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Q&A: Laying out progressive discipline in the employment contract

progressive disciplineIn this conference Q&A, we address whether employers must stipulate the use of a progressive discipline policy in the employment contract.

In partnership with Stringer LLP, First Reference Inc. recently hosted the 19th Annual Employment Law Conference on June 12, 2018, where we discussed the latest legal developments including issues surrounding the best practices for employee discipline and discharge.

We received a large number of questions from conference attendees during the Q&A session. Though we could not answer them all during the conference, the First Reference Blog will be updated weekly (until we have answered most of the unique questions) to provide further clarity on this year’s hot topics based on the questions we received.

Q:

Does progressive discipline need to be expressly written into the employment contract? If yes, do all steps need to be laid out in writing? Or is it on a case-by-case basis?

A:

The law does not require the employment contract to include the employer’s approach to progressive discipline; however, common law requires an employer to set out their approach to progressive discipline in a well written and well-communicated policy and procedures in order to rely on it. While it is not a mandatory part of the employment contract, the employer can if he so wishes to refer to a policy or to company policy in the employment contract.

Traditionally employment contracts have included clauses that referred to an employer’s expectations around conduct and company policies and procedures, however there has been a movement away from this practice as employers prefer to have control over the content, inclusion or removal of the policies without binding themselves contractually.

The case law in this area varies and establishes that, while policies may be incorporated into employment contracts, or simply referenced within the contract, there is a risk that this creates binding obligations on both the employer and its employees. Employers must use precise, unambiguous and clear language to ensure their true intentions are carried across. Otherwise, employers could find themselves in legal trouble if they fail to abide by their own policies. A review of the case law in this area indicates that whether or not a reference to policies within an employment contract creates contractual obligations will be judged on the particular facts of each case.

In most cases it is preferable for employers that want to reference workplace policies in the employment contract to include in the clause that workplace policies do not form part of the contract. At the same time, it should be outlined that an employer expects these policies will be observed by its employees. This way, policies will take the form of directions rather than giving them contractual force. Where an employee fails to observe a policy term, employers will be well within their rights to take disciplinary action, provided they can demonstrate that they have taken reasonable steps to inform the employee about the contents of the policy and the employee’s resulting obligations.

That said, according to Neena Gupta at Gowlings, “the right to suspend an employee due to misconduct has an uncertain status in Ontario. While there are some indications that the Ontario courts may recognize the wisdom of an intermediate step of discipline, short of termination for cause, the traditional position is that an employer cannot “suspend” an employee for disciplinary reasons unless it can establish that it had just cause for termination and chose to impose a lesser remedy instead. Accordingly, it may be appropriate to consider the inclusion of a right of suspension as part of an overall disciplinary policy in a contract of employment.”

She further states,

“The courts have taken two approaches on policies, depending on their nature. Where they deal with legal rights, such as rights upon termination or intellectual property, the courts have required that the employer prove that the policy is a binding contractual term of employment. In other cases, where the policies deal more with workplace conduct and rules, the courts have required that it be demonstrated that the employer has clearly communicated the policy to the employee and that the employee understands the consequences of a lack of compliance.”

“A good illustration of the requirement that a policy be proven to be part of the employment agreement is demonstrated by Ellison v. Burnaby Hospital Society, a decision of the British Columbia Supreme Court. Ms. Ellison was a nurse who had worked for Burnaby Hospital for 25 years and was terminated due to an overall restructuring of the nursing administration. 21 years after she had commenced employment with Burnaby Hospital, a policy was introduced regarding termination and severance. The policy was found buried in the benefits policies of the Hospital and afforded Ms. Ellison significantly lesser rights than at common law. The court required the party relying on the policy – in this case, the employer – to prove that both parties accepted the policy as a term of the contract. It should be noted that the courts typically require evidence of actual acceptance. Silence or acquiescence has been rejected as evidence of acceptance. Not surprisingly, the court found that Burnaby Hospital’s policy did not apply and awarded her notice at common law.”

As a practical matter, contracts of employment should contain explicit references to any policies that are deemed to be contractually relevant. These policies should be provided to a candidate simultaneously with any offer of employment and should be expressly cross-referenced and incorporated by reference into the terms and conditions of employment. An excellent technique adapted by some Human Resources departments is to require that part of the offer includes the synopsis of the company’s policies and an acknowledgement in the contractual document that the employee:

  • Has read and understood the policies and agrees that his/her employment will be governed by such policies;
  • Acknowledges that the employer may, from time to time, amend, alter, change or delete policies to meet the business needs of the enterprise and that the employee agrees that upon receiving notice of such policies, his/her employment will be governed by such revised policies.”

So what is a progressive discipline policy?

Progressive discipline is an employer’s disciplinary system that addresses employee problems of performance or conduct through a graduated range of responses before resorting to a dismissal. Such policy should outline the specific actions that could trigger a violation of a workplace standard or unacceptable behaviour, and their respective disciplinary measures. An effective discipline policy will provide supervisors with the means of providing fair discipline to employees by being able to let the employee know what the problem is, what he or she as an employee needs to do to fix the problem, what is a reasonable time period in which to fix the problem, and what are the consequences of the employee’s inaction or inability to correct the problem.

Courts and tribunals expect employers to apply disciplinary measures fairly and consistently, taking into account the specific circumstances of the situation on a case-by-case basis. Differences that may call for different disciplinary measures can include an employee’s clean employment history with no disciplinary record on file, or the state of mind that the employee was in when the behaviour came into question, such as provocation, a medical condition, emotional problems, harassment, violence, etc. Also, how an employee responds during the investigation, such as admitting responsibility, cooperating and showing remorse and offering an apology, could mitigate a disciplinary response.

As best practice, the following factors should be considered when determining the level of discipline on a case-by-case basis when responding to workplace misconduct (this list is not exhaustive):

  • The work environment in which the misconduct occurred;
  • The existence of any health and safety issues;
  • The seriousness of the behaviour or conduct in question;
  • The employee’s employment history;
  • The individual circumstances of the employees involved;
  • The orientation, training, coaching and communication provided;
  • Clearly established expectations for behaviour and performance; and
  • Any mitigating circumstances, among other things.

When demoting or terminating an employee, progressive discipline plays an important role for employers as it provides the basis of a defence if an employee files a complaint of unjust dismissal. Consult The Human Resources Advisor, Ontario edition for a more in-depth discussion on compliance and best practices for progressive discipline and discharge from employment. If you are not already a subscriber, try a 30-day free trial here.

Please Note: This article is prepared for information purposes only; it is not legal advice. Consult a lawyer before acting on it or to obtain legal advice or a legal opinion.

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Yosie Saint-Cyr, LL.B. Managing Editor

Managing Editor at First Reference Inc.
Yosie Saint-Cyr, LL.B., is a trained lawyer called to the Quebec bar in 1988 and is still a member in good standing. She practiced business, employment and labour law until 1999. For over 18 years, Yosie has been the Managing Editor of the following publications, Human Resources Advisor, Human Resources PolicyPro, HRinfodesk and Accessibility Standards PolicyPro from First Reference. Yosie is one of Canada’s best known and most respected HR authors, with an extensive background in employment and labour across the country. Read more
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