by Barbara A. McIsaac, Helen Gray, and Daniel Pugen

An employee’s expectation of privacy in the workplace is a big issue these days, especially with respect to the use of company computers.

Employers are often faced with questions like these: Is an employee entitled to privacy over e-mail and other data created and stored on a computer used for work or personal purposes? What rights does an employer have to access that information? The answer to these questions can depend on whether the employee has a reasonable expectation of privacy over the information stored on a given computer.

What is a reasonable expectation of privacy?
Two criteria must be established to show a reasonable expectation of privacy. First, an employee must subjectively expect some level of privacy, which is usually demonstrated through steps taken to protect the information in question, such as making a password or moving the data off company servers. Second, the employee’s expectation of privacy must be objectively reasonable.

Determining whether these criteria are present involves asking key questions such as:

• Who owns the physical equipment on which the data is stored?
• Has the data been transferred to the employer’s system or network?
• Does the employer have an Internet or computer policy that provides for employer access to information?
• How is the data arranged on the computer? Is employer data segregated from other material on the employee’s personal computer?
• Has the employee attempted to password-protect his or her computer and/or selected files?

Employer’s ownership of the computer
An employer’s ownership of a computer used by an employee for work purposes is strong evidence that an employee does not have a reasonable expectation of privacy over data stored on that computer or other data generated by personal use.

Several Canadian arbitrators have ruled that employees who use an employer system to send and receive e-mail messages and to post messages on discussion boards have no right to privacy. It has been held that an employee cannot expect to have any right of privacy when using the employer’s e-mail and Internet facilities.

Ownership is such a significant factor that in one case the arbitrator found that where a terminated employee had used the employer-owned laptop both at home and at work to access his Hotmail e-mail account, any reasonable expectation of privacy over his Hotmail e-mail account was trumped by the employer’s right to search its own property.

Employer policies
Another significant factor in determining if a reasonable expectation of privacy exists is whether the employer has a policy governing e-mail and Internet use. In one case, the existence of an employer’s policy against the use of the e-mail system for unacceptable purposes, and a clear “log-on warning” that the system would be monitored in accordance with the policy, was found to undermine an employee’s expectation of privacy.
Employee’s ownership of the computer

If the employee owns the computer personally but uses it for work purposes, does a reasonable expectation of privacy exist with respect to the data stored on that computer? In Canada, the answer to this question is unclear.

In the United States, certain decisions have favored an employer’s right of access where an expectation of privacy is not objectively reasonable. For example, there was no reasonable expectation of privacy over the files stored on an individual’s own laptop that had been connected to a military base network with a shared drive.

Similarly, there was no reasonable expectation of privacy over the information stored on an employee’s computer where an employee voluntarily brought his own computer to work to use for work purposes and took no steps to password-protect the data.

Lessons for employers
Many employers wish to monitor employee use of computers and networks for a variety of legitimate reasons, including preventing the collection and dissemination of improper/illegal material (e.g. pornography) and preventing employee theft of time associated with prolonged personal use of the Internet and e-mail.

Even though there is some uncertainty in the law in Canada, there are some simple steps that can be taken to help prevent employees from claiming a reasonable expectation of privacy:

• Employers should implement clear-cut and comprehensive policies governing their right to access data and systems. If an employer does not want an employee to have a reasonable expectation of privacy over any data found on a computer, then this should be clearly stated.
• Employees should be required to acknowledge that they have read, understood, and agree to abide by the policies.
• “Log-on” or “I Agree” statements and acknowledgements, which must be accepted before the computer or Internet can be used, can be a useful tool in this regard.
• Employers should also make clear that copies of employer-owned data remain the employer’s property regardless of where the data is stored.
• Finally, employers may manage employee privacy expectations over information stored on laptops by providing company laptops to employees for offsite work, so that, if necessary, the employer can justify a search of the computer (because of its ownership interest).

By Simon-Pierre Hébert and Rachel Ravary

If you have employees in Québec, then you are likely familiar with the prohibition against “psychological harassment” that was added to the Act Respecting Labour Standards in 2004.

Managers initially reacted to the new provisions with a lot of apprehension, fearing that a disgruntled employee could turn any kind of employee ‘management’ into a psychological harassment complaint. And rightly so — because, until recently, there was no real guidance as to what exactly “psychological harassment” meant.

Now that the first wave of complaints has finally wound itself through the administrative process, we can draw some clear lines about what psychological harassment is, and what it is not, and finally give managers some comfort that they won’t be punished for simply exercising their managerial rights.

What does “psychological harassment” mean?
If you want the legal answer, psychological harassment is defined in the Act as “any vexatious behaviour in the form of repeated and hostile or unwanted conduct, verbal comments, actions or gestures, that affects an employee’s dignity or psychological or physical integrity and that results in a harmful work environment for the employee.” The Act also says that psychological harassment can be the result of a single serious incident, if it has a lasting harmful effect on the employee.

The experience so far
The statistics that have come out so far are encouraging: 97% of psychological harassment complaints are settled either at the investigation stage or through early mediation, and very few ever end up in a formal hearing.

That said, for those complaints that are heard employers must be prepared for a long haul. Experience has shown that employers have to devote significant time and resources to handling complaints, and they often require several days of hearing. It can also take a great deal of time and attention for a good work environment to be restored after a complaint has been filed.

Where is the line between management and harassment
As noted earlier, some employers have been concerned that the normal exercise of their management rights may lead to claims of psychological harassment. The decisions rendered to date have now made it clear that employers still have the right to manage their businesses and their employees – but they cannot do so arbitrarily or in a way that is abusive or harmful to the employee. The decisions have also made a clear distinction between legitimate performance management and psychological harassment.

While it is clear that the provisions on psychological harassment do not trump management rights, they do put some limits on them. Understanding these limits will help employers reduce the risk of complaints and improve their work environments.

Lessons for employers
Based on experience to date, here are some tips on how to prevent regular employee management from turning into psychological harassment complaints:

1. When criticizing an employee’s performance, make sure to also provide the support necessary to correct the problems.
2. Try as much as possible to treat all employees similarly when it comes to disciplinary measures for similar behaviour. Don’t single people out!
3. Take the same approach when handling performance issues. Only require an employee to provide the same level of performance as you expect and accept from other employees.
4. When commenting on performance, make sure your comments are both legitimate and respectful. Do not make comments in a disdainful way or in a way that humiliates the employee.
5. Make your managers aware of what is and is not permissible, as they are the main targets of psychological harassment complaints. Taking the time to train managers properly is an investment that will reap many benefits in labour relations, productivity and other areas.

If you have ever thought it wouldn’t be worth the cost to investigate an employee’s criminal misconduct, the recent decision in Canada Safeway Limited v. Brown, [2007] B.C.J. No. 2400 (S.C.) might make you reconsider. Not only was the employee ordered to pay back the money she stole, the judge tacked on six times that amount to cover the costs incurred by the employer in investigating and prosecuting the employee.

Facts
As a cashier and customer service representative for Canada Safeway, a major grocery store chain in Western Canada, Sharon Brown had unsupervised access to the company’s cash and accounting records. When Safeway began experiencing cash and inventory shortages, it installed surveillance equipment and assigned its security officer to investigate. Lo and behold, Safeway discovered that Ms. Brown was processing fraudulent refunds and pocketing the cash.

Ms. Brown was criminally charged with theft over $5,000 and, in the end, pleaded guilty to theft under $5,000. Safeway participated in the police investigation and Crown prosecution.

Safeway incurred huge costs, both in terms of cash expenditures for installing the surveillance cameras and human resources dedicated to conducting the investigation and assisting the police and prosecution in the criminal case. Safeway subsequently launched a civil lawsuit against Ms. Brown to recover the cash she had stolen, as well as the related costs.

Damages award
Based on Safeway’s investigation and accounting records, the judge accepted its claim that Ms. Brown had stolen approximately $6,000 and ordered her to repay Safeway that amount in damages. Safeway also claimed its expenses for the security officer’s travel to the grocery store from his headquarters and hours lost due to the internal and police investigation. Safeway calculated these losses taking into consideration the full salary and benefit costs of the employees involved in the investigation.

For her part, Ms. Brown argued that compensatory damages should not include costs incurred in assisting the police and Crown with the prosecution, especially since she confessed to Safeway after the internal investigation.

The judge agreed with Safeway and held that compensating an employer for the use of its corporate resources to investigate a theft and to assist the police and prosecution is “fair, appropriate and not too remote.” In the end, in addition to an order to repay the stolen funds, the judge awarded Safeway an additional $24,512.26 in consequential damages for expenses it incurred in the criminal investigation and prosecution of Ms. Brown.

Lessons for employers
Employers often choose not to act on their suspicions about employee misconduct because of the costs of investigation and the burden it places on other employees.  However, there is now one more good reason to go ahead with an investigation. Not only will it allow you to identify weaknesses in your internal anti-crime processes and procedures and put better safeguards in place and allow you to gather evidence to use against the employee in either a criminal or civil proceeding, you also may in the end be able to recover the costs of the investigation from the thieves themselves.

Business transactions won’t eliminate union bargaining rights in Canada

by Daniel Pugen

Labor laws in Canada provide that the purchaser of a business will generally “take over” any collective bargaining agreements (CBAs) between a union and the vendor. The purchaser becomes the “successor employer” and becomes bound by the vendor’s existing CBAs. In this situation, the union continues to represent unionized employees after the sale or transfer of the business to the new owners or operators.

In addition to the continuation of bargaining rights after a sale or transfer, two companies that are under “common control or direction” can be held to constitute a single or common employer for labor relations purposes. Such a finding can mean that the union’s bargaining unit encompasses employees of both companies.

As a result, in the face of a corporate transaction that could eliminate or weaken a unionized workforce, unions will often file “sucessorship” or “common employer” applications in order to protect their bargaining rights and to ensure the continued representation of affected employees.

In a case decided by the Alberta Labour Relations Board (the Board), which later meandered its way up through the courts, a union filed such applications and was successful in arguing that it should continue to represent employees despite the closure of the facility and the contracting out of certain work to another company.

Facts
Finning International is a Canadian-based, international distributor of mobile heavy equipment for mining, forestry, agriculture, construction, and other industries. Finning Canada, a division of Finning International, sells and services equipment in Western Canada and the Canadian North.

The union represented production employees working in Finning Canada’s Component Rebuild Centre (CRC). There, unionized employees repaired and restored worn or damaged equipment components for Finning’s customers.

On June 23, 2004, Finning International announced it would close the CRC, lay off approximately 160 unionized employees and contract out its remanufacturing work to another company, OEM Remanufacturing Company Inc. (OEM).

A number of points about the transaction between Finning International and OEM are noteworthy:

1. OEM established itself in the remanufacturing industry using Finning International’s money.
2. Finning International financed 100 percent of the cost of building OEM’s new plant.
3. Finning International was the 100 percent beneficial owner of OEM.
4. The building and operation of the new plant was the object of a joint venture between Finning International and the owner of OEM, Gerald McLaughlan.
5. Finning International possessed legal power over the operation of OEM through legal rights it possessed as a joint venturer, financier, or both (e.g. it could block certain business decisions at the board of directors level).
6. While day-to-day operations of OEM were vested with a local management team, high-level strategic decisions were vetted by Finning International.

Labor board finding
The Board ruled that OEM was a successor to Finning Canada. It also ruled that Finning International and OEM constituted a single or common employer. It relied on the following:

1. Finning International’s control over OEM’s management through the terms of a Joint Venture Agreement, which (among other things) provided Finning International with a say over high-level strategic decisions and gave Finning International a “blocking vote” on the OEM board of directors.
2. The $87 million in capital Finning International provided for OEM.
3. Finning International’s ownership of all the common shares of OEM.
4. Forty-nine employees were hired from Finning Canada to work at OEM.
5. Finning International provided the funding for OEM to acquire other remanufacturing companies (whose work was absorbed into OEM) in an operational relationship.

Although the decision was reversed by the Alberta Court of Queen’s Bench, the Alberta Court of Appeal restored the Board’s decision. The Alberta Court of Appeal supported the board’s approach, which involved a dissection of the transaction in order to determine the “closeness” of the parties to the transaction and the “real” relationship between the purchaser, vendor, the employees, and the business undertaking.

The Alberta Court of Appeal reminded labor boards that they should look closely at corporate restructurings that weaken a union’s bargaining rights:

The focus should be on the realities of the collective bargaining framework and the true effect of the overall transaction. The complexity of modern business transactions warrants such an inquiry, and labour tribunals must be wary of creative corporate restructuring or reorganizations that undermine collective bargaining rights.

[…]

The creation of myriads of holding companies, corporate divisions, and other ownership structures should not be a factor against a successorship finding in the face of the underlying commercial realities at play.

Lessons for employers
Courts and labor boards are clearly becoming more knowledgeable about sophisticated corporate restructuring schemes, especially if they seem to be aimed at evading collective bargaining rights. Employers must keep in mind that courts and labor boards will focus on the realities of the collective bargaining framework and the true effect of the overall transaction in determining whether a union’s bargaining rights should continue.

This decision serves as a reminder of the importance of preparing for the consequences that a corporate transaction may have on bargaining rights. The risk of applications by unions for successor rights or common employer declarations may be taken into account and perhaps avoided. Employers are advised to take extra precautions when entering into transactions with related companies.

Not sweating the small stuff can be expensive

by Donovan Plomp

When employees are terminated in Canada, unless they have been fired for “cause” (such as theft) employers have an obligation to provide common law “reasonable notice” of termination or pay in lieu of reasonable notice.

Unless the amount of reasonable notice is clearly set out in an employment agreement, it will be assessed in a court action after an employee has been terminated. The courts consider factors such as age, length of service, the nature of the position, and the likelihood of the employee finding reemployment in deciding how much reasonable notice to award.

Previous decisions provide some guidance, but each case is decided on its own facts. Thus, the parties often will negotiate to obtain a settlement most favorable to their interests. The majority of these cases settle without ever reaching court.

In most terminations, common law reasonable notice is the biggest potential liability for employers. Employers also can be liable for termination and statutory severance pay, but it’s usually much less than common law reasonable notice. Employers must also issue a Record of Employment (ROE) under Canada’s Employment Insurance Act after termination.

The ROE and statutory severance are “the small stuff” that employers might overlook or prefer to deal with later as part of a settlement of all employment related claims. This can be dangerous if negotiations fail and the matter goes to court.

Employees have argued that an employer’s failure to issue an ROE or pay statutory severance is evidence that an employer acted in bad faith, which can result in substantially increased damages awards. Developing a checklist can help ensure that you meet your statutory obligations when terminating an employee. We suggest employers consider the following points:

Statutory payments

• Is the employee entitled to statutory notice or termination pay in lieu of notice? Consult the applicable employment standards legislation to determine what termination pay is payable to the employee as of the date of termination.
• Is the employee also entitled to statutory severance pay? If so, check whether the length of service for purposes of calculating severance pay is the same as that used for notice of termination or termination pay.
• When does the termination and severance pay have to be paid to the employee? In British Columbia, for example, an employer must pay all termination pay owing within 48 hours of the termination. In Ontario, however, termination and severance pay must normally be paid within seven days of termination or on the employer’s next regularly scheduled payday, whichever is later. The rules for severance pay may be different.

Records of employment

• On what date must the ROE be issued for the employee? The Employment Insurance Act provides that an ROE must be issued no later than five days after “an interruption of earnings.”
• Even if the employer is still negotiating with the employee, the employer should issue the ROE within the statutory deadline. If the parties reach a settlement later, the employer must file a new, corrected ROE. When plans are being made to terminate an employee, the employer should diarize and keep track of the dates by which statutory payments must be made and the ROE must be issued. Such advance planning should help make the termination process less stressful for employer and employee alike and can help to avoid allegations of bad faith conduct on the part of your organization.

New limits placed on ‘bad faith’ damages in terminations

by Helen Gray

A recent decision of the Ontario Court of Appeal places new limits on a trial judge’s ability to award damages for conduct on the part of an employer during the termination process that is said to amount to “bad faith.”

While it’s an Ontario decision, it can be expected to have broad ramifications across Canada.

City assessed Wallace damages
We have discussed in this space in the past the 1997 decision of the Supreme Court of Canada, Wallace v. United Grain Growers, which ruled that additional damages could be awarded on top of normal damages for inadequate notice of termination. These additional damages came to be called Wallace damages and are typically awarded when the employer has engaged in bad faith or unfair conduct during termination by being, for example, untruthful, misleading, or unduly insensitive.

In the recent case, Mulvihill v. City of Ottawa, Mulvihill sued for wrongful dismissal seeking 36 months’ pay in lieu of notice plus punitive, exemplary, and Wallace damages. She had been employed by the City of Ottawa three years and, before that, by a neighboring city, Kanata, for about four years.

The city defended the lawsuit, initially alleging that it had just cause to terminate Mulvihill without notice. It later withdrew the allegations of just cause. It then paid her pay in lieu of notice of termination equal to three months’ salary and benefits. This was the amount the city felt was called for under her signed contract of employment.

At the trial, the judge agreed with the city that the written contract governed Mulvihill’s entitlement to notice of termination without cause. However, he found that service with both the cities of Kanata and Ottawa should be credited in calculating her entitlement so that Mulvihill was entitled to 4.5 months’ salary and benefits.

The trial judge also ordered the city to pay Mulvihill 5.5 months pay for Wallace damages. The judge appears to have awarded these damages because the city terminated Mulvihill’s employment while she was on sick leave and because the city initially terminated her employment for cause. The trial judge also ordered the city to pay her $50,000 for costs of the trial.

City appeals
The City of Ottawa, which was represented by the McCarthy Tetrault and the author of this post, appealed the trial judge’s award of Wallace damages and costs. In a decision released March 25, 2008, the appeal was allowed. The Ontario Court of Appeal unanimously held that the evidence didn’t support an award of Wallace damages. The court found that Wallace damages could not be ordered simply because the city at first made and later withdrew the allegation of just cause for termination. Nor could Wallace damages be awarded because the city had terminated Mulvihill while she was on sick leave.

Absent any finding of bad faith employer conduct, which was not proven in this case, these facts don’t give rise to Wallace damages. The appeal court noted that the city had a reasonably held belief at the time of dismissal that it had cause to terminate the employee’s employment.

Good news for employers
The case has been heralded as welcome news for employers because it clarifies that certain employer actions during the termination process won’t automatically give rise to Wallace damages. Such damages aren’t to be handed out like candy. There must be evidence of bad faith.

Further, the appeal court may drill down into the trial judgment and the factual record to determine whether bad faith conduct existed that is sufficient to provide a basis for Wallace damages.

Understand workers’ applications for permanent residence

By Naseem Malik and Daniel Pugen

Let’s say you are the human resources director for a Canadian-based operation with affiliates in other countries. One of your numerous responsibilities is to manage the company’s temporary foreign workers, including Americans, in Canada.

A challenge you face is handling retention issues with some foreign workers. Given their skill set, you would like to hire and keep them on a permanent basis in Canada.

Unfortunately, you find that the rules in Canada for admission of foreign nationals for permanent residence are complicated.

Not to worry — while the rules may be complex, there are circumstances where temporary foreign workers may be granted status as permanent residents of Canada. Gaining a better understanding of the rules around their eligibility and the timelines of the process will make your life much easier and lessen the likelihood that you will lose skilled employees because of their foreign status.

Applications for permanent residence
Most work permit categories for temporary foreign workers have hard cap limits on them, such as seven to 10 years. Therefore, if an employer wants to retain a foreign national in Canada on a longer-term basis, the employee must generally apply for and obtain permanent residence status

The two most common categories for foreign workers applying for permanent residence are (1) federal skilled worker and (2) family class sponsorship.

Federal skilled worker
The federal skilled worker category is the most common one used by temporary foreign workers who want to attain permanent residence in Canada. Under this category, workers must undergo an assessment based on six criteria:

1. age;
2. educational level;
3. work experience;
4. adaptability;
5. arranged employment; and
6. language abilities.

To qualify for permanent residence under this category, an applicant need only obtain a “C” grade – a minimum score of 67 points out of 100 on the assessment.

Seventy of the possible 100 points are assigned to the education, work experience, and language categories. As an example, under most circumstances, a person with a university degree and four years of work experience in a professional capacity along with fluency in either English or French (the Canadian official languages) would be very close to obtaining the minimum 67 points. The applicant would just need to accumulate another eight points in the final three categories of age, arranged employment, and adaptability, which make up the final 30 points.

Family class sponsorship
The worker’s family may also come in handy for keeping the foreign worker.
A temporary foreign worker may be eligible for permanent residence through the family class category. He or she must have a close relative who is willing to sponsor him or her and who is a Canadian citizen or permanent resident of Canada.

Acceptable relatives who may be sponsored include spouses, grandparents, and parents. This category is most commonly used when a temporary foreign worker is married to or is a common-law spouse of a Canadian citizen or permanent resident of Canada.

Unfortunately, given the limited types of relatives who may be sponsored, in many instances a temporary foreign worker is simply not eligible to take advantage of the family class category and must apply as a federal skilled worker.

The process
Once an applicant in Canada files through the family class or the federal skilled worker categories, it can take up to two years for him or her to be granted permanent residence. It’s essential for the foreign worker and his or her employer to maintain the worker’s lawful temporary status in Canada during that time.

Given the lengthy processing times involved, a decision about whether the worker should seek permanent residence in Canada should be made (if possible) early enough in the worker’s stay in Canada to avoid the worker running out of eligibility room on his or her work permit and being potentially forced to leave Canada.

Retaining skilled workers is an important goal of any organization. An organization is only as good or successful as the people which comprise it. By better understanding these rules, you will be better able to mange your foreign national workers with less risk of losing their skilled labor just because they are foreign nationals.

Supreme Court broadens dismissed employee’s duty to minimize damages

By Rachel Ravary and Philippe Lacoursière

Chalk one up for employers! In an era when the courts seem to be on a slippery slope of broadening employee rights, Canada’s highest court has given employers a break when it comes to assessing the costs of dismissing an employee without cause.

In its decision earlier this month in Evans v. Teamsters Local Union No. 31, the Supreme Court reaffirmed an employee’s duty to minimize or mitigate the losses resulting from an unjust dismissal. And, going one step further, the court ruled that an employee might even have to accept an offer to return to work for the dismissing employer or risk forfeiting his right to pay in lieu of notice of termination.

This decision may give Canadian employers more options for containing termination costs.

Facts
Donald Evans worked as a business agent for the Teamsters for over 23 years. In early 2003, he was dismissed after a new union executive was elected. Through his lawyer, Evans told the Teamsters, the employer in this case, that he considered 24 months’ notice of termination to be reasonable and would be prepared to accept 12 months of continued employment along with a lump sum payment equal to an additional 12 months of salary.

This proposal was rejected. Instead, the Teamsters asked him to return to work for the balance of his 24-month notice period. If he refused, his employment would be terminated immediately without further notice and he would be considered to have failed to mitigate his losses.

A long shot? Not according to the Supreme Court of Canada.

Courts weigh in
The trial judge found that Evans was indeed wrongfully dismissed. He was awarded $100,000 in damages. The trial decision was then overturned by the Yukon Court of Appeal, which agreed with the employer that Evans had failed to mitigate damages by not considering the offer put on the table by the Teamsters.

The Supreme Court of Canada upheld the appeal court decision. It agreed that in some circumstances it will be necessary for a dismissed employee to mitigate his or her damages by returning to or remaining at work for the same employer.

The Supreme Court’s reasons contain a number of interesting points that are useful for employers.

• First, the court confirmed that employers who give sufficient working notice of termination aren’t required to pay the employee above and beyond that notice.
• Second, the court reinforced the principle that damages in wrongful dismissal cases are meant to compensate for lack of notice and not to penalize the employer. Moreover, the employer’s obligation to pay damages in lieu of notice is subject to the employee making a reasonable effort to mitigate his losses by seeking an alternate source of income.
• Third – and this is the new one – the court held that provided that the employee won’t be subject to hostility, embarrassment, or humiliation, an employer can satisfy its notice obligation by making the employee an offer to return to work for the balance of the notice period. According to the court, it would be nonsensical to say that “working notice” is OK but that an offer to continue or resume employment as a means of reducing the damages claim is not.

Interestingly, the court adopted an objective test to determine whether reemployment is an appropriate option. The question is: Would a reasonable person consider the offer as a legitimate employment opportunity?

If the employee is offered a position at the same salary with similar benefits and status and if the personal relationships haven’t deteriorated to the point of hostility and no litigation has been brought, the offer would likely be considered a reasonable one.

Finally, the court made a point of noting that damages awarded because the employer acted in bad faith in the manner of dismissal (called “Wallace damages”) are never subject to mitigation. This is also new. This part of the ruling “ups the ante” for employers who act in bad faith.

Lessons for employers
This decision is important for employers because it confirms the employee’s duty to mitigate and gives employers more flexibility when it comes to working notices. Just remember that you still have to be careful since dismissed employees won’t necessarily be forced to return to work with their ex-employers, especially when the situation has deteriorated as a result of the dismissal.

Each situation will be evaluated on a case-by-case basis, keeping in mind the guidelines set out by the Supreme Court of Canada.

New defense against overtime class actions confirmed

by Donovan Plomp

The British Columbia Court of Appeal just issued an important decision about an employee’s right to make a statute-based overtime claim in a civil action. The decision, Macaraeg v. E Care Contact Centers Ltd., should make BC employers very happy. And it may provide a new defense to overtime pay class actions in other Canadian jurisdictions as well.

Avoiding a dangerous trap
The BC Employment Standards Act applies to most employees in British Columbia with some limited exceptions. It requires employers to pay overtime pay to employees if they are required or “directly or indirectly” allowed to work more than eight hours a day or 40 hours a week.

This is a dangerous trap for employers. What if an employer lets employees leave early some days if they work an extra half hour other days? Or expects employees to stay an extra 15 minutes or half hour during busy times without paying overtime?

This unpaid overtime can add up quickly. Overtime rates are 1.5 times an employee’s regular wage for time worked over eight hours a day or 40 hours a week. And the rate is double the employee’s regular wage for time worked over 12 hours a day.

In Macaraeg, Cori Macaraeg was dismissed and received the minimum severance required under the Employment Standards Act. She sued her employer, E Care, claiming the company regularly required her to work overtime without paying overtime pay pursuant to the Act. She applied to make the decision a class action. If certified as a class action, the claim would be on behalf of all of E Care’s approximately 100 employees in BC.

Unusual trip to court
Claiming overtime pay in court was unusual because the Act contains its own administrative process for claiming unpaid overtime. Employees must file a complaint with the Employment Standards Branch, which investigates the complaint. That process has significant limitations in favor of employers that a civil action does not, including:

• a limit on the amount of wages that the employer may be required to pay;
• a six-month time limit on bringing a complaint after termination of employment; and,
• no ability to bring a “class action” on behalf of other employees.

At trial, the employer claimed that Macaraeg must follow the administrative process under the Act, and therefore couldn’t bring her claim in court. This was the generally accepted view in British Columbia to that date.

The trial judge disagreed with the employer, and held that:

• the overtime requirements of the Act are implied terms of every contract of employment, including Macaraeg’s, so she could bring a civil action for breach of her contract in court; and
• the Act doesn’t prevent a court action for overtime pay, even though it provides its own administrative mechanism for bringing such claims.

The trial decision was bad news for employers. Employees can bring a civil action up to six years after their employment has been terminated, and there is no “cap” on the damages a court can award.

Class actions in court also make it profitable for employees’ lawyers to bring actions for small amounts on behalf of many employees. These actions would be unprofitable if brought only on behalf of individuals. Thus, the trial decision significantly increased potential liability for BC employers and contradicted the law to date.

The Court of Appeal unanimously disagreed with the trial judge’s conclusion that overtime rights under the Employment Standards Act are implied by law into employment contracts.

The Court of Appeal said the law is clear: The general rule is that one cannot bring a civil action in court to enforce a right conferred by a statute, such as a right to overtime pay under the Act. An exception to this general rule arises if the court finds legislators intended the statutory rights to be enforced by civil action.

Court of Appeal rules
The Court of Appeal ruled that the Act provided an effective mechanism outside of a civil action for enforcing the right to overtime. That mechanism is the “comprehensive administrative scheme” provided under the Act for the granting and enforcement of employee rights. In other words, the employee can bring a complaint to the Employment Standards Branch, and that branch will deal with it. A civil action isn’t necessary.

Although BC employers escaped expanded liability this time, employers should always make sure that an effective system for monitoring and controlling overtime is in place.

Perhaps more importantly, this BC decision could have significant ramifications for class actions in relation to overtime pay in other Canadian jurisdictions. As in the United States, we have recently seen a flurry of such multimillion-dollar class actions in Ontario and in relation to federally regulated employers.

Since the statutes covering overtime pay are somewhat different in other jurisdictions, it remains to be seen if the Macaraeg decision will be followed elsewhere in Canada. But it certainly does provide helpful judicial authority for a possible line of defense against such class actions.

Be prepared if an inspector knocks at your door

by Karen M. Sargeant and Daniel M. Pugen

In most Canadian provinces, occupational health and safety legislation provides for government inspections.

Besides random or regular audits, workplace accidents often will prompt inspections, and especially where an accident has taken place, prosecution of the employer and managers is a potential outcome. Inspectors generally have broad powers to enter a workplace, operate or test machinery, interview employees, and seize records, samples, or equipment.

Regulatory climate
The climate is chilly to say the least. In recent years, Ontario’s Ministry of Labour (MOL) has hired hundreds of new inspectors and has put renewed focus on enforcing compliance with occupational health and safety legislation. An example of this can be seen in the MOL’s efforts to curb workplace violence.

As discussed in our blog entry Workplace Violence: Health and safety legislative and regulatory responses, the MOL has devised a workplace violence prevention initiative and has instructed inspectors to make orders and issue directives to employers in certain industries lacking workplace violence prevention programs.

In addition, health and safety legislation has been amended in recent years to institute severe penalties for legislative noncompliance. As an example, in Ontario, the Occupational Health and Safety Act now imposes a maximum fine of $500,000 for corporations and, for individuals, a maximum fine of $25,000 and/or imprisonment for 12 months. Individuals are now being charged with offenses more often than before, both with and without their employer being charged.

Finally, in response to an explosion at a mine in Nova Scotia that killed 26 miners, the Criminal Code of Canada was amended to impose a legal duty on organizations and individuals who direct how others work and to expand the kind of individuals who can be seen as acting for an organization. As a result, it’s now easier for the courts to impose criminal liability for health and safety accidents. (See articles on Bill C-45 amendments and exposure to criminal liability.)

Given this climate, it’s imperative for organizations to have sound and diligent health and safety practices. You also should have procedures in place to deal with health and safety inspectors when they arrive in your reception area.

Tips for responding to health and safety inspectors
The tips below will assist your organization in ensuring that a health and safety inspection in your Canadian operation is conducted in an orderly and reasonable fashion with minimal disruption. Following the tips will provide procedural safeguards against overzealous inspectors and also will decrease the risk that your organization will be charged under health and safety legislation.

Before an inspector arrives

• Designate a contact person (and backup) at each location.
• Develop procedures for dealing with inspectors and train staff in those procedures.
• Maintain a separate file for privileged material (e.g. communications with your attorney).
• Keep in-house or outside legal counsel informed of any situations that may increase the likelihood of an inspection (e.g. a workplace accident, an employee injury on the job, a “near miss,” defective machinery, etc.)

When an inspector arrives

• Immediately contact the designated contact person.
• Check the inspector’s identification.
• Ask the inspector what the purpose of his or her visit is. Is it a general audit or a more specific investigation in aid of a possible prosecution? The inspector’s powers, and your procedural rights, may differ based on the inspector’s answer.
• Consider immediately contacting legal counsel.
• Have someone (hopefully the designated contact person) accompany the inspector at all times. Never leave the inspector alone.
• Be careful not to obstruct the investigation (which could be considered an offense). However, you may be able to make alternate arrangements for the time and date of the inspection.
• Keep notes of everything the inspector does and says in his or her visit. The notes will be invaluable to your counsel if the inspector’s actions need to be challenged in court.
• Remember that anything you say, even if you think it’s “off the record” may be recorded by the inspector and used against the employer or you later.
• Keep a record of all documents and other items taken by the inspector. Object if the inspector requests privileged documents.
• Cooperate in any interviews, but consider asking the inspector to return later to conduct the interviews. This will give legal counsel an opportunity to meet with any persons to be interviewed to help them be prepared. It also will give you a chance to conduct any further internal investigations.
• Request that legal counsel or another employer representative be present in any interviews. If the interviews may lead to prosecution, the individuals have a right to have counsel present.
• Ensure that everyone answers all interview questions honestly. “I don’t know” is an acceptable answer.
• Inspectors may create a “witness statement” and ask the interviewee to sign the document. There is no obligation to sign the statement. However, if forced, the interviewee should sign the statement but note his or her objection in order to avoid obstruction charges.
• If the inspector has a search warrant, immediately contact legal counsel and ask the inspector to wait until your legal counsel arrives. Although inspectors have no obligation to wait, most will. Ensure that the inspector’s activities don’t extend beyond the parameters of the search warrant.
• If you have any objections to anything the inspector is doing, note your objections on paper but don’t attempt to obstruct the search.
• Don’t underestimate the importance of an inspector’s visit. Information gathered by an inspector could form the basis for a prosecution down the road.
• Everything you say or do during an investigation is therefore very important.