In Nova Scotia, employees with ten years of service are provided
with special protections under the Labour Standards
Code. Section 71 of the Code provides that, subject to
certain exceptions, an employer can only dismiss an employee with
ten years of service or more for just cause. This is called the
tenured employee rule.
A finding that an employer violated Section 71 can have serious
consequences. In addition to the potential time and cost involved
in defending a Labour Standards complaint, the employer may be
ordered to reinstate the employee and provide them with back pay
and benefits, or to pay damages to the employee.
In the past, many employers in Nova Scotia chose to dismiss
tenured employees without cause despite the risk of a Section 71
complaint. These employers would offer the employee a severance
package in exchange for a release, with the assumption that the
release would shield them from Section 71 liability. However, in
November, 2014, the Labour Board held that a release does not
afford the protection that an employer might expect.
In Demone v Composites Atlantic Limited, 2014
NSLB 163, an employee with more than 18 years of service filed a
complaint that he had been dismissed in violation of Section 71.
The employee had signed a release after taking time to consider the
employer's offer and receiving legal advice. In exchange for
signing the release, the employee received 27 weeks of pay. Despite
the presence of these hallmarks of an enforceable release, the
Labour Board found that the release did not bar the complaint
because parties cannot contract out of the Labour Standards
This was a preliminary decision which only decided whether the
complaint could proceed, and it did not determine whether Section
71 had in fact been violated. Many employment lawyers and employers
in Nova Scotia have been waiting to see how the complaint itself
would be decided.
The Labour Board's decision on the complaint has now been
released. In DeMone v Composites Atlantic Limited, 2015 NSLB 141,
the Board found that Section 71 had not been violated because
DeMone's position had been eliminated due to the employer's
restructuring. The permanent lay-off of an employee as a result of
the good faith elimination of an employee's position is a
well-established exception to Section 71. This aspect of the
decision does not change the applicable principles in assessing a
Section 71 complaint.
The Board also reconsidered its previous decision with respect
to the effect of the Release. The Board accepted that the parties
may not have appreciated the full importance of the issue during
the preliminary hearing, and therefore provided them with the
opportunity to make further arguments.
The Board varied its decision and concluded that the release,
in the particular
circumstances of this case, barred the complaint. This was
based on the Board's finding that Section 71 was not violated
because there had been a good faith elimination of DeMone's
position. As DeMone had received his statutory entitlement to 8
weeks' pay in lieu of notice and an additional 19 weeks'
pay, DeMone had received a benefit that exceeded his entitlement
under the Code. Accordingly, the Board concluded that the release
was enforceable because the parties had not attempted to contract
out of the Code.
Notably, however, the Board declined to decide whether a release
is binding in a situation where an employer is unable to establish
that an employee had been permanently laid off by the elimination
of a position and the employee is therefore entitled to the
protection of Section 71. The Board stated that this remains
to be determined in a different case.
This decision slightly varied the November, 2014 preliminary
decision. There is now no clear statement from the Labour Board
that a release will not bar a Section 71 complaint. Instead, it now
seems that a release likely will be enforceable in circumstances
where an exception to Section 71 applies. However, there remains
significant uncertainty regarding whether a release will bar a
Section 71 complaint in circumstances where an exception to the
provision does not apply. Accordingly, given the significant risks
of a Section 71 complaint, employers in Nova Scotia would be
well-advised to seek legal advice before dismissing an employee
with more than 10 years of service.
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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