Holiday pay – Regular voluntary overtime should be included

A recent decision of the Employment Appeal Tribunal has held that employees who regularly work voluntary overtime beyond their contracted hours may now have those payments taken into account in calculating holiday pay.

Article 7 of the Working Time Directive (2003/88/EC) (WTD) provides that workers have the right to at least four weeks’ paid annual leave.   This is implemented in the UK by Regulation 13 of the Working Time Regulations 1998 (WTR).  Over the past few years we have seen a number of cases considering what payments should be included in the calculation of holiday pay. These cases have held that an employer should look at what amounts to “normal remuneration”. This is remuneration which is “intrinsically linked to the performance of the tasks which he is required to carry out under his contract of employment”. As a result cases have considered that commission, compulsory overtime and certain allowances should all be included.  The question has remained as to how voluntary overtime should be treated.

In the latest case of Dudley Metropolitan Borough Council v Willetts (and others) the Employment Appeals Tribunal (EAT) upheld the decision of the Employment Tribunal and held that voluntary overtime worked for a sufficient period of time on a regular basis should be included in the first four weeks’ paid holiday. (For our blog post on the Employment Tribunal decision see Calculating holiday pay- should voluntary overtime be included?

A group of 56 employees employed by the Council claimed that they had not received the correct rate of statutory holiday pay. They worked a set number of hours per week which counted as their normal working hours. In addition, they volunteered to perform additional duties which their contracts of employment did not require them to carry out. They also participated in on-call rotas for which they were paid a standby allowance, plus call-out payments if they were called upon to do work while on call. Employees could drop on and off the rotas to suit themselves, and so the work was done “almost entirely at the whim of the employee”, with the Council having no right to force the employee to take on the additional work.  However, these voluntary payments were excluded from their holiday pay and the workers argued that this was contrary to the WTR.

The EAT upheld the earlier decision and drew on the previous ECJ decisions. It concluded that the overtime pay and allowances should be included in most of the claimants’ statutory holiday pay for the Regulation 13 leave. They were paid in such a manner, and with sufficient regularity, to be considered part of normal remuneration. Although they were not expressly included in the contract of employment, the specific agreement or arrangement for voluntary overtime would not exist in the absence of a contract of employment. Once the claimants commenced working a shift of voluntary overtime or a period of standby duty or callout, they were performing tasks required of them under their contracts of employment even if there was also a separate agreement or arrangement.

Further, the EAT pointed out that one of the principles of the WTD is that a worker should not be deterred from taking annual leave and any reduction in salary is presumed to act as a deterrent. To exclude voluntary overtime carried the risk that employers could set artificially low levels of basic hours and categorise the remaining working time as “voluntary overtime” that does not count for holiday pay purposes.

The case only concerns pay for the four weeks’ leave under regulation 13 of the WTR (which implements the WTD), not pay for the additional 1.6 weeks’ leave under regulation 13A, which is a purely UK measure, or additional contractual leave.

The case has been remitted back to the Tribunal to determine whether or not, on the facts for each individual case, the claimants are due outstanding holiday pay. The tribunal must consider the working pattern of each individual, what they normally did and when at work and what they would have earned if they did not take annual leave. Overtime which is rare or unusual will not count for these purposes, while overtime which is usual and regular may do so.

Employers should therefore take steps to review their overtime policies to consider whether payments are made with sufficient regularity to amount to normal remuneration and should therefore be factored into holiday pay. Employers will also need to consider how this should be dealt with in the payroll as a practical issue.  In terms of back dated claims, employers should note that an interval of more than three months between underpayments will “break the chain” of an unlawful series of deductions and prevent a claim by an employee for underpayment of holiday pay from reaching back prior to that break.

It seems that many employers up to now have adopted a “wait and see” approach to holiday pay. However, following this ruling and with a possible increased likelihood of claims following the abolition of employment tribunal fees, employers should address this issue sooner rather than later.

What is the latest on employees’ rights in the event of redundancy in Germany?

In business, the restructuring of a company (such as by the closure of an individual business unit or a necessary reduction in the number of staff) may result in an employee’s redundancy. However, dismissing an employee by reason of redundancy has strict prerequisites under German law.

The main requirements which must be observed under German law for a dismissal based on redundancy are as follows:

  • In business units with more than ten employees (more than five if hired before 31 December 2003), and if an employee has been at the company for more than six months, a specific justification for any dismissal is required. Redundancy qualifies as a sufficient justification in this sense. Smaller businesses do not require a similar justification for dismissals subject to the dismissal not being discriminatory; a dismissal is possible without any specific reason and only a minimum of social consideration is required.
  • A dismissal based on redundancy is possible only if the position of the affected employee no longer exists for operational reasons (e.g. restructuring) and if it is not possible to offer the employee any suitable alternative employment within the whole company. German case law is very detailed in this regard and courts traditionally take a rather supportive stance towards employees.
  • A management decision regarding the envisaged measure must be taken, which should always be documented to provide proof.
  • Prior to the dismissal the employer must perform a so-called “social selection”. During this process the employer has to select the employee with the strongest social background for dismissal by considering certain criteria (length of service in the company, age, family maintenance obligations, any severe disability) of comparable employees and may terminate the employment only of the employee who requires least “social protection” (i.e. who has no family, is young, healthy etc.).

Further, any applicable special protection against dismissal (i.e. pregnant women, employees on maternity/parental leave, severely disabled persons, and members of the works council) as well as co-determination rights of the works council must be observed. In particular, the works council, if there is one, needs to be informed prior to any dismissal and be allowed one week to revert with any comments or objections.

In business units with more than 20 employees, the works council has additional information and consultation rights with regard to major changes in the conduct of the business unit. A shutdown or a drastic reduction of staff (at least 10%, depending on the size of the business unit) also qualifies for such change in the conduct of the business unit. When a change in the conduct of the business unit occurs, the employer is required to inform the works council of the change well in advance and to consult with the works council about the proposed action to be taken. The aim of such consultation is to reach agreement on two issues: First, answers to the questions “if”, “how” and “when” in relation to the proposed change are to be set out in writing under a so-called “reconciliation of interests”. Secondly, issues related to the type and scope of compensation for any – in particular financial – disadvantages to the employees related to the change are to be set out under a “social plan”.

In cases of mass redundancy (which is determined considering the relevant headcount and the employees to be laid off within a specific period of time) the employer must inform the local labour agency regarding the planned dismissals in advance and – again – consult with the works council. If the employer fails to do so, the notice of dismissal is invalid. Labour Courts have recently been very strict on meeting the requirements as set out and interpreted in several cases by the European Court of Justice.

If notice of termination is given (irrespective of the size of the business), the employee may file a suit at a labour court within three weeks after receipt of the termination notice, asking the court to review the validity of the dismissal. Experience shows that most affected employees make use of this option. In Germany, officially the court can only award re-instatement of the employee where there has been an invalid termination and German law does not provide for specific compensation in cases of dismissal for redundancy. However, in practice most cases are eventually settled in consideration of a severance payment. Alternatively, to avoid dismissal and the following lengthy and cost-consuming court proceeding, the parties may terminate an employment relationship (usually in exchange for compensation) at any time by mutual consent.

Subcontracting of workers under the Terms of Employment Posted Workers in the European Union Act (Wet arbeidsvoorwaarden gedetacheerde werknemers in de Europese Unie)

The Posted Workers Directive (Directive 96/71/EC and Directive 2014/67/EU) (the Posted Workers Directive) applies where a company (the Service Provider) in one EU member state, has a contract to provide services to an undertaking in another member state and pursuant to that contract posts workers (Workers) to that other member state. The Posted Workers Directive is implemented in the Netherlands by the Employment Posted Workers in the European Union Act (Wet arbeidsvoorwaarden gedetacheerde werknemers in de Europese Unie) (WagwEU).

Below we look at the most important aspects of the WagwEU.

Enforcement

There are a number of administrative obligations which apply to Service Providers:

  1. The duty to report: Service Providers must report in advance about where and when and with which employees work will be performed in the Netherlands. A copy of the report has to be provided by the Service Provider to the service recipient. The service recipient in the Netherlands has to check whether the report has been made and whether it is correct.
  • This obligation will come into force at a later date, probably on 1 January 2018.
  1. The obligation to have certain documents available at the workplace: the documents must be in hard copy or electronically and cover such matters as the identity of the Service Provider and the recipient; employment agreements of Workers; salary slips and evidence of wages paid to the Workers; overview of working hours; valid-ID, evidence showing the contribution for social security schemes.
  2. The obligation to provide information: all relevant information, if requested, must be provided to the Inspectorate SZW which is designated to enforce the WagwEU.
  3. The obligation to appoint a contact person: this individual functions as a point of contact for the Inspectorate SZW and is ideally a posted Worker in the Netherlands.

Employment conditions

A Worker who temporarily works in the Netherlands under the Posted Workers Directive, irrespective of the law that governs the underlying employment contract, derives rights from the WagwEU on day one of the assignment. In accordance with Article 2 of the WagwEU, the foreign employer is obliged to apply several provisions of the Dutch Civil Code to the underlying relationship.

The Posted Workers Directive provides a limited list of terms and conditions that should be guaranteed by the Service Provider:

  • maximum work periods and minimum rest periods;
  • minimum paid annual holidays;
  • minimum rates of pay, including overtime rates;
  • conditions for making employees available;
  • health, safety and hygiene at work;
  • protective measures with regard to the terms and conditions of employment of pregnant women or women who have recently given birth, of children and of young people; and
  • equality of treatment between men and women and other provisions on non-discrimination.

Applicability of Collective Labour Agreements (CLA)

In addition to the rights under the Dutch Civil Code (7:616, 7:626; 7:634-642; 7:646; 7:648; 7:649; 7:655; 7:658), the Worker must be guaranteed any terms and conditions under any CLA that has been declared generally binding in a given sector of industry. If these obligations are not observed, the Inspectorate SZW may impose a fine. The amount of any fine can be increased where there has been wilful evasion or repeated offence.

Whether a universally binding CLA applies can be checked on: http://cao.minszw.nl/ (Directie Uitvoeringstaken Arbeidsvoorwaardenwetgeving). If certain provisions from the CLA are not observed, employees and/or social partners may institute an action against the Service Provider.

CLAs that have been specifically mentioned on the website of the SZW Inspectorate are: (i) the CLA for temporary agency workers; (ii) the CLA for the Dutch Insurance Industry (office staff); (iii) the CLA in the Metal Working and Electrical Engineering Industry (Metalektro); and (iv) the CLA for the Dutch Construction Industry.

Responsibility for the substantive accuracy of the information provided and the translation of the CLA provisions rests exclusively with the parties to the CLAs. Only the Dutch version of the text of the decision to declare a provision universally binding (AVV Decision) has legal validity for the determination of rights and obligations.

Further questions / legal advice

Please feel free to contact Maartje Govaert or Thomas Timmermans for any advice or further questions in respect of the above.

Record number of mutual termination agreements signed in France

According to the data published by the French labour administration, mutual termination agreements (ruptures conventionnelles) have never been so popular. Indeed, in June 2017, more than 35,700 mutual terminations agreements have been validated by the French labour Administration.

But why are mutual termination agreements so popular?

First, mutual termination agreements represent – for the employer and the employee – a quick and easy way to terminate an incompatible working relationship.

The procedure for entering into a mutual termination can be summarized as follows:

  1. Invitation to a negotiation meeting
  2. Agreement between employee and employer on the principle of a mutual termination – regarding in particular the amount to be paid to the employee and the date of termination – and signature of a pro forma document
  3. Mandatory waiting period of 15 calendar days during which either party may withdraw
  4. Submission of the mutual termination agreement to the French labour Administration
  5. Mandatory homologation period of 15 working days
  6. Termination of the employment agreement at a chosen date
    (subject to the homologation, whether tacit or express, being obtained)

Pursuant to the French labour Code provisions, employers are required to pay the employee a specific indemnity. This indemnity must correspond at least to the dismissal indemnity he/she would have received – calculated by reference to the French labour Code or to the applicable collective bargaining agreement. The amount of this specific indemnity constitutes the core point of scrutiny by the French labour authorities.

Second, mutual termination agreements allow employers and employees to benefit from several advantages:

  • the employee voluntarily leaves the company, with a termination payment and is also entitled to unemployment benefits;
  • the employers are not required to furnish any justification to terminate the employee, and are not required to pay any notice period indemnity.

However, mutual termination agreements are not free from any risks as they do not trigger any waiver of claims. Therefore, the employees are not prevented from:

  • challenging the validity of the termination – within a one-year period after the homologation – on vitiated consents grounds;
  • lodging claims before the Employment Tribunal regarding the performance of their employment agreement.

 

Employers may be justified in requesting an independent medical examination as part of the procedural aspect of the duty to accommodate

 

Jurisprudence on independent medical examinations (IME) in the context of the employer’s duty to accommodate is sparse.  The Ontario Superior Court of Justice recently provided much-needed guidance in Bottiglia v Ottawa Catholic School Board.  In Bottiglia, the Court held that in certain circumstances, an employer may be justified in requesting an IME as part of the duty to accommodate under the Ontario Human Rights Code (the Code).

The Facts

Marcello Bottiglia worked for the Ottawa Catholic School Board (School Board) from 1975 until he went on sick leave in April 2010.  At the time he went on sick leave, Mr. Bottiglia was being treated by his family doctor for anxiety and stress.  In May 2011, Mr. Bottiglia began to see a psychiatrist, Dr. Levine.

In a letter dated March 19, 2012, Dr. Levine opined that: (i) Mr. Bottiglia’s condition had been relatively treatment resistant, (ii) Mr. Bottiglia required an extended period of time off work, and (iii) a return to Mr. Bottiglia’s current workplace entailed a risk of relapse and the loss of the gains that Mr. Bottiglia had made to that date.  However, in a letter dated August 31, 2012, Dr. Levine indicated that Mr. Bottiglia was ready to return to work.

Concerned that Dr. Levine’s August 2012 letter contradicted the March 2012 letter, the School Board eventually decided to seek a second, independent medical opinion.  Mr. Bottiglia refused the request for an IME.

In November 2012, Mr. Bottiglia commenced an application under the Code, in which he alleged that the School Board had discriminated against him by failing to accommodate him and return to work and subsequently resigned without ever returning to work.  He argued that the School Board had required him to attend an IME before it would permit him to resume his duties, leaving him with no choice but to resign to begin drawing on his retirement pension.

The Ontario Human Rights Commission’s Policy on ableism and discrimination based on disability  states that an IME should not be used to “second guess” a person’s request for accommodation.  An employer is only entitled to ask an employee to ask that an employee undergo an IME where there is a reasonable and bona fide basis to question the legitimacy of the employee’s accommodation request or the adequacy of the information provided.  The Policy also states that, while no one can be made to attend an IME, “failure to respond to reasonable requests may delay the accommodation until such information is provided, and may ultimately frustrate the accommodation process.”

The Decision of the Human Rights Tribunal of Ontario

The Human Rights Tribunal of Ontario (the Tribunal) dismissed Mr. Bottiglia’s application, holding that the School Board had acted in good faith and that its request for an IME fulfilled the procedural aspect of the duty to accommodate.

Mr. Bottiglia applied for judicial review of the Tribunal’s decision.

The Ontario Superior Court of Justice Decision

The Ontario Superior Court of Justice dismissed Mr. Bottiglia’s application, holding that the Tribunal’s decision fell within a range of acceptable, defensible outcomes.  The Court found that Dr. Levine’s apparent “about-face within a span of roughly five months with respect to Mr. Bottiglia’s ability to work” provided a “reasonable and bona fide basis for the School Board to question the adequacy and reasonableness of Dr. Levine’s opinion, because he had been writing for two years that Mr. Bottiglia was unable to resume his duties at all.”  More generally, at paragraph 76 of the decision the Court stated that “In certain circumstances, the procedural aspect of an employee’s duty to accommodate will permit, or even require, the employer to ask for a second medical opinion.”

Seeing no reason to depart from the usual rule that the successful party should be awarded costs, the Court awarded the School Board costs in the all-inclusive amount of $30,000.

Written with the assistance of Scott Thorner, summer student.

Employer ordered to pay $141,000 for tort of harassment and intentional infliction of mental suffering at the workplace

In a previous post on this blog, we discussed how an employer’s non-compliance with workplace harassment and violence provisions of the Occupational Health and Safety Act resulted in a $70,000 fine ordered against the employer. Recently, the Superior Court reminded employers of the importance of ensuring that a harassment-free workplace is maintained and that all complaints are taken seriously and thoroughly investigated. After 40 days of trial spanning over the course of a year and a half, the Court in Merrifield v Canada (Attorney General) ordered the Royal Canadian Mounted Police (“RCMP”) to pay general damages of $100,000 and special damages of $41,000 to a member of the RCMP for harassment and intentional infliction of mental suffering at the workplace.

The Plaintiff stated that he was harassed and bullied by his superiors, which damaged his reputation, impaired his career advancement and caused him to suffer severe emotional distress. The harassment faced by the Plaintiff included accusations that he had committed criminal offences and a subsequent investigation as a result of these allegations. In this case, the Court held that the tort of harassment exists and it is recognized as an independent cause of action in Ontario. The Court made the following findings:

(a) the Defendants’ conduct toward the Plaintiff was outrageous;

(b) the Defendants had reckless disregard of causing the Plaintiff to suffer emotional distress;

(c) the emotional distress suffered by the Plaintiff was severe; and

(d) the Defendants’ outrageous conduct was the actual and proximate cause of the Plaintiff’s emotional distress.

As such, the Plaintiff had proven all of the elements of the tort of harassment. Further, the Court was satisfied that the tort of intentional infliction of mental suffering was made out because the Plaintiff suffered depression and post-traumatic stress disorder as a result of the RCMP’s actions. The general damages of $100,000 were meant to compensate him for the harm suffered as a result of these actions. This case illustrates the potentially costly result of an employer’s failure to ensure a workplace free of harassment, especially now that there appears to be a relatively new tort of harassment, which is not based on any of the prohibited grounds of discrimination. This potentially constitutes an alternate route for employees to seek damages against employers who are not careful in ensuring that their workplaces are harassment-free.

Please note that this decision has been appealed.

 

The (latest) reform of the French employment code is ongoing

As part of candidate Emmanuel Macron’s program during the Presidential elections campaign, a substantial reform of the French employment Code was promised. After his election as President, French commentators anticipated new changes would be implemented quickly, given Emmanuel Macron’s indications that he wished to go ahead as soon as possible, without too much debate before the French Parliament.

This reform is now on track, and will be implemented through a specific procedure:

  • an “enabling” law (loi d’habilitation) shall be voted by Parliament to set a specific framework for the reform;
  • ordinances (ordonnances) will be published after being agreed by the Government; and
  • a “ratification” law (loi de ratification) shall then be voted by Parliament to ratify the decrees made by the Government.

The enabling law was definitely voted on August 2nd, 2017 but it has not been published yet as it is currently subject to a claim before the French constitutional court. The Government announced that after publication of the law, the ordinances will be published around September 2017.

Based on the content of the enabling law and on the various announcements made by the Government, the expected reform should focus on the following topics.

More flexibility through negotiation

The link between collective agreements entered into at sector-wide level and collective agreements entered into at company level should be redefined, in particular to authorise employers and unions to negotiate company-level collective agreements which could take over from industry-level collective agreement regarding certain topics.

Staff representation

The announced reform also proposes to extend the possibilities to merge the three main employee representative bodies into a single staff representation body covering the attributions of the works council, the staff delegates and the health and safety committees. In principle, all companies should benefit from this possibility of merging staff representation.

Termination of contracts

It is also proposed to redefine the scope of assessment of the economic difficulties justifying redundancies (group, company, etc.) and to specify the scope and extent of the research for alternative reclassification and of the selection criteria for dismissals. Termination of employment contracts would also be made more secure for employers by various new measures: (i) the creation of a “pro-forma” dismissal letter, (ii) the establishment of a mandatory scale of damages to be granted by courts in case of unfair dismissal, and (iii) the setting of uniform time-limits for employees’ claims.

Adaptation of rules relating to employment contracts

The Government also wishes to adapt the rules regarding homeworking, night work, fixed term contracts, and lending of employees.

The Summer season will be busy for the French Government!

The German law on employee participation is compatible with European law

On July 18th 2017 the European Court of Justice (ECJ) held, that employees of a subsidiary located in the territory of another member state do not have the right to vote and stand as a candidate in elections of workers’ representatives on the supervisory board of the German parent company of that group and that such an exclusion is not contrary to EU law.

The plaintiff is a shareholder of a company, which is the parent company of a group of companies operating in the tourism sector. In the European Union, that group employs around 50,000 people, of which slightly more than 10,000 work in Germany.

The German Law on employee participation provides that half of the members of the supervisory board must be elected by the employees. Due to the principle of territoriality, which means that the German social order cannot extend to the territory of other states, employees of the group, who are located in another member state outside Germany, cannot vote or stand as a candidate in elections of representatives to the supervisory board. Moreover, any employee who carries out tasks on the supervisory board of the parent company must resign his position where he takes up a post with one of the subsidiaries of that group located in a state other than Germany.

The plaintiff therefore claimed that the supervisory board was not properly constituted. He argued, that the general principle of non-discrimination under European law (article 18 of the Treaty on the Functioning of the European Union (TFEU)) has been breached due to the fact that employees who live and work outside Germany are prevented from participating in the composition of the supervisory board. Furthermore, the loss of membership on the supervisory board in the case of a transfer to another Member State is likely about to dissuade workers from exercising their right to free movement within the EU (article 45 TFEU).

The ECJ distinguishes two situations in that regard. It points out, that with regard to employees employed in a subsidiary established in a Member State other than Germany, article 45 para. 2 TFEU contains a special clause of prohibition against discrimination on basis of nationality in respect of employment conditions relating to the free movement of workers. Therefore, the situation of all employees of the parent company must be examined solely on the basis of article 45 TFEU as a special regulation and therefore article 18 is not applicable. The court concluded, that article 45 para. 2 TFEU is not applicable to the situation of the affected employees, because that regulation does not apply to employees who have never exercised their freedom to move within the EU and who do not intend to do so. The fact that the foreign subsidiary is controlled by the parent company located in Germany is not relevant in order to be covered by that provision.

With regard to the employees in Germany who leave that employment in order to be employed in another entity outside of Germany, the ECJ held that article 45 TFEU is applicable. Any national measure which is suitable to hinder the freedom of movement or makes it less attractive is covered by that provision. However, EU law cannot guarantee, that moving into another member state will be neutral in terms of social security. The employee who decides to leave his state of origin in order to be employed in another member state is not entitled to claim for the working conditions which applied before in the country he was employed. The fact that those employees are required to give up exercising their mandate in Germany is merely the consequence of the application of a national legislation limiting the field of participation within Germany. The EU members are free to set criteria for defining the scope of legislation, as long as there is no harmonisation or coordination measures at union level. The affected national provisions are within the scope of collective labour law as well as company law.

As a consequence, the restriction of the national provisions of the German law on employee participation is in accordance with EU law.

Minimum hourly wage for service providers in Poland

For many years, the structure of employment law in Poland has been characterized by a large number of civil law agreements, which serve as a substitute for employment contracts.  According to statistical data, up to 85 per cent of service providers in Poland historically have  been hired under civil law agreements, but not as a matter  of choice – they would have preferred to work under an employment contract[1].  Although there are many reasons for this situation, one of the principal ones has been the practice of circumventing the minimum monthly wage legislation, which applies only to employment contracts.

In order to minimize the negative effect of such practices on workers, as from 1 January 2017, the legislator introduced a new minimum hourly wage act (Journal of Laws 2016, item 1265).

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Now you see it (now you don’t), or do you?  Can an employer retract an offer of employment?

The retraction of an accepted offer of employment can create significant legal challenges for an employer.  The BC Supreme Court recently reaffirmed that, absent an express contractual provision to the contrary or just cause, a pre-employment retraction of an accepted offer of employment constitutes termination of employment entitling the individual to reasonable notice or damages in lieu of notice.

In Buchanan v. Introjunction Ltd., 2017 BCSC 1002, the employer decided that it needed to retract an accepted offer of employment for business reasons.  A key issue was whether the employer could rely on a probation clause within the contract which would have enabled it to terminate the plaintiff’s employment, had he already started work, without any obligation to pay damages in lieu of notice within the first three months of employment. Despite the employer’s argument that it would be illogical for the plaintiff to have stronger rights before starting work than after, the Court found that the employer could not rely on the probation clause for three reasons.

First, the probation clause provided that the three month probation period commenced on the plaintiff’s scheduled start date of November 1, 2016. Therefore, the probation provisions were not applicable at the time of the pre-employment retraction.

Second, a probation clause does not give an employer an unfettered right to terminate an employee without notice or cause. The court referred to a recent decision in Ly v. British Columbia (Interior Health Authority), 2017 BCSC 42, which was discussed in more detail in our blog, available here.  In short, there is seemingly growing support in B.C. caselaw for the proposition that employers must engage in a good faith assessment of the employee’s suitability for permanent employment before exercising a “probationary” termination clause.

Third, although it was not argued by the parties, the Court also commented that the employer’s retraction of the employment offer amounted to an anticipatory repudiation of the contract, which was accepted by the plaintiff. The employer’s retraction communicated its clear intention not to be bound by the contract.  In the Court’s view, the repudiating party could not rely on a provision of the contract, here the probation clause, to avoid or limit its damages.  We note that this appears to be contrary to a seminal principle of contract law, namely that the party subject to the breach of contract is to be placed in the position he/she would have been in had the contract been performed.  Therefore, there are some strong arguments to be made that employers should be able to rely on a termination clause or other important clauses in an employment contract despite a breach by the employer.

Finding that the plaintiff was wrongfully terminated and the probation clause was not applicable, the Court determined that a reasonable notice period of six weeks would be reasonable for a 27 year old senior software engineer in the circumstances.  The Court also considered the plaintiff’s duty to mitigate and found that although the employer had genuinely offered other re-employment of short-term work to the plaintiff it was not an offer a reasonable person, given all the prevailing circumstances, would accept. The offer was vague and lacked particulars about start date, number of available hours and scope of work, as well as pay (which was framed as “reasonable hourly wage”).

Employers should utilize termination clauses to limit liability.  Buchanan demonstrates that to rely on a termination provision to revoke an offer, such clauses have to be drafted to have legal effect even before the employment commences.  Employers continue to have the lawful right to enter into agreements that provide the minimum termination entitlement required by employment standards legislation.  For example, this may include no notice for employment periods of less than three months for provincially regulated employees in B.C.  Further, employers should carefully consider whether it is advisable to refer to the word “probation”, at all, as it may import more legal obligations (or at least uncertainty) than intended.

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