The Ontario Superior Court’s recent decision in Antunes v Limen Structures Ltd is an important caution to employers who embellish the attributes of their company or a particular position when courting future employees. This decision makes clear that the general duty of honesty in contractual performance can impact an employer’s liability for compensation in lieu of reasonable notice upon termination.
The plaintiff, John Antunes started working as a Senior Vice President of Operations/Concrete Forming with the defendant, Limen Structures Ltd (“Limen”), on May 28, 2012. After just over five months, and without prior notice, Mr. Antunes was terminated without cause on November 9, 2012.
Mr. Antunes’ employment agreement provided that he would be compensated with a starting salary of $150,000 per year, which was to increase to $200,000 after his first year of employment. In addition, he was to receive 5% of Limen’s shares, with the potential for another 5% of the shares of Limen’s Residential Division within a year of the commencement of his employment. Lastly, the employment agreement provided for up to 12 months’ pay in lieu of notice for termination.
At the date of his termination, no shares had been issued to Mr. Antunes.
Prior to signing the employment agreement, Mr. Antunes discussed the terms of his employment with Mr. Lima during numerous phone calls and two in-person meetings. During these discussions, Mr. Lima advised Mr. Antunes that the company, in his opinion, was worth $10 million. Mr. Antunes relied on Mr. Lima’s representation, along with the promise of company shares, when he agreed to sign an employment agreement with Limen on May 28, 2012.
At trial, Mr. Antunes testified that shortly after starting at Limen, he realized that the company was not worth $10 million. Limen did not call Mr. Lima, or any other witness at trial. Given that he was as a material witness with direct and relevant knowledge of the value of the company and the negotiation of Mr. Antunes’ employment agreement, Justice Brown drew an adverse inference from Mr. Lima’s failure to testify.
Ultimately, Justice Brown awarded Mr. Antunes 8 months’ reasonable notice. In determining the amount of reasonable notice owing to Mr. Antunes, Justice Brown applied the well-established factors for determining the reasonable notice period as set out Bardal v Globe & Mail Ltd (1960), 23 DLR (2) 140; namely the character of the employment (project manager in construction with supervisory responsibilities), Mr. Antunes’ length of service (5 months and 11 days), his age (50 years old) and the availability of similar employment, having regard to Mr. Antunes’ experience, training and qualifications.
Justice Brown also considered the impact of Mr. Antunes’ allegation of inducement, which she quickly dismissed, and Limen’s bad faith in terminating Mr. Antunes (of which there were ample facts to support). Of particular note, however is her consideration of general duty of honesty in contractual performance.
In relying on the Supreme Court’s recent decision in Bhasin v Hrynew, Justice Brown states that parties must be able to rely on a minimum standard of honesty from their contracting partner in relation to performing the contract as a reassurance that if the contract does not work out, they will have a fair opportunity to protect their interests (Bhasin v Hrynew, 2014 SCC 71 at paragraph 86). Justice Brown finds that Limen failed to act honestly in the performance of its contractual obligations when:
The above misrepresentations, which Mr. Antunes relied on in accepting the offer of employment, were central to Justice Brown’s determination of an eight month reasonable notice period.
Interestingly, Justice Brown determines that Mr. Antunes is entitled to the 8 months’ reasonable notice under his employment agreement as well as at common law. Although she concludes that the contractual entitlement to eight months reasonable is justified on “the plain wording of the contractual provision, [Limen’s] failure to act in good faith vis-à-vis the employment contract and the misrepresentations on which [Mr. Antunes] relied, and on the adverse inference … drawn against [Limen]”(see paragraph 74) she seems to apply the same Bardal analysis as applicable at common law.
In Limen’s case, Mr. Lima’s embellishments cost them 8 months’ salary in addition to $500,000 for Limen’s failure to issue Limen shares to Mr. Antunes as per the terms of the employment agreement. Justice Brown accepted the uncontroverted evidence that Mr. Lima told Mr. Antunes the shares were worth about $500,000 and concluded that Mr. Antunes “is to be put in a position commensurate with his expectations arising from the contract and from Mr. Lima’s representations to him.”
While it is of no surprise that employer conduct at termination can impact the reasonable notice period, this decision serves as a warning to employers who over-sell the benefits of their offer to potential employment candidates. Where such embellishments are relied on in accepting an offer of employment, they may translate into greater employer liability post-termination.
A recent case of the Federal Court of Appeal, Bernard v Canada (Customs and Revenue Agency), 2015 FCA 263, is a cautionary tale on the importance of collecting all necessary evidence and putting it before an administrative decision maker in the first instance, and not before a Court on judicial review. An applicant challenging administrative or government decision making will normally be prevented from introducing new evidence before the reviewing Court which was not put before the original administrative decision maker. This rule exists not just for efficiency, but to maintain and protect the different roles entrusted to administrative decision-makers and reviewing courts by Parliament.
In Bernard, the applicant sought judicial review of a Public Service Labour Relations and Employment Board decision not to reconsider its earlier decision, which the applicant alleged was tainted by a reasonable apprehension of bias. On judicial review, the applicant sought to file an affidavit containing paragraphs and exhibits which had not been put before the Board. The respondent moved to strike this new evidence. In response, the applicant submitted that the evidence was relevant to her allegations of bias and a breach of natural justice and should remain in the Court record.
The Court found that this new evidence could have been placed before the Board in the first instance and granted the respondent’s motion to strike it from the record. The Court explained that the rule preventing an applicant from introducing new evidence on judicial review is rooted in the fundamentally different roles accorded to administrative decision-makers as “merits deciders” and judicial review courts as “reviewers”. The evidence the applicant sought to file went to the merits of the matter before the Board and was available at the time of the Board’s proceedings.
The Court noted that the general rule is subject to exceptions and the evidence did not fall within any of these. The Court explained that the general exceptions are:(1) if the evidence is filed to provide background information or a summary of the evidence that was before the administrative decision-maker; (2) if the evidence is filed to disclose a complete absence of evidence and tell the reviewing court what cannot be found in the record; and(3) if this evidence is filed to provide details relevant to an issue of natural justice, procedural fairness, improper purpose or fraud. However, if the evidence of natural justice, procedural fairness, improper purpose or fraud had been available at the time of the administrative proceedings and the party had the capacity to object to the issue at that time, this exception does not apply.
This decision highlights the importance of seeking legal advice early on to identify and collect all necessary evidence when approaching an administrative decision maker to challenge a decision. Although administrative proceedings may be more informal than Court proceedings, it is important to understand the legal evidentiary principles applicable to maximize the chances of success. If this is not done, important evidence may be missing that is essential to a successful legal outcome of a case.
From time to time we meet with employees who have been given notice of termination by their employer and want to know what happens to their severance pay if they decide to resign during the working notice period. Are they still entitled to it? Must they work the entire notice period or risk losing their severance pay? In Ontario, the Employment Standards Act, 2000, (“ESA”) sets out the answers to this question.
Notice of Termination and Severance Pay under the ESA
Under the ESA, an employee is entitled to notice of termination or termination pay in lieu of notice. Section 57 of the Act prescribes the minimum required notice period or pay that an employer must give: essentially one week per year of service up to eight weeks. It is the employer’s option to give an employee notice, pay in lieu of notice, or a combination of both. An employer may also provide a dismissed employee more notice than is required under the ESA. (Please note: an employee may be entitled to more than the minimum requirements in light of an employment contract and the common law. Consult an employment lawyer to obtain legal advice regarding your specific entitlements.)
In some circumstances, an employee is also entitled to a severance payment if he or she has worked at least five years for the employer and either (a) the employer permanently discontinues all or part of its business and fires 50 employees or more within a six month period, or (b) the employer has a payroll of $2.5 million or more. Where these factors are present, the employee is entitled to one week of pay per year of service up to a maximum of 26 weeks. Severance pay under the ESA is different than notice of termination or termination pay in that it compensates the dismissed employee for loss of employment.
Resignation during the Working Notice Period
More often than not, when an employer terminates an employee it opts to provide termination pay in lieu of notice for a variety of business reasons. However, in some cases the employer will opt to provide an employee with working notice of termination. This means that the employee is required to continue working for the duration of the notice period, unless the employee opts to resign at some point during the notice period.
Further still, in some cases the employer will give more notice of termination than is required by the ESA. In this case, the statutory notice period prescribed by the ESA is the last part of the notice period ending on the date of termination. For example, if an employer is required to provide four weeks of termination notice, but opts to provide six weeks, then the statutory part – the four weeks – takes effect the last four weeks of the working notice period.
Employees often wonder what happens to their severance pay entitlement if they resign during the notice period provided by their employer. The answer is the employee is still entitled to their severance pay so long as their resignation meets the following conditions: they give two weeks’ notice of resignation, and the resignation takes place during the statutory part of the notice period.
The issue of an employer’s right to itsemployees’ medical information is a fiercely contested one in the Ontario workplace. Ontario law provides employees with a degree of security that their employment will be protected while on medical leave. The Courts are still in the process of clearly defining the rights of each party vis-à-vis what constitutes reasonable access to medical information versus the competing right of an employee to privacy. Some important policy guidelines and legal decisions define the limits ofan employer’s ability to demand medical information.
In the Ontario Human Rights Commission’s publicationHuman Rights at Work, Third Edition, the Commission states that:
A request for a second opinion, an opinion from a specialist or an independent medical examination (IME) must be necessary to provide accommodation. Such a request should not be made to refute whether the employee has the disability in the first place or to avoid providing the accommodation.
Further, in Human Rights at Work, the Commission asserts that:
It is not normally advisable for an employer to second-guess the validity of an employee’s doctor’s advice, only on a suspicion that it is not objective because it is based on the employee’s own perceptions. Avoid challenging a medical note or requiring a second opinion unless there is evidence that the doctor’s recommendations are based on something other than his or her best opinion as to what is needed to make sure the patient recovers.
The Privacy Commissioner of Canada provided further clarification inFinding #233, 2003 CanLII 5181 (PCC), wherein the Commissioner found that the employer’s collection of employee health information was abusive inasmuch as the employer did not prove that it was necessary. In the context of employees’ medical leaves, the Commissioner found that organizations are entitled to ask for and obtain a medical certificate, but not entitled to ask for details about the nature of the illness. The Commissioner concluded that the employee’s complaint of breach of privacy by her employer was well founded.
Employers should be wary of demanding further medical particulars from employees on medical leave as they may find themselves overstepping the legal boundaries of their authority.Consult with one of our lawyers should you find yourself assessing the legal risk associated with requiring a second medical report from an employee.
Few areas of employment law cause as much confusion as the duty to accommodate persons with disabilities in the workplace. Under the Ontario Human Rights Code ("Code"), every person has a right to equal treatment with respect to employment without discrimination because of disability.