- The case is here: Pisko v. Trican Well Service Ltd., 2016 ABQB 500
- Plaintiff worked for Defendant for more than 11 years
- Entered into “most recent employment contract” on February 26, 2014
- The work for Trican was performed in Saudi Arabia
- Pursuant to the Agreement:
- Employee entitled to base salary plus a “Rotational Assignment Allowance” of 25% of base salary for working in Saudi Arabia
- Employee was entitled to (i) working notice of 60 days; (ii) pay in lieu of working notice equal to 60 days of base salary (excluding RAA); or (iii) a combination of working notice and pay in lieu of notice equivalent to 60 days of pay (excluding RAA)
- offending terms could be severed from the contract
- Employee was terminated and paid 60 days of base salary PLUS the equivalent RAA (despite the exclusion found in the agreement)
- Employee sued, arguing that the termination provisions in the Agreement were unenforceable because they fell below the requirements set out in the Employment Standards Code
- The Employer applied for summary dismissal, arguing (1) that the RAA did not constitute wages and, therefore, the termination provisions did not fall below the ESC standards (2) if the RAA did constitute wages, the termination provisions could be saved by the severance clause
- The Master found that the RAA did constitute “wages” as defined in the ESC and that a failure to pay the RAA would fall below the ESC standards. However, using some mental gymnastics, he found that the notice period requirement of the Agreement (60 days notice) was a separate issue from the methodology for calculating “wages” and, accordingly, was valid and enforceable.
- As the Employer paid the Employee the equivalent “wages” he would have received had he been given 60 days working notice, the Master granted summary dismissal of the Employee’s action
This is a strange decision.
Something that is not addressed in the decision is whether the Employee was given some consideration in exchange for entering into a new agreement many years into his employment. If he didn’t receive consideration, it could have been argued that the Agreement in question was not enforceable.
I don’t agree with the Master’s choice in enforcing the 60 day notice period but ignoring the Agreement’s exclusion of the RAA as a part of calculating termination pay. This is exactly what the SCC in Machtinger wanted to avoid: a situation where an employer can “get away” with having a clause which requires less than is required by the Code. For example, using the Master’s logic, an employer could draft a contract agreeing to pay an employee minimum wage plus Bonus X for services performed AND provide for the ability to terminate upon paying the equivalent of X days of notice (calculated using only the minimum wage base salary). In such a situation, I suspect many employers would attempt simply to pay the minimum wage salary multiplied by the X days of notice. If confronted about this (ie the employee incurs the expense of legal advice), the employer could just say “my bad” and pay the Bonus X multiplied by the X days of notice… even if it works only 50% of the time, that could add up to a pile of money that should have been paid to terminated employees.
- The case is here: McCormick v. FMD, 2014 SCC 39
- 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.
- 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.
- “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.