A New Court Ruling May Have Invalidated Your Employee Agreements

EMPLOYERS BEWARE! A recent court decision may have just made your current employee agreements unenforceable.

On June 17, 2020, the Ontario Court of Appeal provided its troubling decision on the case of Waksdale v Swegon North America Inc., 2020 ONCA 391 (“Waksdale”). Yes, you should be taking notes.

Why is this decision so troubling for employers? The Court found that if any part of a termination clause in an employment agreement is found to be in violation of the Employment Standards Act, 2000 (“ESA”), then all other clauses in the Agreement can be deemed unenforceable as well. That means your carefully crafted employment agreement may not hold up in Court!

In Waksdale, an employee was terminated after 10 months of employment on a “without-cause” basis and paid two weeks’ pay in lieu of notice. The employee’s salary was a hefty $200,000 per annum. 

The employee sued the employer for wrongful dismissal and brought a motion for summary judgment. No, you are not expected to know what “summary judgment” is, and it will not be on the final exam (“Summary judgment” is a motion brought by a party against the other to have the case decided without a trial).

During the motion, the employer admitted that the termination “for cause” provision of the employment agreement violated the ESA.  

How and why, you ask?

The offending clause potentially allowed the employer to terminate the employee without any notice or pay in lieu of notice if the employee was fired “for cause”. It seems fair as an employer, right? Well, Ontario Regulation 288/01 under the ESA provides that notice or pay in lieu of notice must be provided by the employer unless the employee has engaged in wilful misconduct, disobedience or wilful neglect of duty. Unfortunately, for an employer, this is not easy to prove in Court. 

The employee in Waksdale argued that the entire termination section in the employee agreement, including the portion that was deemed illegal, should be read together which would render the entire section unenforceable.

The employer cried “severability!” and pointed to the severability clause in the agreement that stated that if any part of the contract was found to be void, the rest of the contract that was deemed legal and consistent with the ESA remained enforceable. Severability meant that as the employer in Waksdale had terminated “without cause”, and this part of the clause was valid, it could not be invalidated just because the “for-cause” provision was illegal and existed in the same document.  

The motions judge agreed with the employer and dismissed the action. THE END.

If only! Sorry employers, you should recork the champaign bottle, because this case was appealed to the Ontario Court of Appeal.

What did the Court of Appeal say? The severability clause could not save the termination “with-notice” clause from the part of the agreement that was illegal.

It was the Court’s opinion that the ESA should be interpreted broadly in a way that protects as many employees as possible, as they are the vulnerable party in the relationship. The Court of Appeal found that the law should encourage employers to draft termination clauses that comply with the ESA, and while the Courts “permit an employer to enforce a rights-restricting contract, they will not enforce termination provisions that are in whole or in part illegal.”

So, what does that mean? Well, in this case it means that the employer cannot rely on the severability clause in the agreement, and the entire termination clause is therefore void. 

If the employer could rely on their termination clause, they could have limited the amount of notice the employee was entitled to two-weeks’ notice. Without a contract limiting the employee’s notice entitlement to the ESA minimum, the employer is on the hook for “common law reasonable notice,” which can work out to months or years of notice pay. Yikes, right? 

The Court of Appeal referred this matter back to the lower court to determine how much is owed to the employee by the employer. With the entire termination clause voided, the employee is no longer required to accept the ESA minimum and can make his claim for 6 months’ pay in lieu of notice (as he initially sought). That’s a lot to potentially pay out for such a perceivably small mistake on an employee agreement, isn’t it?

As an employer, you need to be sure that no part of your employee agreement violates the ESA.  Not only do you run the risk of nullifying your entire agreement, but let’s face it, if you have to go to Court the Court will be looking for ways to help the employee. So help yourself, and make sure your employee agreement will hold up.  

Robin K. Mann, Associate Lawyer

Challenges with the Changes to Ontario’s Commercial Tenancies Act (or it’s a crap law)

What do you get when a Prime Minister “wings it” and says that there should be a ban on Commercial Evictions during a press conference?  Well, you get Provinces scrambling to make it so, because it’s not a federal issue, it’s a provincial issue.  You finally end up with legislation that is crap, well, in Ontario you do.  I don’t know about the other Provinces.

The first problem is the timing: by the time the legislation was out on June 17, 2020, many tenants were already in arrears on March, April and May rent.     As there was no legislation preventing Landlords from terminating leases (there is actually no such thing as a Commercial Eviction) many small Landlords who could not afford to keep tenants who are not paying, had already started enforcement proceedings.    If they started after June 3, 2020 they are “undone” if they were before they were fine.

The second problem is that the legislation did not ensure it only applied to tenants who were not in arrears prior to the pandemic.  If a tenant was in chronic arrears, why should a Landlord be forced to continue on due to a pandemic?  That makes no sense and was not the purpose of the legislation.

Perhaps the biggest problem is that while the Landlord is prevented from Distraining (selling the goods of the tenant to pay for arrears of rent) there is no additional deterrent in the legislation to prevent tenants from emptying the premises of goods while the amendments are in place. 

The scale has been incredibly tipped in favour of non-paying tenants. 

It is completely unfair to put a pause on the Landlord’s remedies without also putting a pause on the ability of tenants to empty out premises.

As I see it the math on this looks like this:

PM Press Conference + rushed legislation = crap

My Grade 10 math teacher would be proud: I finally showed my work !

Inga B. Andriessen, JD

Renew Your Enforcement Documents !

In 2012 I obtained judgment against a debtor for failing to file Defence.

In late 2013, we confirmed employment with a simple call to the Employer after obtaining an updated Equifax Report.  We issued a Notice of Garnishment, thinking enforcement would be easy.  Not so fast!

There was a Federal Garnishment issued against our debtor, whether it be a tax or child support order, we did not know.  All we knew was it took priority over every other Garnishment against the debtor.

We were told by the employer that the amount of the Garnishment was six figures! 

When served with a Notice of Garnishment, an Employer is obligated to deduct 20% of the net wages of a debtor and submit them to the Court.  If there are multiple Garnishments, only 20% is still garnished, and that 20% is divided amongst the parties who have issued Garnishments and or Writs of Seizure and Sale of Lands against the debtor.

With this Federal Garnishment, the full 20% was going to whomever issued the Garnishment, while we sat on the background waiting.  And waiting.

Writs of Seizure and Sale of Lands and Notice of Garnishments expire after six years.  If you are our client, you would know because we advise you of the date they expire and give you the option to renew them.

Late last year, this file with zero collected from 2013 came up for review to get instructions to renew the Notice of Garnishment and Writ of Seizure and Sale of Lands.

I made a phone call, and confirmed they’re employed at the Garnishee (the employer).  I also confirmed that that pesky Federal Garnishment was still being paid, but we renewed the Notice of Garnishment and Writ of Seizure and Sale of Lands anyway. You never know, right?

Well, our patience and the renewal paid off.

It appears that that the Federal Garnishment is paid and our client after almost a decade of waiting is get paid!  The amounts that have been coming in suggest that this judgment will be paid off sooner than later!

The cost to renew a Garnishment or Writ in Small Claims Court is nominal, and unless the debtor is no longer employed with the employer, failing renewing a Writ and/or Garnishment will only hurt you in the end if you find out that you could get paid and you didn’t follow through with that garnishment.

Also, when you issue a Writ of Seizure and Sale of Lands against a Debtor, that allows you to get paid if someone else successfully enforces their judgment – you get a piece of that!

So unless the Debtor is bankrupt, deceased or fled the country, there really is no reason not to renew your enforcements against them, because you just never know when a cheque shows up in the mail from the Sheriff.

Murray Brown, Licensed Paralegal

We Were Ready & We Didn’t Even Know It!

Over the last few years, having everything on-line was becoming more of the norm.  I know our offices have started having our documents stored as PDFs on our system and including in our Discovery Plan the exchange of documents electronically.  For the bigger volume documents, we utilize OneDrive to send our documents.  We also started to make sure that every pleading, Motion Record or Court document was also on our system electronically.

For the exchange of documents, for the most part other law firms would come on board and be amenable to having electronic delivery of documents, however, there were still the few who just couldn’t facilitate the exchange.  What did this mean for the client?  This meant higher disbursements being incurred for the extra copies that had to be made, binding, tabbing and couriering. 

While we started saving electronically before this interesting year of 2020, we still kept in mind the need to ensure paper copies were being produced.  For example, attending at Discovery with physical bound copies of the documents, as well electronic copies on a computer.  Why would a lawyer do this?  When examining a party, you will want to make sure parties are looking at the document that you are referring to, and not a document on another lawyer’s laptop.  I’m surprised to hear that some lawyers would only come with an electronic copy, which would only cause confusion and uncertainty as to the document and delay Discoveries.

Having adopted the electronic versions of our documents before 2020, the transition has been minimal for us.  As many of you know, the Courts have now allowed video hearings of matters and Court Reports are conducting Discoveries and Examinations via video conferences.  I feel that we may have been a bit ahead of the game (no we did not know what was going to happen) and we can ensure our clients that we are doing everything we can to move their matter along, to the extent that the Courts are allowing.  Maybe we will see a big shift with electronic delivery and storing in the future.   

Christine Allan, Law Clerk

Constructing a New Normal

The Construction industry is just one among many industries that have been severely impacted by COVID-19, and the resulting provincial shutdowns.

The last several weeks we have seen the Ontario government gradually roll out phases for re-opening the province.

As workers return to construction sites, it is important to remember that it still the employer’s responsibility to ensure the workplace is safe. A clearly stated and accessible COVID-19 policy will not only work to protect employees from harm, but also protect employers from possible legal exposure. 

Think of a COVID-19 policy as a construction blueprint. You wouldn’t start work on a construction site without a blueprint, so why return to work without a guide on how to operate during the current pandemic?   

Employers should post and communicate COVID-19 related policies to their employees, contractors, and trades. These policies should set out how the construction site will operate, including: how the site will be sanitized; how physical distancing will be practiced; and, how work will be scheduled.

For physical distancing, employers should consider not only restricting the number of workers on site, but also staggering worker’s start times, breaks, and lunches. Employers can also limit the number of employees with access to elevators and hoists at a given time.

COVID-19 policies in the construction industry should aim to responsibly limit the amount of on-site contact between workers and outside service providers.

Carefully crafted policies can also set out to employees how they are to proceed if they feel unwell either on-site or before the start of work.

As workers are gradually returning to construction sites, it is important to keep in mind it isn’t business as usual anymore. Employers need to know how to navigate in today’s world of a “new normal” and a detailed COVID-19 policy is just the blueprint they need. 

Robin K. Mann, JD, Associate Lawyer

The Good & The Bad of Ontario’s Covid19 Court System

“The Courts are Open and they never closed” is what I heard the Chief Justice of Ontario tell me on a webinar in April.  Technically that’s true, but the technicalities only get you so far.

Small Claims Court in Ontario is being completely ignored.  Despite the Toronto Small Claims Court using telephone conference for “trial management” over the past year, somehow the idea of expanding those telephone conferences to sue them for settlement conferences is not being put into play.    Why are claims $35,000.00 and under being completely ignored?

In Superior Court ($35,000 and above) we are able to move matters forward by video, writing and telephone conferences.  To be clear “move matters forward” only works in defended matters if the other side agrees.  Also, many matters are on hold because of the Ontario Provincial Order suspending Limitation Periods.

During the “shut down” I have enjoyed bringing motions in writing and receiving the signed Order back within three hours of emailing it to the Court.  Our Clients are saving a lot of money in legal fees, not paying for travelling time and the time to wait around in Court Rooms – I am loving that.

However, I am not enjoying the Sheriff’s Offices holding onto garnishment funds “because of Covid”.  Really?  You cannot put a single person in a room to cut cheques?  Come on now.  The money is going into the Sheriff’s bank account just fine: let’s get it out !

So, now we continue to wait and we’re grateful for any expansion of hearings that is allowed.  While we wait, we also prepare for the inevitable onslaught of litigation matters that will have to be dealt with “at the same time”.   Add to that the Tribunals in Ontario which are closed and will have onslaughts as well and this is going to be “interesting” when things reopen.

Interesting is never good.

Inga B. Andriessen, JD

Principal Lawyer

How does Spring Cleaning look in 2020

It’s hard to believe it has been a year since I’ve talked about Spring Cleaning for businesses.  Last year we touched on 4 main arears:  Reviewing Employee Agreements and Handbooks, Corporate Minute Books, Accounts Receivables and Estate Planning. 

These are all very important and should be reviewed yearly, but how does this look for you today amid the COVID-19 pandemic.  As much as we are all sick of hearing about it, it is our reality right now and I feel that everything will look different on the other side of this. 

Have you reviewed your employment agreements during this?  I know that many of our clients had reach out to our firm to determine what their rights were as an employer.  Can you layoff your employees?  Can you reduce their hours?  What are you responsible for as an employer when your employees are working from home?  These are all questions that we have had to look at, and in a short period of time.  Coming out of this, you may need to take a hard look at your Agreements to determine if they need some refreshing to help you in the future for the unexpected.

I am famous for reminding you about updating your corporate Minute Book, but of greater importance I believe at this time is reviewing your accounts receivables regularly.  Have you asked yourself if your customers are required to pay you right now, or are they allowed to delay?  These are all things that we need to give thought to, and you need to keep on eye on your cash flow.  It is a tough time for everyone, so do you give a little leniency with our customer or do you play hardball?  Only you know what you can do but conducting regular reviews of your accounts will ensure you have the full picture.

Estate Planning?  What better time than now to review your Wills and Powers of Attorney, or start thinking about having them drafted.  We have been preparing some Estate documents for clients, so I know this is on a lot of minds these days. 

And now let’s turn our attention to the most important fact about this year’s Spring Cleaning… getting rid of murder hornet nests & cleaning snow off cars and driveways in May, are you serious? 

Christine Allan, Law Clerk

Small Claims Court and COVID-19

2020: the year of living in strange times. 

COVID-19 is wreaking havoc around the world with people trying to adapt to social distancing, and business trying to keep carrying on. 

Small Claims Court is no different.

Small Claims Court offices throughout Ontario were initially operating on a skeleton crew, where they were only accepting emergency filings, but has since completely shut down all operations.

Well, what does that mean?  Court appearances have been suspended until further notice.  You cannot go to Court to issue Garnishments, Motions, or set your matter down for Trial.

The Small Claims Court have recently decided to starting hearing any issues relating outstanding warrants that were issued in relation to a Small Claims Court proceeding or time-sensitive cases that would result in immediate and serious financial hardship if a hearing were not scheduled by telephone and videoconference, and nothing more at this point.

We can still issue Plaintiff’s Claims online and serve them, but Defences will not be due until the suspension is lifted.  Defendants will have twenty to twenty-five days (depending on how service was effected upon them) after the Courts re-open to serve and file their Defence. 

When will the Courts open?  We have no idea.

What we do know is that the Small Claims Court is going to be quite hectic upon reopening with all the cancelled matters then being rescheduled and new matters being scheduled all at the same time.

Buckle up if you practice in Small Claims Court, its going to be very busy.

Thankfully, I have been using this time working from home to prepare myself for all my Trials, Motions and Settlement Conferences, so I have no surprises when the Courts reopen and I am ready to go!

Murray Brown, Licensed Paralegal

Make Your Payments and Don’t Cry “Covid!”

Remember in elementary school when you realized that your teacher no longer bought your (clearly well thought out) excuse that your dog ate your homework? Similarly, you can’t rely on Covid-19 to make all of your financial obligations go away.

If you owe money under a Judgment or a settlement agreement for example, you should keep making your payments accordingly. Sitting back, missing payments, and then hoping to use the increasingly popular “Covid excuse” will not cut it.

If you cannot make payments and are in fact significantly impacted by this pandemic, then be proactive and reach out to the other party BEFORE the payment becomes due. The other party may be willing to work with you.

Keep in mind that if you are a payor under a settlement agreement, there’s a good chance that the agreement provides remedies to the other party in the event that you miss payments. You could be required to pay a lot more than you bargained for by missing even one payment!

In light of Covid-19, the Courts are currently trying to figure out how to handle matters such as the defaults discussed above. If you’re a party that is owed money by a defaulting payor, you need to proceed strategically if you want to seek a remedy from the court in this current climate.

But remember, if you’re owed money under an existing agreement, and have not agreed to defer payments, you are entitled to be paid. And if you like, even during the current pandemic, we can help “show you the money!”

We get things done – well, except that one time my dog actually ate my motion materials.      

Robin K. Mann, JD, Associate Lawyer

Some Common Questions from Businesses as Ontario Starts to Re-Open

Our firm is starting to get some repeat questions as we inch (shouldn’t it be cm, as we’re Canadian) towards some kind of re-opening of the Ontario economy.

As such, we’re happy to answer some of the most popular questions here:

  1. Can an employee refuse to return to work? 

Provided the Employer has a workplace that is socially distanced and employees can do their job safely, then an Employee’s refusal to return to work could be considered a resignation.   Employees need to think carefully about that as resignation does not generally allow one to collect EI.

2. Can I carry on my business using curb side pickup?

If your business is specifically listed in the April 3, 2020 and  May 1, 2020 Ontario list of essential workplaces, then you can carry on curbside pickup.

If your business is not listed, you can do delivery, however, you cannot do curbside pickup. 

3. Do I have to socially distance within the workplace?

Yes.   This will require a lot of planning by employers.   Is the kitchen closed?  In a shared washroom situation, how many people are allowed in it? How do you control that?

The employees have a right to a safe workspace, so complying with Covid-19 precautions is key to being able to remain open once you are open.  

4. Do employees have the right to demand they continue to work from home?

Generally the answer is no.   If the employee reported to a physical workplace pre-pandemic rules, then that is the basis of their employment and the employee cannot unilaterally demand the right to work from home.

5. Will this ever end?

If by this, you mean being locked down and having a restricted economy, the answer is yes.  We don’t know when, but at sometime in the future, businesses will be completely reopened, though likely not the same way they used to be.

As with any legal Blog, the above is not legal advice.  If you have a question about your specific business contact a Business Lawyer for advice.

It’s great to see the start of re-opening of the Ontario economy.  We’ve all given up so much to get to this point, lets ensure we don’t take two steps backwards by ignoring all lessons we’ve learned.   So people, wash hands, use a mask when you’re inside a building that is not your house and socially distance, let’s get the economy moving again !

Inga B. Andriessen JD