Published February 10, 2007
Are you up to speed on employment law issues in your workplace? Take this quiz to test your knowledge!
1. An employment contract for an indefinite term provides notice periods for termination that match the statutory minimum in employment standards legislation but no more. Is the contract enforceable?
2. An Executive Director (ED) of a provincial sport organization has used a series of one-year fixed-term contracts for a staff position in the office. Each year this contract is renewed for one year. After many years, the ED decides to let the contract run its course and to terminate the employee. The ED tells the employee that he is entitled to severance pay consistent with the 1-year contract. Is the ED correct?
3. A Senior Manager who has been with a sport organization for six months has been told her scope of responsibilities will change significantly in another 12 months. She is now claiming constructive dismissal. Is she correct?
4. Your PSO is about to go bankrupt. Are the employees entitled under employment standards laws to claim termination and severance pay?
5. A former employee is suing your organization for wrongful dismissal. The Board has instructed its lawyer to stonewall and stall the action as long as possible to financially exhaust and discourage the plaintiff from proceeding. Is this a sound strategy?
6. The coach of a non-profit swim club is paid an annual lump sum ‘honoraria’ of $12,000 or roughly $1,000 per month. Both the club and the coach believe the coach to be an independent contractor; however, the Canada Revenue Agency determines that the coach is actually an employee and demands that both the coach and the club pay arrears of taxes, EI and CPP contributions as well as accumulated penalties. The payments put the Club into bankruptcy. Could the Officers and Directors in their personal capacities now be on the hook for the club’s share of the payments?
1. Yes. The foundation for this line of thinking is set out in the 1992 Supreme Court ruling in Machtinger v. HOJ Industries Ltd., which found “an employer can readily make contracts with his or her employees which referentially incorporate by reference the minimum notice periods set out in the [Employment Standards Act] or otherwise take into account later changes to the Act or to the employees’ notice entitlement under the Act.” In one Ontario case citing Machtinger, a terminated employee who sued for wrongful dismissal and won 14 months’ severance at trial (after being offered just over 13 months by the employer), actually had his award rolled back to his contract’s original one-month compensation by the Court of Appeal.
2. No. Case law suggests that employers who repeatedly hire employees on consecutive contracts may find, after a number of years, that their employees will be deemed permanent employees. In the 2001 Ontario, appeal court case of Ceccol v. The Ontario Gymnastics Federation, the court found that the employee had a reasonable belief that at some point over her lengthy career she had become a “permanent” employee rather than a short-term contract employee. The court said she was entitled to consideration for all her years of service in assessing a reasonable notice period. She was given 16 months of severance in lieu of notice rather than the few weeks provided for by her contract.
3. No. While a fundamental change of job functions or responsibilities can be grounds for a constructive dismissal lawsuit, employers are free to introduce any changes with sufficient and advance reasonable notice. Generally, the courts prefer the length of that notice be greater or identical to the notice required to dismiss an employee without cause.
4. Yes. In the 1998 Supreme Court ruling in Rizzo & Rizzo Shoes Ltd. (Re), the court said the impetus behind employees’ termination is irrelevant and an employer’s bankruptcy can still give rise to an unsecured claim for termination and severance pay under employment standards legislation.
5. No. In the 1997 Supreme Court case of Wallace v. United Grain Growers Ltd., the court made it clear that bad faith conduct by employers at a time when a terminated employee is most vulnerable can lead to significant and punitive damages above the required notice period. Unlike in ordinary commercial contracts and negotiations where aggressive tactics may be used, the court held employers must attempt to “minimize the damage and dislocation (both economic and personal) that result from dismissal.”
6. Yes. Although the ‘corporate veil’ offers some protection from personal liability, directors and officers are liable under statute for unpaid wages and related costs. In the 1988 case of Moose Jaw Kinsmen Flying Fins Inc. v. Minister of National Revenue, the Court found that the club’s ownership of tools (whistles, stopwatches, and kickboards), the absence of a chance of profit or risk of loss, and the extent to which the club directed coaching activities indicated the coach was an employee. The directors were personally responsible for unpaid taxes, witholdings, penalties, interest and legal costs.
Originally published: Centre for Sport and Law Newsletter (2007) Vol. 3(1)