010-CorporateHumanResources

Corporate Human Resources: Managing your HR legal risks - common liability issues and how to 

avoid them (presented at Dentons CPD Bootcamp 2016) 

Chelsea Rasmussen: 

All right, good afternoon everyone. This, I think, is the last session of the day. Jeff Mitchell and I 

are in the employment group here at Dentons Toronto, and we will be presenting to you on Corporate 

human resources: Managing your HR legal risks - Common liability issues and how to avoid them, 

So, the four topics we will be covering today. The (1) first is best practices when drafting incentive 

plans and (2) require compliance updates to your HR policies. And I will be taking care of those two. 

Then (3) recent employment cases of interest and (4) managing your exposure and wrongful 

dismissal and human rights claims will be presented by Jeff. 

So best practices and drafting incentive plans. So first how many people in this room have employee 

bonus plans? So pretty much everybody. So it is an important issue for many organizations and 

employee contracts and bonus plans often include language that require an employee to be actively 

employed at the time the bonus is paid in order for the employee to receive any payments under that 

bonus plan. So when an employee is given notice of termination and receives pay in lieu of 

termination notice, employers often take the position that the employee is not actively employed 

during the termination notice period and therefore not entitled to that bonus. So the question we're 

going to be exploring today is whether an employee is entitled to receive a bonus that the employee 

would have otherwise received during the termination period, if the employment contract or bonus 

period plan requires the employee to be actively employed. 

So there is the recent case in the interior Court of Appeal called Paquette and TeraGo Networks 

(Inc., 2016 ONCA 618) That was 2016, and in this case Paquette had been employed by TeraGo 

network for approximately fourteen years at the time he was terminated. He brought a motion for 

summary judgment and the judge the most decided that his common law notice period would be 

seventeen months. So the TeraGo employee bonus program stated that employees who were 

actively employed by TeraGo on the date of the bonus payout are eligible for a bonus based on their 

salary. So in this case bonuses were paid annually in February. So if you think about Mr Paquette's 

common law notice period, there was bonus payouts in February of 2015 and February of 2016. So 

generally speaking where a bonus forms an integral part of the employee's compensation package 

which is to say they get five thousand dollars every year they have come to expect that every year in 

February, they'll get five thousand dollars that would be considered an internal part of their package. 

They are often entitled to wrongful dismissal damages for amount of that bonus they would have 

received had they continued employment during that time or they may be entitled to damages for the 

lost opportunity to earn that bonus. So in this case on the summary judgment motion, the motions 

judge held that although the bonus program was an integral part of Mr Paquette's employment, the 

term active employment in his bonus plan was unambiguous and as such he was not an active 

employee during the reasonable notice period. So the motions judge determined that he was 

entitled to damages for the reasonable notice period but not for any loss damage bonus damages 

during that time. So Mr Paquette unsurprisingly appealed the decision and he appealed it only on the 

basis of whether he was entitled to damages in lieu of bonus during that seventeen month period. 

So the Court of Appeal reviewed a number of similar bonus and stock option plan cases and they 

confirmed that in Ontario, subject to contractual terms, a terminated employee is entitled to 

compensation for all losses arising from the employer's failure to give proper notice and the damages 

award should place the employee in the same financial position he or she would have been in, had 

such notice been given. So the Court of Appeal articulated a two-part test. The first part of the test is 

to determine an employee's common law rights and whether the bonus forms an integral part of the 

employee's compensation. So in this case Mr Paquette's common law rights were seventeen months 

and the judge did find that it was an integral part. The second step is to determine whether there 

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was something in the bonus plan that would specifically remove that common law entitlement to the 

bonus. So the court stated that the question is not whether the bonus plan was ambiguous, but 

whether the wording of the plan was effective to limit Mr Paquette's right to receive compensation for 

the lost salary and bonus during the period of reasonable notice. So I remind you that the language 

in this plan was that an employee must be actively employed on the date of the bonus payout to be 

eligible. So the Court of Appeal held that requiring active employment when the bonus is paid 

without saying anything more is not enough to deprive the employee that was terminated without 

reasonable notice of the bonus that he or she would have received otherwise if they were employed. 

So that means to say because they would have been actively employed but for the failure to get 

reasonable notice they're entitled to that bonus. So the court did find that the active employment 

would not be enough to get around his claim for the bonus and they awarded him an average of the 

bonuses you received in 2011, 2011, and 2013 which amounted to $29.000 per year. And since he 

had the seventeen month notice period he was entitled to earn a bonus in 2015 for the lost 

opportunity to earn the bonus and in 2014 for the damages of the loss of his bonus. So in total he 

was awarded almost $60,000 dollars. 

Some practical considerations in light of this case: The court did leave the door open for a well 

drafted employment contract or a bonus plan to disentitle employees to bonuses during the notice 

period so we're about to give you some tips on how you can do that. So if an employer wants to 

restrict an employee's entitlement to a bonus plan during the notice period, the contract or the bonus 

plan should be unambiguous and it should contain specific limiting language and so if the bonus is in 

fact discretionary, it's not something they get no matter what. It's important to be expressed as 

discretionary and not something that the employee will get. So one way to do this is to say eligible 

to participate in the bonus plan/ not entitled because they're only eligible for example if they meet the 

performance criteria and the organization does well enough that year. Another important aspect is 

to provide the ability of the employer to discontinue or amend the terms of the bonus plan in need of 

the employment contract or the bonus plan because when cases like this come out, it's important that 

you have the opportunity, the flexibility to change your plan and you need to build that into your 

contract so we usually say something like "as the bonus plan may be amended by times by the 

employer from time to time in its sole discretion". And another point is to be careful that the 

employment contract doesn't contradict the bonus plan so don't say you are entitled to participate in 

the bonus plan in the contract and eligible in the bonus plan. Another important consideration is that 

any bonus plan limitations or conditions on the payment of the bonus should be brought to the 

employee's attention. Particularly if the bonus plan is being changed during the employee's 

employment and so specifically with respect to Paquette, the requirement for active employment, it 

can still you can still use that language in a bonus plan but it should be further defined so you can say 

active employment and specifically it's not payable on resignation or it's not payable on terminations 

for cause and when you're defining that active employment period, it's important to say that it is you 

are entitled to it during the period of statutory notice but you can exclude the period of common law 

notice for the purposes of the definition. And the last tip is to state that a bonus plan is subject to 

required deductions in withholdings and is not vested or earned until paid. 

OK so moving to require compliance updates your H.R. Policies. The biggest update this year to 

implement policies is the new sexual harassment legislation that was passed on March 8th 2016 and 

came into force on September 8th 2016. So today I'll be giving you a brief overview of the legislation 

and then we'll focus more on the implications of this new law will have on workplaces and employers 

with employees in Ontario. So Bill 132 which is also known as the "Sexual Violence and Harassment 

Action Plan Act" was introduced in October of 2015 and it received Royal Assent to become law on 

March 8th 2016 so that was only a five month period so I'll say at the outset the Ministry of Labor has 

also released a code and a guide to provide some guidance as to how the legislation is supposed to 

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be interpreted because it's not always clear it was such a quick process. The bill amends the various 

existing acts in Ontario with respect to protections against sexual harassment and violence and 

support for victims of sexual violence and harassment. So as I said earlier the amendments to the 

way which we will focus on today applied to all workplaces with workers in Ontario and they came 

into force on September 8th of this year. So the amendments OHSA include expanding the definition 

of workplace harassment to now include workplace sexual harassment. Second imposes additional 

requirements on employers existing workplace harassment policies and programs. Third it outlines 

specific requirements for employers investigations into workplace harassment. And lastly it actually 

grants further powers to inspectors to order investigations regarding workplace harassment in the 

workplace. So how employers can comply with the new Bill 132? First employers must take a 

proactive steps to ensure they're compliant. So they must review and revise their existing policies and 

programs to include the Bill 132's new requirements. So most importantly this means ensuring that 

they specifically address workplace sexual harassment which is the new definition so the term 

workplace sexual harassment in the OHSA means engaging in a course of vexatious comment or 

conduct against a worker in a workplace because of se, sexual orientation, gender identity, or gender 

expression, where the course of comment or conduct is known or ought reasonably to be known to 

be unwelcome. Making it and also making a sexual solicit solicitation or advance where the person 

making the solicitation or advance is in a position to confer, grant, or deny a benefit, or advancement 

to the worker and the person knows or ought reasonably knows to know that the solicitation or 

advance is unwelcome. So you'll see that this definition actually specifically recognizes sexual 

workplace sexual harassment in positions of power and in balance of power. Second, employer must 

ensure that their workers are provided with information and instruction on their revised workplace 

harassment policies and programs and lastly, employers must appropriately investigate workplace 

harassment in the workplace. And this duty, it's important to note is not limited to reported incidents of 

workplace harassment, so if an employer just becomes aware that workplace harassment may have 

occurred they have a duty to investigate. 

Updating your workplace harassment policies and programs. All employees must currently prepare 

and review a policy on workplace harassment at least annually, employers with six or more workers 

have to have a written policy in place, and has to be posted in a conspicuous place in the workplace, 

and six or fewer workers the policy doesn't necessarily need to be written, but that's certainly a best 

practice and the Ministry of Labor may order that. So all employers must also develop and maintain a 

program to implement their workplace harassment policy. The new requirements with respect to this 

program include developing and maintaining a written program so it didn't used to have to be written, 

and also if the workplace has a joint health and safety committee or a health and safety 

representative the employer needs to work with that person or persons in order to develop this 

program. In terms of the amount that you have to work with the joint health and safety committee or 

rep, The Ministry of Labor suggest that employers consult when the program is developed and any 

changes are made and keep track of any feedback from the rep or the committee. And lastly the 

program has to be reviewed once a year which is the same as the existing requirement to make sure 

that it remains compliant. 

In terms of the contents of the workplace harassment program. First employers must ensure that they 

have set up alternative reporting procedures for instances where the harasser is the workers 

employer or supervisor so often your existing policies will say: report sexual harassment to your boss. 

But what if your boss is the person that is the alleged harasser? The OHSA requires that you have 

somebody else to report to you have to designate that specifically in your policy so in larger 

workplaces they suggest having the human resources department, a specific member of senior 

management, a board member, a consultant, it could be any variety of people, the act doesn't say 

specifically who it must be and then in smaller workplaces where there is likely not to be a formal 

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work from a human resources department the employer should likely designate an individual or group 

of individuals to receive these complaints and you might consider having an external person be the 

person to receive his complaint just to avoid any conflict of interest. 

Secondly there has to be a process on how incidents or complaints of workplace harassment will be 

investigated and will be dealt with. And so notably this amendment refers to both incidents of 

workplace harassment and complaints, so if an employer becomes aware of workplace harassment 

occurring, even if it's not directly reported to them by the person experiencing the alleged 

harassment, they have an obligation to investigate and deal with that potential. Third, how 

information obtained about the incident or complaint will not be disclosed unless necessary. Your 

workplace harassment program has to explicitly expressly stipulate that the employers will keep the 

information confidential to the extent that it can. So the information can only be disclosed if 

necessary in order to investigate the complaint so if you have to tell the alleged harasser the 

allegations against him or her so you have to disclose it there in order to take corrective actions of 

disciplining hiring or firing. And lastly if you are required to disclose that information by law. And 

fourth the process is for how the employer will appropriately investigate both incidents and complaints 

of workplace harassment. So the act requires employees expressly set out the investigation process 

that will be followed and how we'll investigate the incidents and complaints appropriately. So we'll 

get into the term appropriate a bit more later but I just wanted to say as a side note it is possible for 

employers to combine their workplace harassment policies and programs into one document and 

also it is possible to combine those policies and programs with other required policies in programs 

like workplace harassment or discrimination you just have to be careful that you meet all the 

requirements of the act. 

All right, so moving on to information and instruction. All workers should be aware of the employer's 

policy and their program on workplace harassment, and moreover the employees should be aware of 

the program's contents including how to report incidents, and who to report them to, how the 

employer will deal with the incidents and investigate the incidents and complaints, how the employer 

plans to keep the information confidential, and that they need to know that they will be provided with 

the results of the investigation if they're involved and involved parties, so if they are the complainant 

or the alleged harasser. So the information and instruction is dependent on the workers job so, if it's 

just a regular employee they may need as much information as a supervisor who would have to also 

be working on informing and instructing their workers, and also being able to recognize workplace 

harassment, and also persons designated to receive those reports will likely need more information 

and instruction than just your general work force. So the OHSA does not provide specific methods of 

providing this information and instructions, but some possible options are a Webinar, department 

meetings, distributing the updated policy and program and having your employees sign off that they 

read and they understand the contents of that policy. Turning to investigations when changes of the 

OHSA impose a positive duty on employers to protect its workers from workplace harassment so in 

order to satisfy this duty the employers have to conduct appropriate investigations into all incidents 

and complaints of workplace harassment. They have to inform the parties in writing that who are 

involved of the results of the investigation and/or the corrective action and they need to review the 

harassment program as often as necessary but at least annually. That's a popular refrain here. 

So what is an appropriate investigation. The OHSA includes the qualifier. It must be appropriate but it 

doesn't provide any further insight as to how the Ministry of Labor will decide if it's appropriate. But 

the guide that I mentioned the and the code that the ministry has put out has given some guidance. 

They say appropriateness would be considered on a case by case basis depending on the nature of 

the incident but generally speaking the investigation must be timely and must be fair it must be 

objective and address and look into all relevant issues. The ministry will also look at how the 

investigator gathered and consider the evidence how the involved persons were kept informed of the 

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status of the investigation and how the investigation was documented and the information received 

was kept confidential. So in external investigations if the alleged harasser is the employer or the 

supervisor the resulting investigation could be carried out by somebody external to the organization 

as long as that person isn't under the direct control of the harasser. So if the CEO is the harasser he 

or she shouldn't be the person retaining the external investigator and paying the bills. So, often the 

documentation of an investigation will be considered when considering whether an investigation is 

appropriate. So where possible the documentation should include names, dates, the nature of the 

complaint, details of the incident notes for meetings and investigation any documents or evidence the 

investigation report and documents any action taken as a result of the incident or the complaint. In 

terms of who can conduct an investigation any neutral party who was not involved in the incident and 

not under the direct control of the alleged harasser, so it can be someone in the workplace a 

manager or a supervisor human resources. It can be someone within the broader organization, so 

somebody from another company location or from corporate head office can come in do it it can be 

from another franchise or an associated business or if necessary and appropriate from outside the 

workplace. So a lawyer in human resources, or a licensed private investigator. Although it does not 

need to be there's no requirement for someone to be licensed. 

OK so the act is not specifically require a certain time period for investigations to be completed and 

the length of time will depend on the circumstances and the complexity of the matter. So a number of 

witnesses, how many, it's difficult to get in touch with people but it should be done as quickly as 

possible while being as thorough and providing sufficient time to complete a fair investigation. So one 

also big new change is that there's an enforcement mechanism in respect of the sexual harassment 

investigations. So Ministry of Labor inspectors now have the power to order an employer to arrange 

for an appropriate investigation to be conducted by an impartial person who possesses knowledge, 

experience, or qualifications as specified by the inspector, and obtain at the employer's expense, a 

written report by that impartial person. So in this action impartial person can mean someone who's an 

unbiased with no conflict of interes,t and in good standing with their professional body. It could be 

someone from within the organization or and maybe a third party. So, that is it for me I'll pass it off 

to Jeff to discuss recent cases. 

Jeff Mitchell: 

Thanks, Chelsea and I'm aware that I'm now the one thing standing between you and the bar so I will 

do my best. So I get kind of the fun part of all of this which is some of the sort of wacky cases from 

2016 that we've been seeing. And so I'm going to run through them some of them have a lot of sort of 

details back so I'm going to keep it fairly high level because I just wanted to to raise a few points with 

you about each one of them. The first one that I want to talk about is Howard and Benson Group, and 

this case deals with something that is a constant thorn in my side which is the use of fixed term 

contracts, and what I would say to each one of you out there is that if you're using fixed term 

contracts, be really really careful and this is a good example of why. Mr Howard was employed on a 

five year fixed term contract and the contract actually had a termination clause that said in the event 

of early termination without cause any amounts paid to the employee shall be in accordance with the 

Employment Standards Act and the employer in that case Benson Group terminated Mr Howard 

about two years into that five year term contract so he had about three years left on his contract. 

And what the employer said was the Employment Standards Act applies and the terminations clause 

clearly sets out employment standards entitlements in the event of early termination. Mr Howard 

disagreed with that interpretation and brought an action claiming the unexpired period of the term so 

he said you terminated me two years in I'm owed three years of payment because you have to pay 

me to the end of the term. So this went through to trial and the employer at trial made two primary 

arguments: the employer first relied on the terminations provision in the employment agreement said 

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all you get is your two weeks under your under Employment Standards Act and in the alternative the 

employer said even if the terminations clause does not apply then all I owe you is common law pay in 

lieu of notice, because that's the presumption at law. This went through the trial and went up to the 

Court of Appeal at trial. It was a bit of a mixed bag at trial. The court held that the terminations clause 

was ambiguous because all it said was in accordance with the E.S.A. And the court said that that was 

not specific enough to say you're entitlements are limited to the E.S.A. So again another shoutout to 

terminations clauses. If you're relying on a termination clause. It has to be really specific saying in 

accordance with probably not specific enough and wasn't specific enough in this case you have to 

say your intentions will be limited to the Employment Standards Act entitlements. In any event at 

trial court says terminations was not specific enough it's ambiguous. So it doesn't apply. So what 

happens is the court says you get common law. Mr Howard and awards Mr Howard common law pay 

in lieu of notice based on his two years of service. Court of Appeal looks at it and at the Court of 

Appeal the employer didn't even try to make an argument that the terminations clause was specific 

enough. They said OK that's ambiguous but the employer argued that the common law decision was 

sound. Court of Appeal overturned that decision and said no the parties contracted for a five year 

fixed term, a five year fixed term means exactly that. If you terminate a fixed term contract you 

employer are responsible for damages to the end of the contract. Since determination clause was 

invalidated the employer doesn't get the benefit of the terminations clause since there's a five year 

term contract the employer can't rely on common law. So ultimately Mr Howard gets his three years 

left on his unexpired term. Not only that but the court of appeal goes further and says, because this is 

a fixed term contract mitigation does not apply. So Mr Howard once he's been terminated, during that 

three year period is entitled to go to get another job start earning income without affecting his three 

year payment from Benson Group. So not only is the employer tagged with three years of 

compensation for a two year employee, they can't rely on mitigation either. Fixed term contracts are 

very very dangerous for employers. So I'm hoping you're taking from this Benson Group case to 

really think before you used a fixed term contract. The only time I ever recommend them to clients is 

when there's a specific reason for them if you're covering for a mat leave or if there is somebody who 

is away on a three month or six month sabbatical. Maybe then use them but otherwise I really shy 

away from them for exactly these reasons. You can put a terminations provision in a fixed term 

contract so again if this one in Benson Group had been better worded the employer could have said 

yeah we employed you on a five year fixed term but there's a specific terminations clause that 

applies. That would be fine as long as it complies with the E.S.A. And as long as it's specific enough 

that it will be enforceable. So just a quick note on the dangers of fixed term contracts. Any questions 

on that before I move along? Feel free to jump in with questions as we go through. 

Otherwise I'm going to move on to Wilson and Atomic Energy. I'll be quick with this one. This applies 

only to federally regulated employers and you out there know who you are if you're governed by the 

Canada labor code then this decision applies to you and you're probably already aware of it because 

it made huge news as it went through the courts. The Canada labor code and some provinces in 

Canada have what are called unjust dismissal protections for employees. Ontario does not have 

unjust dismissal, federal does, and a few Maritime Provinces do. And so this case dealt with the 

question of whether an employer can terminate someone without cause and provide them with pay in 

lieu of notice and therefore get around the unjust dismissal provisions of the code. Before this case 

started winding its way through, there was lots of case law it there that unjust dismissal under the 

Canada Labor Code occurs, unless there's a discontinuance of function, or there's just cause, so the 

employer has to meet a high standard, otherwise reinstatement will be ordered if the employee has 

more than one year of service, Wilson and Atomic Energy, the Federal Court of Appeal held that that 

was not the correct law that an employer who provides reasonable pay in lieu of notice is found not to 

unjustly dismiss an employee so took away that right of employees in the federal sphere to claim 

reinstatement on an unjust dismissal. The case went all the way to Supreme Court of Canada and 

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ultimately the Supreme Court of Canada took a really deep dive on unjust dismissals under the 

Canada labor code and ultimately held that these protections were inserted into the Canada labor 

code to provide federal employees with protections similar to what they would get under a collective 

agreement. So non-union employees get protection from unjust dismissal where the remedy if they've 

been unjustly dismissed is presumptively reinstatement. 

So the court went through all of that and said essentially to interpret unjust dismissal as just requiring 

pay in lieu of notice would mean that the provision was essentialy hollow because all it would be 

would is mirror the common law and so they read the Supreme Court of Canada reiterated the 

position that I think most employment law practitioners thought was the case is that under the 

Canada Labor Code an unjust dismissal can result in reinstatement for the employee if they can 

show that there was no just cause and that there was no discontinuance of function again provided 

the employee has the required one year of service. So for federal employees that was a big kind of 

disappointment at the end of the day. Then we move into Canac Kitchens which Canac which has 

been a constant source of of amusement I guess would be the word for employment law 

practitioners. Canac Kitchens is constantly taking really hard line positions with its employees and in 

this case with its dependent contractors and courts are constantly hammering them for it. There are 

about five or six decisions that are against Canac where they just continually get hammered and they 

get hammered again in this case. This is a case of independent/dependent contractors. And in our 

world there are really three statuses that we look at. There is the classic employee deductions taken 

off, Employment Standards Act applies, and then there are contractors where the Employment 

Standards Act does not apply. There are two types of contractors. There are independent contractors 

and then there are dependent contractors. Both are contractors, so the Employment Standards Act 

does not apply to them, but they have different rights and they have different indicia. And in this 

case, the plaintiffs were husband and wife, nice team, who had been retained in the case of the 

husband since 1983, and in case of the wife since 1987 so very very long service people with Canac. 

In '87 when the wife joined Canac converted them. They said that they that the husband would no 

longer be an employee and they hired the both the husband and the wife as contractors and they put 

in the contract that they would be independent contractors. So they stopped taking taxes off they 

started providing invoices and started acting like contractors. Ultimately the relationship ended up 

being very longstanding, So at the time Canac terminated in 2009, they'd been employed for over 

twenty years both of them. But again as what were called independent contractors. The plaintiffs 

argued that they were dependant contractors so there was no argument that they were actually 

employees at law but what the plaintiffs said was we were so dependent on Canac for our livelihood 

that we weren't truly independent notwithstanding that the agreement provided. Otherwise we were 

really dependent, so you, court, should consider what our terminations entitlements are thinking 

about the degree of economic dependence we had and they induced evidence that except for a 

couple of really small contracts they had essentially been solely retained by Canac, and Canac had 

been their one source of income for both of them. Based primarily on that factor, the court agreed 

that they were dependant contractors and the court then had to look at what kind of notice does a 

dependent contractor get, and ultimately the court analyzed it and came down very close, I think to 

what an employee you would get. So it said you're a dependent contractor, you're centrally reliant on 

Canac for all of your income. We're going to award you twenty six months of pay in lieu of 

terminations notice. So again very similar to what they probably would have gotten for employees. 

The court also looked at the way Canac had arranged it, and how Canac in the courts where it's kind 

of taking advantage of these two individuals. But I think underlying it is this sense of just because 

somebody is a contractor, whether they be dependent or even independent you should not assume 

that their entitlement to notice will be minimal. And so what I've told most of my clients is if you've 

got independent contractors or dependent contractors and that's primarily economic reliance, in either 

case you should be putting in your contracts with these contractors what the terminations 

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entitlements would be. You don't have to follow the Employment Standards Act because contractors 

are not entitled to termination and severance pay under the E.S.A. As long as they are really 

contractors and again this gets into the argument of what is a contractor versus what is an employee 

because on terminations if it's to their benefit, the individuals may argue that they were actually 

employees for the entire time. But if they're really contractors, it doesn't mean you owe them no 

notice. So really think and go back and look at your independent or dependent contractor agreements 

and insert notice provisions in there. Various ways to do it but just make sure there's something in 

there so that you don't get into these disputes and don't fall into the Canac problem. Just looking to 

see if I caught all this, and I think I did so I'm going to move along. 

Next one I want to talk about is Computer Enhancement Corp, and this is a 2016 decision really 

interesting and continuing with our family trend because family's important. This was two brothers. 

So two brothers were employed by CEC subject to restrictive covenant agreements and CEC had the 

full gamut on both of these brothers: non competes, non-solicits, confidentiality, the whole ball of wax, 

and so these two brothers left CEC together and started up a competing business: JC Options. And 

the two brothers started competing immediately started trying to take clients and CEC not surprisingly 

commenced an action against both brothers and their new company seeking to rely on the restrictive 

covenants. And it was interesting because the two brothers ended up in very different legal positions. 

The first brother, had signed the contract after he had started working for CEC. So the first brother 

started working for CEC was presented with this restrictive covenant agreement signed it during his 

employment and then when CEC went to enforce it that brother said there is no consideration and 

what I mean by that is at law in order for any contract to be valid both sides need to receive some 

kind of benefit for it. And we run into this all the time where someone who starts employment and 

signs and an employment agreement with the terminations provision that's really restrictive or 

restrictive covenant agreement. If the individual is already employed, their continued employment 

generally will not be considered to be consideration because the individual has to receive something 

new of value that they wouldn't get if they didn't sign the contract. So whether it be an off cycle 

bonus of one hundred dollars. Whether it be a promotion time a promotion is a good time to do it 

whether it be an off cycle salary increase it has to be something at the end of the day the employer 

can say you wouldn't have gotten this if you hadn't signed my contract. In CEC, the first brother., 

there was a provision in the contract that said the consideration for this contract is that we each pay 

the other ten dollars. And so the CEC argue that the ten dollars payment was sufficient consideration 

and there is a lot of law out there that the amount of consideration isn't a factor. So a small amount 

of consideration, a small benefit can constitute legal consideration. So CEC relied on the ten bucks. 

And the difficulty for CEC wasn't the ten dollars wasn't sufficient. It's that the ten dollars was never 

paid so CEC, the first brother said I never received ten bucks they didn't give me ten bucks. I just 

signed this contract and the court said that this was invalid consideration because the employee 

didn't actually receive it and the court said you know waiving ten dollars over somebody's head and 

then taking it back isn't sufficient because of course each side was supposed to have given each 

other the ten dollars. So the court invalidated the entire agreement the entire restrictive covenant 

aghreement for lack of consideration. So Brother Number one is freed of his restrictive covenant 

obligations. The next brother comes along. This brother had only signed the restrictive covenant as a 

condition of employment and so since it was signed as a condition of employment the actual 

employment was sufficient consideration. So there was no issue of consideration for the second 

brother the contract didn't fail for lack of consideration. So the court had to go in and actually look at 

the terms of the restrictive covenant agreement and analyze them in context. And so what the what 

the agreement said was it said for six months after employment ended Brother Number two could not 

compete in any province in which the CEC did business. Second could not intentionally act in a 

manner that was detrimental to the relations between CEC and its customers clients and employees. 

And third that the brother could not solicit any customers or clients of CEC including those in an 

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ongoing relationship. And so the court was then asked to analyze these three different restrictive 

covenants because Brother number two said "Sure there was consideration but these clauses are 

unreasonable" and courts hate these restrictive covenant agreements. They're constantly looking at 

non competes and non solicits and saying they're against public policy so unless the employer can 

establish that they are reasonable in terms of the length of time and what is restricted we are not 

going to enforce them. So when the court looked at these three obligations: compete in any province 

in which CEC does business intentionally, act in a manner that is detrimental, and solicit any 

customers or employees, the court was really focused on whether CEC could demonstrate that these 

were reasonable clauses. And on the first issue compete in any province in which CEC does 

business with, court held that it was not reasonable the court looked at the provision about 

competition and said CEC does business across Canada, so what we effectively have here is a 

Canada wide non-compete and that is too broad-looking both at what the brother does in terms of his 

sales responsibilities, the sales responsibilities were not Canada wide, the court said a Canada wide 

restriction is simply too broad. There shouldn't be any restriction on him going outside of his sales 

territory because outside of his sales territory presumably he has no specific interest in the has no 

specific knowledge that would be harmful to CEC. So again it's this whole notion of if you're 

introducing a non compete., you have to carefully tailor it to the specific individual you should not be 

using non-competes as a one size fits all approach. Particularly when it comes to geographic scope. 

You should look at what the territory is for the person and tailor it to that person's territory. On the 

second obligation: intentionally act in a manner that is detrimental to CEC, its relations with 

customers Court struck that one down as well. This was not a big surprise because that's an 

extremely vague phrase and if you interpret it literally, it could mean just going out and getting 

another job going, and getting another job could be detrimental. So it is quite clear on that it was just 

simply too vague to be enforceabl. It just was devoid of any meaning because the employee couldn't 

really determine with any degree of certainty whether he had breached it. The third when the non 

solicit court found that this wasn't forcible so non-solicit again is less restrictive than a non-compete 

court said six months. Non-soliciting of customers that were in the process of doing business with is 

OK, so the court upheld the non-solicit found it was several blocks from the rest of the agreement and 

the employee the second brother was subject to the non-solicitor. Then we got into a really 

interesting issue. The really interesting issue, is did the non-solicitor prevent the brother from 

submitting a bid in response to RFPs? So the employer in that case, CEC argued that the non solicit 

applied and so the brother could not respond to RFPs from current customers of CEC. The brother 

argued that responding to an RFP that had already been issued was not a solicitation because all he 

was doing was responding to something that a customer had put out a customer puts out the RFP, 

he says I'm free to respond to it because I'm not soliciting them they essentially solicited me. So the 

court looked at that, and held that a bid submitted in response to an RFP is not a solicitation. So the 

non-solicitation provision did not prevent Brother Number two from going out and responding to it. 

He could respond to the request for proposals and trying to steal the work away and the 

non-solicitation provision did not prohibit that. The irony here is the court here said in order to prevent 

the employee from responding to an RFP he would need a non-compete but of course the court had 

already struck down the non-compete, and so we're sort of full circle. So it was really interesting how 

the court analyzed it and I guess what I would leave you with is is two points. First of all these 

restrictive covenants have to be drafted as narrowly as possible. And second, you really have to look 

when it comes to enforcement because the court will interpret these against employers at every step 

it can. So I hate to be the bringer of bad news. But those are those are a few of the really recent 

cases that are that are sort of on our radar screen right now. 

I also want to talk a little bit about exposure and wrongful dismissal and human rights, and first I want 

to talk about damages in employment litigation. So this is your straightforward wrongful, and what I 

would say to employers is keep a straightforward wrongful straightforward. I'm going to run through 

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a few cases right now. But essentially courts hate it when employers try to overreach in their cases 

and what I mean by that is taking a really hard line positions, alleging cause when there isn't one, or 

putting barriers in front of an employee. You know making comments about their performance 

publicly, anything that hurts the employee that is not justified, and have to be really, really careful 

about. So that if we're talking a straight-up wrongful claim, the three types of primary damages are 

(1) wrongful dismissal damages pay in lieu of notice contractual entitlements all of those great things. 

And then (2) second are what are called aggravated damages and these are really damages that 

won't arise if there is no wrongful conduct at all, so conduct that may hurt the employee but not rise to 

the level of a different kind of claim like making spurious allegations against them and then(3) third on 

the level is when the employer gets really nasty and the court actually wants to punish the employer 

and those are of course punitive damages. Those are comparatively rare but where the employer is 

really heavy-handed a court will award them. 

So let's take a look at a couple of cases the first tonight I love this case for the township it's a really 

interesting one, The plaintiff had been the chief building officer for about nine years when his 

employment was terminated, and they terminated him based on discrepancies in the collection of 

building permit fees. Township never asked the employee for his version of events and what 

happened. They simply said we have all these problems, we think something's going on, and you're 

terminated for cause. So the they never did a real investigation, and never asked the plaintiff what 

his version of events was, and then they contacted the OPP. And what they had said to the 

employee at terminations was if you resign, we won't contact the police, and let me tell you, that's a 

bad thing to say. Because what you're really doing is you are using your advantage to try and 

unfairly pressure the employee, and there's actually a criminal code provision it doesn't really come 

up in the case where an employer could be criminally charged for making that kind of comment, 

because you're trying to leverage your civil position on criminal charges. So, if you're ever thinking 

criminal charges bring them or don't bring them but don't say to the employee "Well if you do this, I 

won't call the police", that kind of stuff that always gets in trouble, so township said "Resign or we'll 

call the police" Employee says "I'm not resigning because I did nothing wrong", and township fires the 

employee and calls the police. The township also misrepresented pretty significantly the information 

that it had against the employee. They didn't tell the police that they had actually lost some of their 

files when they had moved and they didn't tell the police that town council had decided that in the at 

least one of the cases that they were giving to the police town council had already decided in that 

case that the employee was blameless. They gave it all over to the police and said we think we've 

got a smoking gun here, and ultimately the police officer involved said I don't think there's enough to 

charge this employee and the township went over the employee's head, went to the police officer's 

superior and said "You got to press charges". So ultimately the police did press charges. The 

employee went through a criminal trial trial and was ultimately acquitted. And as a result of all of this 

the employee did not ultimately get re-employed for a significant period of time being about I think 

thirteen years all told from '98 to 2011 so was out for a significant amount of time and the court 

actually hammered the town because what they said was you had no good faith belief in what you 

were doing. You ran around and besmirched his reputation. You ran around making the police 

charge the individual with really no legitimate basis for anything so they so the court ultimately 

awarded the employee but he had unfortunately passed away by the time this all went forward. But 

the court awarded the estate $550,000 in punitive damages which is, I would say one of the largest 

punitive damages awards in employment law history. But the conduct here was so severe that the 

court couldn't get past it. 

Want to talk a little bit about costs in the civil litigation system. If you're in arbitration this won't to 

apply but in the straight civil court based system generally speaking our system is that the loser pays 

a portion of the winner's costs. And there are two scales of costs, there's partial indemnity costs, 

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and then substantial indemnity costs. The court has the power to decide which scale to use 

although there are guidelines. The general rule is if the loser pays partial indemnity costs of the 

winner which is about sixty percent of the winners cost, so if you're engaging in litigation you and your 

successful, you can expect to get about sixty percent your costs if you're unsuccessful eking expect 

to pay about sixty percent of the other sides costs. There is the higher level of costs that are 

substantial indemnity cost. This is about eighty to ninety percent. And these aren't fixed 

percentages but it's about eighty to ninety percent. And this is really geared towards trying to 

discourage people from being unreasonable in the civil litigation process. So if the employer or the 

employee engages in conduct that is unreasonable in the context of the litigation itself so not not the 

not the conduct while the individual was employed but in the actual litigation. If you do things to 

make the litigation take longer, if you take really unreasonable positions, if you try to take things to 

increase the other side costs the court can award substantial indemnity costs, and so what you want 

to do is, you want to make sure that you're streamlining the system both for your own cost, but also 

so that you stay on on the right side of things. The other thing is that the court also looks at the end 

of the day, at litigation at offers to settle. Offers to settle can actually reverse the cost 

consequences, and what they're designed to do is, they're designed to make both sides consider 

their cases and make reasonable offers. And so the way the costs work is if a plaintiff makes an 

offer to settle in the course of litigation, and the plaintiffs does better than it's offer to settle. So if I'm 

a plaintiff and I offer to settle for $60,000 and I make $80,000 at trial, the court will look at that and 

say "OK the defendant should have accepted that offer". So we're going to award partial indemnity 

costs up to the date the offer is made and then we're going to award higher substantially indemnity 

substantial indemnity costs for the period after the offer to settle was made and that's really designed 

to encourage both sides to make offers and also accept reasonable offers on the flip-side the 

defendant. If the defendant makes an offer to settle, and then the opposite happens, so say I'm the 

defendant and I make an offer to settle for$50,000 and the plaintiff only recovers $40,000, then up to 

the date I make my offer, so I owe the plaintiff a partial indemnity costs, because up until the date I 

make the offer, the plaintiff was legitimately going forward, but from the date of my offer to the date of 

the end of trial, the plaintiffs actually owes me partial integrity costs, so it reverses the cost 

consequences of the offer and that's why we always recommend that at the outset of litigation you 

consider making an offer to settle because it really puts pressure on the other side. If you're dealing 

with the average wrongful case where there's no allegation of cause., chances are the plaintiff's going 

to recover something, unless you get really lucky, and the plaintiff mitigates right away. Chances 

are, you know we may argue over whether it's a seven month notice period versus a ten month 

versus a twelve month, but at the end of day the plaintiff's going to get something, so by making an 

offer early in the game you can actually reverse the cost consequences. You can also change your 

offer at any point during the litigation process. So if if I make an offer for $50,000 at the outset of 

litigation, and at some point I become aware that the defendant that the plaintiffs mitigated, I can 

withdraw my offer and replace it with a lower offer. Or similarly if the plaintiff doesn't become 

reemployed I can look at it and sort of go OK let's increase our offer and then from that date forward I 

have some pop. Protection. So really important thing to look at the beginning of litigation and 

through litigation if you go through. 

I'm going to run through really really quickly a couple of cases on costs in this one the. It was a kind 

of an odd situation so I'll go through it pretty quickly. It was a joint venture that was getting started. 

So they were trying to get it up and running, it never really took off, and then ultimately when the joint 

venture kind of fell apart, the bank terminated it's relationship and alleged cause, so they said you 

committed serious misconduct. Right at the point of trial, when the when they had gone through full 

discovery and everything else, the defendant abandoned its cause argument. So all through 

pre-hearing examinations for discovery all this stuff they could put the plaintiffs through the expense 

of considering the cause allegation and then they get to trial "I'm not trying to cause allegation" the 

11



only thing going is that the amount of terminations payments that are owed. The court really 

frowned on this because what the court said is number one you increase the cost of litigation 

substantially for no good reason because at the end of the day there was no allegation of cause that 

survive trial. So the court awarded substantially in them and substantial indemnity costs which is 

that eighty to ninety percent cost award, and I throw this out there because what you really want to do 

at the outset of your case is really examine what the merits of your case are. Not saying abandon 

every defense, I'm not saying take it apart but really especially if it's a cause allegation. Take a good 

hard look at how and how legitimate it is because it really increases both your costs and the other 

side's costs, in the course of of all the pre-hearing work that you have to do, and also if you get to trial 

in a court, that means you don't have any good basis for a cause allegation. They will hammer you. 

So give some real thought to that. 

Next one is to Sony and this is this is an example of a case gone kind of I would say horribly wrong. 

The case was about whether the plaintiff and the defendant had agreed to a five year fixed term 

contract and really what the plaintiffs entitlements to damages were. The Court found for the 

defendant on the first issue. Said the defendant was terminated did not have the plaintiff did not 

have a five year fixed term contract but on the second issue about whether the plaintiff resigned or 

was dismissed found the plaintiff had been dismissed. So was entitled to termination payments, 

court only awarded$13,000 in damages, but the cost award was $92,000. So ultimately you got 

$105,000 judgment, almost 90% of it was the cost award So when you're dealing with these things 

you have to really look at the relative merits and also that the value of the claim itself on a case like 

this an offer to settle could have been tremendously helpful. One of the reasons for the court's order 

of costs was that the defendant at the end of the day didn't make any offers to settle, should have, 

and the result was the court found that the employer had been playing hardball throughout and that 

this could've been short circuited by being reasonable. There was also an issue about a motion for 

security costs court found that that wasn't a legitimate motion to have brought and considered that in 

the cost as well. So really thinking about every step in litigation as you go through. I think I am 

about five minutes from the end. 

So I'm going to go through human rights damages really really quickly. In terms of human rights 

damages, you don't want to go there. You don't want to get human rights damages awarded against 

you. There are three types of damages in the human rights arena. Number one are financial, we 

all know what those are. Number two are non-financial so directed at the employer specifically, and 

then number three what the tribunal calls "public interest remedies". So I'll run through all three of 

those classes really quickly. The first is in respect of financial damages and the primary ones here 

are what the court, the tribunal calls general damages and those are pain and suffering, hurt feelings, 

breach of the Human Rights Code. Those are non-wage type damages, and so what what you 

always think about on those scales are the types of damages that are not wage-based. So, if the 

employee had to undergo treatment for a mental distress claim they might produce evidence of the 

fact that they had to go see a psychiatrist and have your treatment, the tribunal might accept that and 

say "OK that's evidence of your mental distress we're going to award you five ten/fifteen/thousand 

dollars in mental distress damages non-taxable." They don't appear on a T-4. For because they are 

not wage claims. The second are the special damages and largely these are wage type damages. 

So the tribunal, if they find you breach the Human Rights Code in terminating an employee for 

example, they can award lost income, and the lost income that the tribunals can award is not limited 

to wrongful dismissal damages. They can award lost income for a much longer period, and they can 

also work things like lost benefits, bonuses, commissions, all the sort of wrongful dismissal type stuff 

you would see. Then we get into the non-financial damages, and this is what I would think of as the 

the tribunal trying to fix the employer. So, in terms of the employee, that would be reinstating the 

employee, and the tribunal, five years ago, I used to say all that I've never seen reinstatement, so 

anybody don't worry about it. The tribunal has come a long way on that view and they are now 

12



starting to reinstate if they find that there is a breach of the code, and the employee wants it, often the 

employee doesn't want to, but if the employee wants it, they'll reinstate, ordering a promotion that the 

employee should have had offers of employment. If the employee was refused an offer of 

employment, letter of assurance that the employer will comply with the Human Rights Code, all of 

those kinds of things and then we get into the public-interest damages. So these are the broader 

remedies not tied to the employee directly, which is you have to change your hiring practices, your 

employees have to undergo training, and doing other proactive things to fix the workplace. 

I'm gonna leave you with one last case, because it's a scary one. This is an Ontario Court of Appeal 

case that was that was judicially reviewed from our human rights tribunal. You may have heard 

about it. The employee Ms Fair had been on disability leave for about three years. She tried to 

come back and the employer said we can't accommodate you. Your restrictions are too severe. 

And ultimately entirely refused to accommodate her. The case in front of the tribunal took a whopping 

ten years to move forward to a decision. So this was under the old system with the commission and 

all that other stuff so it took a really long time, the tribunal heard the case and ordered reinstatement 

with back-pay. So ten years after the fact the tribunal said we think reinstatement is appropriate. 

She's got limited opportunities for employment, and you employer, Hamilton Wentworth, have to pay 

her ten years of lost income. So again it's this idea that the tribunal is not limited to reasonable 

notice. The employer, not surprisingly, judicially reviewed it to the Court of Appeal and the Court of 

Appeal upheld the decision, and said "No, reinstatement is within the tribunals discretion, their 

conclusions were reasonable, and it follows from that, that the back-pay should be ordered upon 

reinstatement". So Thank you very much. Chelsea and I are happy to stick around for questions 

afterwards but I know it's been a long day. We really appreciate you coming out. Thank you very 

much, hope you found it informative. We always look forward to your comments or questions or if you 

have suggestions for future topics we are certainly all ears. But otherwise head to the bar, and thank 

you again very much. 

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