Canada: Year in Review — Key Labour And Employment Decisions Of 2009

As another year draws to an end, we are once again reflecting on what the past year has brought to the labour and employment scene in Canada. For better or for worse, the courts this year have given employers much-needed clarity on a number of unresolved issues. Here, we recap some of the key labour and employment decisions of 2009 — our annual "cheat sheet" to help employers stay on top of the most recent developments.

Hard Line on Random Drug Testing Confirmed

Over the past several years, we have kept you up to speed on the evolving debate over employee drug and alcohol testing. In the most recent chapter, the Court of Appeal for Ontario maintained the hardline approach to random drug testing in its May 2009 decision in Imperial Oil and Communications, Energy & Paperworkers Union of Canada, Local 900.

After its random drug-testing policy was rejected by the Court of Appeal for Ontario in the highly publicized Entrop case — largely on the ground that the urinalysis process could not measure current impairment — Imperial Oil immediately began to investigate other, more effective, drug-testing technologies. It finally settled on saliva swab testing, and implemented a new policy for random mandatory testing in safety-sensitive positions. Again, the Union challenged the policy, claiming it was unconstitutional.

The arbitration board, the Ontario Divisional Court, and the Court of Appeal were unanimous in holding that the policy should be struck down. The Court of Appeal concluded that the company's policy of testing without reasonable cause — even in safety-sensitive positions — was an "unwarranted intrusion" on employees' privacy and "an unjustifiable affront to their dignity."

This decision confirms that employers in Ontario, much like those in other provinces, including Québec and British Columbia, must tread very softly when it comes to employee drug testing, which will only be permitted in very specific circumstances. That said, courts in other provinces, in particular, the Alberta Court of Appeal in Chiasson v. Kellogg Brown, have been more permissive with employer drug testing in safety-sensitive workplaces. This debate may well end up before the Supreme Court of Canada (SCC).

Until then, employers should be cautious and seek advice before proceeding with any form of employee testing, including alcohol or drug testing.

Employers Can Monitor Attendance without Discriminating

In Coast Mountain Bus v. CAW-Canada, the British Columbia Superior Court gave employers a much-needed break by affirming their right to monitor and manage employee attendance without running afoul of discrimination laws.

Facing unacceptable rates of absenteeism, Coast introduced an Attendance Management Program (AMP) that set out a formal step-by-step procedure for dealing with problematic absenteeism cases, ultimately culminating in possible termination if attendance standards were not met. The union challenged the AMP, arguing that it discriminated against employees with chronic or serious disabilities.

The court found that the AMP was not discriminatory. Even though it would apply to individuals with chronic, recurring and other disabilities, it did not target those employees arbitrarily. Rather, it was based on an objective determination: as compared to the average, the employees were absent more days.

The court concluded that there is nothing systemically discriminatory about monitoring employee attendance. In fact, it considered that employers have an obligation to warn employees of their attendance concerns and of the potential consequences.

Finally, referring to recent SCC case law, the court found that monitoring the absences of employees who are regularly absent from work is a genuine work requirement and a fundamental right of the employer under the employment contract.

This decision gives employers comfort that they can, and should, monitor and enforce reasonable attendance standards ─ with appropriate accommodation, of course, for employees with more serious or chronic disabilities.

Further Clarity on Post-Employment Restrictive Covenants

At the end of 2008, the decision of the Court of Appeal for Ontario in H.L. Staebler Company Limited v. Allan, followed closely by the SCC decision in RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc., gave employers valuable guidance on the extent to which they can restrict competition by departing employees. This trend continued into 2009 with the SCC decision in Shafron v. KRG Insurance Brokers.

In Staebler, the court set out the framework for determining whether a contractual restrictive covenant is "reasonable," and therefore, enforceable. Two key points can be drawn from Staebler. First, referring to the 1978 SCC decision in Elsley Estate v. J.G. Collins Insurance Agencies, the court confirmed that, in most cases, a non-solicitation clause will be sufficient to protect the employer's legitimate business interests, and that a non-competition clause will only be warranted in "exceptional circumstances." Second, a clause that is overly broad in terms of its duration or territory, or because it restricts competition generally, will not be read down to make it valid.

The onus is therefore on employers to draft restrictive covenants that are strictly limited to what is reasonable, taking into consideration the nature of their business and the position occupied by the departing employee.

In RBC Dominion, the SCC considered the obligations of departing employees who are not bound by contractual restrictive covenants.

On the positive side, the SCC confirmed that even non-fiduciary employees have a duty to give reasonable notice of resignation, and they may be subject to pay damages if they do not. As well, employees are held to a general duty of good faith in the discharge of their employment contract, and to a duty of confidentiality. A breach of either of these obligations by departing employees can make them liable for any damages caused, or to pay punitive damages.

On the down side, the SCC confirmed that non-fiduciary employees have no legal duty not to compete unfairly against their former employer, even during the reasonable notice of resignation period. Therefore, employers concerned about potential competition from departing employees should make sure to have written restrictive covenant agreements in place.

In Shafron, the SCC considered the validity of a restrictive covenant that prevented Mr. Shafron (who had joined KRG with the sale of his insurance company) from competing with KRG within the "Metropolitan City of Vancouver" for a period of three years following the termination of his employment. When Mr. Shafron left KRG to join an insurance broker practising in the neighbouring suburb of Richmond, and brought with him a significant number of customers, KRG sued to enforce the restrictive covenant.

The SCC found that the geographic scope of the clause, i.e., the "Metropolitan City of Vancouver," was ambiguous. As such, the employer could not enforce it. In doing so, the SCC confirmed that, in order to be enforceable, a restrictive covenant must be reasonable and unambiguous in respect of: (1) the geographical scope, (2) the time limit, and (3) the activities it seeks to restrict. The SCC also noted that such clauses in employment contracts will be scrutinized more closely than those in sale of business or other commercial agreements.

Finally, employers should be aware that the SCC has now made it very clear that courts will not read down a restrictive covenant to make it legal and enforceable and, except in limited circumstances, will not strike down only the unreasonable part of the clause and leave the remainder intact.

Looking Forward

As noted at the outset, for better or for worse, the key decisions of 2009 have brought employers clarity on their rights and obligations with respect to certain significant issues that were previously unresolved. With the challenges posed by the tough economic times we have been through, there is no doubt we can expect new issues to come before the courts next year. We will continue, as always, to keep you ahead of the curve by informing you about recent cases and developments as they occur.

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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