Canada: It's Not Humbug: Recognizing The Principle Of Mutual Trust And Confidence In The Workplace

Last Updated: December 27 2018
Article by Nicole Skuggedal and Jason Harman

Today the master and servant relationship between Ebenezer Scrooge and his clerk Bob Cratchit appears to our eyes an anachronism. For starters, Scrooge's penny-pinching ways would likely have him offside of employment standards provisions guaranteeing workers a minimum wage and paid statutory holidays.

In the modern world of employment, employers realize that legislation and the common law have provided a number of legal means to protect employees. Cases such as Bardal v. Globe & Mail Ltd. (1960 CanLII 294) stand for the principle that employees are owed "reasonable notice" or pay in lieu if they are dismissed without cause. Honda Canada Inc. v. Keays (2008 SCC 39) lays out the rules for how and when an employee may be awarded aggravated and punitive damages for the manner of dismissal.

Employers should not conclude from these cases, however, that there is no positive duty toward employees during the course of employment — that is, so long as an employer avoids acting malevolently it is otherwise unencumbered in its dealings with its employees. While the fact that employees owe their employer an intangible duty of loyalty to act with the interests of the employer in mind is generally well-known, recent case law has gone some distance in updating this idea to make it reciprocal rather than simply one-sided.

In Potter v. New Brunswick Legal Aid Services Commission (2015 SCC 10), Justice Wagner writing on behalf of the majority of the Supreme Court of Canada held that an employer may not withhold work from an employee without justification.  Negativing the notion that employers have carte blanche in their business affairs vis-à-vis their employees, Justice Wagner wrote that withholding work would be "inconsistent with the employer's duty of good faith and fair dealing that has been gaining acceptance at common law."

The British Columbia Court of Appeal has picked up on this passage in Potter, holding that there is a mutuality of trust inherent in the relationship between employer and employee and that "[j]ust as trust of an employee, in the circumstances of employment, is an important aspect for the employer, so too trust of the employer is important" (Fredrickson v. Newtech Dental Laboratory Inc., 2015 BCCA 357).

Justice Saunders, writing on behalf of the Court of Appeal, went on to adopt the view expressed in Edwards v. Chesterfield Royal Hospital NHS Trust, [2011] UKSC 58 that,

the employer and employee may not, without reasonable and proper cause, conduct themselves in a manner likely to destroy or seriously damage the relationship of confidence and trust between them.

What Edwards indicates by prohibition is that the presumed status between employer and employee is one of mutual confidence and trust. Both parties have a duty to maintain that relationship for the mutual benefit of each other. While this duty does not approximate the well-known fiduciary duty that pledges a fiduciary to act in the best interests of its beneficiary, like a trustee, it does acknowledge that there are on-going obligations on behalf of both parties to build and maintain a positive relationship.

Edwards, Potter, and Fredrickson all indicate that the traditional understanding of employment as a top-down relationship of "master and servant" is long past. Today, there is reciprocity of trust and confidence in the employment relationship.  In looking toward 2019, employers and employees should consider making a new year's resolution to be mindful, that is, to keep each other in mind.

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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