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A common dispute between parties in wrongful dismissal action is an employee’s length of service. An employee may begin a relationship with an employer and leave for a few years before they return, or they may start their relationship with an employer through an agency or as an independent contractor. Upon termination the employee will want all the years of service included in the calculation of notice as a means to maximizing their claim, while an employer will want to limit what time is recognized in the calculation of notice.
This was one of the central issues in a recent decision of the Ontario Superior Court in Cormier v 1772887 Ontario Ltd, 2019 ONSC 587 (CanLII) along with whether a termination clause was valid and whether inappropriate deductions were made from the employee’s pay.
Length of Service
On the length of service issue, the employment relationship between the Plaintiff and the Defendant took different forms: from 1994 to 2004 the Plaintiff worked as a wardrobe stylist and was compensated as an independent contractor on an hourly basis or sometimes on a project basis. Starting in 1996 until 2004 the Plaintiff had worked near exclusively for the Defendant approximately 37 to 40 hours.
Starting in 2004 until 2017 the Plaintiff worked exclusively for the Defendant as a Wardrobe Stylist pursuant to a written employment contract which stipulated non-solicitation and non-competition clauses.
In determining that her full tenure should be used in the calculation of note, the Court found that regardless of her job title throughout the years from a contractor to an employment contract, there was little to distinguish between her years as a contractor and her years as an employee. The Court concluded that the Plaintiff had a twenty-three year workplace relationship with the Defendant.
In concluding that the reasonable period was 21 months (and denying the enforceability of the termination clause) the Court did not ignore the years as a contractor and provided her an elongated notice period.
In exchange for various raises or promotions, the Plaintiff was also asked to sign an employment agreement with a termination clause purporting to limit entitlements that read as follows:
Termination without Cause
(a) The Company may terminate your employment at its sole discretion, at any time for any reason, without cause, upon providing you the minimum notice, pay in lieu of notice and/or severance pay required by the Ontario Employment Standards Act, 2000, as amended from time to time. You will have no other entitlement to notice of termination, pay in lieu of such notice, and/or severance pay.
(b) In addition to the foregoing and subject to the consent of the Company’s insurers, you will be entitled to continue to receive Company benefits (excluding STD and LTD benefits) during the notice period specified above.
The decision to provide actual notice of termination or pay in lieu of such notice or any combination thereof shall be in the sole discretion of the Company. Pay in lieu will be subject to all required tax withholdings and statutory decisions and will be provided by way of salary continuation as per our regular payroll.
These payments are all inclusive of all amounts owing to you under the Ontario Employment Standards Act or other applicable legislation. Your receipt of any payments is conditional upon your signing the Company’s form of Release.
The Court found that having the provision of benefits subject to “the consent of the Company’s insurers” was a violation of the employee’s obligation to continue benefits under the Employment Standards Act.
This is an important finding it is not uncommon for similar language to be included in other employment contracts.
Improper Wage Deduction
In June 28th, 2016, the Defendant CEO advised that as a cost-savings’ measure the company would have 2-week unpaid vacation program, which saw deductions made in the employee’s pay. One year later the Plaintiff was terminated.
The Court found that this plan also violated the Employment Standards Act which prohibits employers from deducting employee wages unless authorized by court order or the employee’s written authorization is sought. As neither occurred in this case the plaintiff received $3,264 that had previously been deducted from her pay.
This case is a prime example of the ways employment standards legislation and judicially-created laws in the common law operate to protect employees. For employers and employees, timely legal advice will help ensure breaches of employment laws are avoided or in some cases, properly compensated for.
Monkhouse Law specializes in all types of workplaces issues. Contact us today for a consultation.
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