SPECIAL CONTRACTUAL RELATIONSHIPS: EMPLOYMENT

Chapter 19, page 349

NATURE OF THE RELATIONSHIP:

The employment contract is a special kind of contract, the law recognizes the need to protect the
employee due to an inequality of bargaining power inherent in the relationship. Whether a person is an
employee or an independent contractor (an important distinction because it will inform the extent of your
rights) is not simply determined by looking at the terms as specified in a written agreement. This
distinction is a question of fact.

• Generally: employment is a contract relationship

• Must have all the elements of regular contract
• Still some important distinctions:
◦ Not mutual consent and equal bargaining power
▪ retains features of historical master/servant relationship
▪ master was liable for servant's breach
▪ master liable for torts committed by servant in commission of duties

◦ Fourfold test, to determine if a contract of employment:

1. control (how independent are you?)
2. ownership of tools (if you own your own tools, you are probably an
independent contractor)
3. chance of profit
4. risk of loss (as with risk of profit, if you are taking on the risk of loss,
more likely to be an independent contractor. For example, Wal-mart employees
don't care if walmart takes a hit: they still get paid).

• Employee v independent contractor / Organization test

◦ employee where initiative to do the work and manner in which done are under control of
contractor
◦ distinction not always clear
◦ organization test, are activities integral part of the business, or adjunct or accessory, part of
the business or something outside it

• contract for services = independent contractor

• contract of service = employment contract

Agency v employer / employee:

• Can use organizational test to distinguish if an agent or employee – can be an agent if the
principal does not control the way the work is done (although principal does have the right to
direct the work that the agent performs); if you find control, then employment.
• Again, this is not an easy thing to determine, there are cases where insurance and real estate
“agents” have been found to be employees

FORM OF THE CONTRACT:

• Need not be in writing, UNLESS fixed term over more than one year, (see Statute of Frauds)
• Statute will not apply if can be terminated in less than a year, or no fixed term, a contract of
indefinite hiring.
 • when in writing, no particular form required, can be informal
• may contain provisions restricting use of confidential information, to protect business secrets, may
also contain restrictive covenants, such as non-solicitation clauses and non-competition clauses.
• can restrict use of confidential information, cannot prevent employee from exercising learned skills

DUTY OF EMPLOYER:

Employment Legislation:
• usually to prevent employer abuses and excesses
• 2 main areas; worker safety; terms of contract
• Both federal and provincial laws: Federal – Canada Labour Code; Provincial – Employment
Standards Act
• Pay Equity Act: must pay men and women the same wage.

Safety: governs working conditions, regular inspections, protective equipment, ability of employee to
refuse to do work, sanctions against employer and often supervisors personally (well: lets be honest. The
legislation allows them to sanction employers and supervisors personally but I've never seen it happen)

Terms of Contract: Employment Standards Legislation

• Governs minimum wage, maximum hours, holiday and vacation pay, termination notice, severance
pay,
• Provincial law, vary province to province
• *cannot contract out of minimum guarantees*

Human Rights Legislation:

• prohibits discrimination on a number of grounds, race, creed, colour, place of origin, nationality,
sex, age, handicap if not related to job performance
• an administrative body, etc., complaints procedure, separate tribunal.
• employer required to maintain discrimination free work environment, control other employees.
• Duty to accommodate to the point of undue hardship.

Common law:
• implies all these duties on employer, and duty to act in good faith.
• compensation, presumption that the worker will be paid for work
• worker compensated for expenses incurred re work
• employer must supply tools necessary to do the work where custom so provides
• employer must provide enough information to allow worker to calculate remuneration where
necessary, ie., where other than hourly rate or salary, ie., bonus structure

DUTY OF EMPLOYEE:

• obey reasonable order within duties of employment

• use property and info in careful and reasonable manner
• confidential info to stay confidential
• duty of fidelity
• hours of employment to be used doing employment work
• employer entitled to profits earned during employee's work
• employee's spare time his own
 • where employment based on special skill, employee required to exercise skill, liability to employer
where breach
• senior employees can acquire a fiduciary status to employer, devote energy and initiative to
employer, place interests of employer above own
• duty to act in best interests of employer
• dishonest employee liable to employer for secret profits and losses due to dishonesty, but still
entitled to payment of wage, this is different than an agent in similar circumstances who also
loses entitlement to commission

TERMINATION:

• Employment standards legislation provides the minimum notice period

• Statutory minimum does not usually prevent court using common law for higher award
• Usually money in lieu of notice, most people wouldn't want to work the notice period, the
relationship is somewhat soured.
◦ However, its becoming more and more common. Its darkly brilliant, actually: give someone 12
months notice, that person has to go to work everyday knowing they have been fired. That
person is likely to quit or find another job really quit: saves the company a lot of money
rather than offering someone 12 months in lieu of notice: They get the labour and the
employer usually leaves. Its a cynical world out there, folks!

• "reasonable notice" is a question of fact, several factors

▪ nature of contract
▪ method of payment
▪ type of position
▪ length of service
▪ custom of business
▪ age of employee

• one week notice period minimum for employee (in Ont. one week per year of service, up to a
maximum of 8 weeks)
• as much as a year for long term employee or person in senior position, (book says “several
years”- this is not accurate in my experience. Usually awards are capped at 18-24 months,
MAX.)
• Factors such as age of employee and position will increase notice period.

WRONGFUL DISMISSAL:

• Employer can dismiss without reasonable notice where:

◦ employee incompetent or grossly negligent
◦ crime against employer
◦ breach of contract
◦ disruption of corporate culture, employee's actions re other employees and customers
• Where dismissed without cause, employee has action for damages
• Ontario statute sets out things that are cause for dismissal - Employment Standards Act

Employee ability to terminate without notice:

• where danger posed by work
• where employer mistreats
 • where employer fails to perform contract

Action for wrongful dismissal:

• action for payment in lieu of notice, reasonable notice period determined as Q of fact, statutory
amount is the minimum
• duty of plaintiff to mitigate damages, have to look for work
• if employment obtained within the reasonable notice period, reduces damages award
• no work, claim is for payment in lieu of reasonable notice
• are cases where punitive damages have been awarded, this is rare
• damages are to put plaintiff in position he would have been if given reasonable notice

• NB: generally employers can dismiss employees. People often come to me saying they've been
dismissed and think its the being dismissed thats not allowed. Wrong: its being dismissed
without cause and without reasonable notice period or pay in lieu of notice. Again: you can be
dismissed at ANY time for ANY reason (except, of course, enumerated grounds under Human
Rights Code) and as long as you get notice or pay in lieu of notice, its 100% ok.

• When lawyers talk wrongful dismissal it means more that what was wrongful was not getting
enough notice period, not the dismissal itself.

Constructive dismissal:
• Where unilateral change in job description, + = radical change of job description or working
conditions you can claim constructive dismissal.
• Can also claim constructive dismissal if unilateral changes to your working contract without
proper consideration.
◦ demotions fall under this heading, where employee does not accept
• Allows employee to bring action for constructive dismissal

Wrongful hiring:
• Employee is induced by employer's inflated description of job to leave other employment and
enter into employment contract
• Action is essentially a negligent misrepresentation case

Vicarious liability:
• Employer liable for acts of employee while in performance of duties of employment
◦ so can't sue employer if person, eg. was driving drunk after hours.
• This for failure to perform contract, and tortious acts
• This because employers have money, employees usually do not

Employer liability to employee for injury

• Common law traditionally not protective of rights of employee, law suit versus employer usually
cost employee his job, use of equipment by injured employee usually raised question of employee
negligence and potential claim for damages against employee, plus voluntary assumption of risk
defence. In other words, employees had a hard time suing employers successfully

Worker's Compensation Legislation

A little history:
• Remember, back in the early 1900s, there was virtually no protection for workers, no workplace
health and safety standards. People worked long hours. No such thing as social safety net, no
employment insurance if you lost your work, no welfare. So workplace accidents were devestating
 to workers and families. Suing was privately was out of reach for most workers and was a long
shot everyone.
• So the government decided to appoint Sir William Meredith to a royal commission to look into
creating a compensation system.
• Sir William Meredith came up with what was called a historic compromise.
• Workers gave up the right to sue in exchange for security of compensation, and employers
received protection from lawsuits and agreed to pay predictable costs.
• Used to be called the Workers Compensation, now called Workplace Safety and Insurance.
• An insurance scheme, no- fault -- who caused the mishap is not relevant to compensation
• All employers pay in
• Employees are entitled to benefits if injured

LABOUR LAW:

Both federal and provincial governments have jurisdiction over parts of labour law due to Constitution
• Federal based on federal responsibility for banking, navigation and shipping, aviation, etc.
• National pension scheme, federal unemployment insurance legislation, manpower training,
• Federal legislation re: employment standards and collective bargaining
• Provincial has most of legislation, as most business falls under category of "property and civil
rights" under Constitutional division of powers

* * Union collective bargaining removes employee's common law remedies and replaces with statutory
ones

Collective Bargaining:
• 1872 law decriminalized collective bargaining and trade unions
• First legislation was in the U.S., 1935
• Statutory codification of collective labour
• Canada lacked legislative infrastructure, outset of War, War Measures Act, needed for continuous
mass production, mirrored U.S. labour law
◦ Purpose and effect of legislation, remove collective bargaining from common law, and make it
subject to administrative tribunals, legislation

Tribunal governs: (labour relations board):

- right of a union to represent employees;
- selection of union as bargaining agent;
- nature and make-up of group of employees;
- certification of union; negotiation of contract;
- resolution of disputes relating to negotiation;

• The rights and duties of employer, union, employees set out in statute;
• Sometimes labour board has power over strikes and lockouts
• Replace use of economic power with orderly process for selecting employee representatives, and
negotiating contracts
• Strike or lockout not allowed re selection of bargaining agent, and restricted regarding
negotiations
• Most jurisdictions there is no right to strike or lockout until all other negotiations have failed
Certification of Union:
• Employees either form own group, or ask to join an existing one
• Large unions have trained organizers, organize and recruit new membership
• Once employees create organization, then will attempt to recruit enough employees to make a
majority,
• Approach the employer with a request to be recognized as the bargaining agent
• If employer agrees, meets with union reps and negotiates collective agreement governing
employment of union membership, contract terms and conditions
• When employer refuses to recognize union, union has to be certified by labour board

Process:
• Submit written application to labour board for certification as exclusive bargaining rep
• Board arranges a hearing
• New union must prove bona fides, independent of employer
• Board then determines bargaining unit
• Unit determined according to regulations re eligibility to bargain collectively
• Excluded persons, some professionals, persons in essential services,
• If parties do not agree on unit, hearing before the board attended by union, employer, and
employees
• Board rules, makes determination about support for the union
• When in doubt, vote to determine employee support for union
• If majority in favour of union, board certifies union exclusive bargaining representative for all
employees
• Certification compels employer to negotiate with union re terms and conditions of contract of
employment

Negotiation process
• Union gives notice to employer wants to bargain
• Employer arranges meeting, to bargain in good faith
• Both sides can propose terms
• Agree, then put in writing, signed by employer and union, and approved by employees /
bargaining unit
• Legislation dictates minimum duration, generally at least one year, can only be reduced on
consent of labour board
• No agreement, 3rd party intervention: conciliation; mediation; fact-finding

• Once an agreement is in place, parties cannot unilaterally alter

• Must be bound by terms and conditions and by statute during bargaining process
• If agreement is a "first" agreement, and parties do not conclude agreement, some jurisdictions
impose a first agreement, -- arbitrator hears dispute and makes a decision to impose agreement

Strike:
• Collective refusal to work,
• Lawful strike only when collective agreement is not in effect, and all 3d party assistance has
failed
• Wildcat strike: unlawful strike when agreement in force, where employees decide without union's
approval
Lockout:
• Employer refuses to allow employees to work
• Lawful in same circumstances as above
• Lawful strikes, have picket lines for purposes of information
• Attempts to restrict persons from entry is unlawful, may be actionable
• Where damage to property or injury to persons, employer asks for court order restricting number
of picketers

Secondary picketing
• Used to be unlawful, means to picket customers or suppliers of employer, they are strangers to
the dispute
• Previously had to prove sufficiently close relationship between businesses
• Now, 2002, Supreme Court of Canada allowed this picketing as exercising “freedom of
expression”, section 2(b) of the Charter
• Picketing is restricted to providing information, can still be civilly liable for interference with
contract between supplier and employer - intentional interference with contractual relations
• Must be peaceful picketing (page 371)

Compulsory Arbitration:
• Persons employed in essential services, no right to strike
• Compulsory arbitration to deal with matters in dispute
• Permits work to continue without interruption
• Arbitration board decides the issues, one rep from each side, and an arbitrator/ 3rd party,
chairperson
• Hearing, then decision
• Parties are bound by collective agreement rendered by decision
• Parties not involved in essential services may submit to arbitration voluntarily

The Collective Agreement:

• Differs from regular contract:
◦ governs rights and duties of employer, employees, and bargaining agent
◦ imposition of economic sanctions is allowed (typically not so for other contracts)
◦ some terms imposed by legislation (eg recognition of union as agent)
◦ usually provide no strike or lockout while agreement in existence
◦ must include dispute resolution mechanism -- usually arbitration
◦ if parties do not set out arbitration procedure, statutory one applies
◦ used where matters of interpretation are in dispute, or where violation of agreement is alleged
◦ grievances, series of meetings where breach is alleged to avoid arbitration
◦ up the ladder of union and employer management, as per procedure outlined in agreement
◦ fail to resolve, go to arbitration
◦ arbitrator selected by parties, failing which can be imposed under legislation
◦ after hearing, arbitrator or arbitration board, makes an award
◦ boards and arbitrators have broad powers in a hearing, but decisions can be attacked on basis
of error of law, improper exercise of statutory power, decision can be quashed -- subject to
judicial review
◦ union can use grievance and arbitration to resolve matter where employee wrongly treated by
employer
• arbitrators can order re-instatement of a wrongfully discharged employee, courts at common law
are reluctant to do this
UNION - MEMBER RELATIONSHIP:

• In Ontario, a union is not a suable entity

• No existence independent of its members, not like a corporation
• Relationship with members is one of contract
• Agreement between members to be bound by contract, one does not abide, others can kick him
out
• Right to expel is limited because : employment may depend on union membership
◦ Couldn't earn a living if not in a union
◦ Right to expel or restrict must not be arbitrary
◦ Person must violate terms of agreement
◦ Decision to expel or restrict can be subject to judicial review, courts will insist on principals of
natural justice, and will determine whether or not procedures were followed, or even whether
following of procedures denied natural justice
◦ Entails giving member opportunity to present case, and full disclosure of allegations
◦ Hearing
◦ Give evidence and cross - examine accusers

Remember: Natural Justice: a common law principle of procedural fairness

i) know the case to be met
ii) opportunity to make full answer
iii) hearing before an impartial arbiter

Duty of Fair Representation:

• Obligation of union to represent members
• Eg in book, page 377, employee member accused of theft by employer, employer dropped the
accusation, employee wanted to be absolved, union didn't grieve the matter, employee brought a
complaint, succeeded in complaint procedure, labour board held: union to take matter to
arbitration, pay employee's legal expenses

You Should Be Able to Answer:

Review Questions: 2, 3, 5, 6, 8, 9, 15

Case problems for discussion, page 381 & 384: 5 and 12