Howard Levitt: Dubious damages claims and tenuous termination clauses among biggest trends in employment law

Posted by Admin November 1, 2024 Bussiness

Too many lawyers representing employees are commencing cases of little worth but asking for large amounts in punitive or aggravated damages. The courts are losing patience with such claims, and the lawyers’ credulous clients are being whacked with cost awards.

In Chin v. Beauty Express Canada Inc., the court awarded Chin seven and a half months’ severance, totalling $16,000. His lawyer claimed costs of $54,777, and most of the trial was spent dealing with Chin’s claim for bad faith damages, which the court dismissed.

In deciding to award no costs at all as the matter should have been brought in Small Claims Court, Justice Morgan pronounced:

“The trial can be objectively characterized as an unfortunate waste of the parties’ resources. The quantity of damages is far outweighed by the legal fees. And that is to say nothing of the court time consumed by what turned out to be a rather small claim.”

The same type of criticism has been meted out to employers who waste courts’ time, with similar cost consequences.

In Summers v. OZ Optics Limited, Justice Hackland determined that the employer failed to admit facts and law that it should have admitted, unduly lengthened the proceeding, and argued, without any basis — and, significantly, without assisting the fired employee find work — that the employee had not taken sufficient steps to mitigate his damages. As result, the court awarded the employee $25,000 in costs on a judgment of only $36,000.

Fixed term contracts are another hot topic in employment law.

In Bouchard v. Facility Condition Assessment Portfolio Experts Ontario Ltd., the employee agreed “to enter into an employment contract which shall be for no less than three years on terms agreeable to both the parties.” The court found that this created a three-year term and the early termination clause in the contract was found to be invalid. As result, Bouchard was held entitled to the balance of the remaining three years.

This is a cautionary tale for employers not to enter into fixed term contracts, particularly since courts are inclined to invalidate termination provisions because the employee is then presumptively entitled to pay until the end of the term, however long. It is far better for employers to not take the risk of such a payout.

Courts striking out termination provisions is the biggest employment law trend of the last two years — other than perhaps the workplace investigation industry being found to cost more than they add.

Employers are increasingly attempting to save their termination clauses by adding additional clauses, which specify that the employee will not receive less than the Employment Standards Act (ESA). These “saving provisions” are simply not working to “save” otherwise invalid termination provisions.

As Justice Vermette concluded in Wilds v. 1959612 Ontario Inc:

“Saving provisions” in termination clauses cannot save employers who attempt to contract out of the ESA’s minimum standards and cannot reconcile a provision that is in direct conflict with the ESA from the outset. Holding otherwise creates the risk that employers will slip sentences into employment contracts in the hope that employees will accept the terms. This outcome exploits vulnerable employees who hold unequal bargaining power in contract negotiations. Moreover, it flouts the purpose of the ESA — to protect employees and to ensure that employers treat them fairly upon termination. Employers cannot be permitted to draft provisions that capitalize on the fact that many employees are unaware of their legal rights and will often refrain from challenging notice provisions in court.”

Another issue that commonly arises is employees holding onto their company vehicle after being fired.

In 415909 Canada Inc. c.o.b. PARS 2000 v. Moghadam, Justice Kaufman ordered the immediate return of a company car and made the employee pay $10,000 in costs, declaring:

“The former employee asserts that his employment was wrongfully terminated and that he would be entitled to the benefit of these cars during the period of reasonable notice. The defendant intends to commence an action for wrongful dismissal.

If the defendant is successful in his wrongful dismissal action, he may be compensated for the value of any employment benefits he would have enjoyed during the reasonable notice period, but he is not entitled to use the vehicles before proving his case for wrongful dismissal, let alone before commencing such an action.”

The judge not only ordered the car to be immediately returned, but made the employee pay $10,000 in costs.

These few recent cases, of the hundreds of employment law cases reaching trial each year, provide some sense of the ever-evolving dynamism of this area of the law, which has a direct impact on tens of millions of Canadians.

Howard Levitt is senior partner of Levitt LLP, employment and labour lawyers with offices in Ontario, Alberta and British Columbia. He practises employment law in eight provinces and is the author of six books, including the Law of Dismissal in Canada.