Archive for August, 2009

New Ontario court rules could put fired employees on the warpath

By Jeffrey R. Smith (jeffrey.r.smith@thomsonreuters.com)

Employers in Ontario already apprehensive about handling terminations may need to be even more cautious starting next year as the risk of legal action by fired employees may increase with new changes to the province’s judicial system.

While there are several changes scheduled to be made to the Ontario courts on Jan. 1, 2010, perhaps one of the most significant to employers might be the increase in the limit for a claim in Small Claims Court. Currently at $10,000, the limit will be increased in the new year to $25,000. Employers should be concerned about this as a large number wrongful dismissal and breach of contract damages fall within this range.

Being able to file a claim in Small Claims Court would give an employee an increased likelihood of a trial and make it less likely employers could negotiate a favourable settlement. Cost awards are also limited in Small Claims Court, so claims will have less financial risk for employees and the financial advantage of employers would be at least partly nullified.

Legal costs are always a concern for individuals, especially when they take on an organization with access to more legal resources, and may discourage them from pursuing claims against employers in many circumstances. There will be a couple of other major changes that lower the costs of legal actions and could reduce this disincentive.

Jan. 1 will see an increase in the amount of damages allowed for a trial heard under the Rules of Simplified Procedure. Claims heard under these rules are more streamlined and cost-effective, a big plus for individuals who might have a beef against an employer. As things are now, employees could be discouraged from pursuing a big claim because of the potential of it getting bogged down in a lengthy, costly process they couldn’t afford. However, the limit on damages for trials under these rules will be doubling from $50,000 to $100,000, which will likely give individuals more motivation and ability to pursue a larger claim, particularly against an employer.

The court changes will also reduce costs for trials that go to summary judgment, which is another way to streamline a trial and get a quick decision. Under the current system, a party in a trial who requests a summary judgment and loses must pay the costs of the other side. Naturally, individuals taking on organizations would be less likely to push for a summary judgment because they would be less likely to afford the financial risk, even though it could potentially get them a quicker damage award if victorious. Under the new system, judges will have discretion on awarding costs based on the appropriateness of the motion. Therefore, if an individual employee seeks summary judgment the judge deems was reasonable regardless of the outcome, she may not be on the hook for much of the employer’s costs even if she loses the case.

The changes to the Ontario court system scheduled to be in place for 2010 all follow the Ontario government’s stated desire of access to justice for individual Ontario residents through ways to decrease costs and the financial risk of pursuing a claim. Will this greater access to justice mean trouble for employers in the form of increased wrongful dismissal trials and breach of contract claims?

Wallace still hanging around

By Jeffrey R. Smith (jeffrey.r.smith@thomsonreuters.com)

Thanks to the Supreme Court of Canada’s ruling in Keays v. Honda Canada Inc. last year, there is a new standard for bad-faith damages in wrongful dismissal. Except when there’s not.

Last summer — June 27, 2008, to be precise — the employment law community was abuzz about the top court’s landmark decision in the closely followed Keays case, which had been working its way through the courts for years.

The Keays legal journey started in the Ontario Superior Court of Justice, which in 2005 ruled on the wrongful dismissal complaint of a Honda employee who had been fired after refusing a medical examination requested by his employer after multiple medical absences. It was notable at the time for the whopping $500,000 in damages awarded to the employee.

The case progressed through the Ontario Court of Appeal, which reduced the damages, and finally to the Supreme Court of Canada in 2008. By this time, there were several intervenors involved, as the case involved issues such as the admissability of medical notes and bad-faith damages. When the Supreme Court released its decision last summer, most employment law experts saw the ruling as a game changer that redefined how damages were awarded.

Bad-faith damages, known as Wallace damages, were effectively eliminated as a separate form of damages and were lumped in with aggravated or “moral” damages. In addition, the Supreme Court quashed the traditional procedure of awarding bad-faith damages as an extension of the reasonable notice period — often an arbitrary extension — and said they should correspond to actual losses by the employee from the conduct.

Those proclaiming a major change in the employment law landscape were proven right as subsequent court decisions followed the Supreme Court of Canada’s precedent and bad-faith damages in many wrongful dismissal cases were reconsidered according to the new standard. Many saw it as good news for employers as it gave a little more certainty, or at least consistency, in how damages might be awarded in these cases.

And then, almost exactly one year later, the Ontario Court of Appeal opened up the Wallace door again and may have thrown things back into uncertainty.

The court heard an appeal in the case of Slepenkova v. Ivanov, in which a real estate agent had been fired for refusing to sign a reworked contract. The day the agent was fired, the employer sent a text to other agents saying she was let go for “non-production” and refusing to sign a new contract. The trial court, which heard the case before the Supreme Court of Canada released its decision in Keays, felt the employer’s conduct amounted to bad faith and awarded Wallace damages of two months on top of the wrongful dismissal award of four months.

On the appeal this year, the Ontario Court of Appeal upheld the reasonable notice period. However, with the Keays decision having been out there for many months, one might have assumed the court would have restructured the bad-faith damages and applied the new requirement, basing them on actual loss by the fired employee. However, the court passed on applying the new standard set by the Supreme Court and upheld the Wallace damages, specifically saying the circumstances warranted the Wallace extension despite the standard set in Keays.

So where does this leave employers and employment law practitioners in their expectations for wrongful dismissal suits where bad faith is alleged? Is Slepenkova an aberration associated with a transitional period after Keays or are lower courts likely to ignore the Supreme Court of Canada’s new standard if they feel strongly about an employer’s bad-faith conduct in a dismissal?

The uncertainty around bad-faith damages doesn’t seem to be going away quite yet.

For more information see:

Keays v. Honda Canada Inc., 2008 CarswellOnt 3743 (S.C.C.).

Slepenkova v. Ivanov, 2009 CarswellOnt 3749 (Ont. C.A.).


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