Deciphering Canadian Employment Law: 6 Updates for 2021

George Waggott is an attorney based in Toronto, Canada. George’s practice focuses on Labour and Employment law and helps US and Canadian companies with related issues. In addition to spelling Labour with a “u”, George also gives a wide range of advice on how to minimize risk when hiring and employing workers in Canada during and post-COVID.

As we settle into January 2021, it now seems apparent that simply turning the page on 2020 is not enough. We need to clear away the numerous employment challenges which confronted employers this past year in Canada and the US. Many of these we continue to face. The pandemic endures. Employers, their HR professionals, and legal counsel must focus on the constantly-evolving legal rules and workplace risks. At the same time, there have been a number of recent significant legal decisions in Canada which affect employers. This blog post intends to share updates in some key areas to focus on for the year ahead. 

1. COVID-19 rules in Canada will continue to evolve

The pandemic has changed how organizations work, where people work from, and numerous related legal rules. This has included corresponding changes in Canadian legislation as well as novel legal arguments. Like whether or not employers have the right to “send home” workers (with or without pay) until work becomes available. The answers to many of the key questions remain unsettled. And the relevant strategies and guidance for employers will no doubt continue to change during 2021. 

2. Remote work remains a focus

Necessity is the mother of invention. During 2020, many employers either  decided to or were forced to adapt or expand their work-from-home arrangements. In many cases, the approach followed was adopted hastily and out of necessity. Some of this brings associated cost savings. Yet there are also potential concerns about the impacts on organizations when there is a prolonged lack of person-to-person interaction. As a result, many employers now face questions about whether some or all of their “temporary” approach can be unwound. And if so, how to do that.

Vaccine availability grows, and pressure to return to the “old normal” escalates. The above questions will be an area of focus. Some of the answers from employers may not necessarily be driven by legal rules. Many will recognize that building and sustaining some organizations will need to continue to be based on having employees who work, learn, develop, grow, and manage in person. 

3. The “temporary” absence will eventually end

It seems as though one consistent feature of 2020 was the idea of being “temporary”. Employers and employees continually had to push out the elusive horizon where the “temporary” period of restriction or adjustment would eventually end. What many had understood to be a disruption of two or three weeks became a month. And then several months, then all summer, and on into the end of the year. There will be an end point to this for a variety of reasons. For example, the end to government supports, the rollout of vaccines, and some better sense from a business perspective about what work will be available.

When taken together, Canadian employers likely need to expect to offer a return to work in 2021. Absent an agreement with relevant employees (or, if applicable, unions), employees who remain “on roster” but not at work will need this. And if that does not happen, we are likely to see a push of related employee claims for severance in Canada.

4. Canadian employment contracts will continue to be challenged

The Canadian Courts continue to issue a number of employee-friendly decisions. These make it increasingly difficult to reliably know that the terms of an employment agreement cap the employer’s liability. One case which now has found its way into employee demand letters is the Waksdale decision from the Ontario Court of Appeal. In this case, the Court found that an improper “cause” clause in the contract negated the whole contract. This is true even in a situation where the employer was attempting to rely upon the “without cause” provision. There are numerous other similar outcomes from the Courts across the country.

The trend from judges appears to be that at times every effort seems to be made to “knock out” the contract. These cases highlight an obvious asymmetry. If the contract has provisions which exceed applicable common law requirements, then freedom of contract prevails. The “a deal is a deal” mantra applies, and the employee can successfully sue to enforce the contract. There also seems to be limited or no reception for employer arguments that a contract which was agreed to in the pre-Covid era should no longer be binding. 

5. The costs of Canadian employee severance claims may continue to rise

Employers are often concerned that termination costs involve paying substantial amounts of severance. And this is without being able to receive any corresponding work from the employee. In this sense, many will consider the required severance package under Canadian common law to be a form of tax based on the prior service of the employee. If we continue with this analogy, then the rate of this tax may continue to increase for at least two reasons.

First, out of work employees have in many cases claimed that the pandemic has made it more difficult for them to find work. While not necessarily creating an explicit “Covid bump” on notice periods, there continues to be a number of cases where damages have been awarded at the higher end of the notice period, with virtually no reduction for mitigation.

Second, there is at least some support for a “full compensation” model of awarding damages. This was clear from the Matthews decision of the Supreme Court of Canada. This decision stated that an incentive which  crystallized in the notice period should have been paid. Similar reasoning arose in the 2020 decision in Battiston v. Microsoft Canada Inc. Here the Court held that unvested long-term incentive awards should not be forfeited on a termination without cause because of the “harsh and oppressive” outcome. These cases confirm the importance that employers continue to closely review their compensation programs and the related agreements and documentation. 

6. Contract / Gig workers in Canada will continue to claim employee entitlements

Organizations in Canada have used contract workers for many years. This is done in part to manage or reduce some of the costs which emerge from the trends summarized above. This has resulted in a number of amendments to legal rules. They intend to limit some of the benefits associated with having a “no strings attached” contract with a worker. One example is the tightening up of Canadian employment standards rules to provide a broader definition of employees.

This is all part of a move to grant  employee-like protections to all “workers”, even if the worker has willingly agreed to be engaged on a gig or on-demand basis. During 2020, the Ontario Labour Relations Board held that a group of Foodora food couriers were “dependent contractors” who thus had the right to unionize. There was also much publicity during the year when the Supreme Court of Canada ruled that Uber could not rely upon an arbitration clause in its contract with Canadian drivers. As a result, the claims by gig workers can be pursued in the Canadian employment courts. It seems as though the pandemic has provided heightened focus on the rights of workers. It likely means that the volumes and types of claims which business must contend with will continue to increase.

If you’re a U.S. company that wants more info on hiring Canadians, you can reach out to the team at George Waggott, anyone at Suitless, or visit our original Canadian Employment post ‘So you want to hire a Canadian eh?’ 

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