Charity runs afoul of Canada Revenue Agency
Deciding to retain a contractor rather than an employee can be the right decision depending on the needs of a business. But there are risks. If a court determines that the relationship is in fact an employment relationship, the employer can be liable. (In PDF)

Failure to disclose workplace affair results in termination for cause
In the recent Ontario Superior Court of Justice case of Reichard v. Kuntz Electroplating Inc., the Court held that an employer was justified in its decision to terminate an employee for cause after almost 24 years of service due to the nondisclosure of a workplace affair that violated company policy and resulted in a loss of trust in the employee. (In PDF)

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Image: www.immigrationcan.com

Citizenship and Immigration Canada (CIC) has launched a pilot project as part of its plan to streamline procedures and improve services to newcomers. As of April 30, 2012, most permanent residents who apply for permanent resident cards no longer need to visit a CIC office; they will instead receive their permanent resident cards by mail. The pilot project will be evaluated after one year.

According to CIC, mailing permanent resident cards directly to applicants is expected to decrease wait times by up to four weeks. It also claims that the direct mail-out of permanent resident cards will reduce the burden on permanent residents who might otherwise need to travel long distances to a local CIC office.

Even before the pilot project, newly landed permanent residents did not need to apply for their permanent resident card, since it was directly mailed to them. However, applicants seeking renewals of their permanent resident cards (which are valid for five years at a time) were required to personally appear at a CIC office in order to pick up their card.

While most permanent resident cards will now be mailed directly to applicants, a small number of applicants will still be asked to pick up their cards at local CIC offices. This will allow CIC to gather information for analysis regarding the effectiveness of the program.

Upon issuance of a new permanent resident card, CIC will invalidate the previous card to ensure that old cards cannot be used. Permanent residents must destroy their old permanent resident card upon receiving their new one, as it will not be valid.

Henry Chang
Blaney McMurtry LLP

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A start-up visa program differs from existing investor and entrepreneur options in that the entrepreneur is not required to be the source of investment capital. Such a program would enable entrepreneurs who establish start-up businesses using capital contributed by third parties, such as venture capital firms or angel investors, to seek permanent residence in Canada.

Although the government is only initiating consultations at this point, the proposed start-up visa program may ultimately resemble S. 565: StartUp Visa Act of 2011 (introduced in the United States Senate on March 14, 2011) and H.R. 1114: StartUp Visa Act of 2011 (introduced in the United States House of Representatives on March 15, 2011). S. 565 and H.R. 1114 (collectively, the “StartUp Visa Bills”) offer three options for immigrant entrepreneurs:

1. Immigrant entrepreneurs living outside the US would be eligible to apply for a start-up visa if a qualified US investor agreed to financially sponsor their entrepreneurial venture with a minimum investment of $100,000. After two years, their business must have created five new jobs and raised not less than $500,000 in additional capital investment or generated not less than $500,000 in revenue.
2. Immigrant entrepreneurs currently in the US: (1) on an unexpired H-1B; or (2) who have completed a graduate level degree in science, technology, engineering, math, computer science or other relevant academic discipline from an accredited US college, university or other institution of higher education would be eligible for a start-up visa if:
   • They demonstrate annual income of not less than 250 percent of the federal poverty level or the possession of assets of not less than two years of income at 250 percent of the federal poverty level; and
   • Have proven that a qualified US investor agrees to financially back their entrepreneurial venture with a minimum investment of $20,000

   After two years, their business must have created three new jobs and raised not less than $100,000 in additional capital investment or generated not less than $100,000 in revenue.

3. Immigrant entrepreneurs living outside the US would be eligible to apply for a start-up visa if they have controlling interest of a company in a foreign country that has generated, during the most recent 12-month period, not less than $100,000 in revenue from sales in the US. After two years, their business must have created three new jobs and raised not less than $100,000 in additional capital investment or generate not less than $100,000 in revenue.

Although these StartUp Visa Bills are unlikely to be passed by Congress, it is hoped that the government of Canada will implement its own start-up visa program soon. If Canada does, it will gain a significant competitive advantage over the United States.

According to CIC, this start-up visa initiative is an example of the type of small-scale programs that would allow Canada to try innovative approaches to economic immigration. Under the proposed changes, CIC can create new, short-term programs under the Economic Immigration Class. These programs would be limited to no more than 2,750 applications per year and would end after five years. If a program proves successful during the five-year trial period and CIC wishes to maintain it, it would be required to formally introduce the new economic class in the Immigration and Refugee Protection Regulations.

Henry Chang
Blaney McMurtry LLP

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According to the commission,

The gender wage gap is the difference between wages earned by men and wages earned by women. The gap can be measured in various ways, but the most common method is to look at full-time, full-year wages. It is also possible to measure the gender wage gap on the basis of hourly wages. The most recent Statistics Canada data shows that the gender wage gap in Ontario is 28% for full-time, full-year workers. This means that for every $1.00 earned by a male worker, a female worker earns 71 cents. In 1987, when the Pay Equity Act was passed, the gender wage gap was 36%. The gender wage gap has been narrowing slowly over time.

Back to the program; the Pay Equity Commission sent out and is still sending out letters of inquiry in the form of a survey to employers requesting they submit current, basic wage data on positions within their organizations.

At first, the commission targeted companies with 500 or more employees and thereafter, included companies with 250 to 500 employees, but note that the program is not designed to be sector-specific. The commission is contemplating canvassing all Ontario workplaces (regardless of sector or size) by the end of the program in order to provide a comprehensive report. Thus, small to medium size businesses (those with less then 250 employees) may be receiving such a query in the near future.

The query letter is looking for details of employees in Ontario, including:

• Each job title or position in their workplace (for each employee)
• Gender (male or female)
• Pay as of a certain date
• Salary range for the position, if applicable
• Years of service

This information will be assessed on the basis of several factors, including merit adjustment, type of work performed and years of service with the employer. If the assessment suggests that there are gender wage gaps in the employer’s workplace, the organization will be referred to a review officer, who will then monitor their compliance with the Act.

In addition, the commission notes that if the employer does not respond to the request for data by a specified deadline, the employer will also be referred to a review officer.

It is important to note that the Ontario Pay Equity Act covers all employees who work in the public sector, and private sector organizations with 10 or more employees, as well as their bargaining agents, if any. Employers that do not comply with the Act are at risk. If a complaint is filed with the Pay Equity Commission, or a review officer finds the employer has not complied with the Act, the employer may be ordered to comply immediately and any adjustments required under the terms of the Act may be retroactive. The costs associated with non-compliance are not worth the risk.

What is the Pay Equity Act?

The Act requires:

• Formulating a pay equity plan for each establishment in Ontario that employs 10 employees or more, or are part of the public sector. If a union is certified at an establishment, the employer must formulate and negotiate a separate pay equity plan with the union(s) representing employees, and post the pay equity plan(s).
• Posting a pay equity plan for employees to examine and comment on. If no concerns are raised, the pay equity plan will be considered approved. Note that organizations with 100 or more employees are required to post a pay equity plan. Organizations with more than 9 but fewer than 100 employees are not required to post a plan, but may voluntarily decide to do so. They are required to adjust wages, as necessary, to achieve pay equity.
• Making pay adjustments for employees to achieve pay equity
• No employee’s compensation can be reduced to achieve pay equity
• Maintaining compensation practices that provide for pay equity

Moreover, it requires employers to use a “gender neutral comparison system” to compare male and female job classes in their organization in order to determine whether male and female job classes of equal value have the same rate of pay. If they do not, the job rate for the female job classes is increased to bring it up to that of the male job class. This method of comparison is known as the “job-to-job” comparison method.

Another method that can be used under the Act is the “proportional value” method of comparison of job classes. Briefly, this means that if the job-to-job comparison method left one or more female job classes without a male comparator, the employer is required to conduct a further proportional value assessment. Proportional value involves choosing a representative group of male job classes and determining the relationship between the value of work performed and their job rate. The female job classes are then analyzed to determine if the same pay relationship or pattern applies to them. Typically, this is done by developing a job rate line or by regression analysis. If the female job classes are lower paid than the representative group of male job classes, pay equity adjustments must be made.

You may find it useful to engage a qualified professional, on a contract basis, to establish a job evaluation program and proper pay equity practices for the organization. In the long run, this should save time while, coincidentally, giving the employer an opportunity to learn the techniques of job evaluation in order to maintain proper compensation practices for the future.

Don’t forget that maintaining pay equity is a requirements under the Act. Hence, employers should review their existing pay equity plan to ensure that it continues to reflect the realities of the organization, the employees and staffing positions and structure so that pay equity is maintained.

If you have recently received a letter or before you receive a letter, ensure you are complying with the Act and that you have taken the required measures to achieve pay equity. Take affirmative action to redress gender discrimination in your organization if identified.

Yosie Saint-Cyr
First Reference Human Resources and Compliance Managing Editor

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Image: Jeroen van Oostrom | FreeDigitalPhotos.net

The employment relationship is a contractual one whether or not a contract of employment was signed. Contracts can be express or implied contracts, i.e., you agree to work and I agree to pay you. Verbal bargains are nearly always upheld as long as those implied contracts are governed by particular employment standards and obligations established by the common law. For example, whether or not there is a written employment agreement, an employment relationship in Ontario—termination, minimum wage, vacation, parental leave etc.—is always governed by the minimum standards as established in the Employment Standards Act. Express and implied contracts are also governed by the Workplace Safety and Insurance Act, the Occupational Health and Safety Act as well as the Ontario Human Rights Code.

However, due to the increased volume of litigation both in the courts and within the context of tribunals, most employment relationships are locked in by written offers of employment and employment agreements prior to the employee commencing work. Obviously, there are other benefits to the written employment agreement, such as providing for a descriptive probationary period, defining job descriptions, defining the expectation of the employee, setting out the employer’s internal policies with respect to different issues, setting out the restrictive covenants required by that employee should the employment relationship cease, clarifying compensation and, more importantly, specifying termination entitlements that are afforded to the employee in the event of termination.

One would be surprised at the amount of termination consultations I provide that deal with termination provisions within the context of the employment agreement. This is nearly always a problem for the employee.

The Supreme Court of Canada told us in the case of Machtinger v. HOJ Industries Ltd. that the common law presumption of termination upon reasonable notice can be rebutted where an employment contract contains a notice provision, so long as that notice provision does not violate minimum employment standards legislation. I refer to these contracts as “caged contracts” in that reasonable notice is rebutted and the contract of employment that the employee signed takes precedence. Remember, absent such termination provisions in an employment contract, an employer needs to provide notice of its objective and intent to terminate, while conforming to both statutory minimums and the common law. If the notice is spelled out, the employee may be out of luck.

Normally, the only way an employee could avoid the caged provisions is with the contract possibly being “outdated.”  The passage of time alone will normally not negate the employment contract termination provisions or make them unenforceable; there must also be a change in the nature of employment or a change in the position which causes the substratum of the contract to fall away and renders the contract unenforceable. This was set out in the case of Wallace v. Toronto Dominion Bank Court of Appeal case.

Over time, our courts have called this issue the “substratum doctrine,” which is law that is still alive and recently explored within the case of McGregor v. National Home Services. In this case, the defendant brought a motion for summary judgment arguing that there was no genuine issue for trial because it was able to enforce an employment agreement signed by the plaintiff which limited his compensation upon dismissal. The plaintiff, McGregor, relied on the substratum doctrine to resist the motion for summary judgment. The judge stated that

The changed substratum doctrine is a part of employment law. The doctrine provides that if an employee enters into an employment agreement that specifies the notice period for a dismissal, the contractual notice period is not enforceable if over the course of employment, the important terms of the agreement concerning the employees responsibility and status has significantly changed…the idea behind these changed substantial doctrine is that with promotions and greater attendant responsibilities, the substratum of the original employment contract has changed, and notice provisions in the original employment contract should be nullified.

The judge found that the plaintiff’s position, responsibilities and status, including taking over the role of vice-president of operations as well as being vice-president of contractor new home sales, changed his role with the company and, as a result, there was a genuine issue for trial.  The employer was not able to rely only on the fact that it had satisfied minimum notice in accordance with the original employment agreement.

Therefore, employers are advised to routinely review their employment contracts and bring them up to date or execute new employment contracts at the time of change of responsibility or compensation.

For employees, if responsibilities, compensation and positions change without re-contractual arrangement, perhaps it may be better in some circumstances to not say anything at all.

Matt Lalande practises catastrophic injury law and employment law. You may reach him through his website at www.hamiltonpersonalinjurylawyers.com.

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Bernice Karn writes in the Cassels Brock Report: “in a speech given on April 24, 2012, the Minister of Industry remarked that the anti-spam legislation is expected to take effect next year.”

Karn attributes the delay to the government “attempting to address the many concerns expressed by stakeholders about this new law.” The initial consultations led to a variety of important changes:

These Regulations clarified and streamlined the information required in a “commercial electronic message,” replaced the “two-click” unsubscribe requirement with the requirement that the unsubscribe mechanism “be able to be readily performed” and confirmed that requests for consent could be obtained orally. Unfortunately, it did not go so far as to state that “in writing” requests for consent could include electronic requests such as may be available on a website for subscription to an email feed.

So, as always, be prepared. Jenny Lee at the Vancouver Sun provides a list of good practices that should keep small organizations on the right side of the law.

Take the FightSpam quiz!

Here’s one small and easy step toward preparation. The federal government has introduced a quick quiz to help businesses and individuals understand the risks associated with spam, malware and unsecured mobile devices. It’s certainly worth the five minutes it’ll take to complete, and it might provide just the impetus to get you started on your electronic messaging and mobile strategies.

Adam Gorley
First Reference Internal Controls, Human Resources and Compliance Editor

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The story goes like this: the employer recruited about 70 temporary foreign workers. Their employment contracts said they would work up to 40 hours, but after they started, they were provided with less than 40 hours of work per week, and they were not compensated for the hours not worked, even though they were able and willing to work. When one employee complained about the lack of hours, her hours were cut even further. In some cases, workers were not given enough hours to meet the requirements to qualify for permanent residency in Canada.

Image: renjith krishnan / FreeDigitalPhotos.net

Moreover, when the workers worked overtime, the employer did not always pay them overtime pay. On other occasions, the employer moved worked hours to other days when the employees did not work a full day so that it did not have to pay overtime. Several workers produced pay statements showing overtime hours were worked, but no overtime was paid.

The workers also had to pay recruitment fees to the recruitment companies. The employer argued it had no knowledge of this, and had to do with the recruitment companies. The employment agreements also promised the foreign workers that the employer would pay their return airfare. Again, the employer pointed to the recruitment companies and argued it was requesting invoicing on several occasions because it expected to be billed in due course.

Employees have had success in the past with complaints under the Employment Standards Act regarding unpaid wages and airfare. But once the employees applied for a class action, several class members were contacted by the employer, which caused the employees to feel threatened.

The Court had no problems certifying the class action under the Class Proceedings Act. All of the requirements were met: there was a cause of action that was properly pled; there was an identifiable class; there was an appropriate representative plaintiff in the case; there were common issues; and the class action was a preferable procedure.

As a result, the action met the statutory requirements to go ahead.

As we saw from the overtime class actions in the banking industry, many class actions do not get certified and do not proceed. But this one did. We will keep you posted on any developments.

Christina Catenacci
First Reference Human Resources and Compliance Editor

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Parliament passed legislation (Bill C-45) in 2004 holding employers criminally liable if they willfully fail to protect the lives and safety of their workers. Briefly stated, sections 22.1, 217.1 and 219 of the Criminal Code imposes a duty on organizations and their representatives (whether a director, partner, manager, supervisor, employee, member, agent or contractor of the organization) who have authority to direct how others do work or perform a task to take reasonable steps to prevent bodily harm to persons performing the work or task, and to the public, arising from the work or task.

To find out more about the guide, read my latest post on Slaw.

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Beware of terminating long-term employees without proper notice

The Ontario Superior Court of Justice decided that an employer terminated a 65-year-old long-term employee without the proper amount of notice or severance. As a result, the employer had to pay hefty damages, interest and costs awards.

Entitlement to paid sick leave and termination pay denied

The Ontario Labour Relations Board confirmed that an employee was not entitled to any wages for a number of sick days she was absent from work. In addition, she was not entitled to notice of termination as it was determined she engaged in wilful misconduct.

Employee faked illness and moved to Mexico

The British Columbia Supreme Court has denied an employee’s wrongful dismissal claim because it was clear that the employee repudiated his employment contract by deciding, unilaterally, to relocate his place of work from Alberta to Mexico…

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Facts of the case

An executive at a development firm misappropriated the employer’s labour, materials and funds to renovate his home. When the employer discovered the wrongdoing, the employer terminated the employee for cause and subsequently sued the executive for damages for conversion, breach of employment contract, unjust enrichment and breach of fiduciary duty. The employee counterclaimed in respect of his bonuses for 2007 and 2008, which the employer did not think it had to pay the employee after what happened.

The parties ultimately submitted the dispute to arbitration.

At arbitration, the employee was found to owe the company a fiduciary duty given that he was an officer of the company and one of the few trusted individuals there. However, the arbitrator found the executive was still entitled to his annual bonus equal to 30 percent of the employer’s profits after overhead because it made up an integral part of his employment contract from the very first day he joined the firm. Hence, the arbitrator awarded the employee $364,661.33 to satisfy his unpaid bonuses for 2007 and 2008.

To read more, check out my latest post on Slaw.

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