SCC says equity partner of law firm is not an employee pursuant to Human Rights Code of BC

  • McCormick became an equity partner at his law firm in 1979.
  • In the 1980s, the equity partners at FMD voted to adopt a clause in their Partnership Agreement that required equity partners to retire as equity partners and divest their ownership shares at the end of the year in which they turned 65.
  • McCormick brought a complaint to the Human Rights Tribunal arguing that this provision was age discrimination in employment and prohibited by the Human Rights Code, R.S.B.C. 1996, c. 210 (“Code”).
  • FMD applied to have the complaint dismissed on the grounds that McCormick was not an employee pursuant to the Code.

Findings below:

  • The Tribunal concluded that there was an employment relationship.
  • The law firm’s application for judicial review was dismissed by the B.C. Supreme Court.
  • The BC Court of Appeal allowed the appeal, concluding that McCormick, as a partner, was not in an employee pursuant to the Code.

SCC:

  • “Deciding who is in an employment relationship for purposes of the Code means, in essence, examining how two synergetic aspects function in an employment relationship: control exercised by an employer over working conditions and remuneration, and corresponding dependency on the part of a worker. In other words, the test is who is responsible for determining working conditions and financial benefits and to what extent does a worker have an influential say in those determinations? The more the work life of individuals is controlled, the greater their dependency and, consequently, their economic, social and psychological vulnerability in the workplace” [paragraph 23, emphasis mine]
  • “Control and dependency, in other words, are a function not only of whether the worker receives immediate direction from, or is affected by the decisions of others, but also whether he or she has the ability to influence decisions that critically affect his or her working life. The answers to these questions represent the compass for determining the true nature of the relationship” [paragraph 27]
  • “Among the distinctive features of a partnership is that partners generally have a right to participate meaningfully in the decision-making process that determines their workplace conditions and remuneration” [paragraph 31]
  • “Turning to Mr. McCormick’s relationship with his partnership and applying the control/dependency test, based on his ownership, sharing of profits and losses, and the right to participate in management, I see him more as someone in control of, rather than subject to, decisions about workplace conditions.  As an equity partner, he was part of the group that controlled the partnership, not a person vulnerable to its control” [paragraph 39]
  • This is not to say that a partner in a firm can never be an employee under the Code, but such a finding would only be justified in a situation quite different from this case, one where the powers, rights and protections normally associated with a partnership were greatly diminished” [paragraph 46, emphasis mine]

There a number of employment lawyers getting hot and bothered about the precedential value of this case.  I am not one of them.  The case contains some interesting and useful comments regarding the test for determining whether an individual is an employee for the purpose of human rights complaints (control/dependency). However, this case does not stand for the proposition that no partner can ever be an employee.  It is a very fact-specific analysis of a particular individual’s partnership.  

Buying drugs from subordinate is just cause for dismissal

  • The case is here: Van den Boogard v. Vancouver Pile Driving Ltd., 2014 BCCA 168  
  • Plaintiff was a senior manager responsible for the safety of a job site in a high risk, safety-sensitive, heavily regulated industry 
  • His core duties included workplace safety, safety training, and enforcement of drug-prohibition policies
  • He participated in the creation of a core value statement for the company and created policies in respect of safety, legal and regulatory risks for the company
  • Plaintiff’s employment was terminated on a without-cause basis in February 2013
  • Plaintiff sued for wrongful dismissal
  • After the Plaintiff returned the company cell phone, the employer discovered he had sent a number of text messages, many during work hours, to solicit drugs from, among others, an employee he supervised
  • Defendant’s defence in the wrongful dismissal action was based on after-acquired cause for dismissal (based on the discovery of the texts)
  • The trial judge dismissed Plaintiff’s claim
  • The trial judge found that the Plaintiff’s conduct was “seriously incompatible with his duties as a project manager for major contracts. Soliciting illegal drugs from an employee under his supervision was misconduct that went to the heart of the employment relationship and created a conflict of interest” [paragraph 7]
  • The Plaintiff appealed
  • The BC Court of Appeal dismissed the Plaintiff’s appeal, finding that (a) the trial judge did not fail to apply the contextual approach mandated by McKinley v. BC Tel, 2001 SCC 38 (CanLII) and (b) the trial judge did not make a palpable and overriding error in finding cause

If an employer discovers it would have had cause to dismiss an employee after it has already dismissed an employee on a without-cause basis, the employer can rely upon the after-discovered cause to defend against a wrongful dismissal claim.

Although it is easy to analyze litigation decisions in retrospect, I question whether the Plaintiff would have been well-served by adducing more evidence supporting his assertion that the employer had a relaxed attitude about drug use and procurement. As the Court of Appeal stated at paragraph 34: “If an employer knew of the misconduct and had expressly or implicitly condoned it, then claims of after-acquired cause will be defeated.”

In Ontario, for an offer of working notice to a constructively dismissed employee to be considered for mitigation purposes, the employer must prove the offer was clearly made AFTER employee refuses to accept changes

  • The case is here: Farwell v. Citair, Inc. (General Coach Canada), 2014 ONCA 177
  • Employee was moved to a different, inferior, position within the employer’s business
  • Employee refused to accept the change and told the employer he was treating the reorganization as a constructive dismissal
  • Employee sued for constructive dismissal
  • Employer argued the employee failed to mitigate his damages when he refused to accept the new position
  • Court found there was no evidence that the employer extended the offer of re-employment (ostensibly, the new position) to the employee after the employee claimed he was constructively dismissed
  • The Court said this was fatal to the employer’s argument regarding the employee’s failure to mitigate.
  • The Court stated:

[t]o trigger this form of mitigation duty, the [employer] was therefore obliged to offer [the employee] the clear opportunity to work out the notice period after her refused to accept the position […] and told the [employer] he was treating the reorganization as constructive and wrongful dismissal” (para 20).

As is typical in these situations, it appears there was no follow-up after the employee balked at the reorganization.  The employer may have saved itself a lot of money by making it very clear to the employee that he would be able to work out the notice period in the new position (although this is questionable, given the trial judge’s finding that the employee was acting reasonably when he refused the new position).  

In BC, functional approach will be used to determine whether an employment contract clause is a restraint of trade

The Associate covenants and agrees that in consideration of the investment in her training and the transfer of goodwill by CVC, if at the termination of this contract with CVC she sets up a veterinary practice in Creston, BC or within a twenty-five (25) mile radius in British Columbia of CVC’s place of business in Creston, BC, she will pay CVC the following amounts:

If her practice is set up within one (1) year termination of this contract – $150,000.00;

If her practice is set up within two (2) years termination of this contract – $120,000.00;

If her practice is set up within three (3) years termination of this contract – $90,000.00.

  • Issue: whether this clause was enforceable
  • BC Court of Appeal held (2-1) that the clause was enforceable
  • The Court held that clause was a restraint of trade (even though the clause did not contain a typical non-compete clause)
  • The Court made the “restraint of trade” determination using the functional approach and not the formalistic approach (in other words, even though the clause didn’t explicitly restrict competition, the effect of the clause did restrict competition)
  • Despite the “restraint of trade” determination, the Court held that the clause was reasonable and declared the clause enforceable

This case will help clarify the approach to be used in BC when Courts in that province are faced with clauses which restrict trade by implication.

Will Ontario follow suit (and overrule that old gem: Inglis v. The Great West Life Assurance Co)?

Alberta?

It would be nice to see the Supreme Court of Canada weigh in on this issue.

Employment contract contained no term guaranteeing minimum amounts of work. No constructive dismissal for failure to provide work: Bonsma v Tesco Corporation, 2013 ABCA 367 (CanLII)

  • The case is here
  • Employee was employed as a top drive supervisor and entered into written employment contract with employer
  • The contract set out rates of pay but did not expressly set out any minimum amount of work to be provided in a given period of time
  • Employee resigned his position after working only 4 hours over a four month period
  • Trial Court found there was no guarantee on the part of the employer to any top drive supervisor to provide any minimum amount of work in the field
  •  Court of Appeal, at paragraph 15, confirmed trial Court’s finding there was no implied term guaranteeing a minimum amount of work:

A term of an employment contract will be implied in fact only where it represents the parties’ intentions at the time the agreement was signed; Glover v SNC Lavalin1998 ABQB 752 (CanLII), 1998 ABQB 752 at para 16, 229 AR 41. The trial judge’s factual findings did not support the drawing of an inference that the parties intended that a minimum work guarantee should be implied into their employment relationship. The evidence relating to the parties’ intentions at the time the contract was signed included evidence: that the work was cyclical; that other employees did not expect a minimum amount of work each year; that some employees worked for other employers or themselves during down times; and that there was a pattern of long gaps in work assignments given to other employees.

  • Further, at paragraphs 16-17:

This evidence does not support the conclusion that a guarantee of a minimum amount of work was necessary pursuant to the business efficacy test – i.e. that the contract would not have been workable otherwise; see Grover v Stirling Bond, [1935] 3 DLR 481, [1935] SCJ No 50; Piggot Construction Ltd v WJ Crowe Ltd, [1963] SCR 238, 28 DLR (2d) 9.

Such an implication was also not available pursuant to the officious bystander test – i.e. that the term was so obvious that it goes without saying that the parties must have intended it to form part of their contract; see Shirlaw v Southern Foundaries (1926) Ltd., [1939] 2 KB 206 at 227; Reigate v Union Manufacturing Co (Ramsbottom), [1918] 1 KB 529 at 605.

  • Appeal dismissed

Somewhat surprising decision if considered without attention to the particular circumstances of this employee.  In my experience, the majority of employment relationships are distinguishable from this situation based on the parties’ expectations and practices regarding minimum amounts of work. 

 

Jurisdiction of Court in dispute involving employee subject to collective agreement: James v Northern Lakes College, 2013 ABCA 408 (CanLII)

  • The case is here
  • employee was bound by collective agreement
  • employment was terminated
  • employee grieved and filed Statement of Claim
  • request for grievance denied
  • employer applied to have Statement of Claim struck on basis that legislation gave exclusive jurisdiction of the dispute to process set out in collective agreement
  • Statement of Claim struck
  • Employee appeals to Court of Queen’s Bench: denied
  • Appealed to Court of Appeal
  • Court of Appeal:
    • at paragraph 8:  “Courts often lack jurisdiction over these claims when they arise from the interpretation, application, administration or violation of a collective agreement and are therefore subject to the dispute resolution procedures in that collective agreement”
    • at paragraph 9: “There may be rare instances where a court retains residual jurisdiction to hear labour disputes”
  • Employee argued: “this is such an instance because (1) the dispute involves a discriminatory clause in a collective agreement (i.e. that probationary employees may grieve claims but may not arbitrate them), and (2) [employee] was otherwise barred from accessing the grievance process and receiving effective redress” paragraph 9) (emphasis added)
  • In response to Argument #1 Court of Appeal states: “Employers may provide fewer rights to probationary employees than non-probationary employees without this amounting to “discrimination”
  • In response to Argument #2 the Court of Appeal states at paragraph 11:

[…] Mr. James argues that a court may take jurisdiction where the grievance process fails to provide effective redress. Although I am sympathetic that his claims have gone unaddressed, the statutory scheme is not the cause. The chambers judge found that Mr. James could and did attempt to grieve his termination, but that his request was denied. I agree that the appropriate route to challenge this decision would have been judicial review. Mr. James argues that he was also denied access to arbitration as a probationary employee. However, Vaughan states that arbitration is not necessary for an aggrieved party to have effective redress, and that a lack of access to independent arbitration is not a sufficient reason in itself for courts to get involved in labour disputes. I find no basis on which to distinguish Vaughan from this case.

  • Appeal denied

The decision is not groundbreaking but it highlights the value of front-end advice from an employment lawyer. The outcome may have been different had the employee pursued a judicial review of the decision to reject his grievance.