Canada: Alberta Employment Update - Fall 2011

Last Updated: December 22 2011
Article by Peter Osadetz

Contents

  • The Alberta Court of Queen's Bench considers novel factors in reducing a wrongful dismissal award made to a long term employee.
  • The Alberta Court of Appeal considers the scope of the term "employer" for the purposes of Alberta Human Rights legislation.
  • The Alberta Court of Queen's bench examines whether long-term oral contracts of employment are binding upon parties in Alberta.

Hansen and Altus Energy Services Partnership
2010 ABQB 820

This case deals with the wrongful dismissal of the plaintiff, Timothy Hansen. The action was decided by Summary Trial on the basis of Affidavit evidence. The evidence before the Court consisted of the Affidavit of Mr. Hansen and the Affidavit of L. Stowkowy, President and Chief Operating Officer of Altus Energy Services Partnership ("Altus").

By way of background, the facts are as follows:

  • Hansen's contract of employment with Altus Energy Services Partnership was terminated in February of 2010 after a period of employment of 23 years. Hansen was a professional engineer. Throughout his employment with Altus, Hansen had worked in various engineering and managerial roles, including as the Engineering Manager of the company's Nisku Facility. At the time of his termination, Hansen was 50 years old.
  • During 2009, Altus experienced some periods of slow activity and, as a result, the working hours at the facility overseen by Hansen were reduced by 20%.
  • In addition, the pay of all employees working at those plants, including Hansen, were reduced an equivalent amount. The reduction in working hours and employee pay was seen as a method by which Altus could avoid dismissing a large number of employees throughout the period of slow activity. Throughout this period, Hansen's salary was reduced from $13,333 per month to $10,666 per month.
  • In October of 2009, the staff of Altus returned to full time work. In late October, Hansen discovered that his pay had not been reinstated to the previous level of $13,333 per month. Around the same time, Hansen was transferred to an alternate role in which he would assist the Vice President of Altus, Mr. Denoon. Shortly thereafter, Mr. Denoon's employment was terminated. From that point forward, Mr. Hansen's role with Altus was unclear.
  • At the time of his termination, Mr. Hansen's salary had not been reinstated to the levels he enjoyed prior to the 2009 period of reduced activity. However, Hansen's termination letter had indicated that his severance would be calculated on the basis of a salary of $160,000, equivalent to $13,333 per month.

Hansen brought a wrongful dismissal claim against Altus, claiming $11,692 in underpayment of base salary. This claim arose because of the reduction in salary from the period of October 2009 to February 2010. The Court agreed that Hansen's base salary of $160,000 remained the same from the period of October, 2009 to February, 2010, awarding Hansen the amount claimed in that regard.

The second issue before the Court was the appropriate notice period in this case. While Hanson claimed for 24 months, the defendant argued that such a period would be inappropriate in these circumstances. The defendant's position was that Hansen could successfully re-enter the employment market as he was an educated individual with highly transferable skills. In contrast, the Hansen argued that it would be difficult to find similar employment in light of his extensive years of service with Altus and his age.

The Court applied the factors enunciated in Bardal v. Globe & Mail Ltd., [1960 ] O.J. No. 149, ("Bardal"), concluding that Hansen was entitled to a notice period of 24 months.

The remaining question before the Court was whether Hansen was entitled to compensation for the annual bonus that he would have likely received during the notice period. At the time of his termination, Hansen was entitled to earn up to 50% of his salary in bonus per annum. During the notice period, Hansen's bonus would have been calculated in a similar fashion as in previous years. The Court examined Mr. Hansen's salary for the 3 years prior to his termination, finding that the average bonus received by Mr. Hansen was 21.73% of his salary over 3 years, or $34,768.

The defendants argued that the plaintiff should not be entitled to a 2011 bonus as bonuses were typically awarded at the end of the calendar year. The Court agreed with the defendants in this regard, stating:

"The measure of damages is the loss of income and benefits that the employee would have received from the employer during the notice period. I am satisfied that the historical pattern was that bonuses were paid at the end of the year for that year. There is no evidence that bonuses were paid for a partial year.

Accordingly, I agree with the defendants that a bonus would not be reasonably expected and therefore should not be awarded for a partial year." Accordingly, a bonus was not awarded for the portion of Hanson's notice period which fell within 2011, as Hanson's notice period only extended into part of that year.

In their final determination of Hansen's entitlement, the Court reduced the award on two grounds: the amounts that Hansen had actually earned as employment income throughout the notice period, and because of the future contingency that Hansen would actually find employment within the notice period awarded by the Court. The Court reduced the award by the amounts actually earned by Hansen and applied a 5% contingency deduction for post trial mitigation.

This decision is significant for two reasons:

First, the decision represents a significant departure from the calculation of bonus awards previously articulated by Canadian Courts. Typically, bonus periods are calculated in accordance with the entire notice period without consideration for when the bonus becomes due. Adopting the rationale accounts for an employee's actual entitlement within the notice period. This rationale represents a significant step forward for employers who have traditionally been prejudiced by the Court's failure to account for the practical realities of the work environment. Based on this decision, savvy employers could reduce their liability arising from wrongful dismissal awards by planning to dismiss employees earlier in the calendar year.

Second, this decision adopts the British Columbia decision of Smith v. Pacific National Exhibition (1991), 34 C.C.E.L. ("Smith"), a decision which had not previously been followed. Smith states that contingencies should be taken into account when determining the appropriate notice period following a wrongful dismissal claim. The Honourable Justice Goss relies upon Smith in contemplation of the future contingency that Hansen would find work within the notice period since 9 months had elapsed since the termination. Although other jurisdictions have declined to apply the rationale from Smith, the Court's recognition of this case indicates that Courts may now be willing to take a more active role in appropriately tailoring wrongful dismissal awards to the particular circumstances of each case.

Dias v. Paragon Gaming EC Company
2010 ABPC 390

This case deals with the dismissal of Michael Dias from Paragon Gaming EC Company, a casino operated by the Enoch Casino Limited Partnership. The case is of some importance because of its discussion of the potential for an increased wrongful dismissal award where an employer has caused an employee to leave a previous position.

By way of background, the facts are as follows:

  • The plaintiff had been employed with the ABS Casino in Edmonton for a period of approximately 16 years before being offered a position the Enoch Casino Limited Partnership.
  • The plaintiff was hired in July 2006 as Games Manager for the Enoch Casino Limited Partnership. The plaintiff commenced employment on August 14, 2006 with a base salary of $61,000.
  • The plaintiff's employment was terminated in February 2008. The plaintiff was paid one week severance as required by the Employment Standards Code, along with one week of vacation pay. The plaintiff was 41 years and had a grade 12 diploma.

The case deals the appropriate period of notice applicable where a plaintiff has been induced to leave secure employment. The Court was considered the factors from Bardal in determining the appropriate notice period in this case. Factors considered included:

  • The character of employment;
  • The length of service;
  • The age of the employee; and
  • The availability of similar employment having regard to experience, training and qualification of the employee.

In its decision, the Court states that the single most important factor in determining the period of reasonable notice was the fact that the plaintiff had been induced to leave a lengthy term of employment. As a result of joining the Enoch Casino, the plaintiff had given up the notice period which he would have been entitled to in that position. The Court stated that the employee would otherwise have been entitled to two months, however, in these circumstances the plaintiff was entitled to a revised period of 4 months.

This case is of particular importance to employers who seek to obtain the services of qualified individuals who are employed elsewhere. Employers should take note that the termination of such employees may be extended simply because those employees have enjoyed secure employment with a previous employer. As seen in this case, the effect on the Court's view of reasonable notice may be significant.

Lockerbie & Hole Industrial Inc. v. Alberta (Human Rights and Citizenship Commission, Director)
2011 ABCA 3

In this case the Alberta Court of Appeal considered the scope of the term "employee" for the purposes of Human Rights and Citizenship and Multiculturalism Act, RSA 2000, c. H-14 (now the Alberta Human Rights Act, RSA 2000 c. A-25.5).

The relevant facts are as follows:

  • The employee was employed by a subcontractor, Lockerby and Hole, who had performed work under contracts on a Syncrude site. It was Syncrude's policy that contractors could not perform work on the worksite unless those workers had passed a drug test. The complainant, Mr. Luca, was denied access to the Syncrude worksite on those grounds.
  • Mr. Luca subsequently brought a complaint to the Human Rights Commission of Alberta. Luca complained that he was a drug addict, and had been the subject of discrimination by Syncrude and Lockerbie and Hole.
  • The Human Rights Commission of Alberta dismissed Mr. Luca's complaint. Luca was not a drug addict, but merely a recreational drug user. Luca was not entitled to avail himself of the productions of human rights legislation.

In their decision, the Commission held that both Syncrude and Lockerbie and Hole were to be viewed as "employers" for the purposes of the Human Rights and Citizenship and Multiculturalism Act. Syncrude and Lockerby and Hole appealed that finding on the grounds that they were not properly viewed as "employers" in that context.

Following the finding of the Alberta Human Rights Commission, the matter proceeded before the Court of Queen's Bench and subsequently the Court of Appeal in this decision. The Court of Queen's Bench agreed that the common law definition of "employer" should be viewed more broadly in a Human Rights context. However, the Court refused to expand the term "employer" to cover the relationship between an owner of an industrial site and the employees of an arms length contractor performing work on that site.

The appeal of the decision in favour of Lockerby and Hole asserted that the Justice had erred by permitting the subcontractor standing at the Court of Queen's Bench. The Human Rights Commission argued that the decision did not affect Lockerbie and Hole, and the company had not applied for intervener status.

The Court of Appeal disagreed with the Commission. The Court found that the company had standing by way of the original complaint, which had named both it and Syncrude as defendants. In addition, had the company applied for intervener status, that status would have been granted. Finally, the participation of Lockerbie and Hole had no effect on the outcome of the appeal.

The Court of Appeal decision considers section 7.1 of the Human Rights and Citizenship and Multiculturalism Act, which deals with discrimination of an employee. That section states that "no employer shall...discriminate against any person with regard to employment or any term or condition of employment..." As the legislation did not contain a definition of "employer", the central question was whether Syncrude or Lockerbie and Hole were properly viewed as an employer for the purposes of the legislation.

Where legislation does not define a term, the Court is free to apply to a common law interpretation of that term. The Court of Appeal states: "Where the legislature uses, without definition, a word that has a long standing common law meaning, the starting point in the analysis is that the intended meaning in the statute has at its core the common law definition."

The Court held that the interpretation adopted by the Human Rights Panel improperly expanded concept of employment beyond what had previously been recognized by Courts in Alberta. As this vast expansion of the definition of "employer" was unjustified by the Panel, the Court of Appeal refused to grant the appeal and adopted the decision of the Alberta Court of Queen's Bench.

This decision is very important for companies operating within contractual relationships with contractors and subcontractors. The decision provides some protection in the human rights context, confirming that companies who have hired contractors are not subject to the same duties and obligations that apply to an "employer" under Human Rights Legislation.

Lavallee and Siksika Nation
2011 ABQB 49

This case deals with the wrongful dismissal of Dr. Melvin Lavallee by the Siksika Nation. Dr. Lavallee had worked at the Siksika Medical Clinic since 1995, a position he took at the age of 50. At the time that Dr. Lavallee began working at the clinic he entered into an oral employment contract. That contract was for a term of twenty years, and stipulated that Dr. Lavallee would be entitled to work a minimum of four days per week throughout the period of his employment. In 2005, Dr. Lavallee's employment was terminated.

The main issue before the Court of Queen's Bench concerned whether the oral employment contract should be honoured and, if not, what damages the plaintiff was entitled to in light of the wrongful dismissal.

With regard to the contract issue, the Court of Queen's Bench recognized that the terms of a fixed term employment contract must be unequivocal and explicit in order to render it enforceable. The court adopted the reasoning from Ceccol v. Ontario Gymnastics Federation (2001), 55 OR (3d) 614 at paras. 26 to 27 (C.A.), which held that a fixed term contract of employment was enforceable where the parties had come to an oral agreement. In such circumstances, it may be difficult for the plaintiff to establish that unequivocal and explicit terms were present such that a fixed term contract should be enforced.

In the case at bar, the Court held that the defendants had offered no evidence to dispute the plaintiff's claim. Although the contract was verbal, there was sufficient evidence at trial to permit the Court to conclude that the contract satisfied these requirements. The Court accepted that the plaintiff had been induced to enter the contract for a fixed term. The Court held that a fixed term contract existed which was to operate for a term for twenty years, until the plaintiff reached the age of seventy.

Counsel for the defendant argued that the Statute of Frauds rendered the contract unenforceable. Section 4 of the Statute of Frauds states that no action shall be brought upon any agreement which is to be performed outside of the scope of one year unless two requirements are met: the agreement must be reduced to writing, and it must be signed by the parties. On these grounds, the Court found that although the contract existed, it was unenforceable. However, the Court was willing to consider presence of the contract, albeit unenforceable, in determining the appropriate notice available to Mr. Lavallee.

The remaining question dealt with the appropriate period of notice in these circumstances. The Court considered the factors from Bardal, noting that those factors are not exhaustive. In addition to the Bardal factors, the Court also considered the intention of the parties in entering the employment relationship to be a relevant consideration in determining the appropriate period of notice. In light of these considerations, The Court held that a notice period of twelve months was appropriate in this case.

This case is of some relevance to employers who have entered into either a fixed term contract or an oral agreement with employees. The case indicates that where such an agreement may give a court reason to extend the period of reasonable notice period available to an employee. In addition, although not enforceable in this instance, a fixed term employment contract will be enforced by Alberta Courts in certain situations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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