. Insurance Corp. of British Columbia, [1989] 1 R.C.S. 1085 et Wallace c. United Grain Growers Ltd., [1997] 3 R.C.S. 701 pour indiquer que la responsabilité délictuelle d’un employeur peut être engagée s’il commet une faute donnant ouverture à un droit d’action. La Cour d’appel fédérale précise que la CSC a reconnu dans l’arrêt Wallace l’existence d’une obligation de bonne foi et de traitement équitable dans le contexte du congédiement afin de protéger les employés au moment où ils sont les plus vulnérables. Toutefois, la CSC ne suggère pas qu’un manquement à une obligation de bonne foi et de traitement équitable équivaut à une faute donnant ouverture à une indemnisation. Steven Levitt [email protected] L’obligation de bonne foi se limite au contexte du congédiement Nota : Dans ce document, l’emploi du masculin pour désigner des personnes n’a d’autres fins que celles d’alléger le texte. Le cadre contextuel du litige découle de la décision du sous-ministre du ministère de la Justice du Canada d’imposer des mesures disciplinaires contre Me Henri Bédirian (« l’intimé »), un avocat au sein de la Fonction publique fédérale, suite à des allégations de harcèlement sexuel. L’intimé a déposé un grief pour contester la décision du sous-ministre, conformément à l’article 92 de la Loi sur les relations de travail dans la fonction publique. Il réclamait, entre autres, des dommages-intérêts généraux et punitifs de près de 2 millions de dollars. Selon la Cour d’appel fédérale, il importe de déterminer si l’employeur a commis une faute civile distincte donnant ouverture à indemnisation et ce, en vertu des principes de la responsabilité délictuelle, et non pas si l’employeur a agi de mauvaise foi ou traité l’employé de façon inéquitable. L’obligation de bonne foi se limite au contexte du congédiement. D’autant plus, selon la Cour d’appel fédérale, en soi, le fait d’agir de mauvaise foi ou de façon inéquitable ne constitue pas une faute civile distincte ouvrant droit à indemnisation. Ainsi, l’intimé n’avait pas droit aux dommages-intérêts réclamés dans les circonstances de l’espèce. La commissaire a accueilli le grief et conclu que les allégations n’étaient pas fondées, annulant ainsi la décision du sous-ministre et réintégrant l’intimé dans ses fonctions. Or, la commissaire a jugé que les réclamations additionnelles dans le grief de l’intimé ne se trouvaient pas au chapitre de sa compétence. L’intimé effectua donc une demande de contrôle judiciaire de la décision de la commissaire. Sa demande fut accueillie de sorte que l’affaire fut renvoyée à l’arbitre afin qu’elle épuise sa juridiction et rende une décision sur les réclamations monétaires de l’intimé. L’arbitre rejeta la réclamation en dommages-intérêts. La Cour fédérale a accueilli la demande de contrôle judiciaire de cet arbitre. Le Procureur général du Canada c. Bédirian, 2007 C.A.F. 221 Julie Skinner [email protected] 63 Nelligan O’Brien Payne LLP www.nelligan.ca [ OTTAWA ] 66 Slater, Suite 1900, Ottawa, ON K1P 5H1, Tel: (613) 238 8080, Fax: (613) 238 2098, TDD/ATS: (613) 563 4960 [ KINGSTON ] The Woolen Mill, 4 Cataraqui, Suite 202, Kingston, ON K7K 1Z7, Tel: (613) 531 7905, Fax: (613) 531 0857 [ VANKLEEK HILL ] 86 High Street, Vankleek Hill, ON K0B 1R0, Tel: (613) 678 2490, Toll Free: (877) 678 2490, Fax: (613) 678 3762 [ ALEXANDRIA ] 139 Main South, Alexandria, ON K0C 1A0, Tel: (613) 525 2396, Fax: (613) 525 2752 Nelligan O'Brien Payne – Employment Law Newsletter Winter 2008 Court awards damages of almost $2 million for departing employees breach of restrictive covenant Ontario Superior Court Justice Taylor upheld Staebler’s claims for breach of contract and he upheld the stipulated damages clause. H.L. Staebler Co., an insurance brokerage company in the Waterloo region, restructured in 2000. Two of its highly successful producers, Tim Allan and Jeff Kienapple, who sold and serviced commercial insurance, were extremely unhappy with the changes and with being overlooked for senior management roles. The trial judge first asked whether Staebler had a legitimate proprietary interest to protect, and concluded that it did. Having regard to the nature of the insurance industry, common industry practice and the fact that “Staebler's book of business, namely the clients, is an asset owned by Staebler, which it is entitled to protect,” the Court determined that the scope of the clause was not too broad. On October 15, 2003, Allan, Kienapple and their respective assistants all resigned with no notice to Staebler. That same day, from the offices of Stevenson & Hunt's new Waterloo office, they contacted their clients to advise they were no longer with Staebler. Staebler began receiving letters of authority from clients directing the transfer of their business to Stevenson & Hunt before end of day. Staebler obtained an interlocutory injunction two weeks later. By that time 118 clients had already moved their business. Relevant to his decision was the fact that commercial producers have a close and personal relationship with their clients, having taken one or two years to gain familiarity with their clients' businesses. He found, therefore, that a simple non-solicitation clause would not be effective in protecting Staebler's proprietary interest because the "clients would be likely to follow Allan and Kienapple to their new employer without any solicitation." Moreover, Taylor noted, the Staebler covenant was "significantly less restrictive" than the one contained in the employment contracts entered into by the defendants with Stevenson & Hunt, a relevant consideration when determining industry practice and an employee's understanding of what is appropriate. At trial Staebler sought damages, including punitive damages, for breach of fiduciary duty, breach of contract, conspiracy and inducing breach of contract. Allan and Kienapple had signed employment contracts containing restrictive covenants provisions expressly stating that clients belong to the company, and that "[i]n the event of termination of your employment with the Company, you undertake that you will not, for a period of two consecutive years following said termination, conduct business with any clients/customers of H.L. Staebler Company Limited that were handled or serviced by you at the date of your termination." Looking at the question of the public interest, Justice Taylor rejected the argument that Staebler's restrictive covenant prevented these employees from earning a living in their chosen field. He noted that the clause did not stop them from acting as insurance brokers selling commercial insurance, from accepting employment with a competing brokerage, or from contacting other Staebler clients not serviced by them. The Court rejected as well the defendants' argument that the covenant was contrary to the public interest because it "interfere[d] with purchasers of insurance obtaining service and advice from the person most knowledgeable about their insurance needs." The contract also provided that damages for a breach of the undertaking "shall be a sum equal to 1 1/2 times the commission income received by you or your subsequent employer on account of business conducted on behalf of persons or businesses that were clients/customers of H.L. Staebler." 64 Nelligan O’Brien Payne LLP www.nelligan.ca [ OTTAWA ] 66 Slater, Suite 1900, Ottawa, ON K1P 5H1, Tel: (613) 238 8080, Fax: (613) 238 2098, TDD/ATS: (613) 563 4960 [ KINGSTON ] The Woolen Mill, 4 Cataraqui, Suite 202, Kingston, ON K7K 1Z7, Tel: (613) 531 7905, Fax: (613) 531 0857 [ VANKLEEK HILL ] 86 High Street, Vankleek Hill, ON K0B 1R0, Tel: (613) 678 2490, Toll Free: (877) 678 2490, Fax: (613) 678 3762 [ ALEXANDRIA ] 139 Main South, Alexandria, ON K0C 1A0, Tel: (613) 525 2396, Fax: (613) 525 2752 Nelligan O'Brien Payne – Employment Law Newsletter Winter 2008 In that case, Ms. Mastrogiuseppe was summarily dismissed for purportedly failing to abide by a number of bank policies that had been changed several years earlier. These policies discouraged contact between bank managers and mortgage brokers and indicated that a mortgage cash-back program was to be directed at the mortgagee and to no other person. The Court was not troubled by the two-year duration of the prohibition. Looking at the insurance brokerage business generally, these clauses run between 18 months and three years said the trial judge. On the issue whether the damage clause in the contract was enforceable the judge noted that “a sum will be held to be a penalty if it is extravagant and unconscionable in comparison to the greatest loss that could conceivably be proved. It is not sufficient that the pre-estimate of damages is more than the actual damages for it to be held to be a penalty.” Ms. Mastrogiuseppe allegedly contravened these policies when she dealt directly with a mortgage broker with whom she was suspected of having an affair. She also directed a number of cashbacks to be made out to him or to solicitors in trust for him rather than to the mortagee. In addition, Ms. Mastrogiuseppe had been accused of taking advantage of a glitch in the system for an early renewal of her mortgage without penalty. She also approved loans for family members in non-arm’s length transactions. Both sides called expert evidence on the question of damages and the trial judge reviewed it and assessed the actual damages sustained by Staebler from the breach. He concluded actual damages sustained by Staebler to be about $1.5 million. The stipulated damage clause providing for 1.5 times gross commissions earned by Stevenson & Hunt from former Staebler clients yielded a number of approximately $1.85 million. The trial judge found this was not extravagant or unconscionable and awarded the higher amount. The Bank launched an investigation when it got wind of these actions. The investigator’s report came to the conclusion on each of these points that Ms. Mastrogiuseppe’s explanations were not satisfactory and that, given her extensive experience with the bank and her senior position, she knew, or ought to have known better. As a result, the investigator recommended that she be terminated for cause. This case serves as a useful reminder that restrictive covenants narrowly drafted to protect legitimate proprietary interests are enforced by the Courts if they are reasonable in all the circumstances. The Superior Court came to the conclusions that the policies relied on by the bank were not unambiguous prohibitions but rather recommendations. As a result, the bank could not rely on them to support its decision to terminate for cause. In addition, the bank’s conclusion that Ms. Mastrogiuseppe was having an affair with a mortgage broker was based on outdated stereotypes that person’s of the opposite sex could not have friendly relations exclusive of sexual relationships. The bank had also overlooked the evidence that indicated that she had renewed her mortgage the day before she found out about the glitch in the system, and the approval of loans to family members, although perhaps not good practice, were eventually proven to be legitimate. H. L. Staebler Company Limited v. Allan, 2007 CanLII 37692 (ON S.C.) Robert Monti [email protected] “Blacklisting” by former employer against an employee’s family gives rise to bad faith and punitive damages award A recent case of the Ontario Court of Appeal made the novel decision to award punitive damages (as well as bad faith damages) because a Bank blacklisted a former employee’s relatives. 65 Nelligan O’Brien Payne LLP www.nelligan.ca [ OTTAWA ] 66 Slater, Suite 1900, Ottawa, ON K1P 5H1, Tel: (613) 238 8080, Fax: (613) 238 2098, TDD/ATS: (613) 563 4960 [ KINGSTON ] The Woolen Mill, 4 Cataraqui, Suite 202, Kingston, ON K7K 1Z7, Tel: (613) 531 7905, Fax: (613) 531 0857 [ VANKLEEK HILL ] 86 High Street, Vankleek Hill, ON K0B 1R0, Tel: (613) 678 2490, Toll Free: (877) 678 2490, Fax: (613) 678 3762 [ ALEXANDRIA ] 139 Main South, Alexandria, ON K0C 1A0, Tel: (613) 525 2396, Fax: (613) 525 2752 Nelligan O'Brien Payne – Employment Law Newsletter Winter 2008 doubled her interest rate on her personal loans and unlawfully used a direction signed by the plaintiff to deduct mortgage payments from a different bank, under protest of Ms. Mastrogiuseppe. As a result, her personal cheques were returned as NSF and her credit was adversely affected. The judge states, given the circumstances, that “[w]arnings, setting out the performance problem, the actions required to improve to an acceptable level and the consequences of failing to improve, were required.” Given her age (47), her 30 years of service and her role as a mid-tosenior manager, the judge awarded her 22 months in lieu of notice. In addition the judge awarded 8 additional months in Wallace damages as a result of the accusation of dishonest conduct and improper personal relations with the mortgage broker, the fact that the dismissal letter did not cite reasons, the Bank had written her a letter whose intent was found to devastate her prospects of getting employment insurance, the Bank refused to provide her with a letter of reference despite her years of exemplary service and finally because the Bank had refused to allow her to retrieve her personal effects and had instead couriered them to her. The Court also awarded an additional $25,000 in punitive damages for having blacklisted Ms. Mastrogiuseppe’s family members who were customers. The bank also The Court of Appeal deferred to the Superior Court on its conclusions because they were all findings of fact. The Court of Appeal, however, reduced Wallace damages to 4 months because the Bank was not acting in bad faith in pursuing the allegations of dishonesty, even though they were ultimately not proved or refusing to provide a letter of reference in those circumstances. However, the Court of Appeal upheld the punitive damages and bad faith award due to the Bank’s vendetta against Ms. Mastrogiuseppe and her family. Mastroguiseppe v. Bank of Nova Scotia, [2007] O.J. No. 4052 (Ont. C.A.) Adrian Ishak [email protected] Nelligan O’Brien Payne is a multi-service law firm with offices in Ottawa, Kingston, Vankleek Hill and Alexandria. 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Copies of this newsletter are also posted on our Web site at www.nelligan.ca. © Copyright 2007 Nelligan O’Brien Payne LLP 66 Nelligan O’Brien Payne LLP www.nelligan.ca [ OTTAWA ] 66 Slater, Suite 1900, Ottawa, ON K1P 5H1, Tel: (613) 238 8080, Fax: (613) 238 2098, TDD/ATS: (613) 563 4960 [ KINGSTON ] The Woolen Mill, 4 Cataraqui, Suite 202, Kingston, ON K7K 1Z7, Tel: (613) 531 7905, Fax: (613) 531 0857 [ VANKLEEK HILL ] 86 High Street, Vankleek Hill, ON K0B 1R0, Tel: (613) 678 2490, Toll Free: (877) 678 2490, Fax: (613) 678 3762 [ ALEXANDRIA ] 139 Main South, Alexandria, ON K0C 1A0, Tel: (613) 525 2396, Fax: (613) 525 2752