Mitigation Income and Wrongful Dismissal Damages – The Court of Appeal Muddies the Waters

The Wrongful Dismissal – What Happened?

Esther Brake worked for McDonald’s for over twenty-five years, first in Cornerbrook, Newfoundland, and then as a restaurant manager in Ottawa. She had received nothing but excellent reviews for years, but in 2011 she was suddenly told her performance was inadequate and that she had two options: accept a demotion or be fired. Ms. Brake refused the demotion and filed a successful action for wrongful dismissal.

The most interesting issue in this case was not the question of whether the dismissal was justified or not, but whether the trial judge erred by not subtracting Ms. Brake’s post-dismissal income from her damages.

The Trial Judge Holds Inferior Income is Not Deductible as “Mitigation Income”

The trial judge awarded Ms. Brake damages based on 20 months of remuneration, and made no deductions for the new work she had acquired in the meantime. Ms. Brake had obtained significantly lower-paid work that the trial judge described as “so substantially inferior to the managerial position she held with the defendant that the former does not diminish the loss of the latter”. In other words, her new income was so insignificant that it should not be deducted from her damages.

This cast doubt on the application of the well-established principle that following related to an employer’s duty to provide notice of termination is the employee’s duty to mitigate the damages flowing from a wrongful termination. Mitigation income, being the income earned in the “reasonable notice” period following an employee’s dismissal will typically be deducted from any amount owing to the employee.

The Court of Appeal Weighs In

The trial judge’s findings with respect to Ms. Brake’s constructive dismissal were largely upheld.

However, with respect to mitigation income, the majority in the Court of Appeal held that her mitigation income did not need to be deducted, but for different reasons, which were:

  1. Some of it included employment insurance benefits, which are not to be deducted.
  2. Brake was entitled to termination and severance pay that could not be deducted because they are statutory minimums and the majority of her income in the intervening period since her termination was earned during Ms. Brake’s “statutory entitlement period”.
  3. Some of Ms. Brake’s income earned following her dismissal was from a job she had while she was still working at McDonald’s and so was not mitigation income.

The Court of Appeal’s comments regarding a “statutory entitlement period” appear inconsistent with how statutory amounts have typically been treated when an employee commences a wrongful dismissal action and receives damages inclusive of any statutory amounts. In such a case, the employee’s statutory entitlements are paid by way of lump sum, and so it is that lump sum amount that the employee, regardless of mitigation income, at minimum must receive. It is not the case, however, that mitigation income earned over the period that corresponds with the period over which statutory amounts would have been paid (if the severance payment was treated as a severance period, which it is not. Indeed, the Ontario Employment Standards Act, 2000 requires severance be paid by lump sum and an employer cannot simply provide an employee with working notice instead of severance pay) is not to be otherwise deducted from the common law wrongful dismissal damages award.

Interestingly, Justice Feldman wrote a concurring opinion agreeing with the trial judge’s reasoning that the inferiority of Ms. Brake’s new employment should be considered when awarding damages. The question for Justice Feldman is whether the or not the employee would be in breach of their duty to mitigate if they turned down the inferior job offer. If the answer is no, then the income is not mitigation income. This, however, seems contrary to the well-established principles of mitigation in the employment law context and the principle that the employee is not to be placed in a better position than they would have been had reasonable notice of termination at common been provided.

Employer Takeaways

The Court of Appeal majority has likely created some confusion over how mitigation income is to be deducted based on their discussion of a “statutory entitlement period”.  And Justice Feldman in her concurring opinion agreeing with the trial judge’s conclusion that “inferior” mitigation income may not need to be deducted from a wrongful dismissal damages award further muddies the water on this issue.

We may have to wait until the Court of Appeal weighs in again, or until such an issue is addressed by the Supreme Court of Canada, to gain some clarity on these issues.

For now, however, employers should be aware that it may not be the case that any income earned over the reasonable notice period will be deducted from wrongful dismissal damages. That said, it remains the case that if an employee finds a new job during this period, it is likely that this will serve to reduce any common law liability on the employer. Thus, employees should still be held to their duty to mitigate and employers should help if possible, and certainly not hinder them, in doing so.

Written with the assistance of Kevin Schoenfeldt, summer student.

Protected species? Considering rights associated with pregnancy and parental leave in the event of redundancy

When an organisation is considering making redundancies, it is important to consider whether employees who are pregnant or on parental leave are afforded any special protections under Australian law.

Both the Fair Work Act 2009 and anti-discrimination legislation include provisions particularly relating to pregnancy and parental leave, including the right to return to the same or a similar position.  The fact that declaring a position redundant may result in the termination of an individual’s employment means consideration must be had to whether the termination employee’s employment is in fact lawful, even if there are genuine grounds for making a position redundant.  This takes into account whether the termination violates any of the protections afforded to pregnant and parental leave employees.  In addition, the fact that the Fair Work Act 2009 provides a reverse onus of proof for adverse action matters means that there is an even higher obligation on employers to ensure that the redundancy was lawful in all of the circumstances.

The position in Australia can be contrasted against the position in France, for example, where employers are not allowed to dismiss an employee from the moment she is medically certified as being pregnant and must reinstate an  employee who was terminated when pregnant when informed of her pregnancy.   The position in France is discussed in an earlier post which can be assessed at the following link.

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Toronto firefighters in hot water over vulgar tweets

Two Toronto firefighters found themselves fighting to get their jobs back after some vulgar tweets on their personal Twitter accounts landed them in hot water. The cases of Matt Bowman and Lawaun Edwards demonstrate the importance of ensuring employees understand the reach of their social media accounts. After a National Post article exposed both firefighters for their tweets, Toronto Fire Services (“TFS”) terminated their employment.  Both filed grievances.

Arbitrator Newman upheld Bowman’s dismissal due to the vulgarity and quantity of Bowman’s tweets, which were found to be objectively sexist and racist, and their resulting implications.  The arbitrator honed in on the fact that Bowman’s Twitter profile clearly identified him as a Toronto firefighter, and included a picture of him in full uniform. This was crucial in establishing that the tweets at issue caused reputational damage to TFS, making his continued employment untenable.

Of note, TFS had a genuine policy in place aimed at recruiting more female firefighters. The harm caused by the National Post article was damaging to this goal, and to the public’s trust in TFS.  Moreover, it was clear that Bowman lacked any real remorse.

By contrast, Arbitrator Misra found that Edwards’ dismissal was too severe and imposed lesser discipline. Unlike Bowman, Edwards had posted only one tweet of major concern. Further, he had responded to Bowman’s tweets only in a misguided attempt to educate him. Asking what a reasonable and fair-minded member of the public would think of Edwards’ tweets, if apprised of all the facts, Arbitrator Misra found that, although the one-time event was not significant enough to warrant dismissal, serious consequences had to follow in the form of a three-day unpaid suspension.

Given the wide reach of social media – and especially Twitter – employers should consider educating their employees on its use and reach. Taking a proactive approach when implementing workplace social media policies could save an employer from the irreparable harm of an off-side tweet.

Written with the assistance of Travis Bertrand, summer student.

 

What impact will Brexit have on UK employment law?

As reported on the blog last year, the result of the EU referendum in the UK on 23 June 2016 was that the UK should leave the EU. Since then, formal notice of withdrawal was served on 29 March 2017 which means that the UK’s exit from the EU will take place once agreement is reached but, in any event, by 29 March 2019 (unless there is agreement for an extension of the negotiation period). This post looks at the latest on what Brexit will mean for UK employment law.

Background

Key parts of UK employment law are derived from EU law, which provides minimum standards for domestic employment law.

Some EU law has been implemented in the UK by way of primary legislation, for example, the Equality Act 2010 which prohibits discrimination on a number of protected grounds such as race, sex, age, disability, religion and belief and sexual orientation. These rights can only be changed by primary legislation and would not fall away when the UK exits the EU.

Other EU law, such as the law on agency workers’ rights and working time, has been implemented in the UK by way of secondary legislation. Following withdrawal from the EU, these rights would fall away if no saving provisions are put in place.

The Government’s White Paper

After serving notice of withdrawal from the EU on 29 March, the UK Government published its White Paper on how it would legislate for that withdrawal by way of the Great Repeal Bill, which was introduced to Parliament for its first reading on 13 July 2017 under its new name, the European Union (Withdrawal) Bill.

In its White Paper the Government confirms that the Bill will do three main things:

  • First, it will repeal the European Communities Act 1972 and return power to UK institutions.
  • Second, it will convert EU law as it stands at the point of exit into UK law – (this will allow businesses to continue operating, knowing that the rules won’t change significantly overnight).
  • Finally, the Bill will create powers to make secondary legislation to enable any necessary corrections to be made to UK laws which would not otherwise make sense after Brexit, and to enable UK laws to reflect the terms of any withdrawal agreement.

Workers’ rights and equalities

So what will this mean for employment law?

Until the point of exit, (which is likely to be at the end of March 2019), the UK remains a full member of the EU, and therefore all rights and obligations of EU membership remain in full force. This means that EU law will continue to be implemented and applied until then.

As mentioned above, some EU employment law has been implemented in the UK by primary legislation which will not fall away on exit from the EU. However, other EU law, which has been implemented by way of secondary legislation, would fall away on repeal of the European Communities Act, unless saved by the provisions of the Bill. The provisions of the Bill as drafted do just this.

The Bill will convert all existing EU law into domestic law, so that workers’ rights which are enjoyed under EU law will continue to be available in the UK after Brexit.

Employment protection rights will be further strengthened by the Bill’s incorporation of the case law of the Court of Justice of the European Union (CJEU), which means that where workers’ rights have been extended by judgements of the CJEU, (such as those on the calculation of holiday pay), these rights will continue to be protected in the UK.

The Bill provides that historic European case law be given the same binding status in the UK courts as decisions of the UK Supreme Court. This means that existing EU case law will be departed from in only exceptional circumstances, although Parliament may of course change the law, and therefore overturn case law, where it decides it is right to do so.

The White Paper reminds us that in a number of areas (such as the right to statutory maternity leave) UK employment law already goes further than the minimum standards set out in EU legislation, and the Government intends to continue to protect and enhance the rights people have at work.

The Bill is unlikely to receive its second reading in Parliament before September and whether it remains as currently drafted by the time it is finalised will of course depend on its progress through Parliament. However, it is unlikely that its key provisions will change significantly.

Summary 

In summary, so far as workers’ employment rights are concerned, no imminent changes are planned by the UK Government. All EU-derived laws which apply at the point of exit from the EU will be saved by whatever means necessary.

However, in the longer term, as is the case with all UK employment law, EU-derived employment law may be amended or repealed where Parliament considers it appropriate to do so.

ContractorCheck Canada App

Employee or contractor?

The ContractorCheck Canada application (App) is a practical tool developed by the Norton Rose Fulbright employment and labour team. It is designed to help employers accurately determine the status of their workforces and whether they should be considered contractors or employees.

Defining employees versus contractors can be sometimes challenging; improperly classifying them may have consequences on your business operations. Norton Rose Fulbright has lauched the ContractorCheck Canada App to help employers navigate through their working relationships more effectively as well as mitigate the legal risks that may prevail.

Check it out!

The app is hosted on our website and will guide you through a series of questions, which take approximately 10 minutes to complete. An instant report on workers status will then be emailed to you.

Visit the ContractorCheck Canada app on our website.

Whistleblowing – what amounts to the public interest?

A recent Court of Appeal decision has confirmed that a disclosure which is in the private interest of the worker can still be considered to be in the ‘public interest’ and therefore fall within the whistleblower protection included in the Public Interest Disclosure Act 1998. However, it did confirm that any decision will depend on its facts.

Under the Employment Rights Act 1996, the definition of a qualifying disclosure for whistleblowing purposes includes that “in the reasonable belief of the worker making the disclosure, [the disclosure] is made in the public interest…” What is meant by this phrase was examined in this case.

In the case, the employee complained about the manipulation of the company accounts, one of the consequences of which was that a reduced commission payment was paid to him and approximately 100 other senior managers. The issue that therefore arose was whether a disclosure which is in the private interest of the worker could be considered to be in the public interest simply because it also relates to a relatively small number of other workers as well.

The Court of Appeal held that it could fall within the public interest, stating the mere fact something is in the worker’s private interests does not prevent it also being in the public interest. Whether a disclosure falls within the public interest will depend on the character of the interest served rather than the number of people sharing that interest.  Each case will therefore be heavily dependent on its facts.

In deciding whether a disclosure was in the public interest, the courts should consider all the circumstances, and in particular adopt four criteria:

  • The numbers in the group – the larger the number affected, the more likely a disclosure will be in the public interest;
  • The nature of the interests affected – a disclosure of wrongdoing affecting a very important interest (for example, the welfare of patients in the healthcare sector) is more likely to be in the public interest than a disclosure of a trivial wrongdoing;
  • The nature of the wrongdoing disclosed – i.e. whether it is deliberate or unintentional; and
  • The identity of the alleged wrongdoer – the larger or more prominent the wrongdoer the more likely this is to engage the public interest.

But the Court did suggest that employment tribunals should be cautious about reaching a conclusion that matters affecting just people within a workforce is a ‘public interest’ disclosure: they should do so after balancing the relevant factors.

Whilst useful in providing some guidance and avoiding the position that it would be “extremely unsatisfactory if liability depended on the happenstance of the circumstances of other employees”, it will undoubtedly lead to further litigation and a lack of certainty as to whether a disclosure will fall within the public interest

Modern Workplaces – Wide ranging recommendations in the Taylor Report

The long awaited Taylor Review of Modern Working Practices was published on 11 July. The recommendations from the review throw some interesting questions into the mix. The general theme  is the need for an adaptable, consistent and protected community in which employment and security of workers can prosper.  It will be interesting to see how this will transpire in practice. Some of the main points from the review are mentioned below, but a further more detailed briefing will follow.

Employment status

The Review calls for the retention of the three-tier approach to employment status, with further clarification of the definition of worker, which would be renamed “dependent contractor” . This should be outlined in legislation.  The report recommends placing less emphasis on the requirement for personal service for the “worker” category and giving the “control” exercised by the company greater importance.  The confirmation of the employment status would be a term included in the statement which must be given to employees under section 1 Employment Rights Act 1996 (ERA). The report also recommends extending the right to this written statement to dependent contractors and introducing a standalone right to bring a claim for compensation if the employer fails to do so, and a right to determine employment status at a tribunal before paying substantial tribunal fees.  Another recommendation is that effort should be made to align employment status with tax status.

 The ‘gig’ economy

The proposed change to the test for worker status would potentially bring many more individuals in the “gig” economy within worker status. Workers are entitled to the National Minimum Wage (NMW) and the report includes various proposals as to how the NMW should apply in these circumstances.  For example, the Government could adapt the piece rate legislation to enable platforms to compensate workers based on output.  However, this would also include a requirement for the company to provide information to the worker about the level of work they could expect to receive at that time.

Zero hours Workers and Agency Workers

In trying to balance the desire of some to retain flexibility with those who need certainty and more formalised employment, the report recommends introducing new rights for agency workers and those on zero hours contracts to formalise the reality of working arrangements. People engaged on zero hours contracts should have the right to request fixed hours with the starting level based on the average hours worked over the previous 12 months. Agency workers should have the right to request a direct contract of employment with the hirer if they have been placed with the same hirer for 12 months, with the hirer required to consider requests reasonably. The report also recommends that the Government must take steps to ensure that flexibility does not benefit the employer, at the unreasonable expense of the worker, and that flexibility is genuinely a mutually beneficial arrangement. It therefore suggests that the Low Pay Commission should consider the introduction of a higher rate of NMW payable for hours which are not guaranteed as part of the contract where a worker is on a zero hours contract, set at a level to incentivise employers to guarantee hours as far as possible.  In addition, to make it easier for casual workers to qualify for statutory employment rights the report recommends increasing the maximum gap between work assignments which will not break continuity of employment from one week to one month.

Other benefits

The report recommends that individuals should have the choice to be paid rolled-up holiday pay (something currently not permitted), meaning that a dependent contractor could choose to receive a 12.07% premium on pay rather than being paid during holiday periods. However, a mechanism would have to be included to ensure that holiday was taken. The report also recommends increasing the reference period for the calculation of holiday pay to 52 weeks so that casual workers receive holiday pay based on their average earnings over the year rather than over a shorter period.

Employee representation

The report recommends that the Government should examine the effectiveness of the Information and Consultation Regulations, extend them to cover workers and reduce the threshold for employee requests from 10% to 2%.

Transparency

In line with the increased requirement on employers to publish information, the report recommends that the Government should require companies of a certain size to publish information relating to their model of employment, including such matters as the number of requests received, and agreed to, from zero hours contract workers for fixed hours.

Conclusion

Whilst this report has been welcomed, significant work will be required to introduce the amendments to the current legislation. With the government’s plate full with the likes of Brexit negotiations, it will be interesting to see how this review is taken forward and recommendations are progressed.

 

ICO updates its subject access Code of Practice

The Information Commissioner’s Office in the UK (ICO) has updated its Subject Access Code of Practice (the Code) which deals with requests from individuals for personal information. The amendments are mainly to reflect the Court of Appeal’s decisions in the recent cases of Dawson-Damer and others v Taylor Wessing LLP [2017] EWCA Civ 74 and Ittihadieh v 5-11 Cheyne Gardens RTM Company Ltd and Deer v University of Oxford [2017] EWCA Civ 121.

In the UK under the Data Protection Act 1998 (DPA 1998) a data subject, such as an employee, has a right, on making a subject access request (SAR) to the data controller (the employer), to be informed whether personal data of which he is the data subject is being processed. If so, the employee also has a right to certain information relating to that personal data and a copy of the data in permanent form must be provided. The Code is published to assist organisations in dealing with these requests.

Section 8(2) DPA 1998 provides an exemption to the requirement to provide a copy of the information in permanent form, where to do so would involve “disproportionate effort”. The updates to the recent version of the Code largely concern considerations of the “disproportionate effort” exception as a result of guidance in the recent cases referred to above. Whilst the Code makes it clear that “the DPA places a high expectation on you to provide information in response to a SAR” and that the disproportionate effort exception ” cannot be used to justify a blanket refusal” of a SAR, the ICO notes that the court has explained the scope for assessing whether, in the circumstances of a particular case, the disproportionate exception may apply. In relation to assessing disproportionate effort, the guidance notes that:

  • Data controllers may take into account difficulties which occur throughout the process of complying with a SAR, including any difficulties in finding the requested information.
  • Data controllers are expected to evaluate the particular circumstances of each request, balancing any difficulties involved in complying with the request against the benefits the information might bring to the data subject, whilst bearing in mind the fundamental nature of the right of subject access.
  • The burden of proof is on the data controller to demonstrate that all reasonable steps to comply with the SAR have been taken and that it would be disproportionate in all the circumstances to take further steps.
  • It is good practice to engage with the requester in open conversation about what information they require, which may avert unnecessary costs and effort in searching. If it receives a complaint about the handling of a SAR, the ICO may take into account a data controller’s readiness to engage with the requester.
  • Even if the employer can show that complying with a SAR would involve disproportionate effort, it must still comply with it in another way, if the requester agrees. For example, if supplying hard copies would involve disproportionate effort, the parties may agree that it is appropriate to allow the individual to view the original documents with specific requests for copies.

The Code also looks at the motive behind an individual’s request. It now expressly states that whether or not a requester has a “collateral” purpose (that is, other than seeking to check or correct their personal data) for making the SAR is not relevant. However, although the right is “purpose blind” , a court has a wide discretion in deciding whether or not to order compliance with a SAR under section 7(9) of the DPA. In addition the Code provides updated guidance on the various factors a court may wish to consider in exercising its discretion.

The General Data Protection Regulation (GDPR) will bring further changes to an employee’s rights on a data subject access request (see our previous blog The GDPR – what does it mean for HR? However, clarification on these points in the Code is to be welcomed.

Application for interlocutory injunction preventing implementation of random drug and alcohol testing of TTC employees denied

 

In Amalgamated Transit Union, Local 113 v Toronto Transit Commission, 2017 ONSC 2078, Amalgamated Transit Union, Local 113 (ATU) unsuccessfully argued that the implementation of the random drug and alcohol testing of its members should be withheld until the conclusion of the main arbitration hearing addressing the validity of the new drug and alcohol testing policy instituted by the Toronto Transit Commission (TTC).

The TTC implemented a “Fitness for Duty Policy” (Policy) in October 2010, which called for drug and alcohol testing in certain situations to ensure that TTC employees and management are mentally and physically fit to perform their duties.  At the time that it was implemented, the Policy did not allow for random drug and alcohol testing; rather it was limited to situations where there was reasonable cause or where there was a full investigation into a workplace incident.  In response to the Policy, ATU filed a grievance under its Collective Agreement, which was referred to arbitration.  Despite commencing on March 2011, the arbitration is still ongoing.  On October 19, 2011, the TTC amended its Policy to include random drug and alcohol testing.  This present motion for an interlocutory injunction was brought in response to the random testing amendment.

The Decision

With an emphasis on how random drug and alcohol testing would advance public safety in the City of Toronto, Justice Marrocco was satisfied that random testing would either increase the probability that employees using drugs or alcohol at work will be detected, or deter employees from using drugs or alcohol at a time too close to work.  Considering the complex circumstances surrounding the TTC’s decision to institute random drug and alcohol testing in the workplace, Justice Marrocco articulated a several noteworthy conclusions.  First, since potential employees are required to pass a pre-employment urinalysis test for drug use, it is reasonable to expect that they would be required to continue to test negatively in order to maintain their employment.  Second, given that TTC management and employees facilitate approximately 1.8 million transit rides daily, it is reasonable to expect that efforts will be taken to ensure employees in safety positions are fit for duty.  Third, the risk of false positives is combated by proper testing procedures and certified laboratories, and can ultimately be compensated by damages.

Early Observations from the Decision

On May 8, 2017, the day the random drug and alcohol testing policy was introduced, the very first TTC worker tested failed an alcohol breathalyser test.  Later that same day, a second employee tested positive for an undisclosed drug.  By the end of the month, two more had tested positive, bringing the total number of employees caught under the new random drug and alcohol policy to four.

As the main arbitration between ATU and the TTC continues to unfold, it will be interesting to see if the results of these and any subsequent random drug and alcohol tests ultimately have an impact on the central litigation between the two parties.

Written with the assistance of Neil Rosen, summer student.

2.5 million casual employees could soon have the right to become permanent

In a landmark decision, on 5 July 2017 a 5-member full bench of the Fair Work Commission (FWC) has accepted the primary proposition of the Australian Council of Trade Unions (ACTU) that the “unrestricted use of casual employment without the safeguard of a casual conversion clause may operate to undermine the fairness and relevance of the safety net”. Accordingly, the FWC has found that it is necessary for modern awards to contain a provision by which casual employees may elect to convert to full-time or part-time employment, subject to specified criteria and restrictions, to meet the modern awards’ objective of providing a fair and relevant minimum safety net.

Whilst this aspect of the FWC’s decision has caused concern amongst employer groups that it will lead to reduced flexibility for some employers in some industries, the FWC rejected potentially more restrictive aspects of the ACTU’s claims including that:

  • all casual and part-time employees be engaged for a daily minimum period of 4 hours;
  • an employer be prohibited from hiring more casual or part-time employees until existing employees were offered more hours; and
  • casuals be given an absolute right to convert to permanent employment after six months of regular work with no right for the employer to refuse the conversion.

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