Confidentiality in Employment Settlements

It is typical in most settlements of employment disputes for the employer to request, and the employee to agree, to provide a confidentiality provision with respect to the settlement.

Typically these clauses prohibit the employee from disclosing the details of the settlement to any third party (spouse, financial and legal advisors excepted).

Some clauses stipulate that the fact that the matter settled may be disclosed but nothing else.

Other clauses contain an explicit penalty provision that permits a clawback or forfeiture of settlement funds if a breach.

The rationale for these clauses is quite simple.  An employer in resolving a dispute has an interest in ensuring that a settlement of a dispute does not create a “shark effect” of future claimants coming forward with the mistaken notion that the employer will settle any dispute.  In most respects, it is the confidentiality clause that the employer is paying for as much as avoiding the time and cost of a trial.  A trial would be a public proceeding whereas a settlement affords the employer the opportunity to control disclosure.

The Toronto Star recently reported on the decision of a Labour Relations Arbitrator  that found that an employee should forfeit the financial remedy received on a successful grievance on account of the employee’s breach of the confidentiality provision.

Interestingly, the employee in question did not sign the settlement agreement or the confidentiality provision.  The grievance having been handled by the employee’s union and as is apparent from the article against the desires of the employee to have an airing of the grievance in a hearing.

We encounter many employee clients who, whether on account of emotion or bad feelings, actually would prefer to have a public airing of their issues with the employer in court for the world to witness, rather than a strictly monetary resolution of the claim.

Similarly, we encounter may employees who are part of a bargaining unit/union, and find that the union is not representing their interests in the way in which they may have expected.

We strive to meet the client’s objectives in any employment matter, however, it is our duty to properly inform the client on what reasonable objectives are attainable from the outset.  Conducting a trial or hearing simply for the purpose of broadcasting a complaint to the public ignores the fact that our civil court system is designed primarily to grant monetary remedies for wrongs.  Clients seeking publicity are best to achieve this objective through the media, rather than a costly and less than ideal court process.

Confidentiality provisions, properly negotiated, and agreed to by the parties are enforceable, and should be treated as such following conclusion of the settlement.

D. Jared Brown – Lead Counsel

GOVERNMENT PROPOSED NEW LEAVES FOR ONTARIO WORKERS

The Ontario government recently proposed a new piece of legislation, titled the Employment Standards Act (Leaves to Help Families).   If passed, the three new leaves would be:

Family Care Leave

Under this leave, an employee would be entitled to a maximum of 8 weeks of unpaid leave in a given year.  The aim of the leave is to allow an employee the opportunity to provide care and support to a family member with a serious medical condition.  To be eligible, the employee would be required to produce a doctor’s note certifying that the applicable family member of the employee has a serious medical condition.

 Critically Ill Child Care Leave

Under this proposed leave, an employee may be entitled for up to 37 weeks of unpaid leave to provide care or support to a child who is critically ill.  This could be in addition to any Family Care Leave which the employee might have taken.  However, to qualify, the worker must have been employed by his or her employer for at least six consecutive months in order to be entitled.

Crime-Related Child Death and Disappearance Leave

Here, an employee may be entitled to up to 52 weeks leave of absence without pay, where the employee’s child has disappeared, as a result of a crime.  Where the child had died as a result of a crime, the employee would be entitled to up to 104 weeks of leave without pay.  One notable qualification in this section is that the employee would not be entitled to the leave if he or she is charged with the crime.  The leave would also not be available where it has been determined that the child was a party to a crime.  Also, like the Critically Ill Child Care Leave, the employee must have been employed with the employer for at least six consecutive months.

The passage of the proposed amendments to the Employment Standards Act would provide workers with increased job security.  Employees would have the assurance that their absence from work, due to family emergencies, could not be used by an employer to justify their termination.  Employers who violate these provisions would be liable for sanctions under the Employment Standards Act, as well as a civil claim for damages based on wrongful termination.

If you have any questions regarding your rights as an employee, or employer, feel free to contact one of the employment lawyers at Brown Litigation.

Posted by D. Jared Brown Lead Counsel

Does the duty to mitigate apply to all dismissed employees?

While the application of common law reasonable notice remains central to the determination of damages in wrongful termination cases, written employment agreements, with termination clauses fixing notice entitlement in the event of termination, are becoming more common.

Employers, no doubt, resort to written agreements with the aim of limiting their exposure to damages upon an employee’s without cause termination.  Such written contracts may be attractive to the employer as they create a degree of certainty and predictability in terms of the employer’s liability in the event the employer ends the employment relationship.  However, unless carefully drafted, a written agreement might not necessarily limit an employer’s exposure to the extent desired.

For example, in Bowes v. Goss Power Products Ltd., 2012 ONCA 425 (CanLII),  the Ontario Court of Appeal recently considered the issue of an employee’s duty to mitigate in the face of a written employment agreement where the parties had agreed to fix the amount of notice payable upon termination.

Mr. Bowes worked for Goss Power for just over 42 months.  There was a written employment agreement, prepared by Goss Power.  The employee’s entitlement upon termination, without cause, was set out at paragraph 30(c) which provides that:

30. The Employee’s employment may be terminated in the following manner and in the following circumstances:

(c) By the Employer at any time without cause by providing the Employee with the following period of notice, or pay in lieu thereof:

Six (6) months if the Employee’s employment is terminated prior to the completion of forty-eight (48) months of service;

Following his dismissal, and in accordance with paragraph 30(c), Goss Power initially confirmed that Mr. Bowes would be paid his salary for a period of six months.  The employer also advised Mr. Bowes that he had a duty to seek alternate employment during the notice period, and to keep Goss Power updated on his mitigation efforts.  However, the employment agreement itself made no reference to mitigation.

About 12 days after his termination, Mr. Bowes found a new job paying him a salary equivalent to that which he was being paid at Goss Power.  Goss Power then ceased further payments on the basis that the employee had fully mitigated his losses.

The employee commenced an application under rule 14.5 of the Rules of Civil Procedures, R.R.O, 1990, Reg. 194, seeking a determination of his rights under his employment contract.  In support of his application, Mr. Bowes argued that, given that the notice period was fixed by terms of the contract, there was no accompanying duty to mitigate.  He argued, therefore, that he should be entitled to the full 6 months’ pay in lieu of notice, despite having found replacement employment.

However, the lower court agreed with the employer in finding that the Mr. Bowes was not entitled to any further payments, as he had fully mitigated his damages with his new employment.  The court found that this was consistent with the case law, and that absent an agreement to the contrary, a dismissed employee has a duty to mitigate.

In setting aside the lower court’s decision, the Court of Appeal states at paragraph 34 that:

An employment agreement that stipulates a fixed term of notice or payment in lieu should be treated as fixing liquidated damages or a contractual amount. It follows that, in such cases, there is no obligation on the employee to mitigate his or her damages.

The Court of Appeal points out that it was an error to consider employment contracts with fixed notice periods as being akin to damages in lieu of notice at common law.  According to the Court, the correct approach is that the fixed notice should be regarded as liquidated damages or a contractual sum, which is not subject to mitigation.  The Court also rejected the lower court’s view that a duty to mitigate applies unless the contract provides otherwise.  Instead, the Court of Appeal holds that where the employment agreement is silent on mitigation, the common law duty to mitigate will not be applicable.

Brown Litigation regularly advises and assists both employers and employees with respect to contracts of employment, and has traditionally recommended that the contracting parties specifically stipulate if any notice period is subject to mitigation or setoff.  The Court of Appeal has now confirmed the importance of proper planning and contract review.

Posted by D. Jared Brown – Lead Counsel

A new standard for punitive damages in wrongful dismissal?

The Toronto Star is reporting on a recent decision of a jury trial in B.C. which awarded a long service (34 years) electrical manager significant punitive damages at trial ($573k).

http://www.moneyville.ca/article/1254936–jury-awards-809-000-in-record-wrongful-dismissal-case

The decision is unique not only because of the size of the award, but also because the employee elected to try the case by jury, rather than judge alone.

The article identifies that the case was uniquely suited to a jury trial on account of the fact that the business in question was the largest single employer in a small town, and it was thought a jury of the employee’s peers would better understand the undercurrents that resulted in the termination (the power imbalance between employer and employee).

While it is hard to imagine that this decision on its own will be representative of a new standard for punitive damages, it is noteworthy for the fact that a jury felt the employer’s actions warranted such severe condemnation.

Brown Litigation regularly assists employers and employees in employment disputes through strategies aimed at mitigating risk, minimizing cost, and ensuring favourable outcomes.

Posted by D. Jared Brown – Lead Counsel

 

Employer assistance for the terminated employee (Mitigation)

Mitigation is a two-way street.  While we have discussed in a previous blog post the employee’s duty to mitigate when terminated, the duty to mitigate is a concept that should resonate with employers as well.

While most employers want to use an employee’s apparent failure to take reasonable steps to find alternative employment post-termination as a defence to a wrongful dismissal claim, prudent employers recognize that assisting employees to mitigate can reduce the overall risks associated with wrongful dismissal claims.

When representing employers who have made the decision to terminate an individual, we typically recommend offering post-employment support and outreach to the employee to assist the employee in their mitigation efforts.  Offering services such as outplacement counseling to the departed employee ensures that the employee begins the job search in a timely way, and further has all necessary tools and skills to ensure a successful job search.      As mitigation earnings can set off against entitlements to reasonable notice, timely re-employment (particularly during any period of reasonable notice) ensures cost and risk containment for the employer.

Further, offering post-employment assistance to transitioning employees evidences an employer acting in good faith during the termination process, with due regard to the sensitivities and issues inherent in an employee termination.

In certain situations, it may be appropriate for the employer to offer a new position in the organization to the departing employee either in a different department or geographic region.  In some court cases, the employee’s failure to accept a reasonable offer of alternative employment from the same employer, was ruled to be an unreasonable rejection of an opportunity to mitigate by the departing employee thereby reducing the employee’s entitlement to reasonable notice.

Whether these employer strategies (and the myriad of others available) are appropriate depend upon the circumstances in each case, including the employee in question, the personal relationships at stake, and the anticipated duration of the notice entitlement.

Posted by D. Jared Brown – Lead Counsel

Fired? Get a Job!

If you have been dismissed from your job, there is a duty in contract law which states that you have an obligation to mitigate your damages.  This doctrine means that a dismissed employee must take steps to minimize the losses they suffered as a result of losing their job.  Basically, this means that you need to take steps to look for another job.

The leading case on the duty to mitigate is the Supreme Court of Canada decision of Red Deer College v. Michaels.  In this case, the Supreme Court explained the duty to mitigate as follows:

The primary rule in breach of contract cases, that a wronged plaintiff is entitled to be put in as good a position as he would have been in if there had been proper performance by the defendant, is subject to the qualification that the defendant cannot be called upon to pay for avoidable losses which would result in an increase in the quantum of damages payable to the plaintiff.  There reference in the case law to a “duty” to mitigate should be understood in this sense.

The Court held that the burden is on the defendant to provide proof that the plaintiff failed to mitigate her/her damages:

It seems to be the generally accepted rule that the burden of proof is upon the defendant to show that the plaintiff either found, or, by the exercise of proper industry in the search, could have procured other employment of an approximately similar kind reasonably adapted to his abilities, and that in absence of such proof the plaintiff is entitled to recover the salary fixed by contract.

The Court went on to emphasize that the onus on the employer is heavy, citing a previous decision, because “the burden which lies on the defendant of proving that the plaintiff has failed in his duty of mitigation is by no means a light one, for this is a case where a party already in breach of a contract demands positive action from one who is often innocent of blame.”

Despite the burden being on the defendant to show that efforts were made, plaintiffs have been criticized by the courts for not making enough of an effort. In Chambers v. Axia Netmedia Corp., it was held:

Clearly, the efforts of Mr. Chambers [the plaintiff] were to a large extent confined to reading the local newspaper and forwarding his resume to employers. Although commendable, I am satisfied, by restricting his search to this one vehicle, the effort was too limited. Although there is no evidence as to whether these other efforts would necessarily have produced a positive result, earlier than he was able to find the employment he did, I am satisfied there was, to some extent at least, a failure to take all reasonable steps to mitigate

There are simple steps that a plaintiff can take to demonstrate that they attempted to mitigate their damages in an attempt to avoid an adverse decision like the one in Chambers.  We counsel our clients to keep a running log or mitigation journal outlining all the key events, dates, and information related to their job search post-termination including identifying job search efforts, networking, applications, and other career building steps.  This is typically done in the form of a diary or a calendar.  Second, retain copies of the letters, emails, or any other correspondence you sent in an attempt to secure a position.  Third, diversify your search.  You don’t need to limit to just one means.  You could add yourself to the social networking site LinkedIn, search on websites such as Workopolis, scan the newspapers and attend local networking events in your city.  Further, Human Resources Development Canada (“HRDC”) offers a range of free networking, job search, and outplacement services for qualifying dismissed individuals.  All of these steps will assist you in demonstrating that a genuine effort was made to secure new employment.

Posted by D. Jared Brown – Lead Counsel