Table of ContentsA) BASIC PRINCIPLES OF A CONTRACT4B) THE EMPLOYMENT CONTRACT5What is employment?6CVL Ordre des arpenteurs gomtres du Qubec v Poulin, 1999 QCCS (paras 21 30)6CVL Gendron v Denicourt, 1997 QC CS7CVL Rachel Emond v Motoneigistes du Lac St-Jean Est, 2005 QCCRT 207.7Terms of contract7Probationary clauses8Obligations of the employer8CVL Janzen v Platy Enterprises, [1989] 1 RCS 1252 (headnotes and Part VI)8Obligations of the employee9CML Canada Aero v O'Malley, [1974] SCR 592 (from ONCA)10CVL Concentrs scientifiques Belisle v Lyrco Nutrition, 2007 QCCA 67610CVL Cameron c. Canadian Factors, 1971 SCR 14811CML Elsley v JG Collins Insurance Agencies Ltd., [1978] 2 SCR 916 (from ONCA)12CML Shafron v KRG Insurance Brokers, 2009 SCC 6 (headnotes and paras 14-32)12CVL Lange Co. c. Platt, 1973 QCCA 106813CML Reservoir Group Partnership v 1304613 Ontario Ltd, [2007] OJ No 20213.13Tacit renewal13TERMINATION OF THE EMPLOYMENT CONTRACT141 Termination agreement:142 Fixed Term Agreement14Termination and Probationary Periods14CVL Proulx v Communications Voir, 2002 CanLII 16298 (QCCS). (Read paras 1 32)15CVL Merlitti v Excel Cargo, 2002 CanLII 41011 (QC CS) (Read paras 1 50)15CML Ritchie v. Intercontinental Packers Ltd., 1982 CarswellSask 2916NOTICE REQUIREMENTS16Layoffs17How to determine duration of notice:18CVL Standard Broadcasting Corp. Ltd. c. Stewart (1994, QCCA) (Facts and Part A)18CVL Merlitti v Excel Cargo, 2002 CanLII 41011 (QC CS) (Paras 69-110)19*** Elements included with pay in lieu of RN (i.e. What to claim on termination):19TERMINATION FOR CAUSE20CML McKinley v BC Tel, 2001 SCC 3821CML Dowling v. Ontario (WSIB), 2004 CanLII 43692 (ON CA)22CVL - Retchless v Stanstead Wesleyan College, QCCS 199923Gradation des sanctions / Theorie des silos23CULPABLE CONDUCT:23Possible reasons to terminate for cause (roughly in order of seriousness):24NON-CULPABLE CONDUCT:24MITIGATING FACTORS affecting cause allegations:25MORAL DAMAGES:25CVL - Standard Broadcasting Corp. Ltd. c. Stewart (1994, QCCA)25CML Honda Canada Inc. v Keays, [2008] 2 SCC 36226EXAMPLES OF Termination Conduct Resulting in Moral Damages, from Wallace:26CVL Bristol-Myers Squibb Canada Inc. v Legros, 2005 QCCA 48 (Reasons of Mailhot J.A.)27CVL Sauve v Banque Laurentienne, 1998 CanLII 12592 (QC CA).27Punitive damages27Honda Canada Inc. v Keays, [2008] 2 RCS 362:27Administrative Suspension28CVL Industrial Life v Cabiakman, 2004 CSC 55.28CVL Amziane v Bell Mobilit, 2004 CanLII 4929 (QC CS).29Constructive dismissal29CVL & CML Farber v Cie Trust Royal, [1997] 1 SCR 846.29CML Wronko v Western Inventory Service Ltd., 2008 ONCA 327.30DUTY TO MITIGATE DAMAGES30CVL - Standard Radio Inc. c. Doudeau, 1994 CanLII 5840 (QC CA)31CML - Evans v Teamsters Local Union No. 31, 2008 SCC 20. (Read headnotes)31Resignation32CVL - Asphalte Desjardins inc. v CNT, 2013 QCCA 484. (Read reasons of Bich J.A.)33C) CONTRACT OF TRANSACTION 2631 ff CCQ 33CVL - Fontaine v Denis, 2002 CanLII 559 (QC CS).33D) SALE OF THE BUSINESS / EFFECTS ON THE EMPLOYMENT CONTRACT34Ivanhoe case35CVL - Tanguay v Service de pneus Auclair, REJB 2001-24135 (2001, QCCS).35CVL - Line Beaudry et al v Socit du Parc des les, 2006 QCCA 146736Sorel v Tomenson Saunders Whitehead Ltd., 1987 CanLII 154 (BC CA):36E) RESPECT OF PRIVACY37PIPEDA summary:37Quebec: CCQ 37CVL - Syndicat des travailleurs(euses) de Bridgestone Firestone de Joliette (CSN) v. Trudeau, 1999 CanLII 13295 (QC CA)38CVL - Syndicat des travailleuses et travailleurs du Pavillon St-Joseph CSN c. Laplante, 2011 QCCS 342638F) EMPLOYMENT STANDARDS39EMPLOYMENT STANDARDS IN QUEBEC AND THE OTHER PROVINCES39SCOPE OF ES STATUTES:39Upper Management Excluded40CVL - El-Mir v Monette, 2002 CanLII 626 (QC CS).41BASIC LABOUR STANDARDS (ARLS)41RECOURSES How to enforce your rights46Recourse against a prohibited practice s. 122 / 12447Lafrance et al. v. Commercial Photo Service Inc., [1980] 1 S.C.R. 536:48Hilton Qubec Lte v. Labour Court et al., [1980] 1 SCR 54848Remedies49Section 124:49PSYCHOLOGICAL HARASSMENT51Process: (s. 123.6 ff)51Definition of PH51ERs duties51REMEDIES52CLASS ACTIONS52THE CHARTER OF HUMAN RIGHTS AND FREEDOMS53Process:53CVL - Ville de Montral v Commission des droits de la personne, 2008 CSC 4854Bona Fide Occupational Requirements54WORKERS COMPENSATION56OHSA SCHEME56LATMD SCHEME57Indemnity58Process58

Employment Law

Me Franois Longpr

Fall 2013

A) BASIC PRINCIPLES OF A CONTRACT

1378-1385 CCQ (Nature and certain classes of contracts and Formation)

1378.A contract is an agreement of wills by which one or several persons obligate themselves to one or several other persons to perform a prestation.

Contracts may be divided into contracts of adhesion and contracts by mutual agreement, synallagmatic and unilateral contracts, onerous and gratuitous contracts, commutative and aleatory contracts, and contracts of instantaneous performance or of successive performance; they may also be consumer contracts.

1379.A contract of adhesion is a contract in which the essential stipulations were imposed or drawn up by one of the parties, on his behalf or upon his instructions, and were not negotiable.

Any contract that is not a contract of adhesion is a contract by mutual agreement. (Emp kt can be either)

1380.A contract is synallagmatic, or bilateral, when the parties obligate themselves reciprocally, each to the other, so that the obligation of one party is correlative to the obligation of the other.

When one party obligates himself to the other without any obligation on the part of the latter, the contract is unilateral.

1381.A contract is onerous when each party obtains an advantage in return for his obligation.

When one party obligates himself to the other for the benefit of the latter without obtaining any advantage in return, the contract is gratuitous.

1382.A contract is commutative when, at the time it is formed, the extent of the obligations of the parties and of the advantages obtained by them in return is certain and determinate.

When the extent of the obligations or of the advantages is uncertain, the contract is aleatory.

1383.Where the circumstances do not preclude the performance of the obligations of the parties at one single time, the contract is a contract of instantaneous performance.

Where the circumstances absolutely require that the obligations be performed at several different times or without interruption, the contract is a contract of successive performance.

1385.A contract is formed by the sole exchange of consents between persons having capacity to contract, unless, in addition, the law requires a particular form to be respected as a necessary condition of its formation, or unless the parties require the contract to take the form of a solemn agreement.

It is also of the essence of a contract that it have a cause and an object.

Consent of Minors CCQ Youre deemed an adult for employment purposes at age 14.

CCQ 17.A minor 14 years of age or over may give his consent alone to care not required by the state of his health; however the consent of the person having parental authority or of the tutor is required if the care entails a serious risk for the health of the minor and may cause him grave and permanent effects.

CCQ 156. A minor 14 years of age or over is deemed to be of full age for all acts pertaining to his employment or to the practice of his craft or profession.

84.2-84.7 ARLS (Capacity of minors) Special rules for minors regarding work hours, conditions:

84.2.No employer may have work performed by a child that is disproportionate to the child's capacity, or that is likely to be detrimental to the child's education, health or physical or moral development.

84.3.No employer may have work performed by a child under the age of 14 years without first obtaining the written consent of the holder of parental authority or the tutor.

The employer must preserve the written consent as if it were an entry required to be made in the registration system or register referred to in paragraph 3 of section 29.

84.4.No employer may have work performed during school hours by a child subject to compulsory school attendance.

84.5.An employer who has work performed by a child subject to compulsory school attendance must ensure that the child's work is scheduled so that the child is able to attend school during school hours.

84.6.No employer may have work performed by a child between 11 p.m. on any given day and 6 a.m. on the following day, except in the case of a child no longer subject to compulsory school attendance, in the case of newspaper deliveries, or in any other case determined by regulation of the Government.

84.7.An employer who has work performed by a child must schedule the work so that, having regard to the location of the child's family residence, the child may be at the family residence between 11 p.m. on any given day and 6 a.m. on the following day, except in the case of a child no longer subject to compulsory school attendance or in the cases, circumstances or periods or under the conditions determined by regulation of the Government.

Employment contract does NOT need to be written, but oral contracts are not of much value.

Should be written, lots of content is presumed (CCQ, statutes)

Always write up remuneration clauses and be as detailed as possible (5% commission, etc.)

Restrictive covenants must be written.

Special rules for minors (above CCQ, ARLS)

B) THE EMPLOYMENT CONTRACT

* Quebec: 2085 to 2097 CCQ, public order rules

2085.A contract of employment is a contract by which a person, the employee, undertakes for a limited period to do work for remuneration, according to the instructions and under the direction or control of another person, the employer.

2086.A contract of employment is for a fixed term or an indeterminate term.

2087.The employer is bound not only to allow the performance of the work agreed upon and to pay the remuneration fixed, but also to take any measures consistent with the nature of the work to protect the health, safety and dignity of the employee.

2088.The employee is bound not only to carry on his work with prudence and diligence, but also to act faithfully and honestly and not to use any confidential information he may obtain in carrying on or in the course of his work. // These obligations continue for a reasonable time after cessation of the contract, and permanently where the information concerns the reputation and private life of another person.

2089.The parties may stipulate in writing and in express terms that, even after the termination of the contract, the employee may neither compete with his employer nor participate in any capacity whatsoever in an enterprise which would then compete with him. // Such a stipulation shall be limited, however, as to time, place and type of employment, to whatever is necessary for the protection of the legitimate interests of the employer. // The burden of proof that the stipulation is valid is on the employer.

2090.A contract of employment is tacitly renewed for an indeterminate term where the employee continues to carry on his work for five days after the expiry of the term, without objection from the employer.

2091.Either party to a contract with an indeterminate term may terminate it by giving notice of termination to the other party. // The notice of termination shall be given in reasonable time, taking into account, in particular, the nature of the employment, the special circumstances in which it is carried on and the duration of the period of work.

2092.The employee may not renounce his right to obtain compensation for any injury he suffers where insufficient notice of termination is given or where the manner of resiliation is abusive.

2093.A contract of employment terminates upon the death of the employee. // Depending on the circumstances, it may also terminate upon the death of the employer.

2094.One of the parties may, for a serious reason, unilaterally resiliate the contract of employment without prior notice.

2095.An employer may not avail himself of a stipulation of non-competition if he has resiliated the contract without a serious reason or if he has himself given the employee such a reason for resiliating the contract.

2096.Upon termination of the contract, the employer shall furnish to the employee, at his request, a certificate of employment, showing only the nature and duration of the employment and indicating the identities of the parties.

2097.A contract of employment is not terminated by alienation of the enterprise or any change in its legal structure by way of amalgamation or otherwise. // The contract is binding on the successor of the employer.

CCQ 2085: Emp K must be limited period (i.e. not slavery)

Period can be determinate or indeterminate (usually indeterminate).

If hired to complete a particular project, its determinate.

* Common Law: finds its sources in the common law contract rules

What is employment?

Differences between the employment contract and the contract for services and the risks of entering into a contract for services (2098 CCQ).

An employee must be under instructions, direction, control of employer.

Employers supervisory role is crucial. Supervision creates ER-EE relationship

KEY: Facts will determine the issue, regardless of what the K says. Whats the essence of the relationship?

Relationship can develop into an ER-EE, even though youre still contractor on paper. ER will want you to be a contractor since its all deductible and no ER tax, health insurance, CSST, etc.

If you have your own EEs then youre probably not one yourself, but even thats not determinative. Depends on the level of control, but in reality judges consider many factors. Are you acting like a boss or a client?

ARLS art. 1

(10)employee means a person who works for an employer and who is entitled to a wage; this word also includes a worker who is a party to a contract, under which he or she

(i)undertakes to perform specified work for a person within the scope and in accordance with the methods and means determined by that person;

(ii)undertakes to furnish, for the carrying out of the contract, the material, equipment, raw materials or merchandise chosen by that person and to use them in the manner indicated by him or her; and

(iii)keeps, as remuneration, the amount remaining to him or her from the sum he has received in conformity with the contract, after deducting the expenses entailed in the performance of that contract;

Case law (Criteria to determine who is an employee)

CVL Ordre des arpenteurs gomtres du Qubec v Poulin, 1999 QCCS (paras 21 30)

Facts: P was fired and complained to Commission. Commission found he was an employee and was fired without cause.

Issue: Was Poulin an employee?

Held: Yes Commission was not unreasonable in finding he was an employee.

Reasoning:

Court outlines three criteria for employee status.

Cites ARLS art. 1 (10). Three criteria for an employee = (1) la prestation de travail;(2) l'existence d'un lien de subordination; (3) la rmunration.

*** Subordination is the most important element.*** (remuneration is of little importance)

The Commission had found that Poulin had no decision-making authority, and that he took directions and instructions directly from the Comit. All his inspections were conducted at their request and at locations they designated.

The fact that he based his work at home and in the field, and used his own car, was immaterial.

An employee can still be quite autonomous.

Its a highly factual issue to be determined case-by-case.

RATIO: Criteria to consider for employee status. Subordination is the crucial factor.

CVL Gendron v Denicourt, 1997 QC CS

Facts: G works for the etude des notaires. Employer changed his contract to say it was retaining his services as an independent contractor. He was later fired, and tried to claim termination without cause.

Issue: Was G an employee, or an independent contractor? Did he have a contract of employment or a contract for services?

Held: yes employee.

Reasoning:

Four criteria to decide whether EE or Independent Contractor These criteria determine if subordination exists:

1 Direction and Control Just because youre in a professional order doesnt mean that you have control. He received a weekly salary and his working conditions were entirely determined by others (hours of work, work assignments, remuneration, pricing, salary, etc.)

2 Ownership of the means of production He was given an office and equipment.

3 Risk Bearing He did not participate in the profits and didnt have any investments with the tude notarriel.

4 Integration with the operations of the enterprise Yes, he was integrated in the operations, but they were operations governed by others.

On the whole, he was subordinate to the organizations heads and was an employee.

Was he a senior manager? (If not, hes covered by LNT as well as CCQ.)

1 Hierarchy No, he was not at the top of the hierarchy.

2 Decisional Power He had none. **Most important criterion to determine if senior manager**

(i.e. Didnt make strategic decisions, didnt participate in budget or policy decisions, development plans, determining the companys mission, didnt control or evaluate human resources programs)

RATIO: Criteria to determine subordination -- if EE or Independent Contractor, or Senior Manager

CVL Rachel Emond v Motoneigistes du Lac St-Jean Est, 2005 QCCRT 207.

Facts: E worked at a gas station and restaurant for the Ski-Doo society. She had her own employee in the restaurant. E was fired and made a s. 124 complaint for wrongful dismissal. ER said he wasnt an EE. (Subsidiarily, said there was cause.)

Issue: Was E an employee?

Held: NO - contractor

Reasoning:

Commission cites LNT art. 1 (10). The definition of EE is broad and includes dependent contractors. Only independent contractors are excluded.:

L'lment fondamental qui distingue le salari de l'entrepreneur indpendant est la prsence d'un lien de subordination.

KEY: [25] Le lien de subordination se caractrise donc par une forme quelconque de contrle de l'employeur sur le salari et il s'apprcie en fonction de l'ensemble de la situation; le contexte dans sa globalit doit tre analys. Aux fins de cette analyse, les critres suivants sont habituellement retenus : le contrle sur l'excution du travail, la proprit des outils de travail, les chances de pertes ou de profits, l'obligation d'excution personnelle et l'intgration dans l'entreprise.

In this case, the Union gave them money for the gas and required receipts. But the Union had no control over the execution of the work. There was no regular supervision and E was highly autonomous. She could delegate tasks to anyone else without authorization (didnt have to execute the tasks herself). The gas service was tied to attracting customers to her nearby restaurant.

Thus, E was an independent contractor.

RATIO: Criteria for subordination applied.

Terms of contract

* Indeterminate vs. fixed term contract of employment (2086 CCQ)

- Indeterminate: Either party can terminate with reasonable notice.

- Determinate: Cannot terminate. Reasonable notice does not apply. If you commit to the term, you owe the whole. No termination without cause. Courts no longer allow you to insert a clause allow termination with notice. Must be either determinate or indeterminate not both. If theres a way out, its indeterm.

The fixed term will be void if it keeps renewing and you have a long notice period.

CCQ 2090 If fixed term continues for 5 extra days, it becomes indeterminate.

Probationary clauses

Must specify what probation means. (see below)

Four hurdles in QC: CCQ, Charter, 2092, LNT.

Discretionary probation must be limited.

Parry Sound CASE Probation must be in good faith, no abuse of rights, etc.

If termination is on a discriminatory ground, probation clause wont work.

Probation clauses attempt to get around CCQ 2092 Cannot renounce compensation for termination w/o notice. In QC, cannot forgo your right to CML severance beforehand these rights. (No 2092 equiv in CML.) (Even if Kt says 3 months notice, if you work a long time it still accrues.)

NOTE: Employ. Standard legis no minimums for less than 3 months service (LNT 82.1). Some view this as probation.

Obligations of the employer

- We will review all aspects of 2087 CCQ with particular emphasis on the obligation of the employer to protect the health, dignity and safety of the employee.

Quebec: 2087 CCQ

Employers obligs extend beyond allowing work performance.

Broad oblig to protect health, safety, dignity.

1 Must provide work. Layoff not an employment law concept, lack of work can be stipulated not to end ER-EE relation.

If layoff occurs, EE can claim its a fundamental breach. Suspension can be constructive dismissal. (Progressive discipline is taken to be implied in an Emp K.)

2 Must protect health and dignity. In QC, governed by s. 51 of OHSA. Also harassment, safe workplace, etc. Governed by other statutes. (below).

Common Law: duty to pay, keep records, provide work, provide a healthy and safe

work environment and other implied duties (fairness, provide references, etc.)

CVL Janzen v Platy Enterprises, [1989] 1 RCS 1252 (headnotes and Part VI)

Facts: J worked at a restaurant owned by P. Another employee sexually harassed her over the course of a month. He constantly criticized her work and acted as her supervisor even though he wasnt.

Issue: Is the ER responsible for sexual harassment of an EE by another EE?

Held: Yes liable.

Reasoning:

Sexual harassment is discriminatory and is does not need to be systemic.

The offending EE was acting in respect of his employment when he sexually harassed the appellants. His actions were clearly work related. His authority, which had been accorded to him by the respondent, and which derived from his control in running the restaurant and his purported ability to fire waitresses, gave him de facto power over the waitresses. P did not meet its responsibility to ensure that this power was not abused, even after the appellants made specific complaints.

RATIO: ER is liable for harassment of EEs by other EEs. This obligation arises form the ER-EE relationship itself. There is an obligation to protect the EEs dignity statutes and CCQ 2087.

Obligations of the employee

- What does it means to carry on work with prudence and diligence?

- What is the duty of loyalty? (avoid conflicts of interest, etc.)

- Post-employment obligations

In civil law ks EE does have a duty to look out for his own safety.

Case law has lots of continuity, but in Shafron you can see its still being developed.

Quebec: 2088 CCQ

Can include: duty to be honest, not to steal, no moonlighting, non-compete, etc.

Fiduciary duties for senior managers (OMalley)

Common law: implied duty of fidelity, the employee as a fiduciary

Re: Info I receive during the course of my work, three clauses in most Emp Ks:

1- Confidentiality

2- non-solicitation

3- non-competition

Rights of the parties in the absence of a restrictive covenant (employees duty of loyalty):

CONFIDENTIALITY / LOYALTY

Duty of Confidentiality General duty under 2088, but courts wont label something confidential if the ER hasnt been treating it as such, even if the K says its confidential.

Must be (1) treated as confidential; (2) reasonably confidential.

Professional knowledge: What is the property of ER & EE? Any employment involves a gain in general knowledge of the industry that can be used by EE for the benefit of society. (US: inevitable disclosure). Cant overly limit an EEs right to use the knowledge acquired.

CCQ 2088 involves temporality duty of confidentiality and loyalty is limited only for reasonable time, not permanently (unless personal info)

Appropriate length depends on nature of responsibility, job, etc.

Confidentiality clauses might want to deal with intellectual property, trademarks, patents, etc. There is a moral right to these unless explicitly waived.

One exception to confidentiality duty = whistleblowing legislation (CCQ 1472 considerations of general interest) esp. public health and safety, and criminal activity.

Fiduciary Duties of Senior Managers:CML Canada Aero v O'Malley, [1974] SCR 592 (from ONCA)

Facts: O and Z were directors with Canada Aero, working to secure a contract in Guyana. At the last moment, they took advantage of the opportunity and founded their own company, and got the same contract for themselves.

Issue: Did O have a fiduciary duty toward his ER? Did this duty persist after his emp K was terminated?

Held: Yes profits disgorged.

Reasoning:

Even though they had supervisors, they were senior directors and much more than servants. Thus they had fiduciary duties, which normally consist of loyalty, good faith and avoidance of a conflict of duty and self-interest.

A director or a senior is precluded from obtaining for himself, either secretly or without the approval, any property or business advantage either belonging to the company or for which it has been negotiating; and especially is this so where the director or officer is a participant in the negotiations on behalf of the company.

A strict ethic in this area of the law disqualifies a director or senior officer from usurping for himself or diverting to another person or company with whom or with which he is associated a maturing business opportunity which his company is actively pursuing; he is also precluded from so acting even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself the opportunity sought by the company, or where it was his position with the company rather than a fresh initiative that led him to the opportunity which he later acquired.

RATIO: Senior management have fiduciary duties.

Comments: CML formal distinction between (1) fiduciary duties; and (2) lower duty of loyalty. Senior managers have a high bar, as applied in this case, and its informed by trust law. In QC, there is no trust law per se, but CCQ 2088 judges will impose a higher bar for senior managers. In both CVL & CML, there are two levels of duty of loyalty.

Duty of Loyalty:CVL Concentrs scientifiques Belisle v Lyrco Nutrition, 2007 QCCA 676

Just paras 37-44:

What is implied by CCQ 2088, absent a specific clause?

Bich J interprets CCQ 2088s duty of loyalty.

During Emp K its a heavy burden (like OMalley) (first para of 2088)

After Emp K, what are the duties of loyalty? (second para of 2088)

There must be clear limits to what is implied, absent a specific clause, in a post-contractual duty of loyalty.

Not the same as non-competition. Competition is not prevented by default.

Solicitation of former clients is not implied prohibited, but only bad faith stealing of customers.

Factors to consider: Nature of position and contract, nature of business, conditions and EEs place on the level of hierarchy, reasons for termination (why?), nature of the market in the business.

Can only last for a reasonable time.

But, repeated violations of duty of loyalty during the contract can be a serious reason for termination under CCQ 2094, even if no prejudice caused.

Post-contract, the ER can try to get an injunction, prevent the violation, seek damages if there is injury, as the case may be.

Non-competition and non-solicitation agreements:

NON-SOLICITATION CLAUSES

Non-solicitation = poaching old ERs current clients, customers

Non-competition = any potential clients, customers

Subject to Bichs limited interpretation of CCQ 2088 in Concentrs.

Solicitation needs to be an insistent, deliberate act (not just ads in the paper). Must explicitly ask for their business to follow you, and need some direct evidence.

Also, limits on duration and scope (CCQ 2089) - MAX 36 months, but usu. 6 or 12 mths.

Question: How long will it take ER to protect / rebuild the relationship with clients? How many clients are there, etc.?

Scope: Must be explicit. If it includes subsidiaries of parent company, must say so. Cannot say will not speak to former customers for any reason too broad and will be struck down and replaced by CCQ 2088.

NON-COMPETITION CLAUSES

e.g. Cant participate in the market at all for a year. Sometimes offer payment as compensation.

CML judges: freedom of trade is essential, but ERs need a degree of protection.

CVL: similar concerns, same analysis. Apply CCQ 2089 while balancing societal and personal concerns

*** NON-COMPETE MUST BE IN WRITING

CCQ 2089:

(1) limited in time and place;

(2) whatever is necessary;

(3) legitimate interests;

(4) burden of proof on ER

Must be precise Cant say all of Quebec. Must show why this is necessary to protect legitimate interest.

What if clause is limited but business expanded? Big problem with internet business If clause no good, cant force them to sign a better one later (CML no consideration)

(ASK: how many ees? whats the market structure? whats ees role? etc.)

Territory must be clearly defined (Shafron)

Scope Judges are less picky here. Ask: (1) What does company do? (2) What does EE do for company?

Circumscribe clause to whats necessary (look at mission statement, etc.)

Some name specific competitors.

Remedy? Need to show you lose business because of the breach need proof, so rare to sue for damages; usually as for injunction (provisional/interim, interlocutory, permanent)

Delays are long, so interim relief is crucial, then settle it out of court.

Injunctions: CCP 751 ff. interim judgment requires urgency, renew every 10 days or get a safeguard order

NEED: Appearance of right; serious/irreparable harm; balance of inconvenience; urgency.

NOTE: CCQ 2095 ER cannot rely on non-compete if he terminates w/o cause.

Case Law:

CVL Cameron c. Canadian Factors, 1971 SCR 148

Facts: C signed an employment contract with CF. In it he promised (1) for five years after leaving the company to not steal clients from CF and (2) that for five years after leaving the company he would not work in a finance or factoring company or with any competitor of CF or with any prospect with whom CF was negotiating anywhere in Canada. If he violated that contract, he accepted a penalty of $10,000. C resigned from his post and three weeks later started working for a competitor of CF and also stole clients.

Issue: (1) Is the non-compete clause valid? (2) If not, what effect does this have on the rest of the contract?

Holding: (1) No (2) Entire contract is null.

Reasoning:

Majority: The contracts wide scope, long duration and pan-Canadian application (while CF only operates in Qubec) show that it goes far beyond legitimate protection of the employers interests. Thus it is invalid.

Employee restraint covenants may be held invalid because of their unreasonable duration or because of their unreasonable territorial ambit, having regard in each respect to the range of businesses or activities covered by the restraining covenants. The principle raised in the present case is the application of a rule of reason to a balancing of the interests of the employer and the erstwhile employee in respect of the need of the former for protection of his business and of the latter for economic mobility, in the light of a policy that discourages limitations on personal freedom, and, specifically, on freedom of economic or employment opportunity. On this phase of the case, the five year prohibition is quite unreasonable and hence contrary to public order.

As to paragraph (3), it is offensive to the principle of public order because it exceeds, in its Canada-wide ambit, any reasonable requirement of the plaintiff for the protection of its business interests which, on the record, are centered in the province of Quebec.

Dissent: Such a clause is only invalid if it actually impairs freedom.

Ratio: Excessive non-competition clauses will be harshly policed by the courts, to the extent that they render entire contracts invalid.

CML Elsley v JG Collins Insurance Agencies Ltd., [1978] 2 SCR 916 (from ONCA)

Facts: Business was sold and manager signed contract saying he wouldnt compete and after employment ended wouldnt do so for 5 years. He resigned 17 years later and started his own business. Said it was unreasonably broad and shouldve been limited to non-solicitation of particular clients. (There was also an agreement of sale that imposed a non-compete condition.)

Issue: Was the non-competition clause valid?

Held: Yes - valid

Reasoning:

Must balance societal interests and private interests. Rigorous test should be applied.

In an exceptional case such as this, the nature of the employment may justify a covenant prohibiting an employee not only from soliciting customers, but also from establishing his own business or working for others so as to be likely to appropriate the employers trade connection through his acquaintance with the employers customers.

The EE was such a key, senior employee that a broad non-compete was valid.

RATIO: Nature of employment must be considered to determine valid scope of non-competition under CCQ 2089.

** Today this probably wouldnt work ** -- 6 months usually safe.

CML Shafron v KRG Insurance Brokers, 2009 SCC 6 (headnotes and paras 14-32)

Facts: Guy signed non-compete that said Metropolitan City of Vancouver, which doesnt exist. CA applied the doctrine of notional severance to read it

Issue: Was the non-competition clause valid?

Held: No - invalid

Reasoning:

RATIO:

The term Metropolitan City of Vancouver was uncertain and ambiguous.

Nothing demonstrates a mutual understanding of the parties at the time they entered into the contract as to what geographic area the restrictive covenant covered and it was inappropriate for the Court of Appeal to rewrite the covenant. In this case, neither bluepencil severance nor rectification can be applied to rewrite the restrictive covenant. Notional severance cannot be applied to a restrictive covenant. Also, the findings that S was not a fiduciary and did not abuse confidential information belonging to KRG Western are not pure questions of law. These findings were based on evidence at trial and must stand in the absence of any palpable and overriding error by the trial judge.

KEY: The EE cant learn what the content is in court.

RATIO: Must be clear as to scope. EE must have certainty. Should use legal territory descriptions (Island of Montreal, etc.) Badly drafted non-compete clause will not stand.

NOTE: Judges will say a non-solicitation clause is OK but non-compete is too vague treat them separately.

CVL Lange Co. c. Platt, 1973 QCCA 1068

RATIO:

Protection of company secrets must be balanced with the public interest in not letting peoples skills and knowledge lie dormant, and the individuals interest in earning a living.

CML Reservoir Group Partnership v 1304613 Ontario Ltd, [2007] OJ No 202

FACTS: L was principal along with H in partnership agreement between their two insurance companies. It contained a non-competition clause. L resigned and joined another company and by the next year five clients had left for his new company. H and Reservoir Group brought action for injunction and damages.

ISSUE: Did L breach the non-competition clause?

HELD: Yes

REASONING:

The non-competition clause was signed by L personally as well as the company and so it was binding on him personally even after he left. The fact that the company dissolved and that his role in the partnership was replace by someone else was contemplated

A non- competition clause is a more drastic weapon in an employer's arsenal and generally will not be enforced if a non- solicitation clause would adequately protect an employer's interest. In this case it was a hybrid clause containing aspects of both, and it was reasonable in the circumstances. They were were reasonably related, in scope, duration and geographic area, to the legitimate interest of Reservoir in having time following L's resignation to retain the loyalty of its clients who had developed strong ties with L.

L breached his contractual and fiduciary obligations to Reservoir by accepting business from Reservoir's existing customers. He also breached his obligations by soliciting Reservoir's existing customers. Solicitation is not limited to such blunt techniques as cold calling or sending out letters of solicitation. Maintaining regular communications and warm relationships with customers constituted a form of solicitation, albeit of a highly sophisticated and professional kind. Finally, he breached his obligations under section 13(b) (ii) of the GPA not to have any communications or agreements with a competitor on prices, terms, sales policies or customer selection or classifications.

RATIO:

Restrictive covenants

Non-competition and non-solicitation agreements

Rights of the parties in the absence of a restrictive covenant (employees duty of loyalty)

Employer's recourses

Quebec: 2089, 2095 CCQ

Common law: development of hybrid clauses:

. Tacit renewal

Quebec: 2090 CCQ

Common law: To be discussed.

TERMINATION OF THE EMPLOYMENT CONTRACT

Situations leading to termination of employment:

Resignation (dmission)

Constructive dismissal (congdiement dguis)

Dismissal (congdiement)

Termination (licenciement)

Distinction between termination and lay-off

1 Termination agreement:

ER needs cause or must give notice, and EE doesnt want to resign b/c wont get EI. So, sometimes you can cut a deal. Pay you $$ and you leave, in lieu of discipline. (Put in writing!)

Issues: Courts will not enforce if unconscionable. E.g. EEs financial problems taken advantage of, not fair, under pressure, couldnt consult counsel (esp in CML).

(Kt must be valid according to normal rules CCQ 1378, etc. no lesion, error, fear, etc.)

2 Fixed Term Agreement

Only for limited duration of time, or a project. Not usually desirable since ER owes the whole.

Work-around: Youre hired to replace Jane and its expected to last a year, but law allows her to return in certain conditions.

Not many EEs will want this. If term cut short, EE has oblig to mitigate; some ERs will take the risk.

If EE keeps working after the term for 5 days, then CCQ 2090. (CML same, but # of days not given)

CCQ 2092 Cant renounce right to indemnity.

Termination and Probationary Periods

A trial period for new EE subject to CCQ 2092, public order.

** Key: ER should tell the EE if theyre not happy. Keep notes, periodic check-ins, reviews.

Quebec: 82.1 ARLS and 2092 CCQ

82.1.Section 82 [i.e. notice period] does not apply to an employee

(1)who has less than three months of uninterrupted service; []

Unsettled whether notice period applies to probation period (both cases below say YES).

Public order weigh the circumstances.

Common law: concept of near cause/ fair and reasonable determination

No 2092 problem in CML, so its clearer judges go with wording of K.

Courts will decide whether term. was justified. Onus on ER despite the probation clause.

Need a cause but not formally just cause.

Reasonable unsuitability for the job (Ritchie). EE is owed reasonable chance to show suitability.

CVL Proulx v Communications Voir, 2002 CanLII 16298 (QCCS). (Read paras 1 32)

Facts: K said probation period for 3 months from the date of hiring. BUT also agreed to give 6 months indemnity if terminated without cause during the first year. Proulx was hired on Dec 4 and fired on Jan 30. No cause given, but a letter sent saying they were unhappy with his performance and attitude, and that they considered a meeting on Jan 15 sufficient warning of their concerns.

Issue: Although he was terminated during probation, is Proulx owed the indemnity upon departure? Does he have a right to moral damages?

Held: Yes; No.

Reasoning:

On the indemnity, the K was clear. The indemnity of 6 months applies during the probation period. If it didnt apply they shouldve said so explicitly.

Moral damages not owed because the manner of termination was not abusive or humiliating.

RATIO: Nothing prevents the granting of an indemnity on departure during a probation period, especially if its in the K. This is really about Kual interpretation.

CVL Merlitti v Excel Cargo, 2002 CanLII 41011 (QC CS) (Read paras 1 50)

Facts: M worked for another company for 26 years. He accepted a new position with Excel, with a guaranteed promotion to director general after he was acclimatised. Probation period of 3 months that said the ER could dismiss him without cause and without warning during probation. He started work on May 3. On Sept 30 he was dismissed, but offered the earlier lower position with lower pay, which he refused.

Issues:

1 Was M still on probation when he was fired?

2 Was the probation clause and the notice period valid under CCQ 2092?

3 What was a reasonable notice period?

4 Is M owed moral damages?

Held: No;

Reasoning:

- ER said probation period started when he became director general on July 1. But the normal practice is that a probation period begins to run when the K comes into effect. Court takes judicial notice of this. The point of a written contract is to not depend on understood conditions. The contract does not indicate that it deviates from the regular practice.

Even if the K were ambiguous (which its not), any doubt would be resolved in favour of the EE.

Even if the probation period WERE in force, its possible the ER would owe reasonable notice under CCQ 2092, since some think that that 2092 applies to probation periods too.

Reasonable notice owed: 8 months. (Factors: length of time with ER, 2091, Ms age, the fact he was persuaded to leave another company)

Moral damages: Not an abuse of right, but the manner of dismissal WAS embarrassing and humiliating (it was in the presence of colleagues during a tele-conference).

In total, owed notice period (56K) + moral damages (3K)

RATIO: CCQ 2092 may apply to probation periods. Probation period normally runs from when K comes into effect.

Comment: Judge emphasizes that an employment K is not a K like other Ks. An ER who treats it as such makes a grave error of interpretation.

CML Ritchie v. Intercontinental Packers Ltd., 1982 CarswellSask 29

Facts: R hired with 6 months probation, subject to satisfactory job performance. He was fired after 5 months, with 2 weeks pay in lieu of notice. ER said it was due to reorganization but later said in evidence that it was because he wasnt suitable. He was aggressive and hard to deal with.

Issue: Was R wrongfully dismissed?

Held: No

Reasoning:

Probationary EEs are being tested for suitability. ER may consider issues such as character and compatibility, and ability to work with others, as well as performance. Onus is on ER to prove that he acted fairly and with reasonable diligence in determining the employee's suitability.

EE must have opportunity to meet standards set by the ER, including not only a testing of his skills, but also his ability to work in harmony with others, his potential usefulness to the employer in the future, and such other factors as the employer deems essential to the viable performance of the position. As for the employer, he cannot be held liable if his assessment of the probationary employee's suitability for the job is based on such criteria and a fair and reasonable determination of the question. In my opinion the law does not require the employer to do anything more. [14]

RATIO: CML requires a a fair and reasonable determination of EEs suitability during probation period.

NOTICE REQUIREMENTS

ER or EE can end the relationship if notice is given.

Working notice presumed, but can be pay in lieu.

Must give working notice or make whole by $$ in lieu

CML wrongful dismissal = not adequate notice.

Notice allows EE to mitigate and look for other work. Can offer retention bonus if you need them to stay.

Notice is always signed & agreed to, so its not damages.

*** QC lawyers first question: More or less than 2 years service??

In Quebec, no termination without cause if more than 2 years service (s. 124 ARLS) Public Order

Quebec:

2091 CCQ Notice of termination

o Relationship of CCQ to ARLS and minimum requirements (s.82ff.)

** NOTE: Statutory notice still owed even if EE finds new job right away.

LNT 82 gives minimum amount, which is incorporated into cml/2091 reasonable notice.

CML reasonable notice = presumed intent of parties.

CVL: CCQ 2091

LNT 82. The employer must give written notice to an employee before terminating his contract of employment or laying him off for six months or more. //

The notice shall be of one week if the employee is credited with less than one year of uninterrupted service, two weeks if he is credited with one year to five years of uninterrupted service, four weeks if he is credited with five years to ten years of uninterrupted service and eight weeks if he is credited with ten years or more of uninterrupted service. //

A notice of termination of employment given to an employee during the period when he is laid off is absolutely null, except in the case of employment that usually lasts for not more than six months each year due to the influence of the seasons. //

This section does not deprive an employee of a right granted to him under another Act.

EE sues for LNT minimums for free, so ER often wont bother hiring a lawyer and fighting in civil court.

But, its often not worth it for EE to sue for the rest under CCQ.

ER cant change working conditions during notice period.

When is statutory notice NOT required?

Just cause/ serious reason (CCQ 2094)

seasonal work

temporary layoff

unforeseeable events (ice storm, fire, etc.)

strikes/lockouts

LNT 82.1: No statutory notice if:

less than 3 months service

fixed term or specific undertaking

serious fault

superior force

Layoffs

No inherent right to a layoff Not a statutory right, but requires agreement.

LNT 83 If layoff for > 6 months, indemnity owed. If indeterminate, indemnity deferred 6 months. (Dont count the 6 months when calculating the indemnity.)

Statutory severance basically included in notice. If more than 5 years of service in ON, if ERs payroll is > $2.5M, or let 50+ EEs go in 6 months, then severance is 1 week per years of service up to 26 weeks.

- Needs to be a cheque (no working severance)

In QC, you get minimum notice under LNT 82, plus reasonable notice under CCQ 2091-2.

Must consider age, position, market, etc.

** Good idea to include in K some language on what reasonable notice is (average is 4 weeks per year of service)

CCQ 2092: EE cannot renounce $$ for no reasonable notice in advance (public order).

After termination takes place he can take a settlement.

IN CML, Ks language on notice usually prevails but courts will strike down.

If unclear, read in EEs favour.

Where EE has not consented or had sufficient of notice of changes to manual, etc.

Where EEs duties have evolved over time from whats in the K (position held is relevant..)

Implied term of good faith / fairness.

*** UNIQUE TO ONTARIO: Where notice in K is less than stat minimums, courts will strike the whole clause and determine reasonable notice themselves. (Machtinger v HOJ Industries almost punitive)

(QC has CCQ 2092 instead).

ER can offer: (1) lump-sum payout, (2) working notice, (3) salary continuance.

#3 allows clawback (e.g. if you get a new job, Ill pay 50% of whats left, )

If you get a new job during working notice, ERs obligations cease. (might offer retention bonus)

ONTARIO possibilities:

1 K says nothing on notice EE can ask court for RN

2 Ks language is below mins Court will strike and replace

3 ER says youll only get minimums OK

4 Parties agree to something more generous

QUEBEC possibilities:

1 K says nothing ER must meet both LNT & CCQ 2094

2 language is below mins Not OK

3 ER says youll only get LNT Not OK

4 ER offers more than LNT can still be insufficient due to CCQ, even if EE agrees.

How to determine duration of notice:

CCQ 2091: consider: the nature of the employment, the special circumstances in which it is carried on and the duration of the period of work.

Point is that EE shouldnt bear the cost of ERs decision to terminate w/o cause.

circumstances = did they leave another job? intention of parties? difficulty finding other job?

Similar in CVL & CML look at years of service, position/duties, age, salary, job market, etc. Also, did EE leave another good job to come to you, etc.? (might increase what ER owes)

Bardal v. Globe & Mail Ltd., [1960] O.W.N. 253 (H.C.J.) at p. 255: There could be no catalogue laid down as to what was reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant.

** ER can owe more notice if ER represented that youd be there for a long time

MAX is 24 months, but youll probably never get more than 18 months.

Normal range of notice (w/o exceptional circumstances):

blue collar (