Canada: Alberta Employment Update - Winter 2011

Contents

• The Alberta Court of Queen's Bench considers the use of confidential information by a former employee in a competing business venture.
• Alberta Courts consider the availability of Workers' Compensation coverage in three cases involving disputes between individuals and various administrative branches of the Workers' Compensation Board ("WCB").

Stonetile (Canada) Ltd. v. Castcon Ltd. 2010 ABQB 392

Castcon and Stonetile are Alberta companies, both of which produce concrete products used for the finishing of home exteriors. Stonetile began developing concrete products in 1990 and presently continues in the business of production and development of those products. Castcon was started in 2003, and uses many of the same production processes that had been implemented by Stonetile. Castcon's director and primary shareholder is Robert Will, a former employee and member of the executive of Stonetile. The dispute between the parties arose due to allegations that Will had misappropriated the production processes of Stonetile, later using those secrets to create a competing business in Castcon. Stonetile brought an action against Castcon for breach of confidence, breach of contract, and breach of fiduciary duty.

At trial, Justice Nation found that none of the individual processes used by Stonetile in the production of their products could be properly classified as either a trade secret or confidential information to which Stonetile had any right. Instead, the question of confidentiality arose out of the combination of individual processes which, when implemented collectively, were alleged to be the confidential property of Stonetile.

Justice Nation outlined the test required to prove misuse of confidential information, citing Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574: "The plaintiff has the onus to prove that: (1) the information conveyed was confidential, (2) the information was communicated in confidence and (3) it was misused by the party to whom it was communicated." Justice Nation held that the plaintiff satisfied the requirements of that test in this case. The information was confidential as it was neither known nor available to individuals outside of the company. In satisfaction of the second branch of the test, the confidential information was communicated to the defendant in confidence, as was evidenced by the plaintiff's employment of confidentiality agreements signed by the defendant. Finally, the confidential information was misused by the defendant company to "springboard" it into an advantageous position as a direct result of the confidential information misappropriated from the plaintiff.

During his employment at Stonetile, Will signed a document entitled 'Confidential Understanding'. The purpose of the document was to prevent the dissemination of confidential information that could be used contrary to the commercial interests of Stonetile. Many aspects of the confidentiality agreement were irrelevant to the matters at issue in the case. The contents of the Confidential Understanding which were of interest to the Court were contained in three paragraphs of the Confidential Understanding. The first paragraph dealt with technical knowledge relating to the Stonetile production process obtained by Stonetile employees. The second dealt with dissemination of information to persons "outside of the employee realm". The third dealt with the use of confidential information in an attempt to compete directly or indirectly with Stonetile.

Justice Nation characterized the Understanding as 'vague', especially in regard to information which was subject to confidentiality. The agreement described this information as that which was "other than common knowledge". Applying the principle of contra proferentem, Justice Nation interpreted this ambiguity against Stonetile, holding that the contract was not sufficiently specific about the information to which it applied in order to hold the defendant to the understanding. Stonetile's action for breach of contract was dismissed.

The final issue for the Court to decide was whether Castcon, through the actions of Will, had breached a fiduciary duty to Stonetile. In order for Stonetile's claim to succeed, it must prove that Will stood in the position of fiduciary to Stonetile, and that he had acted contrary to his fiduciary duties while such duties were still owed to Stonetile. Justice Nation outlined the preconditions necessary for a fiduciary duty to arise, as stated in Frame v. Smith, [1987] 2 S.C.R. 99: "(1) The fiduciary has scope for the exercise of some discretion of power. (2) The fiduciary can unilaterally exercise that power or discretion so as to affect that beneficiary's legal or practical interests. (and) (3) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power."

After conducting a review of Will's duties and responsibilities within Stonetile, Justice Nation concluded that Will did not owe a fiduciary obligation to the company. Will had not, for the majority of the term of his employment, acted in a managerial capacity. Further, for the period when Will was a part of the executive committee of the company, his duties had been unrelated to the actual management and direction of the company. Throughout Will's employment at Stonetile, these circumstances allowed him no powers of discretion relating to the interests of the company.

In determining an appropriate damage award for the misuse of Stonetile's confidential information, Justice Nation considered the fact that the information available to Castcon allowed the company to bypass both the time and the risk associated with developing a new product. Justice Nation considered that this 'springboard' effect would give Castcon a one year head-start as compared to the position that it would have been in but for the use of Stonetile's confidential information. To arrive at an appropriate damage award, Justice Nation averaged Castcon's profits since 2003, resulting in a $111,345 reward to Stonetile.

Nabours Canada Ltd. v. Alberta (Appeals Commission for Alberta Workers' Compensation) 2010 ABCA 243

This appeal arises from a motor-vehicle accident in which two workers were injured on a private road. The workers were returning to their worksite late on the evening of December 31, 2002, when the driver lost control of the vehicle and it rolled into a tree. As a result of the accident one worker died and the other was seriously injured. The main issue on appeal was whether or not the accident arose out of the employment of the workers. If answered in the affirmative, the injuries of the parties would be compensable under the Workers' Compensation Act, R.S.A. 2000, c. W-15 (the "Act").

In considering the issue, the Court of Appeal reviewed the relevant policy considerations under the Act. The WCB Policy 02-01 states that travel to and from work is covered when at the direction of the employer, if such travel is on an employer owned or leased road. Such travel is not considered to be at the direction of the employer if it occurs only because the employee is travelling to work, regardless of whether the employee receives compensation for travel to and from work. The decision of the WCB Appeals Commission found that the travel in question in this case fell within the scope of that Policy and were therefore properly viewed as a compensable injury pursuant to the Policy stated above.

The first instance of appeal of the Appeals Commission's decision was upheld by the Chambers Judge of the Alberta Court of Queen's Bench. The Judge found that the Appeals Commission had applied the appropriate standard of review, reasonableness, in coming to its decision, and that the decision of the Appeals Commission was itself reasonable.

On appeal to the Alberta Court of Appeal, the appellant urged the Court to consider a new issue: that the decision of the Commission was invalid because it was premised on an invalid policy. The appellant argued that the Board's decision relating to whether the accident arose out of the course of employment was outside of the Appeals Commission's jurisdiction to decide compensation policies.

The preliminary issue of whether the Court of Appeal had the authority to hear the matter was decided as follows. Applying Shuchuk v. Alberta (Workers' Compensation Board, Appeals Commission), 2007 ABCA 213, the Court found that it was within its authority to hear the appeal on the grounds that there was sufficient record to allow a full examination of the issue, and that the respondent was not prejudiced by the issue being heard.

In deciding the central issue of the Appeal, whether the Appeals Commission had the authority to decide that the injury arose out of the course of employment, the Court of Appeal applied principles of statutory interpretation from both a decision of the Supreme Court of Canada and from the Interpretation Act, R.S.A. 2000, c. I-8, s. 10. In Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, the Supreme Court discussed statutory interpretation stating: "...there is only one principle or approach, namely that the words of the Act are to be read in their grammatical and ordinary sense harmoniously, with the scheme of the Act, the object of the Act, and the intention of Parliament." The Interpretation Act states that enactments should be given "fair, large and liberal construction and interpretation that best ensures the attainment of its objects."

The Alberta Court of Appeal applied the above principles of interpretation in reaching its decision on the authority of the Appeals Commission to decide the issue of whether the accident arose out of the course of employment. The Court found that the Board's approach was consistent with the purposes and object of the Act, allowing the Appeals Commission to inquire into all relevant matters including entitlement. The Board's authority to decide compensation policies is to be given a "broad interpretation, such that it includes not only authority to issue policies that address the extent to which an injury is to be compensated, but also on topics as to whether the injury is one that entitles the claimant to compensation."

Johnson v. Alberta (Appeals Commission for Alberta Workers' Compensation) 2010 ABQB 393

Mr. Johnson allegedly suffered from chronic pain due to an injury which occurred while he was working. Mr. Johnson's injury took place when he slipped while getting out of his truck, hitting his back on the bumper of the vehicle. Although Mr. Johnson had strained his back, an initial CT scan did not reveal any issue consistent with the symptoms described.

Initially, the WCB accepted Mr. Johnson's claim, and began treatment aimed at assisting his return to work. Despite these efforts, Johnson continued to suffer lower back pain. Medical reports were inconclusive. While Johnson continued to suffer from chronic lower back pain, a medical consultant for the WCB concluded that there were no significant abnormalities to Johnson's physiology to which the pain could be attributed, concluding that the symptoms experienced were not related to the injury suffered. Despite the existence of conflicting medical reports, the WCB concluded that Mr. Johnson's symptoms were not attributable to the injury suffered. The matter was forwarded to a WCB supervisor, and subsequently to the Dispute Resolution and Decision Review Board ("DRDRB"). Each of those decisions found that Johnson's injury was not compensable and the WCB cancelled coverage for Johnson's claim.

Mr. Johnson's counsel applied to the Appeals Commission in relation to the DRDRB decision. Johnson's counsel requested an opportunity to cross examine four physicians who had provided opinions contrary to Johnson's interests. Both that application and Mr. Johnson's substantive appeal were rejected by the Appeals Commission.

Mr. Johnson's appeal of the Appeals Commission's decision raises two issues: whether it was a breach of procedural fairness/natural justice to deny the application to cross examine the physicians who had provided opinions contrary to Mr. Johnson's interest; and, whether the denial of Mr. Johnson's claim was reasonable. The Appeals Commission argued that the statutory authority of. s. 13.1 of the Workers' Compensation Act, granted the Appeals Commission authority to determine its own procedural rules, including the cross examination of medical experts.

The Appeals Commission further submitted that the appropriate standard of review was fairness, rather than reasonableness. The Court of Queen's Bench applied the factors from Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817, to the facts of this application.

The court aimed to determine the appeals commission's decision to deny Johnson's application regarding cross-examination where procedurally fair. The Baker factors include:

1. the nature of the decision being made;
2. the nature of the statutory scheme and terms of the statute pursuant to which the administrative body operates;
3. the importance of the decision;
4. the legitimate expectations of the person challenging the decision; and,
5. the procedural choices of the agency itself.

Applying Baker, the Court found that more procedural fairness was required. The judicial nature of the decision, the limited availability of appeal pursuant to applicable legislation and the presence of a privative clause were factors considered by the court in coming to that decision.

The Court noted that cross examination has been viewed as an important part of any process which recognizes and fosters natural justice. Cross examination should be viewed as especially important in instances where credibility is at issue, or where the evidence which may be tested in cross is vital to the case of one of the parties, as it was in this instance.

The Court rejected the assertion of the Appeals Commission that equally effective means to test the information at issue existed. The Court concluded that the Appeals Commission's decision was procedurally unfair. Mr. Johnson should have been given the opportunity to cross examine the physicians who provided evidence contrary to his interests. The Court set aside the decision of the Appeals Commission.

The court also ordered that the matter be remitted to the Appeals Commission for rehearing with the direction that the physicians in question be served with notices to attend.

The Workers' Compensation Board v. Alberta (Appeals Commission for Alberta Workers' Compensation) 2010 ABQB 368

In a recent decision of Mr. Justice S. D. Hillier, the Alberta Court of Queen's Bench considered whether a WCB claim was compensable. The main issue before the Court was whether the claimant's respiratory problems, complaints of fatigue and changes in her voice were attributable to workplace conditions.

By way of background, the symptoms suffered by Ms. Wallace included upper air way irritability arising from employment in an aging facility with poor air quality. Ms. Wallace, the Claimant, had a long standing history of asthma and was predisposed to the development of severe allergies. Symptoms included nasal congestion, cough leading to shortness of breath and changes in vocal quality.

The history of WCB decisions relating to Ms. Wallace's claim are as follows:

1. The case manager of the WCB rejected the claim on the grounds that medical reports were inconclusive on whether or not Ms. Wallace suffered a total disability from her injury.
2. An independent medical panel (the "Panel") appointed by the WCB, comprised of physicians reviewed the case and found that Ms. Wallace suffered from "...upper airway irritability syndrome, mild allergic diathesis, vague asthma, possible laryngeal dysfunction and an overlap of medically unexplained physical symptoms."
3. The decision of the case manager of the WCB was subsequently reviewed by the DRDRB. The DRDRB also rejected Ms. Wallace's claim on the grounds that the injuries suffered by Ms. Wallace was not a compensable injury under the terms of the Act.
4. The decision of the DRDRB was further reviewed by the WCB Appeals Commission and reversed.

It is the decision of the Appeals Commission that is the issue of the appeal.

The Appeals Commission found that Ms. Wallace's claim was compensable, and further, that the findings of the Panel were not binding on the Appeals Commission in making a determination about the legal issue of compensability. The Appeals Commission asserted that medical findings are binding on the Appeals Commission only so far as they are findings of fact. The decision of the Appeals Commission expressed that its role was to determine whether the injury suffered by Ms. Wallace was compensable in a legal context rather than in a factual context; it is on that basis that the Appeals Commission found that the injury was compensable.

The positions of the parties revealed a number of issues, including:

1. the appropriate standard of review;
2. the jurisdiction of the Appeals Commission to reach a different finding than the Panel on causation; and,
3. the reasonableness of the Appeals Commission's decision.

Standard of Review

In relation to the first issue, the standard of review, the Court cites Dunsmuir v. New Brunswick 2008 SCC 9 ("Dunsmuir"). In Dunsmuir, the Supreme Court of Canada set out a two-step process to be applied when determining the standard of review appropriate for an appeal or judicial review. The two step-process is as follows:

1. Courts are to determine whether or not jurisprudence has already determined the satisfactory standard of review for such case; and,
2. should the first branch of inquiry provide no assistance, Courts are to conduct a full Dunsmuir analysis in order to identify the proper standard of review.

In considering the first branch of the standard of review analysis from Dunsmuir, the Court states that the appropriate standard, either reasonableness or correctness, must be applied to each issue: jurisdiction and the reasonableness of the decision.

The Court cites Gahir and Alberta (Workers' Compensation, Appeals Commission), 2009 ABCA 59 ("Gahir"). Gahir summarizes the various standards of review applicable to issues arising from WCB cases. Findings of fact, interpretation of WCB policies and interpretation of legislation applicable to the WCB are all assessed on a standard of reasonableness, whereas true jurisdictional issues are evaluated on a standard of correctness.

Applying the jurisprudence, the Court finds that entitlement to compensation should be assessed on a standard of reasonableness. The jurisdictional issue is not specifically contemplated by any of the jurisprudence. Since determination in the appropriate standard of review has not fully been decided in Alberta, it was necessary for the Court of Queen's Bench to endeavour to determine the issue under the second step of the Dunsmuir analysis, namely, the pragmatic and functional approach. The pragmatic and functional approach considers 6 main questions, as follows:

1. the nature of the question at issue;
2. whether or not there exists a privative clause;
3. restricting review;
4. the purpose of the tribunal;
5. the expertise of the tribunal; and
6. the conclusion on that standard.

In reviewing these 6 questions, the Court of Queen's Bench concluded that the appropriate standard of review for the issue of jurisdiction is reasonableness. However, the Court noted that whichever standard of review applied, be it reasonableness or correctness, it would not impact the Court's determination of the jurisdictional issue. As discussed below, the Commission's interpretation of its jurisdictional issue was correct. Correctness, as a more stringent standard, validates any review of the issue regardless of the standard applied.

Jurisdiction

In relation to the second issue of jurisdiction, the Court states as follows:

From this passage, it is clear that the Court views the Appeals Commission's authority to determine the issue of causation as broad. The decision of the medical panel, as asserted by the Appeals Commission is a finding of fact, distinct from the legal finding of causation as suggested by the Appeals Commission. The Court finds that the Commission correctly determined the jurisdiction issue. The Commission's determination of the issue accorded with the legislative mandate of the Commission, to determine the worker's entitlement to compensation.

Reasonableness

The final issue for the Court's consideration dealt with whether "the Commission's decision on entitlement was in fact reasonable". This issue deals largely with whether or not the Appeals Commission's interpretation of the medical panel's statements was reasonable. The Court settles this issue stating that it was reasonable for the Appeals Commission to look to other evidence beyond the medical panel's finding. Further, the Appeals Commission expressly considered whether or not its decision was consistent with the medical findings of the panel stating:

This passage explains why the decision of the medical panel and the decision of the Appeals Commission are not contradictory. Further, the passage indicates that the Appeals Commission turned its mind to the possibility of a contradiction between its conclusions and the decision of the medical panel. The Court again agrees with the Appeals Commission's assessment of this issue, and finds that the decision is reasonable. In light of the Court's conclusions on the preceding issues, the application to set aside the decision of the Appeals Commission was denied.

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