Employment Law for Business and Human Resources Professionals (PDF)

1 CHAPTER 2 Provincially Regulated Employers...

1 CHAPTER 2 Provincially Regulated Employers Understanding Common Law PP 29-58 Copyright © 2021 Emond Montgomery Publications. All rights reserved.  2 Learning Outcomes After completing this chapter, you will be able to: Understand key common law issues related to hiring, including negligent misrepresentation Understand the effect of using executive search firms in the recruitment process. Explain the legal implications of using background checks, including conducting internet and social media searches. Understand differences in categories of employees, including fill time, part-time and temporary employees. Copyright © 2021 Emond Montgomery Publications. All rights reserved.  3 Twin Pillars of Individual Employment Law 1. Common Law 2. Employment-related legislation (statutes and regulations): these provide the “floor” rights and mechanisms for enforcement Legislation will either be provincial or federal In this chapter we focus on PROVINCIAL Copyright © 2021 Emond Montgomery Publications. All rights reserved.  4 Areas of Common Law Liability 1. Negligent Misrepresentation by candidates 2. Wrongful hiring: negligent misrepresentation by employer 3. Inducement: aggressive recruiting (enticing from secure employment) 4. Restrictive covenants (including non- competition, confidentiality and non-solicitation) 5. Anticipatory breach of contract 6. Background checks: negligent hiring 7. Induced breach of contract Copyright © 2021 Emond Montgomery Publications. All rights reserved.  5 Negligent Misrepresentation by Job Candidates May be just cause for dismissal if the misrepresentation: seriously prejudices the employer, or indicates material untrustworthiness of candidate Minor misstatements, even deliberate ones that do not induce the employer to hire the applicant, do not justify dismissal It depends on the impact or potential impact of the misrepresentation … Copyright © 2021 Emond Montgomery Publications. All rights reserved.  6 Fraudulent Misrepresentation Where a party makes a statement of fact that he or she knows to be untrue, and the other party relies on it to their detriment Note: Dismissal with or without notice is discussed in Chapters 13 & 14 An employer who wishes to emphasize the importance of honesty should include an “attestation clause” at the end of all job application forms. Applicant to confirm that information is true and that false statements may disqualify employment, may lead to disciplinary action and may be cause for dismissal Copyright © 2021 Emond Montgomery Publications. All rights reserved.  7 Wrongful Hiring - Negligent Misrepresentation by Employer (during hiring process) Queen v Cognos Inc, 1993 CanLII 146 (SCC) Mr. Queen was induced by Cognos to accept a job in Ottawa on the representation that he would oversee a large project that had not yet been approved; the interviewer was aware of this fact and the job offer was not contingent on project funding. Queen signed a contract of employment under which he could be terminated without cause on one month’s notice or pay in lieu. Queen left a secure job and moved his family from Calgary to Ottawa and was dismissed soon after b/c project not funded; he sued for negligent misrepresentation in hiring. The SCC held that the employer and its representative breached the duty of care owed to Queen during the hiring process. Queen was awarded $50,000 for loss of income and for cost of obtaining other employment, loss of money incurred on sale of Ottawa home and $5000 for emotional stress. Copyright © 2021 Emond Montgomery Publications. All rights reserved.  8 Wrongful Hiring - Negligent Misrepresentation by Employer The court set out the test to be met for a finding of negligent misrepresentation: There must be a duty of care between party making representation and the candidate The representation must be untrue or misleading The representation must have been made negligently The candidate must have reasonably relied on the representation The reliance must have caused harm to the candidate. Copyright © 2021 Emond Montgomery Publications. All rights reserved.  9 Beauchemin Case – Reliance must be Reasonable Note that the candidate’s reliance on the negligent misrepresentation must be reasonable. ”Full-time permanent employment” cannot be construed as a promise to employ a person until retirement regardless of the suitability of management style or the quality of job performance: Beauchemin v Universal Handling Equipment Co. It was not reasonable for the plaintiff (B) to rely on such an interpretation of the defendant and so negligent misrepresentation was not established Copyright © 2021 Emond Montgomery Publications. All rights reserved.  10 What is Reasonable Reliance? Queen v Cognos – Queen was found to have reasonably relied on the negligent misstatements made to him in the hiring process. He was told he would lead a large project. He did not know the funds had not been secured. The person who interviewed him knew and withheld the information In the case of Beauchemin v Universal Handling Equipment, B brought action for alleged negligent misrepresentations made to him that induced him to leave long term employment for a new role as operations lead at another company.  11 Copyright © 2021 Emond Montgomery Publications. All rights reserved.  12 Beauchemin v Universal Handling Equipment (cont) HELD: ABQB rejected B’s negligent misrepresentation claim based on the Cognos test: There was a duty of care owed to Beauchemin based on the special relationship. The offer of a “full time permanent position” is not a promise or guarantee of employment to retirement regardless of one’s suitability and quality of job performance, etc. [common parlance, not an untrue or misleading statement] It was not reasonable for B to rely on that interpretation of the defendant’s statement so negligent misrepresentation was not established. Copyright © 2021 Emond Montgomery Publications. All rights reserved.  13 Recruitment and Executive Search Misrepresentations Employer is still liable for any: breaches, misrepresentation, or inducements. Search firm “acts on behalf of” the employer How to reduce exposure: Careful selection of firm Set boundaries and guidelines including an expectation firm will abide by all laws Get search firm to provide indemnity Copyright © 2021 Emond Montgomery Publications. All rights reserved.  14 Treaty Group Inc. v. Drake, 2007 ONCA 450 (I) Treaty engaged Drake to fill a position that involved bookkeeping and banking duties In doing so, Drake would provide the “highest calibre of professional screening, evaluation and reference checking.” Drake recommended and Treaty hired Simpson who had been twice been criminally convicted of fraud. 2 years later, Treaty discovered that Simpson had defrauded it of $263,000 Copyright © 2021 Emond Montgomery Publications. All rights reserved.  15 Treaty Group Inc. v. Drake (II) Treaty sued for breach of contract and for negligent misrepresentation for failing to conduct proper checks Issue: is the search firm liable for losses sustained by Treaty as a result of e’ee fraud? Held: Yes, trial judge and CA held Drake liable; if it had properly checked, Treaty would not have hired her but, T & D were contributorily negligent Copyright © 2021 Emond Montgomery Publications. All rights reserved.  16 Tort of Inducement, Allurement or Enticement Inducement: Aggressive recruiting techniques or inflated promises that lure an employee to new job; it involved more than advertising a position Result: Longer notice of termination period required (or larger wrongful dismissal awards granted) Additional damages may be awarded for the tort of allurement which will compensate employee for lost earnings, costs of moving, or buying a new home. Copyright © 2021 Emond Montgomery Publications. All rights reserved.  17 Best Advice to Employers Honesty and openness about job being offered is key; be careful around: Job security Promises of career advancement Do not promise long-term job security Address the issue of termination notice in the employment agreement before employee commences work Copyright © 2021 Emond Montgomery Publications. All rights reserved.  18 Restrictive Covenants (I) Contractual terms that bar a former employee from certain activities during or after employment Restrictive Covenant An “express” term of employment that seeks to prevent employees and former employees from: Exploiting the employer’s client relationships, trade secrets, confidential info, and goodwill Competing with the employer Applies during employment and after the employment relationship has ended (called a “post-employment obligation”) Copyright © 2021 Emond Montgomery Publications. All rights reserved.  19 Restrictive Covenants (II) Types of Restrictive Covenants: 1. Confidentiality - information must be kept secret or disclosed with permission 2. Non-compete - cannot work for competitor 3. Non-solicit - cannot solicit clients and employees of previous employer Copyright © 2021 Emond Montgomery Publications. All rights reserved.  20 Restrictive Covenants (III) Public interest: Free competition and labour mobility Employee interest: Employer interest: To use their knowledge, skill, and expertise to To protect its business secure employment Copyright © 2021 Emond Montgomery Publications. All rights reserved.  21 Restrictive Covenants (IV) Any restrictive covenant is void as being a restraint of trade unless all of the following conditions are met: 1. Protects a legitimate proprietary interest of the employer that is worthy of protection Firm-specific, not just general expertise and skills 2. Reasonable in terms of duration and geographic location Only where competition exists for the employer’s product Only so long as it takes for the employer to recover 3. Must not be contrary to the public interest Should not be overly broad or unduly restrictive Copyright © 2021 Emond Montgomery Publications. All rights reserved.  22 Restrictive Covenants (V) The burden of proof is on the employer to prove the reasonableness and validity of a RC Doubts about reasonableness and validity are resolved in favour of the employee This reflects a recognition of the non-equality in bargaining power between employee and employer Note: An otherwise valid restrictive covenant will cease to bind an employee if they are found to have been wrongfully dismissed Copyright © 2021 Emond Montgomery Publications. All rights reserved.  23 Jones v Klassen, 2006 ABQB 41 (CanLII) Klassen was hired and trained to run a one- person storefront office for Edward Jones (St. Albert office) After 4y K left to work for another storefront-style brokerage firm. Prior to his departure, he emailed all of his clients, provided his contact info and suggested they could be better served by his new firm. Copyright © 2021 Emond Montgomery Publications. All rights reserved.  24 Jones v Klassen, (II) K also printed and took client list and thousands of pages of client data from EJ. After he resigned over $3M in client accounts transferred to Klassen’s new firm (37% of EJ’s business!) EJ sued for breach of restrictive covenant HELD: Klassen was liable for breach of contract and breach of fiduciary duty Copyright © 2021 Emond Montgomery Publications. All rights reserved.  25 Anticipatory Breach of Contract (I) Definition: When one party indicates it has no intention of living up to its obligations under the employment contract Repudiation (rejection) can be by statements or by conduct It is ’anticipatory’ because it occurs after the contract has been made but before employment begins. Copyright © 2021 Emond Montgomery Publications. All rights reserved.  26 Anticipatory Breach of Contract (II) Either employer or employee may be liable if it repudiates (rejects) the employment contract before employment begins If plans change and there is no longer a position: 1. Where there has been an offer and acceptance (written or verbal) 2. Where there is no cause for withdrawing the offer 3. Where the breach is not the result of “Frustration” Copyright © 2021 Emond Montgomery Publications. All rights reserved.  27 Background Checks: Negligent Hiring Background checks should be completed at least to the extent necessary to avoid a claim that the employer could have reasonably prevented a foreseeable harm to a third party Employment references Educational and professional credentials Credit Police records Internet and social media Seeking information outside of the reference process may violate AB Personal Information Protection Act. Copyright © 2021 Emond Montgomery Publications. All rights reserved.  28 Class 2 Copyright © 2021 Emond Montgomery Publications. All rights reserved.  29 Background Checks: Negligent Hiring Background checks should be completed at least to the extent necessary to avoid a claim that the employer could have reasonably prevented a foreseeable harm to a third party Employment references Educational and professional credentials Credit Police records Internet and social media Seeking information outside of the reference process may violate AB Personal Information Protection Act. Copyright © 2021 Emond Montgomery Publications. All rights reserved.  30 Background Checks Cont. Common misrepresentations by employees: Listing family members as former supervisors Altered start/end dates to hide gaps Providing incorrect job titles Listing false academic credentials The cost of bad hires can be very high; best to verify information provided and conduct a background check before someone is hired Risk of negligent hiring if a third party is harmed in a way that is foreseeable Copyright © 2021 Emond Montgomery Publications. All rights reserved.  31 Reference Checks Asking for references is a common and recommended practice Failure to check references can lead to employer liability where harm to third party Bouncer with violent past injures patron Authorized agent suspected of theft in past (as revealed via reference process) steals from client Employer must exercise reasonable care; a level of due diligence that is reasonable in the circumstances (more diligence in the face of greater risk); document carefully  32 Reference Checks The same inquiry should be made of all applicants to ensure constituency and thoroughness and to avoid perceptions of discrimination All information must be kept confidential; the references and the identity of referees References from past employers are often watered down to avoid allegations of defamation Despite challenges, reference checks should e done especially if position of trust and harm to 3rd party could result  33 Education/Credentials Checks In situations where an individual is required by law to be credentialed, this is an important step (e.g. engineers, accountants, nurses) Diploma mills and fake degrees are problematic Speak directly to registrar’s office at institution Where there is doubt about the institution, contact an independent source that evaluates educational institutions Copyright © 2021 Emond Montgomery Publications. All rights reserved.  34 Credit Checks Mark’s Work Wearhouse Ltd. Investigation Report, Alberta Office of the Information and Privacy Commissioner, P2010-IR-001 The pre-employment screening procedure at MWW involving security clearance and credit check was not reasonable. MWW job applicant filed complaint under the AB Personal Information Protection Act alleging a breach of privacy because MWW conducted an unnecessary credit check. MMW argued credit check would provide ‘insight’ the Privacy Comm’r was “not persuaded” and ordered that MWW stop collecting credit info as part of hiring process for sales associates in all locations  35 Police Record Checks Where posted position concerns vulnerable people (children, elderly, mentally ill) or otherwise involves substantial trust, employers should require candidates to have a police records check All police records checks require informed consent In AB, an employer may refuse to hire someone with criminal record even if not related to the job Best practice: only do a search if it is necessary for the position Copyright © 2021 Emond Montgomery Publications. All rights reserved.  36 Internet and Social Media Searches Potential pitfalls Mistaken identity – might find info about another person Quality control – information may have been posted by someone other than the applicant, with an intention to harm that person Online information can touch on prohibited grounds of discrimination Privacy concerns – see guidelines published by the OIPC in AB and BC Copyright © 2021 Emond Montgomery Publications. All rights reserved. 37  38 When Should Background Checks be performed? Most background checking should only be done after a conditional offer of employment is made to reduce risk of allegations of discrimination by unsuccessful applicants Exception: Reference Checks But, current employer should be contacted only after conditional offer unless the candidate consents otherwise Many orgs use 3rd parties to carry out background checks after conditional offer made  39 Defining the Relationship: Tests for Determining Status Copyright © 2021 Emond Montgomery Publications. All rights reserved.  40 Employee Versus Independent Contractor (IC) Trend towards more ICs Determining status (E’ee v IC) is a common issue in employment setting, particularly non-union Much of the protective employment legislation (Employment Standards, minimum wage, etc.) applies only to emplooyees But NOTE, Human Rights and OHS legislation applies to both ICs and employees Copyright © 2021 Emond Montgomery Publications. All rights reserved.  41 Independent Contractors (I) Independent contractors are self-employed / independently employed workers engaged by a principal to perform specific work Increasingly popular alternative to hiring an employee They are NOT employees of the business Legal distinction is important and often difficult to make If contested, courts will look at as many relevant factors as possible Copyright © 2021 Emond Montgomery Publications. All rights reserved.  42 Independent Contractor (II) Advantages of IC for employer included: No statutory remittances collected by employer (CPP, EI, income tax) Not entitled to employment standards protections No common-law wrongful dismissal claims Advantages for IC include: Tax breaks Flexibility to work for others and to self-manage Copyright © 2021 Emond Montgomery Publications. All rights reserved.  43 Four Tests to Determine Status 1. Control test: Who supervises/controls the “when” and “where” of work? An important consideration 2. Risk test: Does the worker have a financial investment in the business, so that there is an opportunity for profit or risk of loss? 3. Organization test: Are the services provided integral or ancillary to the business? 4. Ownership test: Who owns the tools required to do the work? This factor is instructive but not conclusive Copyright © 2021 Emond Montgomery Publications. All rights reserved.  44 Independent Contractor or Employee? Pacific Rim Nutrition v Guardian Insurance of Canada, 7 BCLR (3d) 251 Bookkeeper working for plaintiff company stole $180k from the company; this happened while the plaintiff was covered by liability policies with the defendant insurers. Plaintiff sought indemnification under insurance policies. Recovery depended on whether the acts were committed by e’ee (not payable) or IC (payable) Firm argued that bookkeeper was an IC; Insurance company argued that the bookkeeper was an e’ee Issue: Based on these facts, was the bookkeeper an employee or IC? Copyright © 2021 Emond Montgomery Publications. All rights reserved.  45 Pacific Rim Nutrition (II) PR argued That it did not control the manner/method of work and it did not make deductions for income tax, CPP or EI No holiday pay or benefits paid to bookkeeper BUT, insurer argued that the work was bookkeeping, not ‘accounting’; she was not a member of any professional association The work performed was essential for PR’s day-to-day operations She was under the direct control of the sole shareholder, director and officer of PR (Mr. Reid) who regarded her as an employee She worked regular hours and was directed by Mr. Reid who thought she was his employee and supplied her with tools She did not set fees; she accepted the amount the firm paid her She worked at the business office (never from home) PR had the right to discharge her services and gave her 2 weeks notice of termination when it dismissed her HELD: substantively, the bookkeeper was an employee, not IC Copyright © 2021 Emond Montgomery Publications. All rights reserved.  46 How to Create and Maintain a Principal- Independent Contractor Characterization (I) 1. Have a clearly written contract identifying that IC status is intended 2. Contract should be for a fixed term with fair mutual termination clause 3. Do not withhold statutory deductions or ESC standards such as vacation pay, etc. Have contractor acknowledge this. 4. Have an indemnity clause stating that contractor is responsible for all statutory remittances such as for EI or WC premiums 5. Clear statement that the IC does not have authority to create obligations on behalf of the organization 6. Contract should not prohibit IC from working for others; avoid setting work hours Copyright © 2021 Emond Montgomery Publications. All rights reserved.  47 How to Create and Maintain a Principal-Independent Contractor Characterization (II) 7. Do not provide: benefits, bonuses, tools, uniform, car 8. Give the IC the right to accept or refuse work 9. Have IC purchase and maintain insurance 10. Do not require performance reviews or disciplinary measures as for employees 11. IC should have GST number and incorporate 12. Minimize integration of IC into organization Copyright © 2021 Emond Montgomery Publications. All rights reserved.  48 Agents: The Use of Temporary Employment Agencies (‘Temp Agencies’) Agent: A person who can bind an organization to a contract with customers or of the parties, with or without the organization’s knowledge. “Leasing” personnel from an agency that employs them is a growing trend; it cuts across the spectrum of corporate jobs Trend is likely to accelerate in both the public and private sectors as organizations adapt to new business models made possible by: advances in technology and the trend to outsourcing of non-core functions Copyright © 2021 Emond Montgomery Publications. All rights reserved.  49 Liability of Client Organization for Agency Employees What matters to the courts? Who actually pays for the work, not just who signs the cheque (e.g. a temp agency) Other relevant factors: Who exercises daily control over the employee? Who has the real responsibility for hiring, disciplining, and dismissing employees? Copyright © 2021 Emond Montgomery Publications. All rights reserved.  50 Different Types of Employees For the most part, in Alberta and BC, the law does not distinguish between different categories of employees. Employers frequently categorize employees as follows: Permanent full-time employees Permanent part-time employees Temporary employees (“contract position” for specific task) Casual employee (intermittent) Agency employees or “temps” Copyright © 2021 Emond Montgomery Publications. All rights reserved.  51 NOTICE Copyright Disclaimer This PowerPoint presentation is copyright protected. Individuals who have adopted the related Emond Publishing textbook for their course are granted permission to use this presentation for instructional purposes only. Slides may not be distributed under any kind of Open Access style license, or website, or be duplicated, copied, sold, or otherwise exploited for any commercial purpose without Emond Publishing’s express written consent. Thank you. Copyright © 2021 Emond Montgomery Publications. All rights reserved.