Labour and Employment Law Client Conference 2006

Labour and Employment Law Client Conference 2006 Friday, October 27, 2006 Metro Toronto Convention Centre South Building, Room 718 222 Bremner Boulevard VANCOUVER CALGARY LONDON TORONTO OTTAWA MONTRÉAL QUÉBEC LONDON, UK MCCARTHY.CA

Table of Contents 1 Agenda/Workshops 2 Biographies Guest Speaker: Lawyers: David C. Hagaman Lorraine Allard Sarah Armstrong Karen Bock Paul Boniferro Andrew Bracht Peter Brady Joanna Carvalho Doug Hamilton Sunil Kapur Trevor Lawson Lorenzo Lisi Robb Macpherson Naseem Malik Tara McPhail Susan Neumayer Richard Nixon James Noonan Dean Palmer Marie Diane Paré Brendon Pooran Daniel Pugen Ben Ratelband Karen Sargeant Brian Smeenk Doug Thomson 3 Brochures Labour and Employment Environmental Immigration Tax 4 Plenary session papers 5 Workshops papers VANCOUVER CALGARY LONDON TORONTO OTTAWA MONTRÉAL QUÉBEC LONDON, UK MCCARTHY.CA

Agenda 8:00 a.m. Continental Breakfast & Registration 8:35 a.m. Welcome and Introduction by Chair Dean Palmer Partner, Labour & Employment Group, Toronto 8:45 a.m. Greetings from Ontario Regional Managing Partner Kirby Chown 8:50 a.m. Guest Speaker: The Honourable Michael Bryant, Attorney General of Ontario Reforming Human Rights in Ontario (Bill 107) 9:15-11:45 am PLENARY SESSION 9:20 a.m. Ontario Update: The Year in Review Part 1 - Significant Cases Karen Sargeant and Andrew Bracht In this presentation, Karen and Andrew will discuss significant labour and employment cases decided in the past year, including: Stelco, Alcatel Seneca College SunLife Part 2 - Significant Changes to Labour and Employment Legislation Brian Smeenk In this presentation, Brian will provide you with an overview of recent significant changes to labour and employment legislation in Ontario and tell you what you need to know about: amendments to the Ontario Employment Standards Act, 2000 regarding frustration of contract new rules regarding smoking in the workplace end of mandatory retirement 10:00 a.m. The Relationship Begins: Hiring Pitfalls Dean Palmer and Lorenzo Lisi You seem perfect for one another. But have you asked the right questions? Have you said too much? In this presentation, Dean and Lorenzo will discuss the pitfalls which employers commonly face during the hiring process, including: 10:30 a.m. Break recruiting: the use of headhunters enticement and pre-employment representations applications for employment and interviews background checks 11:00 a.m. The Intervention: Conducting Workplace Investigations Ben Ratelband and Peter Brady In every relationship, disputes arise from time to time which must be resolved if the relationship is to continue. In the employment context, many of these disputes require an employer to intervene and conduct an investigation. In this presentation, Ben and Peter will provide an overview of the issues you need to be aware of when conducting a workplace investigation, including: guidelines for conducting various kinds of workplace investigations privilege issues: how to avoid your organization's own report being used against you 11:30 a.m. The Break-Up: Termination of Employment - Keeping it as Smooth as Possible Robb Macpherson and Karen Bock 12:00 p.m. Lunch 1:00 p.m. Question Period Breaking up is hard to do. Often the only thing that you can do is make the best of what is usually an unpleasant situation. In this presentation, Robb and Karen will discuss the issues which employers commonly face when conducting termination meetings, both with and without cause, and will provide you with tips on how to conduct your termination meetings in a manner which minimizes the risk of a claim for Wallace damages. 1:45 p.m. Workshops (choose one of A to D) 3:00 p.m. Reception All welcome VANCOUVER CALGARY LONDON TORONTO OTTAWA MONTRÉAL QUÉBEC LONDON, UK MCCARTHY.CA

Client Conference Workshops Workshop A Mediation & Arbitration - Getting Results Paul Boniferro, Joanna Carvalho and Christopher Albertyn In this workshop, Paul, Joanna and mediator/arbitrator Christopher Albertyn will discuss the steps employers can take to ensure that they achieve the best possible results at mediation and arbitration and provide tips on how to prepare, what to expect and how to succeed. Workshop B Tax & Immigration Issues in Employment Trevor Lawson, Lorraine Allard and Naseem Malik In this workshop, Trevor, Lorraine and Naseem will discuss questions and concerns commonly raised by employers regarding the tax treatment of amounts payable to employees during the employment relationship and following termination, as well as immigration issues which commonly arise in the employment context. Workshop C Disability & Attendance Management Sunil Kapur and Dan Pugen In this workshop, Sunil and Dan will provide you with an overview of the statutory framework regulating attendance and disability management and take you through several common scenarios faced by human resources professionals in managing disability and absenteeism issues. Workshop D "Labor" vs. "Labour" - Similarities and Differences Between U.S. and Canadian Employment Law Brian Smeenk, Sarah Armstrong and David Hagaman In this workshop, Brian, Sarah and David Hagaman, a partner with the U.S. law firm of Ford & Harrison LLP, will provide you with an overview of the significant similarities and differences between U.S. and Canadian employment law. VANCOUVER CALGARY LONDON TORONTO OTTAWA MONTRÉAL QUÉBEC LONDON, UK MCCARTHY.CA

David C. Hagaman Partner, Atlanta Office 1275 Peachtree Street, NE, Suite 600 Atlanta, Georgia 30309 P: 404-888-3838 F: 404-888-3863 E-mail: dhagaman@fordharrison.com Practice Areas Labor Law; Collective Bargaining/Contract Negotiations; Employee Policies and Handbooks Review; Labor Union Organizing (NLRB); Management Training; Mergers/Acquisitions; Unfair Labor Practices; Wage & Hour/FLSA Dave Hagaman represents management in labor and employment law matters with a focus on employer-employee relations, union organizing campaigns, NLRB cases, arbitrations, labor negotiations, wage and hour matters, employer/supervisor training and employment discrimination litigation. He has tried numerous cases before the NLRB and in federal and state court and represented employers before the Equal Employment Opportunity Commission. Dave frequently lectures on labor and equal employment opportunity law and state related subjects for the Society of Human Resource Management, employer groups, and state and local chambers of commerce. Dave has served as the American Bar Association s regional representative to the Committee on Liaison with the EEOC. He is the past chairman of the Labor and Employment Law Section of the State Bar of Georgia. He is a member of the Atlanta Bar Association; the American Bar Association, Labor and Employment Law Section; the Supreme Court of the United States; and Lawyers Club of Atlanta. Dave is also a member of the Metro Atlanta Chamber of Commerce s Board of Advisors and Economic Development Committee. Dave was contributing attorney to the treatise How Arbitration Works published by the Bureau of National Affairs and is editor of the Georgia Employment Law Letter, a monthly newsletter on employment law developments in the state. He is the author of the book How to Avoid Legal Pitfalls in Hiring and Firing in Georgia. Dave is listed in the publications The Best Lawyers In America and The Best Attorneys Network for Labor and Employment Law, and was named in Georgia Super Lawyers for labor and employment in 2005 and Who s Who Legal: USA. Dave is also AV Peer Review Rated by Martindale-Hubbell. Prior to entering the practice of law in Atlanta, Dave was an assistant professor at the University of Georgia in Athens, Georgia.

Education University of Georgia School of Law (J.D., 1973) University of Georgia (A.B., 1969) Bar Membership Georgia

McCarthy Tétrault LLP Lawyer Profile LORRAINE ALLARD TITLE Partner OFFICE Toronto DIRECT LINE 416-601-7948 LAW SCHOOL University of Ottawa, LLB (Civil Law), 1986 BAR ADMISSIONS Ontario, 1996 Québec, 1993 E-MAIL lallared@mccarthy.ca Biography Lorraine Allard is a partner in our Tax Group in Toronto. Her practice is focused primarily on pension plans, providing advice to employers on the taxation and regulation of pension plans under pension standards legislation and on entitlement to surplus pension assets. Ms. Allard also assists with pension issues in the context of the purchase and sale of a business and reorganizations. She has extensive experience advising employers with respect to pension plans, profit sharing plans, registered retirement savings plans, retirement compensation arrangements and other areas of executive compensation. Ms. Allard also advises employers and employees with respect to downsizings and other terminations of employment. Prior to joining the firm, she worked for Revenue Canada s Registered Plans Division and for an international pension consulting firm. Ms. Allard received her B.Sc. from Laurentian University in 1982, her LLB from the University of Ottawa in 1986 and her LLB (Civil Law) from Université du Québec in 1992. She was called to the Québec and Ontario bars in 1993 and 1996.

McCarthy Tétrault LLP Lawyer Profile SARAH ARMSTRONG TITLE Associate OFFICE Toronto DIRECT LINE 416-601-7906 LAW SCHOOL University of Toronto, J.D., 2004 BAR ADMISSIONS Ontario, 2005 E-MAIL sarmstrong@mccarthy.ca Biography Sarah Armstrong is an associate in our Labour and Employment group in Toronto. Ms. Armstrong has a general management-side labour and employment practice. She received her BFA (Hons) and MFA in Theatre from York University. For several years she was active in the Toronto theatre scene, directing independent productions of new works, assistant directing mega-musicals and working in sketch comedy. Ms. Armstrong received her JD from the University of Toronto in 2004 and was called to the Ontario Bar in 2005. She is a member of the Law Society of Upper Canada, the Canadian Bar Association and the Ontario Bar Association.

McCarthy Tétrault LLP Lawyer Profile KAREN R. BOCK TITLE Associate OFFICE Toronto DIRECT LINE 416-601-8116 LAW SCHOOL University of Toronto, LLB, 2001 BAR ADMISSIONS Ontario, 2002 E-MAIL kbock@mccarthy.ca Biography Karen Bock is an associate in our Labour and Employment Group in Toronto. She has a general management-side labour and employment law practice. Ms. Bock advises public and private-sector employers on relation to both union and non-union workplaces. Her practice includes the areas of labour arbitration, employment contracts, wrongful dismissal litigation, human rights, employment standards and workplace safety and insurance. Ms. Bock also represents employers before the courts, boards of arbitration and various administrative tribunals. In the course of her practice, Ms. Bock has acted for several universities and school boards with respect to labour arbitrations and proceedings before the Ontario Labour Relations Board. In addition, Ms. Bock regularly speaks on employment-related legal issues at conferences and seminars for management employees. Ms. Bock received her LLB from the University of Toronto in 2000 and was called to the Ontario bar in 2002. She was awarded the Osgoode Society for Canadian Legal History Prize. Previously, Ms. Bock earned her BA (Hons.) (English Literature) from the University of Winnipeg where she was awarded the Gold Medal in English. She also earned an MA and PhD in English Literature from Brown University, and taught for some years at Wesleyan University in Connecticut. Ms. Bock is a member of the Law Society of Upper Canada and the Canadian Bar Association.

McCarthy Tétrault LLP Lawyer Profile PAUL A. BONIFERRO TITLE Partner OFFICE Toronto DIRECT LINE 416-601-7975 LAW SCHOOL Osgoode Hall Law School, LLB, 1991 BAR ADMISSIONS Ontario, 1993 E-MAIL pbonifer@mccarthy.ca Biography Paul Boniferro is a partner in our Labour and Employment Group in Toronto and a member of McCarthy Tétrault s Board of Partners. Mr. Boniferro uses his unique combination of experience gained in the private and government/political sectors to advise clients on a wide spectrum of employment issues, including terminations, wrongful dismissals, grievance arbitration, collective agreement negotiations, human rights complaints, government relations, occupational health and safety issues, and WSIB claims. His advice has been sought by governments of all stripes to provide assistance in developing policy and legislation in labour and employment law. Mr. Boniferro is a bi-annual presenter to the Retail Roundtable Compensation Survey Group where he updates all major Canadian Retailers on developments in the area of Labour and Employment Law. He negotiates with trade unions in the retail sector on behalf of major shopping center managers. Prior to joining McCarthy Tétrault, Mr. Boniferro was a Senior Policy Advisor to the Ontario Minister of Labour, during one of the province s most significant periods of labour relations reform, where he advised the government on changes to the Labour Relations Act, the Workers Compensation Act, the Employment Standards Act and the Pay Equity Act. Since joining McCarthy Tétrault in 1996, he has been retained by the government on a number of occasions to provide advice on labour relations and employment issues. In 2004, Mr. Boniferro was appointed to the Minister of Labour s Employment Standards Action Group and prior to that he was appointed by the Premier of Ontario to act as Special Negotiator with Quebec on construction labour mobility. He represents a wide number of private sector employers, both unionized and non-unionized, including those in manufacturing, energy, property management services, steel and hospitality. Mr. Boniferro appears in the 2003 Canadian Legal Lexpert Directory, a guide to the leading lawyers in the area of labour and was selected as Lexpert s Top 40 Under 40 in September 2003. A much-requested presenter at labour and employment conferences, he is also an instructor for the Human Resources Professionals Association of Ontario (HRPAO) and is the past Chair of the HRPAO Government Affairs Committee.

Lawyer Profile PAUL A. BONIFERRO Mr. Boniferro received his BA (Political Science) from the University of Western Ontario in 1987 and his LLB from Osgoode Hall Law School in 1991. He was called to the Ontario bar in 1993. Mr. Boniferro has also studied in the MBA program at Lake Superior State University in Michigan.

McCarthy Tétrault LLP Lawyer Profile ANDREW C. BRACHT TITLE Associate OFFICE Toronto LAW SCHOOL Queen's University DIRECT LINE 416-601-7873 BAR ADMISSIONS Ontario, 2004 E-MAIL abracht@mccarthy.ca Biography Andrew Bracht is an associate in our Labour and Employment Group in Toronto. He has a general management-side labour and employment practice. Mr. Bracht received his BA (Hons.) in Philosophy from the University of Western Ontario in 1999 and his LLB from Queen s University in 2003. He was called to the Ontario bar in 2004 Mr. Bracht is a member of the Law Society of Upper Canada, the Canadian Bar Association and the Ontario Bar Association.

McCarthy Tétrault LLP Lawyer Profile PETER BRADY TITLE Partner OFFICE Toronto DIRECT LINE 416-601-7606 LAW SCHOOL Queen's University, LLB, 1996 BAR ADMISSIONS Ontario, 1999 British Columbia, 1997 E-MAIL pbrady@mccarthy.ca Biography Peter Brady is a partner in our Labour and Employment Group in Toronto. He brings vast experience in occupational health and safety and regulatory affairs to McCarthy Tétrault. Mr. Brady advises and represents clients in all legal aspects of regulatory, and labour and employment litigation, with particular emphasis in the areas of occupational health & safety, environmental law, Coroner s Inquests and the Charter of Rights. He was called to the British Columbia bar in 1997, and to the Ontario bar in 1999. After completing his legal studies in Ontario, Mr. Brady served as a law clerk for Chief Justice Allan McEachern of the British Columbia Court of Appeal (1996-1997) and then worked for the Ministry of the Attorney General, criminal appeals division. Mr. Brady received his BA (Hons.) in 1990 from the University of Guelph and his MA in 1991 from the University of Windsor. His Masters thesis involved a detailed analysis of sentencing in environmental cases in Ontario. Following completion of his Masters, Mr. Brady obtained his LLB from Queen's University in 1996.

McCarthy Tétrault LLP Lawyer Profile JOANNA M. CARVALHO TITLE Associate OFFICE Toronto DIRECT LINE 416-601-8543 LAW SCHOOL University of Toronto, JD/MA (Criminology), 2003 BAR ADMISSIONS Ontario, 2004 E-MAIL jcarvalho@mccarthy.ca Biography Joanna Carvalho is an associate in our Labour and Employment Group in Toronto. She has a general labour and employment practice. Ms. Carvalho represents management in all manners of claims, including employment standards, wrongful dismissal, labour arbitrations, human rights, occupational health and safety, collective bargaining, and employment aspects of corporate restructuring and mergers and acquisitions. Ms. Carvalho received her B.Sc. (Biology) from the University of Toronto in 2001 and her combined JD/MA (Criminology), also from the University of Toronto, in 2003. Ms. Carvalho was called to the Ontario bar in 2004.

McCarthy Tétrault LLP Lawyer Profile DOUGLAS HAMILTON TITLE Partner OFFICE Toronto DIRECT LINE 416-601-7642 LAW SCHOOL University of London, LLM, 1987 Queen's University, LLB, 1983 BAR ADMISSIONS Ontario, 1986 E-MAIL dhamilton@mccarthy.ca Biography Doug Hamilton is a partner in our Environmental Group in Toronto. His has practised exclusively in the areas environmental, and health and safety law since 1988. Mr. Hamilton represents private and public sector clients on a broad range of environmental, and health and safety matters and is widely recognized as a pre-eminent lawyer in Canada in his areas of practice. Mr. Hamilton advises on all legal aspects of environmental and health and safety matters, including criminal litigation relating to environmental, and health and safety offences, civil litigation, administrative tribunal representation and appellate litigation. He also advises on corporate transactions and projects with environmental and health and safety implications and on compliance with existing and proposed legislation. He appears in the 2005 Canadian Legal Lexpert Directory, a guide to the leading law firms and practitioners in Canada, as a leading lawyer in the area of environmental law. Mr. Hamilton received his LLB from Queen s University in 1983, his LLM in 1987 from the University of London and his B.Sc. (Hons.) in 1980 from Queen s University. His extensive training and background in science, especially in biology and chemistry, has been extremely useful in his practice. Mr. Hamilton was called to Ontario bar in 1986. A former world champion and Olympic medallist in rowing, he continues to be active as a volunteer in amateur sport in Canada. Mr. Hamilton is Chair of the National Sport Centre of Ontario and a director of the Canadian Olympic Committee. From 1989 to 1997, he was in charge of Canada s highly successful international rowing program. More recently, Mr. Hamilton was Vice President of Sports and Venues for Toronto s 2008 Olympic Bid. A recent survey of the top Canadian corporations ranked McCarthy Tétrault's Toronto office as the best law firm in the Greater Toronto Area for environmental law.

McCarthy Tétrault LLP Lawyer Profile SUNIL KAPUR TITLE Partner OFFICE Toronto DIRECT LINE 416-601-8339 LAW SCHOOL Osgoode Hall Law School, LLB, 1995 BAR ADMISSIONS Ontario, 1997 E-MAIL skapur@mccarthy.ca Biography Sunil Kapur is a partner in our Labour and Employment Group in Toronto. He carries on a general management-side labour and employment law practice in which he advises employers on a wide spectrum of matters, including union relations, labour relations, employment contracts, wrongful dismissals, human rights, employment standards and workplace safety and insurance. Mr. Kapur represents employers before boards of arbitration, the Ontario Labour Relations Board, the Canada Industrial Relations Board, the Ontario Human Rights Commission, the Workplace Safety and Insurance Appeals Tribunal, the Ontario Superior Court of Justice and both the Divisional Court and the Court of Appeal in judicial review applications. Mr. Kapur was recently appointed to the first advisory committee of the Ontario Labour Relations Board. Mr. Kapur received his B.Sc. from the University of Toronto in 1992. He was an Ontario Graduate Scholar and has won several academic awards from the University of Toronto. Mr. Kapur received his LLB from Osgoode Hall Law School in 1995 and was called to the Ontario bar in 1997.

McCarthy Tétrault LLP Lawyer Profile TREVOR LAWSON TITLE Partner OFFICE Toronto DIRECT LINE 416-601-8227 LAW SCHOOL Dalhousie University, LLB, 1998 BAR ADMISSIONS Ontario, 2000 E-MAIL tlawson@mccarthy.ca Biography Trevor Lawson is a partner in our Labour and Employment Group in Toronto. Mr. Lawson represents management in all manners of claims, including employment standards, wrongful dismissal, labour arbitrations, human rights, collective bargaining, employment aspects of mergers and acquisitions, outsourcing, corporate restructuring matters and privacy issues. Mr. Lawson received his BA (Hons.) (Political Science) from McMaster University in 1995 and his LLB from Dalhousie University in 1998. He was called to the Ontario bar in 2000.

McCarthy Tétrault LLP Lawyer Profile LORENZO LISI TITLE Partner OFFICE Toronto DIRECT LINE 416-601-8131 LAW SCHOOL Queen's University, LLB, 1988 BAR ADMISSIONS Ontario, 1990 E-MAIL llisi@mccarthy.ca Biography Lorenzo Lisi is a partner in our Labour and Employment Group in Toronto. He joined the firm in 1992 after practising as Legal Counsel and Labour Law Specialist for the Canada Post Corporation. Mr. Lisi represents clients in both the public and private sector in connection with collective bargaining, grievance arbitrations, union certification matters, Labour Board proceedings, human rights issues, applications for injunctive relief and strike-related litigation and proceedings before the Canada and Ontario Labour Relations Board. He also represents management clients in actions for wrongful dismissal and regularly provides management advice on both federal and provincial labour and employment legislation, as well as employment related issues arising from business transactions. Mr. Lisi received his BA (Hons.) from the University of Toronto in 1987 and his LLB from Queen s University in 1988. He was called to the Ontario bar in 1990.

McCarthy Tétrault LLP Lawyer Profile ROBB A. MACPHERSON TITLE Partner OFFICE Toronto DIRECT LINE 416-601-7711 LAW SCHOOL Osgoode Hall Law School, LLB, 1979 BAR ADMISSIONS Ontario, 1981 E-MAIL rmacpher@mccarthy.ca Biography Robb Macpherson is a partner and a member of the Labour and Employment Group in Toronto. He advises employers concerning all aspects of labour and employment law, including collective bargaining, collective agreement administration, progressive discipline, labour arbitration, mergers and acquisitions, restructuring and insolvency. wrongful dismissal, employment agreements, employment policies, employment standards, workplace safety and insurance, occupational health and safety, drug testing, workplace harassment, employee benefits, privacy issues, absentee control programs and plant closures. Mr. Macpherson has specific experience representing employers in all aspects of labour and employment law litigation, including acting as counsel in labour and employment law litigation before the Ontario Labour Relations Board, the Canada Labour Relations Board, boards of arbitration, human rights boards of inquiry, courts and other tribunals. He also regularly conducts collective bargaining on behalf of employers and represents employers in mediation and alternative dispute resolution. Mr. Macpherson regularly acts for clients in a number of sectors, including manufacturing, energy, automotive parts, logistics, corrections, technology, trucking, transportation, financial institutions and insurance. In addition, he acts for employers in the public sector, including boards of education and municipalities. Mr. Macpherson has made frequent presentations to management groups on a wide range of employment-related subjects, including collective bargaining, human rights, drug testing, workplace harassment and progressive discipline. He received his BA from Queen s University in 1974 and his LLB in 1979 from Osgoode Hall Law School. Mr. Macpherson articled with our predecessor firm of McCarthy & McCarthy in Toronto and was called to the Ontario bar in 1981.

McCarthy Tétrault LLP Lawyer Profile NASEEM MALIK TITLE Associate OFFICE Toronto DIRECT LINE 416-601-8218 LAW SCHOOL University of Saskatchewan, LLB, 1994 BAR ADMISSIONS Ontario, 1996 E-MAIL nmalik@mccarthy.ca Biography Naseem Malik is counsel in the firm s Labour and Employment Group in Toronto. His practice focuses on business immigration law. Previously, Mr. Malik was employed by the Department of Citizenship and Immigration. He worked as an Immigration Examining Officer at Pearson International Airport. Mr. Malik assists his client, which range from large multinational corporations, financial institutions, industrial, and high tech companies to musicians and entertainment groups, in order to facilitate their entry into Canada for business-related purposes. He assists clients with a wide range of business immigration matters, including: Temporary Resident Visas for persons who require such visas prior to entering Canada; Work Permit applications pursuant to the North American Free Trade Agreement (NAFTA), General Agreement on Trade and Services (GATS), and the Immigration and Refugee Protection Act; Human Resources Development Canada (HRDC) Employment labour market applications; Permanent Residence applications; Citizenship applications; Study Permit applications; Extension applications for work permits, study permits and visitor records; Obtaining permission for the spouse of a temporary foreign worker to obtain a work permit permitting them to work in Canada; Temporary Resident Permits/Rehabilitation applications relating to criminal inadmissibility;

Lawyer Profile NASEEM MALIK Analyzing Criminal Code provisions and foreign statutes to assess whether a person is inadmissible to Canada based on prior criminal convictions; and Analyzing and dealing with medical inadmissibility issues. In addition to his legal skills, Mr. Malik also provides practical advice relating to logistical issues that arise when foreign nationals travel to Canada for business purposes. He has spoken at the McCarthy Tétrault 2002, 2003, and 2005 Labour and Employment Law Client Conference in Toronto on the topic of business immigration. In May 2003, Mr. Malik spoke at the Canadian Bar Association Annual Conference in Montreal on immigration related issues. Mr. Malik has had immigration related articles published in 2004 and 2005 in the Law Times and Lawyers Weekly. He also contributed to a cross-border manual on immigration and customs issues for Carswell in 2003. In 2005 he participated as Seminar leader at a one-day intensive course on business immigration at the Law Society of Upper Canada. He is a member of the OBA Immigration and Citizenship subsections Executive, and has been recognized by Lexpert since 2003 as having a significant practice in the field of Business Immigration. He received his BA (Psychology) in 1991 from the University of Saskatchewan and his LLB from the University of Saskatchewan Law School. Mr. Malik was called to the Ontario bar in 1996. He is a member of the Law Society of Upper Canada and the Citizenship and Immigration section of the Canadian Bar Association.

McCarthy Tétrault LLP Lawyer Profile TARA MCPHAIL TITLE Associate OFFICE Toronto DIRECT LINE 416-601-8080 LAW SCHOOL McGill University, 2005 BAR ADMISSIONS Ontario, 2006 E-MAIL tmcphail@mccarthy.ca Biography Tara McPhail is an Associate in our Labour and Employment Group. Ms. McPhail represents management in all manners of claims, including employment standards, wrongful dismissal, labour arbitrations, human rights, collective bargaining, employment aspects of mergers and acquisitions, outsourcing, corporate restructuring matters and privacy issues. Ms. McPhail received her BA (Hons.) in Political Science from Queen s University in 2000 and her Bachelor of Civil Law and Bachelor of Common Law from McGill University in 2005. Ms. McPhail completed a portion of her legal studies at the Université Pierre-Mendès in Grenoble, France and is fluent in French. She was called to the Ontario bar in 2006.

McCarthy Tétrault LLP Lawyer Profile SUSAN NEUMAYER TITLE Associate OFFICE Toronto DIRECT LINE 416-601-7561 LAW SCHOOL Queen's University, LLB, 1999 BAR ADMISSIONS Ontario, 2001 E-MAIL sneumayer@mccarthy.ca Biography Susan Neumayer is an associate in our Labour and Employment Group in Toronto. She has a general labour and employment law practice acting on behalf of management. Ms. Neumayer assists employers with such matters as employment contracts, employment standards issues, human rights complaints, wrongful dismissal actions and the employment aspects of mergers and acquisitions and corporate restructuring. Prior to joining McCarthy Tétrault, she pursued graduate studies in labour and employment law at the University of Toronto, completing her LLM in 2003. Ms. Neumayer s thesis examined how arbitrators are exercising their jurisdiction over human rights issues in the context of balancing seniority rights with the duty to accommodate disabled employees. She also practised corporate law for close to two years with a major Toronto law firm. Ms. Neumayer s practice focused on corporate finance and acquisition transactions. She received her B.Comm. (Hons.) from McMaster University in 1992 and her LLB from Queen s University in 1999. Ms. Neumayer was called to the Ontario bar in 2001.

McCarthy Tétrault LLP Lawyer Profile RICHARD J. NIXON TITLE Partner OFFICE Toronto DIRECT LINE 416-601-7811 LAW SCHOOL University of Toronto, LLB, 1980 BAR ADMISSIONS Ontario, 1982 E-MAIL rnixon@mccarthy.ca Biography Richard J. Nixon is a partner in our Labour and Employment Group in Toronto. His practice focuses on labour and employment law, acting on behalf of management. Mr. Nixon regularly advises employers with respect to arbitrations, collective agreement negotiations, employee terminations, wrongful dismissal actions, employment standards claims, human rights complaints, occupational health and safety charges, Workplace Safety and Insurance Act matters and corporate transactions. He regularly represents employers before arbitration boards, Workplace Safety and Insurance Act tribunals, the Ontario Labour Relations Board the Canada Industrial Relations Board, Workplace Safety and Insurance Act tribunals and various courts. Mr. Nixon served for two years as the Senior Vice-President, Government Affairs of the Human Resources Professional Association of Ontario. He appears in the 2005 Canadian Legal Lexpert Directory, a guide to the leading law firms and practitioners in Canada, as a leading lawyer in the area of labour relations. Mr. Nixon regularly chairs and speaks at conferences on labour and employment law. He has also been a lecturer for the Advanced Human Resources Management HRPAO program at the Rotman School of Management at the University of Toronto. Mr. Nixon received his MBA from the University of Western Ontario in 1975 and his LLB from the University of Toronto in 1980. He was called to the Ontario bar in 1982.

McCarthy Tétrault LLP Lawyer Profile JAMES B. NOONAN TITLE Counsel OFFICE Toronto DIRECT LINE 416-601-7567 LAW SCHOOL Queen's University, LLB, 1969 BAR ADMISSIONS Ontario, 1971 E-MAIL jnoonan@mccarthy.ca Biography James Noonan is counsel in the firm s Toronto office. Since 1971, his practice has focused on labour relations matters, acting on behalf of management. Mr. Noonan s practice has also focused on arbitration appearances as both counsel and management nominee, extensive negotiation and mediation experience and counsel appearances before both the Ontario and Canada Labour Relations Boards, and various other courts and tribunals dealing with employment matters. Mr. Noonan is certified as a Specialist in Labour Law by the Law Society of Upper Canada, the governing body of the Ontario legal profession. He appears in the 2005 edition of The Leading 500 Lawyers in Canada, published by Lexpert and American Lawyer and he appeared in the 2005 Canadian Legal Lexpert Directory, a guide to the leading law firms and practitioners in Canada, as a leading lawyer in the area of labour law. Mr. Noonan is one of sixteen management labour lawyers in Canada cited in the International Who s Who of Management Labour Lawyers published by Law Business Research of London, England. Mr. Noonan is a past chair of both the Ontario Labour Relations Section and the National Labour Law Section of The Canadian Bar Association. He is a member of the Alternative Dispute Resolution Section of the Canadian Bar Association of Ontario, and the Labour Relations Committee of the Board of Trade of the City of Toronto. He received his BA from St. Mary s University and his LLB from Queen s University. Mr. Noonan was called to the Ontario bar in 1971.

McCarthy Tétrault LLP Lawyer Profile DEAN T. PALMER TITLE Partner OFFICE Toronto DIRECT LINE 416-601-7833 LAW SCHOOL University of Toronto, LLB, 1983 BAR ADMISSIONS Ontario, 1985 E-MAIL dpalmer@mccarthy.ca Biography Dean Palmer is a partner in our Labour and Employment Group in Toronto. He represents employers in all areas of employment and labour law. Mr. Palmer regularly assists employers with wrongful dismissal actions, employee terminations, employment standards claims, human rights complaints, grievances, arbitrations, collective agreement negotiations, employment contracts, workers compensation claims and employment issues arising from the purchase and sale of a business. He regularly appears before the Ontario Labour Relations Board, boards of arbitration, workers compensation tribunals and various other tribunals dealing with labour and employment matters. Mr. Palmer is a frequent lecturer at seminars and conferences relating to employment and labour law. He attended the Faculty of Commerce and Business Administration at the University of British Columbia and then attended the University of Toronto Law School where he received his LLB in 1983. Mr. Palmer was called to the Ontario bar in 1985.

McCarthy Tétrault LLP Lawyer Profile MARIE-DIANE PARÉ TITLE Associate OFFICE Toronto DIRECT LINE 416-601-7925 LAW SCHOOL Laval University, BCL, 1998 BAR ADMISSIONS Québec, 1999 E-MAIL mdpare@mccarthy.ca Biography Marie-Diane Paré is an associate in our Labour and Employment Group. Her practice focuses on grievance arbitration, industrial accidents and occupational diseases, privacy issues, employment standards issues, human rights in the workplace, as well as employment contracts for both federally and provincially-regulated businesses. She is a member of the Canadian Bar Association and the Junior Bar Association of Québec. She received her international bachelor's degree (BI) in health sciences in 1995 from the Petit séminaire de Québec. After attending the University of Western Ontario, she continued her studies at Université Laval where she obtained her bachelor of civil law degree in 1998. Ms. Paré was called to the Québec bar in 1999.

McCarthy Tétrault LLP Lawyer Profile BRENDON POORAN TITLE Associate OFFICE Toronto DIRECT LINE 416-601-8022 LAW SCHOOL Osgoode Hall Law School, LLB, 2005 BAR ADMISSIONS Ontario, 2006 E-MAIL bpooran@mccarthy.ca Biography Brendon Pooran is an associate in our Labour and Employment Group in Toronto. He has a general managementside labour and employment practice. Mr. Pooran received his B. Comm. (Hons.) from Queen s University in 1998. For several years, Mr. Pooran worked as a management consultant for public sector clients based in the northeastern United States. Mr. Pooran received his LLB from Osgoode Hall Law School in 2005 and was called to the Ontario Bar in 2006. He currently sits on the Board of Directors at Community Living York South, Bayview Glen School and the Canadian Abilities Foundation.

McCarthy Tétrault LLP Lawyer Profile DANIEL PUGEN TITLE Associate OFFICE Toronto DIRECT LINE 416-601-7955 LAW SCHOOL Osgoode Hall Law School, LLB, 2004 BAR ADMISSIONS Ontario, 2005 E-MAIL dpugen@mccarthy.ca Biography Daniel Pugen is an associate in the firm s Labour and Employment Group in Toronto. He represents management in a variety of labour and employment issues including employment standards, wrongful dismissal, labour arbitrations, occupational health and safety and labour and employment issues arising in corporate transactions. Mr. Pugen received his B.A. in Political Science from York University in 2001 where he graduated with Distinction and was a member of the Dean s Honour Roll. He received his LLB from Osgoode Hall Law School in 2004. Mr. Pugen was called to the Ontario Bar in 2005 and is a member of the Law Society of Upper Canada, the Ontario Bar Association, and the Canadian Bar Association.

McCarthy Tétrault LLP Lawyer Profile BEN RATELBAND TITLE Associate OFFICE Toronto DIRECT LINE 416-601-8016 LAW SCHOOL University of Toronto, LLB, 1996 BAR ADMISSIONS Ontario, 1998 E-MAIL bratelba@mccarthy.ca Biography Ben Ratelband is an associate in our Labour and Employment Group in Toronto and is a member of our firm s newly-formed Environmental Health and Safety Group. Mr. Ratelband s practice is focused exclusively on management-side labour, employment and health and safety law. He has advised and represented employers in the sectors of manufacturing, security, trucking, health care, education, information technology, correctional services, hospitality, public service, water supply and finance and investment. Mr. Ratelband has also advised and represented those employers in collective bargaining, labour board proceedings, labour arbitration, mediation, employment litigation, judicial review and civil appeals, employment standards, privacy, human rights, occupational health and safety and workplace safety and insurance. He regularly provides training for clients managers and other staff to assist them in meeting their legal duties. Mr. Ratelband has spoken on various labour, employment and health and safety topics for such organizations as the Canadian Institute, the Rotman School of Business at the University of Toronto and the Human Resources Professional Association of Ontario (HRPAO). He has also written on a number of labour and employment law topics for the Ontario Bar Association and various legal publications. Prior to joining the firm, Mr. Ratelband worked in the field of management-side labour relations in private and public sector settings in both Ontario and the Yukon. He was legal counsel to the Management Board Secretariat of the Ontario Ministry of the Attorney General, where he represented the Crown as an employer in a variety of forums, including the Divisional Court and the Court of Appeal. Mr. Ratelband received his BA (Hons.) from York University, where he graduated cum laude in 1992 and he received his LLB from the University of Toronto in 1996. He was called to the Ontario bar in 1998.

McCarthy Tétrault LLP Lawyer Profile KAREN M. SARGEANT TITLE Partner OFFICE Toronto DIRECT LINE 416-601-8113 LAW SCHOOL University of Toronto, LLB, 1995 BAR ADMISSIONS Ontario, 1997 British Columbia, 1996 E-MAIL ksargean@mccarthy.ca Biography Karen Sargeant is a partner in our Labour and Employment Group in Toronto. She carries on a general employment and labour law practice in which she acts on behalf of employers, large and small, and in both the public and private sectors. Included in the scope of Ms. Sargeant s practice are the areas of employment contract, wrongful dismissal, human rights, employment standards, workplace safety and insurance, union relations, labour arbitrations and pay equity. She provides day-to-day advice to employers in relation to both non-union and unionized workplaces. Ms. Sargeant also represents employers before boards of arbitration and various administrative tribunals, such as the Ontario Labour Relations Board, Ministry of Labour Employment Practices Branch, Human Rights Commission, Workplace Safety and Insurance Appeals Tribunal and Pay Equity Hearings Tribunal. She regularly speaks at conferences and to groups of management employees about a wide variety of employment and labour matters. Ms. Sargeant also writes regular articles for a number of legal publications and is an editor of McCarthy Tétrault s Report on Canadian Employment and Labour Law. She received her B.Comm. (Hons.) from the University of British Columbia in 1992 and her LLB from the University of Toronto Law School in 1995. Ms. Sargeant was called to the British Columbia bar in 1996 and to the Ontario bar in 1997.

McCarthy Tétrault LLP Lawyer Profile BRIAN P. SMEENK TITLE Partner OFFICE Toronto DIRECT LINE 416-601-7636 LAW SCHOOL University of Ottawa, LLB, 1977 BAR ADMISSIONS Ontario, 1981 E-MAIL smeenk@mccarthy.ca Biography Brian Smeenk is a partner in our Labour and Employment Group in Toronto. Since 1981, Mr. Smeenk s practice has focussed on management-side labour and employment law. Mr. Smeenk represents both private sector and public sector employers in all aspects of labour relations and employment law. He appears regularly before administrative tribunals, such as arbitration boards, labour relations boards, employment standards adjudicators and human rights boards of inquiry. Mr. Smeenk also acts as counsel in employment-related civil actions, judicial reviews and appeals at all levels. In 2001, he acted for The National Ballet of Canada in a leading case regarding the departure of principal dancer Kimberly Glasco. He has extensive experience in labour negotiations, for a wide variety of employers in the private and public sectors. In 1995, he was named to national mediation-arbitration panels chaired by Mr. Justice George Adams, to resolve national railroad strikes involving CP Rail and five of its unions. He has for many years represented major school boards in bargaining with both teachers and support staff. Mr. Smeenk was editor of Canadian Employment Law For U.S. Companies, published in the U.S. by M. Lee Smith Publishers from 1993 to 2001. He has been granted the designation of Certified Human Resources Professional (C.H.R.P.) by the Human Resources Professionals Association of Ontario (HRPAO). From 1992 to 1997, Mr. Smeenk was a member of the HRPAO s Board of Directors and served as its senior vice-president, Government Affairs. He is currently President-elect of the Toronto Human Resource Professionals Association. He is also past president of the Toronto Area Industrial Relations Association. Mr. Smeenk appears in the 2005 Canadian Legal Lexpert Directory, a guide to the leading law firms and practitioners in Canada, as a leading lawyer in the area of labour, and appears in the 2006 inaugural edition of The Best Lawyers in Canada. He received his LLB from the University of Ottawa, Common Law Section in 1977 and his MBA and Dipl. I.R. from the University of Michigan in 1979. Mr. Smeenk was called to the Ontario bar in 1981.

McCarthy Tétrault LLP Lawyer Profile DOUGLAS R. THOMSON TITLE Partner OFFICE Toronto DIRECT LINE 416-601-7512 LAW SCHOOL Queen's University, LLB, 1980 BAR ADMISSIONS Ontario, 1982 E-MAIL dthomson@mccarthy.ca Biography Doug Thomson is a partner and head of our Environmental Group in Toronto and is a member of the firm s Litigation Group. He advises private and public sector clients on a broad range of environmental legal matters, with particular emphasis on environmental approvals, environmental litigation and prosecutions and complex transactions. Mr. Thomson attended Queen s University where he received his BA (magna cum laude) in 1977 and his LLB in 1980. He is currently enrolled in the LLM program (Criminal Law) at Osgoode Hall. Mr. Thomson was chair of the Environmental Law Section of the Canadian Bar Association Ontario from 1989 to 1992 and a member of the National Environmental Section Executive of the Canadian Bar Association. Mr. Thomson is an editor of the Canadian Environmental Law Reports, as well as the environmental editor of Legal Alert (Insight), a contributing editor of the Environmental Law Journal, and the feature columnist in The Environmental Compliance Report (Southam). Mr. Thomson has been involved in several of the leading Canadian environmental cases. He has also been a member of the Public Advisory Group to the Ontario Government s Environmental Assessment Task Force, and a member of the Public Advisory Group to the Ontario Minister of the Environment concerning the Ontario Environmental Bill of Rights. Mr. Thomson sits on the Business Advisory Committee to the Environmental Commissioner of Ontario. He is the sole environmental lawyer on the Specialist Panel of the Private Court, which adjudicates disputes as an alternative to traditional litigation. Mr. Thomson is an associate of the Environmental Law Institute in Washington, D.C., and a frequent speaker at environmental law conferences and seminars. He is also a member of the Environment Committee of the Canadian Council for International Business. Mr. Thomson recently finished a term on the Board of Directors of the Ontario Waste Management Association. Mr. Thomson is listed as one of the 250 top environmental lawyers in the world by the International Financial Law Review. He also appears in the International Who s Who of Environmental Lawyers, the International Who s Who of Business Lawyers and all editions of the Canadian Legal Lexpert Directory, a guide to the leading law firms and practitioners in Canada, as one of the leading Canadian lawyers in the area of environmental law. A recent survey

Lawyer Profile DOUGLAS R. THOMSON of the top Canadian corporations ranked McCarthy Tétrault s Toronto office as the best law firm in the Greater Toronto Area for environmental law.

Labour and Employment Hands on support. VANCOUVER CALGARY LONDON TORONTO OTTAWA MONTRÉAL QUÉBEC LONDON, UK MCCARTHY.CA

Providing real solutions in labour and employment matters. Our objective advice in complex labour and employment legal issues strengthens your position in the workplace. Creating secure human resource strategies, we are with you every step of the way. Increased globalization and competition in the new economy require efficient management of human resources and labour relations. McCarthy Tétrault s Labour and Employment Group has extensive experience in all aspects of labour and employment law at the provincial, federal and international levels. As part of the nation s premier law firm, we are committed to providing the best possible service and resources to our clients. With offices across Canada, our firm structure complements the nationwide business activities of many of our clients, enabling us to manage their needs across the country through the strength of a single partnership. McCarthy Tétrault s Labour and Employment Group includes lawyers who advise and act as counsel with respect to all aspects of labour relations and employment law. For unionized employers, our practitioners assist in the negotiation of collective agreements and provide representation in labour arbitrations. At the same time, we help clients avoid workplace disputes, fines and litigation. We provide counsel on union certification proceedings, unfair labour practice charges and other union disputes. For union and non-union groups alike, we advise on corporate reorganizations, employment standards, human rights, employment equity, pay equity, pensions and benefits, workers compensation and occupational health and safety. In addition, we handle executive employment matters, such as employment contracts, changeof-control agreements and severance arrangements. Our group regularly advises on current issues such as the Internet in the workplace, novel working relationships and the latest human rights rulings. This enables us to provide the practical, knowledgeable and immediate legal assistance required for your organization to face new challenges in the workplace. Members of our team include litigators with considerable experience in labour and employment related matters. Our lawyers are skilled in all aspects of business from the front line to the bottom line. As provincial and federal laws and court decisions affect employment relations more and more, we constantly monitor new developments. Featuring some of the leading legal talents in the country, we are at the forefront of new developments in labour relations, employment policies, regulations and rulings. According to the Canadian Legal Lexpert Directory and Guide to the Leading 500 Lawyers in Canada, our labour and employment lawyers have a reputation for world-class legal experience. Our Clients We routinely advise private and public sector employers on compliance with federal and provincial employment regulations. Our labour clients cover a broad spectrum of economic activity, including financial services, manufacturing and technology as well as public sector agencies, such as municipalities, universities and school boards. How We Can Help Creating secure human resource strategies and strengthening your position, we are with you every step of the way. McCarthy Tétrault s Labour and Employment Group provides knowledgeable and immediate legal assistance in all areas of labour relations, employment law and related litigation. Page 1 Labour and Employment MCCARTHY.CA

As a result of the size and the focus of our practice, we have specialists in all areas related to labour and employment law, including: Alternative Dispute Resolution (ADR) Our labour and employment lawyers advise clients with respect to alternatives to litigation, including mediation and arbitration. We help develop ADR strategies that can be implemented before claims are filed. In addition, we draft ADR provisions in contracts, assist clients in designing ADR procedures and appear as counsel at mediations and arbitrations. Our lawyers recognize the special needs and circumstances of each client. We formulate and implement cost-saving ADR programs to resolve claims without resorting to expensive litigation. When litigation is unavoidable, we can provide the expertise of some of the country s We have extensive experience in all aspects of labour and employment law. leading litigators. Collective Agreement Bargaining McCarthy Tétrault s Labour and Employment Group has extensive experience in acting for employers in collective bargaining. This includes acting as management s representative at the bargaining table, drafting proposals, developing negotiation strategies, advising on collective agreement language and achieving timely settlements. When necessary, our lawyers can provide advice and prepare clients for strikes and picketing and act on management s behalf before labour relations boards and courts, with respect to illegal strike and picketing activity. Disability Management Keeping employees healthy and productive and reducing the length of disabilities can lower your business s disability costs significantly. Our lawyers take a comprehensive approach to the legal aspects of managing and accommodating disabilities in the workplace. We provide guidance to employers on the duty to accommodate and on disability management. Our team can advise on the structure of wellness and attendance management programs. We advise on how to integrate short and long-term disability coverage and accelerated return-to-work incentives. Educational Programs and Seminars Our Labour and Employment Group is very active in the corporate community, frequently being asked to provide educational programs and seminars. In addition, our practitioners regularly publish articles in a variety of legal and human resources journals and publications. We pride ourselves on staying on the leading edge of knowledge in all aspects of labour and employment law and human resource practices. Practical seminars regularly led by members of our team deal with issues such as workplace harassment, managing absenteeism, progressive discipline, human rights, the duty to accommodate, occupational health and safety and workers compensation. Employment Standards Our practitioners regularly advise clients in all areas of employment standards. This may include advice on the relationship between the employers obligations under relevant employment standards legislation, collective agreements and other statutes. In addition, we appear as counsel on behalf of employers before employment standards tribunals. Page 2 Labour and Employment MCCARTHY.CA

Grievance and Interest Arbitration We regularly assist our clients in planning strategies, including training of supervisors, to avoid or resolve collective agreement disputes without resorting to arbitration. Where arbitration is necessary, our lawyers represent clients before arbitrators, boards of arbitration and tribunals at all levels. Our lawyers guide clients through each step of the grievance process. We believe in early involvement to help avoid litigation and minimize its impact on the daily operation and profitability of your business. Human Rights Issues The Labour and Employment Group has extensive experience in a wide variety of matters with respect to the development of human rights policies, including workplace harassment policies, internal human rights procedures and the duty to accommodate. We are regularly involved in reviewing organizational practices and policies of clients for conformity with human rights legislation. Preparing responses to complaints and representing clients at investigative conferences and throughout the investigatory process is an additional aspect of our service. Our lawyers act as counsel before human rights tribunals and boards of arbitration that deal with human rights issues. Judicial Review and Appeals We handle all levels of judicial review and appeal work before the courts. Wrongful Dismissal and Employment Contracts We regularly advise on employment contracts. This includes their interpretation and administration, termination of employment, settlement of cases, court litigation of wrongful dismissal cases and, where appropriate, alternative dispute resolution of wrongful dismissal cases. We have considerable experience in drafting contracts of employment, as well as executive compensation packages, employment policies and practices and termination letters. Occupational Health and Safety Members of the Labour and Employment Group work closely with clients to prevent health and safety disputes and to help ensure compliance with federal and provincial regulations. We represent clients in all areas of occupational health and safety law, including contractor responsibilities on construction sites, appeals from inspector s orders, prosecutions, inquests, occupational health and safety audits, compliance policies and strategies and related litigation. Our lawyers are supported in these matters by our Environmental Group, which provides advice on environmental audits and compliance policies and strategies. Pay Equity Our lawyers routinely advise private and public sector employers on compliance with employment regulations at the provincial, federal and international levels. Clients sometimes need to evaluate and redress gender-based pay discrimination in the workplace. Our lawyers advise on pay equity plans and find objective ways to determine whether there is a sound basis for pay equity complaints. We advise on how to define what constitutes equal pay for work of equal value. The Labour and Employment Group can help you understand the complexities of the various forms of federal and provincial legislation regarding pay equity. Page 3 Labour and Employment MCCARTHY.CA

Pensions and Benefits McCarthy Tétrault also has lawyers with expertise in pensions, retirement plans and other benefits contracts. Members of our group advise clients on all aspects of pension and benefit matters, including tax implications. They can help establish and draft new pension and benefit plans or revise existing ones. Our lawyers also advise on corporate reorganizations and plant closures, acquisitions and dispositions, particularly with respect to the transfer of employees and pensions. Workplace Safety and Insurance Our lawyers regularly represent clients with respect to all workplace safety and insurance matters. This includes representing employers as counsel before hearing officers and at appeal tribunal hearings. McCarthy Tétrault s Labour and Employment Group has the experience and expertise to assist you with all the complexities of labour and employment law that affect your business. This is our strength and we ll give you hands-on support. Page 4 Labour and Employment MCCARTHY.CA

VANCOUVER P.O. Box 10424, Pacific Centre Suite 1300, 777 Dunsmuir Street Vancouver BC V7Y 1K2 Tel: (604) 643-7100 Fax: (604) 643-7900 CALGARY Suite 3300, 421 7th Avenue SW Calgary AB T2P 4K9 Tel: (403) 260-3500 Fax: (403) 260-3501 LONDON Suite 2000, One London Place 255 Queens Avenue London ON N6A 5R8 Tel: (519) 660-3587 Fax: (519) 660-3599 TORONTO Box 48, Suite 4700 Toronto Dominion Bank Tower Toronto ON M5K 1E6 Tel: (416) 362-1812 Fax: (416) 868-0673 OTTAWA The Chambers Suite 1400, 40 Elgin Street Ottawa ON K1P 5K6 Tel: (613) 238-2000 Fax: (613) 563-9386 MONTRÉAL Suite 2500 1000 De La Gauchetière Street West Montréal QC H3B 0A2 Tel: (514) 397-4100 Fax: (514) 875-6246 QUÉBEC Le Complexe St-Amable 1150, rue de Claire-Fontaine, 7 e étage Québec QC G1R 5G4 Tel: (418) 521-3000 Fax: (418) 521-3099 UNITED KINGDOM & EUROPE 5 Old Bailey, 2nd Floor London, England EC4M 7BA Tel: +44 (0)20 7489 5700 Fax: +44 (0)20 7489 5777 VANCOUVER CALGARY LONDON TORONTO OTTAWA MONTRÉAL QUÉBEC LONDON, UK MCCARTHY.CA October 2006

Environmental Down to earth. VANCOUVER CALGARY LONDON TORONTO OTTAWA MONTRÉAL QUÉBEC LONDON, UK MCCARTHY.CA

Providing clear solutions in environmental matters. The Environmental Law Group of McCarthy Tétrault has been at the forefront of this area of law in Canada for more than 25 years. We understand environmental law because in many cases we helped write it. As one of the first firms to practice environmental law in the country, and one of the founders of the Canadian Environmental Law Association, we continue to be called upon to comment on the next generation of environmental legislation. At McCarthy Tétrault, we use our size and experience to assist and support our clients in achieving their strategic objectives at the local, national and international levels. Recommended as a leading environmental practice by the Canadian Legal Lexpert Directory, we have an enviable national reputation. A recent survey of major Canadian corporations ranked McCarthy Tétrault as the top firm for environmental law in the Greater Toronto Area. The Environmental Group is committed to identifying and understanding our clients needs and objectives, and responding promptly with sound advice. Our lawyers act for public and private sector clients across Canada regarding a wide variety of environmental legal matters. The Environmental Group represents a broad range of corporate and government clients, including public and private corporations, municipalities, industry, financial institutions, directors, officers, employees and shareholders. Our in-depth knowledge and synergy with other practices of the firm enable us to provide our clients with the means of making the most informed decisions in environmental matters, be it in litigation, commercial transactions, environmental assessments, project development or the day-to-day operation of their businesses or municipalities. This integrated structure allows us to develop comprehensive strategies, from planning to implementation, for our clients environmental legal issues. In addition, our lawyers have developed an established network of contacts, with key environmental consultants and government officials, helping create innovative legal solutions. We appear regularly before all levels of Canadian courts as well as administrative tribunals in cases involving environmental assessments associated with new developments, natural resource projects and waste and waste water management facilities. Our group advises and represents a broad range of clients regarding all aspects of: Occupational Health and Safety Law Environmental Law Workplace Safety and Insurance Law Coroner s Inquests Public Inquiries Our Environmental Experience We understand environmental law because in many cases we helped write it. The following are some examples of the type of work we do, including specific environmental court cases and matters on which we have acted: Legal Advice. Environmental law is an extremely broad area, requiring knowledge of emerging and existing legislation as well as case law. We have applied our knowledge for the benefit of our clients in all areas of environmental law. We have also helped to design and implement effective environmental management systems and conducted seminars for training employees for many Canadian corporations and municipalities. Assessing and Minimizing Liabilities. We regularly assist clients in environmental audits and other Page 1 Environmental MCCARTHY.CA

reviews to assess actual and potential liabilities. We also help our clients minimize such liabilities through contractual protections in purchases, financings and other transactions. Legislative Involvement. On many occasions, clients have retained us to make submissions to government concerning environmental legislation. We have a strong record of getting our client s interests and concerns addressed by those governmental authorities. Approvals and Permits. Many projects require various approvals and permits under federal or provincial environmental assessment or other environmental legislation. We have an excellent record of successfully assisting our clients obtain such approvals. We have a strong record of getting our client s interests and concerns addressed by those governmental authorities. Orders and Certificates of Approval. Our lawyers have represented many major corporations and municipalities which have faced the imposition of Ministry orders such as clean up orders, control orders and stop orders or unwelcome conditions in approvals. In addition to advising clients about such orders and approvals, we have often engaged in negotiations with the Ministry concerning them. In the rare instances where negotiations have not been successful, we have appealed Ministry decisions concerning them to the Environmental Review Tribunal. Managing investigations and defending charges. We are often retained by companies, municipalities, other organizations or individuals facing an investigation or charges under environmental laws. We have an excellent record of success in this area. Litigation concerning contaminated sites. We have regularly represented major companies and municipalities which need to prosecute or defend claims concerning contamination of land and other environmental liabilities. Our Occupational Health and Safety Experience The following are some of the ways in which we have helped our clients in the occupational health and safety area: Advice. Keeping up with the ever-increasing requirements relating to occupational health and safety takes a detailed knowledge of the latest legislation and cases. We help our clients understand the duties imposed on them under occupational health and safety legislation and how to ensure that these duties are fulfilled. Training. We have also conducted seminars for training officers and supervisors of many clients concerning the nature of the duties imposed on them and how to exercise due diligence to meet those duties. Assessing and Minimizing Liabilities. We regularly assist clients in audits and other reviews to assess actual and potential liabilities and to ensure an employer is properly positioned to pass a WSIB health and safety (Workwell) audit. We also help our clients minimize such liabilities through, for example, contractual protections when hiring contractors. Orders. Our lawyers have represented many major corporations and public authorities facing the imposition of orders by the Ministry of Labour, such as compliance orders and stop orders. Page 2 Environmental MCCARTHY.CA

We have engaged in proactive negotiations with the Ministry concerning altering the requirements of orders or extending compliance dates. If needed, we have appealed Ministry orders on behalf of our clients. When an appeal hearing is necessary, we have represented our clients at hearings before the Ontario Labour Relations Board. Reprisals. We regularly assist companies and public authorities in defending allegations that they have taken a reprisal against an employee for exercising their rights under the Occupational Health and Safety Act. We help our clients negotiate with the affected parties and, if necessary, defend our clients at hearings before the Ontario Labour Relations Board. Managing Investigations and Defending Charges. We are often retained by companies, public authorities, or individuals facing an investigation or charges under occupational health and safety laws. We have an excellent record of success in this area. Our Workplace Safety and Insurance Experience Our lawyers regularly assist our clients with a full range of workplace safety and insurance matters, including: Advice. Requirements relating to workplace safety and insurance are constantly changing. We help our clients understand the workplace safety and insurance requirements that affect them and help them to stay current with constant changes. We regularly assist our clients in assessing their liabilities concerning workplace health and safety on such issues as return to work obligations, the duty to accommodate, labour market re-entry and entitlement to benefits. Training. Our lawyers have extensive experience in providing our clients managers and employees with training on their obligations and rights under the Workplace Safety and Insurance Act. Audits. We regularly assist our clients if they are audited by the Workplace Safety and Insurance Board. This assistance include dealing with the Board during the audit process as well as representing our clients in any appeal arising from an audit. Investigations and Prosecutions. Our lawyers have assisted our clients in managing investigations by the Workplace Safety and Insurance Board and, where necessary, have defended our clients if they are prosecuted under the Workplace Safety and Insurance Act. Appeals. In the event that a decision by the Workplace Safety and Insurance Board is appealed relating to workers claims and classification audits, our lawyers have a great deal of experience representing our clients before the Board and the Workplace Safety and Insurance Appeals Tribunal. Our lawyers have a great deal of experience representing our clients before the WSIB and the Workplace Safety and Insurance Appeals Tribunal. Our Public Health and Safety Experience Public safety issues are relevant to our clients who: provide products or services to the public. provide public access to their premises or facilities. Page 3 Environmental MCCARTHY.CA

potentially expose the public to materials or equipment they own or operate. The following are some of the ways in which we have helped our clients with public health and safety issues: Advice. Requirements relating to public health and safety are found in many statutes and regulations. They are constantly changing. We help our clients understand the public health and safety requirements that affect them and help them to stay current with constant changes. We regularly assist our clients in assessing their liabilities concerning public health and safety and in taking appropriate steps to minimize those liabilities. We help our clients understand the public health and safety requirements that affect them and help them to stay current with constant changes. Coroner s Inquests. When deaths occur, the Ontario Coroner s office can call an inquest to examine the circumstances giving rise to the death. Coroner s Inquests often raise important public health and safety issues. The Coroner s juries who take part in the inquest have broad powers to issue recommendations for future changes that can have significant effects. We have represented numerous public bodies, including school boards and corporations at Coroner s Inquests relating to such diverse subject matters as mining safety, marine transportation, school trips, provision of fire and emergency services and elevating devices. Public Inquiries. Federal and provincial governments have broad powers to establish public inquiries and royal commissions to inquire into matters of public health and safety. An example of such an inquiry in Ontario is the Walkerton inquiry into issues surrounding the provision of drinking water. We played a central role in the Walkerton inquiry representing the interests of the association of municipalities of Ontario. As in the case of Coroner s Inquests, we have significant experience in representing clients before such inquiries. Other Litigation. Our lawyers have assisted clients in prosecuting or defending civil litigation relating to public health and safety issues. For example, class action litigation has become a popular way for groups to seek compensation for damages arising from public health issues. Our lawyers have represented clients in a variety of class action claims including claims relating to asbestos exposure and environmental contamination. It is also common for those who provide products or services to the public to be met with complaints or claims concerning the effect that those products or services may have had on a person s health or safety. Our lawyers have assisted our clients in responding or defending against such complaints or claims. Page 4 Environmental MCCARTHY.CA

VANCOUVER P.O. Box 10424, Pacific Centre Suite 1300, 777 Dunsmuir Street Vancouver BC V7Y 1K2 Tel: 604-643-7100 Fax: 604-643-7900 CALGARY Suite 3300, 421 7th Avenue SW Calgary AB T2P 4K9 Tel: 403-260-3500 Fax: 403-260-3501 LONDON Suite 2000, One London Place 255 Queens Avenue London ON N6A 5R8 Tel: 519-660-3587 Fax: 519-660-3599 TORONTO Box 48, Suite 4700 Toronto Dominion Bank Tower Toronto ON M5K 1E6 Tel: 416-362-1812 Fax: 416-868-0673 OTTAWA The Chambers Suite 1400, 40 Elgin Street Ottawa ON K1P 5K6 Tel: 613-238-2000 Fax: 613-563-9386 MONTRÉAL Suite 2500 1000 De La Gauchetière Street West Montréal QC H3B 0A2 Tel: 514-397-4100 Fax: 514-875-6246 QUÉBEC Le Complexe St-Amable 1150, rue de Claire-Fontaine, 7 e étage Québec QC G1R 5G4 Tel: 418-521-3000 Fax: 418-521-3099 UNITED KINGDOM & EUROPE 5 Old Bailey, 2nd Floor London, England EC4M 7BA Tel: +44 (0)20 7489 5700 Fax: +44 (0)20 7489 5777 VANCOUVER CALGARY LONDON TORONTO OTTAWA MONTRÉAL QUÉBEC LONDON, UK MCCARTHY.CA October 2006

Immigration Opening borders. VANCOUVER CALGARY LONDON TORONTO OTTAWA MONTRÉAL QUÉBEC LONDON, UK MCCARTHY.CA

Providing direction through complex immigration law. With the increasingly global economy, international companies need to be able to relocate employees wherever their skills are required. Canadian employers may need to obtain the services of foreign nationals with qualifications not easily available within Canada s labour force. Foreign investors may need to obtain authorization to work in Canada. McCarthy Tétrault s Immigration Group helps companies and individuals by developing effective strategies that take into consideration the legal aspects as well as the personal nature of migration. McCarthy Tétrault is the largest full-service law firm in Canada. With close to 700 lawyers in offices across Canada as well as London, U.K., McCarthy Tétrault is McCarthy Tétrault works with immigration authorities to ensure the most efficient processing possible for workers arriving from overseas. recognized as a leader in the Canadian legal profession. Our Immigration Group has considerable experience providing advice on a wide range of business immigration matters. Members of the group include practitioners with extensive knowledge of immigration-related matters as well as individuals who were formerly with Immigration Canada. We assist clients in acquiring temporary status as well as securing and maintaining Canadian permanent residence, Canadian citizenship and obtaining Canadian citizenship certificates and passports. Members of the group advise on the fiscal, custom and tax issues that may arise in transfer situations. We assist clients in applying for government approval to overcome inadmissibility problems based on health or criminal issues. McCarthy Tétrault s Immigration Group works with immigration authorities to ensure the most efficient processing possible for workers arriving from overseas. Working in collaboration with immigration officials, we will propose arrangements that will meet the expectations of the governments involved. Our Clients Our Immigration Group s client base includes major entertainment and sports companies, leading Canadian companies in the fields of engineering, mining, high tech and financial services. How We Can Help Our practice offers a wealth of experience in all aspects of immigration law and related matters, including: Obtaining and extending employment authorizations pursuant to the North American Free Trade Agreement (NAFTA), the General Agreement on Trade in Services (GATS) and the general regulations under the Immigration Act. Assisting clients in obtaining Human Resources Development Canada (HRDC) employment validations. Applying for employment authorizations, student authorizations and visitor records for the dependants of temporary foreign workers. Page 1 Immigration MCCARTHY.CA

Applying for permanent residence. Applying for Canadian citizenship. Advising on and assisting with immigration procedures in the province of Québec. Providing advice respecting special provincial programs in various provinces. Advising Canadian companies on requirements when hiring a foreign national. Facilitating the entry of foreign nationals into Canada to market, negotiate, purchase and sell goods and services to Canadian corporations and individuals. Advising on the legal aspects of the transfer of employees as well as the practical considerations of employment authorizations for spouses, student authorizations for spouses and/or children, schooling, housing and facilitating the adaptation of new employees to a new locale. Assisting transferred employees with family relocation, including registration of their children in schools. Advising on customs and sales tax issues arising in transfer situations, including personal property and pets. Advising on income tax issues, including sophisticated tax planning both before and after immigration to Canada. Advising on business aspects of permanent resident applications for entrepreneurs and investors. We assist clients in acquiring and maintaining Canadian permanent residence, Canadian citizenship and obtaining Canadian citizenship certificates and passports. Page 2 Immigration MCCARTHY.CA

VANCOUVER P.O. Box 10424, Pacific Centre Suite 1300, 777 Dunsmuir Street Vancouver BC V7Y 1K2 Tel: 604-643-7100 Fax: 604-643-7900 CALGARY Suite 3300, 421 7th Avenue SW Calgary AB T2P 4K9 Tel: 403-260-3500 Fax: 403-260-3501 LONDON Suite 2000, One London Place 255 Queens Avenue London ON N6A 5R8 Tel: 519-660-3587 Fax: 519-660-3599 TORONTO Box 48, Suite 4700 Toronto Dominion Bank Tower Toronto ON M5K 1E6 Tel: 416-362-1812 Fax: 416-868-0673 OTTAWA The Chambers Suite 1400, 40 Elgin Street Ottawa ON K1P 5K6 Tel: 613-238-2000 Fax: 613-563-9386 MONTRÉAL Suite 2500 1000 De La Gauchetière Street West Montréal QC H3B 0A2 Tel: 514-397-4100 Fax: 514-875-6246 QUÉBEC Le Complexe St-Amable 1150, rue de Claire-Fontaine, 7 e étage Québec QC G1R 5G4 Tel: 418-521-3000 Fax: 418-521-3099 UNITED KINGDOM & EUROPE 5 Old Bailey, 2nd Floor London, England EC4M 7BA Tel: +44 (0)20 7489 5700 Fax: +44 (0)20 7489 5777 VANCOUVER CALGARY LONDON TORONTO OTTAWA MONTRÉAL QUÉBEC LONDON, UK MCCARTHY.CA October 2006

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The right players. The right strategies. The right results. Tax issues have become increasingly complex and multi-jurisdictional. McCarthy Tétrault s Tax Group has the experience required to develop tax strategies and structures that support your business objectives. Sound tax solutions come from demonstrated expertise, depth and judgement. Our Tax Group has the strategic skills, insight and experience with the principles of law to help you achieve your tax-related goals. Our firm and members of our Tax Group are consistently rated among the top Canadian law firms in tax law by Chambers Global, International Tax Review and Lexpert. The International Tax Review cites McCarthy Tétrault lawyers as Leading Lawyers in tax controversy, transfer pricing, capital markets and indirect taxes. With more than 50 tax lawyers strategically positioned in Canada s major business centres, McCarthy Tétrault s Tax Group is able to marshal the expertise necessary to help our clients plan their transactions or resolve their tax disputes effectively. Many members of our Tax Group have experience working on advisory committees with senior government officials and on secondment to the Rulings Directorate of the Canada Revenue Agency (CRA) This has allowed us to provide our clients with important insight into the development of tax policy, legislation and administrative practice. We frequently provide recommendations to the Department of Finance on legislative amendments to Canada s tax laws. Our Clients Our Tax Group regularly advises on major corporate transactions in Canada. Recent examples include: Molson Inc. s merger with Coors Stelco s debt/equity restructuring Merger of Falconbridge and Noranda Hollinger International s sale of its Canadian newspaper operations Bruce Power s investment in nuclear power generating stations in Ontario CP Ships sale to TUI AG Merger to create EnCana Corporation Our Tax Group has an impressive track record in litigating tax issues before the courts. In addition to having successfully litigated the largest resource taxation case in Canadian history in Gulf Canada Resources Ltd. v. The Queen, we have had a string of significant recent victories, including: Canadian Pacific Limited the first taxpayer victory before the Federal Court of Appeal in a general antiavoidance rule (GAAR) case. Strategically positioned in Canada s major business centres, our Tax Group is home to some of Canada s pre-eminent tax advisers. The Royal Trust Company and The Royal Trust Corporation of Canada a capital tax case on how taxable capital is to be computed. Toronto College Park Limited part of the Supreme Court of Canada trilogy of decisions confirming that profit for tax purposes involves a question of law to be determined by the method that presents an accurate picture of profit in the circumstances, using the truest picture approach. Page 1 Tax MCCARTHY.CA

McCarthy Tétrault s Tax Group has also provided tax expertise in connection with numerous innovative transactions, including income funds and tier one capital financings by several Canadian banks and multinational insurance companies. Knowledge Management Our Robinette Knowledge Management System, a state-of-the-art information sharing and retrieval technology system developed within our firm, is a powerful tool that enables our Tax Group to access our collective experience on-line to best advise you on tax matters. We have significant experience in the tax dispute resolution process, both in negotiations with CRA and before the courts. GAAR Guidance One reason the income tax field has become increasingly complex stems from uncertainty inherent in GAAR. It requires that effective tax planning not only comply with the specific rules set forth in the Income Tax Act, but also not violate the misuse or abuse provisions of GAAR. Every year, new court decisions provide additional guidance regarding how the GAAR provisions will be interpreted. In the field of tax planning, however, clients cannot wait for the certainty that eventually will result from future court decisions. For current transactions, clients require guidance as to how the GAAR provisions are most likely to be interpreted in the future by the courts. The indepth experience and judgment of McCarthy Tétrault s Tax Group provides exactly that. The CRA is also uncertain as to precisely how the courts will interpret GAAR in the future. Consequently, CRA reassesses taxpayers according to how it thinks tax legislation should be interpreted. When a client receives a reassessment of tax from CRA, McCarthy Tétrault s Tax Dispute Resolution Group can advise the client whether or not we consider the basis of the reassessment to be sound or flawed. We have substantial experience in representing clients in tax dispute resolution circumstances, both in negotiations with CRA and before the courts. Our Business Lines McCarthy Tétrault s Tax Group is organized along the following business lines, led by partners with substantial expertise. Capital Markets development of innovative debt, equity and hybrid securities major project financing income and investment funds derivatives securitizations cross-border debt and equity issues pooled investment vehicles, including segregated funds and mutual funds product development for RRSP and pension plan market multinational corporate group structures Mergers, Acquisitions and Reorganizations take-over bids and private acquisitions tax efficient divestitures tax-minimization strategies tax consolidation planning spin-offs Page 2 Tax MCCARTHY.CA

partnerships joint ventures public-private partnerships Tax Dispute Resolution effective negotiation at the audit level to reduce or prevent adverse reassessments representing clients who have been reassessed to achieve attractive settlements representing clients in tax trials and appeals at all levels remission orders numerous major taxpayer victories before the courts International Tax Services structuring in-bound investments by nonresidents» minimize current taxation by Canada» minimize taxation upon exiting the investment structuring out-bound investments by Canadian corporations in foreign projects and business enterprises to maximize benefits from Canada s foreign affiliate taxation system tax efficient cross-border corporate group structures Transfer Pricing strategies to optimize transfer pricing opportunities reviewing and defending transfer prices assisting with preparation of contemporary documentation negotiating competent authority settlements negotiate advance pricing agreements litigation International Trade application and enforcement of international trade and investment agreements, including the agreements of the World Trade Organization, NAFTA, AIT, FTAA and foreign investment protection agreements trade remedies, including antidumping, countervail and safeguard measures customs and tariff compliance and enforcement, including rules of origin, customs valuation and tariff classification import and export controls, sanctions and trade embargo programs challenges to government goods and services procurement anti-corruption measures, including Corruption of Foreign Public Officials Act requirements representation of clients during CRA customs audits and appeals and customs seizures litigation before the Canadian International Trade Tribunal, NAFTA Binational Panels, Federal Court and Supreme Court of Canada Financial Institutions We are consistently rated among the top Canadian firms by directories such as Chambers Global, International Tax Review and Mondaq. strong relationships with banks, life insurance corporations, mutual funds, pension funds and other financial institutions Page 3 Tax MCCARTHY.CA

leaders in the recent tier one capital financings by Canadian banks insurance company taxation tax planning and structuring for major acquisitions by financial institutions Executive Compensation and Relocation/High Net Worth Individuals assisting corporations in developing compensation packages for executives advising on cross-border compensation issues estate planning utilization of trusts domestic and foreign We have advised on numerous innovative transactions such as income funds, tier one capital financings, mergers and acquisitions and privatizations. stock option plans and other employee share participation plans Pensions and Benefits advising purchasers and sellers of businesses on related pension issues taxation and regulation of registered and nonregistered pension plans entitlement to surplus pension assets advising employers on the design and administration of pension plans, profit sharing plans, registered retirement savings plans and retirement compensation arrangements down-sizings terminations of employment Sales and Commodity Taxes structuring purchases and sales of businesses to minimize sales and commodity taxes provincial retail sales and use taxes GST, QST and HST strategies to maximize GST input tax credits excise taxes fuel taxes Energy royalty trusts mergers and acquisitions of royalty trusts flow-through share financings resource property purchase and sale mergers, acquisitions and reorganizations of resource corporations agreements with Aboriginal organizations advising clients engaged in mining, oil and gas, pipelines, electricity generation, transmission and distribution and energy trading Technology licensing agreements minimization of Canadian withholding taxes e-commerce» structures that involve not carrying on business in Canada» structures that involve no permanent establishment in Canada Page 4 Tax MCCARTHY.CA

VANCOUVER P.O. Box 10424, Pacific Centre Suite 1300, 777 Dunsmuir Street Vancouver BC V7Y 1K2 Tel: 604-643-7100 Fax: 604-643-7900 CALGARY Suite 3300, 421 7th Avenue SW Calgary AB T2P 4K9 Tel: 403-260-3500 Fax: 403-260-3501 LONDON Suite 2000, One London Place 255 Queens Avenue London ON N6A 5R8 Tel: 519-660-3587 Fax: 519-660-3599 TORONTO Box 48, Suite 4700 Toronto Dominion Bank Tower Toronto ON M5K 1E6 Tel: 416-362-1812 Fax: 416-868-0673 OTTAWA The Chambers Suite 1400, 40 Elgin Street Ottawa ON K1P 5K6 Tel: 613-238-2000 Fax: 613-563-9386 MONTRÉAL Suite 2500 1000 De La Gauchetière Street West Montréal QC H3B 0A2 Tel: 514-397-4100 Fax: 514-875-6246 QUÉBEC Le Complexe St-Amable 1150, rue de Claire-Fontaine, 7 e étage Québec QC G1R 5G4 Tel: 418-521-3000 Fax: 418-521-3099 UNITED KINGDOM & EUROPE 5 Old Bailey, 2nd Floor London, England EC4M 7BA Tel: +44 (0)20 7489 5700 Fax: +44 (0)20 7489 5777 VANCOUVER CALGARY LONDON TORONTO OTTAWA MONTRÉAL QUÉBEC LONDON, UK MCCARTHY.CA October 2006

Damages in the Employment and Labour Context: What s Happened in the Last Year? Karen Sargeant, Andrew Bracht and Judith Borts October 27, 2006 McCarthy Tétrault LLP Box 48, Suite 4700 Toronto Dominion Bank Tower Toronto, ON M5K 1E6 www.mccarthy.ca

Damages in the Employment and Labour Context: What s Happened in the Last Year? I. Introduction In the past few years, we have seen significant changes in the law of damages resulting from wrongful dismissal and the termination of employment. Accordingly, employers are faced with more and more challenges when deciding whether or not, and when, to terminate an employee s employment. One of the most significant changes has been with respect to an employer s liability for long-term disability benefits. Two recent Ontario decisions have made employers liable for plaintiffs long-term disability benefits, not just the premiums, when the employers failed to continue the plaintiffs benefits coverage for an adequate period following termination of the plaintiffs employment and the plaintiffs became disabled within that time. Another significant change is with respect to the characterization of mental distress damages. Whereas previously mental distress damages were awarded only for breach of peace of mind contracts, the Supreme Court of Canada has recently expanded the scope of mental distress damages. Damages for mental distress may now be awarded for a breach of any contract so long as the mental distress is within the reasonable contemplation of the parties at the time the contract was made and the degree of mental suffering caused by the breach is of a degree sufficient to warrant compensation. On a more positive note, we have also seen the courts claw back on the issue of Wallace Damages. In Ontario, the Court of Appeal very recently reduced the $500,000 punitive damages award in the Keays v. Honda Canada Inc. 1 case to $100,000 on the basis of, inter alia, proportionality. Moreover, the British Columbia Court of Appeal recently stated that Wallace damages are not available to plaintiffs who have not claimed wrongful dismissal. Finally, the Ontario Court of Appeal has recently determined that it is not patently unreasonable for a Board of Arbitration to state that it does not have jurisdiction under a collective agreement to award aggravated or punitive damages. This paper reviews the above changes and highlights just how careful employers must be when deciding to terminate an employee s employment. II. Damages in Respect of Long-Term Disability Benefits In 2005 and 2006, the Ontario Superior Court of Justice and Ontario Court of Appeal made it clear that employers will be liable for damages in respect of long-term disability benefits, not just the premiums, when employers fail 1 Ontario Court of Appeal, September 29, 2006 Page 1 Damages in the Employment and Labour Context: What s Happened in the Last Year

to continue a plaintiff s benefits coverage for an adequate period following termination of his or her employment and a plaintiff became disabled within that time. Stelco Inc. In Stelco Inc. 2, the plaintiff, a forty-three year-old Plant security officer, was dismissed for chronic absenteeism after seventeen years of service. She was in very poor health and, following the termination of her employment, developed a disability. Stelco offered the plaintiff 9 ½ months pay in lieu of reasonable notice in return for a Release of claims against Stelco. The plaintiff declined the offer and commenced an action for damages for wrongful dismissal. At trial it was determined that Stelco failed to provide the plaintiff with adequate notice of the termination of her employment. As a result, the key issues at trial were (1) the proper length of notice and (2) the quantum of damages. The court found that based on her age, length of service, fragile state of health, and prospects of reemployment, the proper notice period was 12 months. While the decision was influenced by human rights principles, the court was unable to find that the employer violated its policy against discrimination or any applicable human rights legislation. As a result, the employer was not found to have acted in bad faith. The plaintiff was ultimately awarded $354,778.84 in damages, less $33,581.11 that she had earned through mitigation. The damages award consisted of: (a) earned vacation pay ($1,252.20); (b) lost salary ($41,139.02); (c) lost healthcare benefits ($7,060.14); (d) lost salary continuance ($25,735.22); (e) lost LTD benefits ($118,584.53); and (f) future LTD benefits ($161,007.73). Lost and future LTD benefits made up the bulk of the award with the former being calculated from the date of termination to the first day of argument (June 21, 2005) and the latter, from such date to the plaintiff s 65 th birthday (May 15, 2018). 2 2005 CarswellOnt 5177 (S.C.J. [Commercial List]) Page 2 Damages in the Employment and Labour Context: What s Happened in the Last Year

Implications This case was released after the Ontario Superior Court s decision in Keays v. Honda which, until the recent Court of Appeal decision, represented the highest amount of punitive damages ever awarded by a Canadian court in a wrongful dismissal action. Like Keays v. Honda, this case illustrates the court s continued reluctance to declare breaches of Ontario human rights legislation. However, allegations of discriminatory conduct are admissible and relevant as a basis for an action of wrongful dismissal. This case is significant because it puts employers, who do not necessarily act in bad faith, on alert that they may be liable for the cost of a plaintiff s disability benefits, not just the premiums, in the event the plaintiff becomes ill during the notice period the plaintiff should have received. Employers must be extremely careful when deciding to terminate the employment of employees with health problems, as they could very easily become liable for LTD benefits which can significantly impact the outcome of wrongful dismissal actions. Egan v. Alcatel A similar issue arose in Egan v. Alcatel 3. In this case, the plaintiff was induced to leave her $85,000-a-year senior marketing job at Bell Canada to work at Alcatel Canada Inc. Less than twenty-one months into the plaintiff s employment, Alcatel terminated her employment without cause as part of a mass termination. Upon termination, the plaintiff received 12 weeks pay in lieu of notice. Three months after her termination, the plaintiff developed a disability which lasted for a period of one year. The plaintiff successfully sued for wrongful dismissal. The trial judge awarded the plaintiff pay in lieu of reasonable notice equal to 9 months salary. The trial judge also found that the plaintiff was denied disability benefits during the proper notice period because Alcatel wrongfully discontinued her coverage prior to the onset of the disability. As a result, the trial judge made Alcatel liable for the resulting damages flowing from Alcatel s premature discontinuance of the disability coverage. However, the trial judge found that Egan was left whole by the award of damages and so she was not awarded lost disability insurance entitlements. Alcatel appealed. On cross-appeal, the plaintiff claimed damages for lost disability insurance entitlements. The Court of Appeal ruled that she was eligible for disability coverage for a disability commencing at any time within the nine-month notice period, for the duration of her disability. The Court of Appeal explained that: Where an employee would otherwise have qualified for disability benefits during the reasonable notice period, but the application is denied on the basis that coverage was wrongfully discontinued by the employer, the employer must be liable for the value of the disability benefits that would otherwise have been payable. 3 [2006] O.J. No. 34 (C.A.) Page 3 Damages in the Employment and Labour Context: What s Happened in the Last Year

As a result, the Court of Appeal awarded the plaintiff damages representing her salary for the first three months of the notice period and disability benefits for the following twelve months (i.e. the duration of her disability). The Court of Appeal also adjusted the plaintiff s disability benefits to reflect the tax consequences of the shortterm and long-term disability payments, which are payable on a non-taxable basis, as opposed to the damages award which was taxable. Implications Employers are responsible for the continuation of disability benefits for the duration of an employee s notice period. Employers must be careful to consider such costs when making determinations regarding terminations and adequate notice periods in severance packages offered to affected employees. III. Mental Distress Damages Not only are courts allowing claims for lost disability benefits for disabilities that occur during the reasonable notice period, they are also expanding the scope of other damages that may be awarded mental distress damages in this case. Fidler v. Sun Life Assurance Co. of Canada In Fidler v. Sun Life Assurance Co. of Canada 4, Connie Fidler was diagnosed with chronic fatigue syndrome and fibromyalgia. She began receiving long-term disability benefits from Sun Life in 1991 and was entitled to these benefits so long as she was unable to perform any job. In 1997, Sun Life terminated her benefits after videosurveillance showed her running errands. Despite both Fidler s doctor s assessment that she was totally disabled and not fit to return to work and a lack of medical evidence to the contrary, Sun Life maintained its decision to terminate her benefits. Fidler commenced an action against Sun Life. A week before the trial was scheduled to begin Sun Life offered to reinstate her benefits and pay all arrears with interest. Consequently, the only issue at trial was Fidler s claim for punitive damages and damages for mental suffering. The trial judge awarded Fidler $20,000 in damages for mental suffering but dismissed her claim for punitive damages because the insurer had not acted in bad faith. In 2004, the British Columbia Court of Appeal upheld the damages for mental suffering on the basis that such damages are only available for breaches of peace of mind contracts, including but not limited to, contracts of insurance. The B.C. Court of Appeal overturned the trial court s decision not to award punitive damages and awarded Fidler $100,000 in punitive damages because the insurer fell short of its duty of utmost good faith and required denunciation and deterrence. The B.C. Court of Appeal decision was appealed to the Supreme Court of Canada. 4 [2006] S.C.J. No. 30 (S.C.C.) Page 4 Damages in the Employment and Labour Context: What s Happened in the Last Year

At the Supreme Court of Canada, the central issue was whether damages for mental distress could be awarded for breach of contract in general or only for peace of mind contracts. In a unanimous decision, the Supreme Court upheld the award of $20,000 for mental distress, ruling that such damages are available where mental distress in the event of a breach of contract is within the reasonable contemplation of the parties at the time the contract was made. The Supreme Court explained that mental distress is within the reasonable contemplation of parties who enter into a contract to secure a particular psychological benefit. That benefit does not need to be the dominant aspect or very essence of the contract, but the degree of mental suffering caused by the breach must be of a degree sufficient to warrant compensation. Disability contracts are designed to provide a reasonable expectation of psychological security and therefore mental distress is an effect which parties to a disability insurance contract may reasonably contemplate may flow from a failure to pay the required benefits. Notwithstanding its ruling in respect of mental distress damages, the Supreme Court overturned the award of punitive damages. The Supreme Court explained that conduct that justifies punitive damages is typically described as malicious, oppressive, or high-handed so as to offend the court s sense of decency. The insurer s denial of benefits was based on an incorrect doubt of Ms. Fidler s capabilities; it could not be described as offending the courts sense of decency. Implications Employment contracts, and especially collective agreements, may include commitments that are intended to provide psychological benefits or security to employees, such as provisions regarding harassment in the workplace, health and safety, disability insurance, and layoff provisions. It may therefore be within the reasonable contemplation of the parties that a breach of these provisions may result in the mental distress of an employee. It is unclear whether the courts will extend this decision to breaches of employment contracts and collective agreements. However, employers should be mindful of this decision when drafting provisions intended to provide psychological benefit or security to employees. IV. Wallace Damages and Punitive Damages Reined In In past years, we have seen Canadian courts awarding Wallace or bad faith damages and punitive damages with increasing frequency. These cases demonstrate that there are said limits on such damages claim. Keays v. Honda Canada Inc. As we have previously reported, Mr. Keays was terminated in 2000 after fourteen years of service at Honda. Mr. Keays suffered from chronic fatigue syndrome and was off work and receiving disability benefits for a period of Page 5 Damages in the Employment and Labour Context: What s Happened in the Last Year

about two years, from 1996 to 1998. When Mr. Keays long term disability benefits were terminated by the insurer, he returned to work but continued to have medical difficulties. Honda advised Mr. Keays to apply for a program that exempted disabled employees from the usual attendance requirements, whereby Honda would only hold him to an attendance standard set by his own doctor. However, Mr. Keays was required to present a medical validation of each absence prior to returning to work. Mr. Keays absenteeism increased to a higher level than his doctor had anticipated. Honda required him to see one of its company doctors, who Mr. Keays claimed threatened to move him to a more physically demanding position. Mr. Keays retained legal counsel who wrote a conciliatory letter to Honda. Honda ignored the letter and unilaterally cancelled Mr. Keays participation in the accommodation program. Honda then instructed Mr. Keays to meet with an occupational medicine specialist that Honda had selected, falsely claiming that the company physicians did not accept the legitimacy of the medical condition. When Honda representatives would not discuss the details of the proposed medical assessment with Mr. Keays, he refused to attend. Mr. Keays was ultimately terminated from employment for insubordination; he commenced an action for wrongful dismissal. The Ontario Superior Court of Justice held that Mr. Keays refusal to attend the medical appointment in such circumstances did not constitute cause for dismissal and that Honda s demand that Mr. Keays attend a meeting with its occupational medicine specialist was made in bad faith. The Court ruled that the reasonable notice period, in light of the relevant factors, was 15 months. Furthermore, the Court awarded Mr. Keays 9 additional months on account of Wallace damages. The Court also awarded punitive damages against Honda in the amount of $500,000, marking the highest punitive damages award in Canadian employment law history. The Court held that punitive damages were justified by a litany of acts of discrimination and harassment contrary to the Ontario Human Rights Code, constituting an independent actionable wrong deserving of punishment. The Court of Appeal upheld the lower court s finding that Mr. Keays was terminated without just cause. Accordingly, the Ontario Court of Appeal upheld the lower court s award of 15 months reasonable notice and 9 months on account of Wallace damages. With respect to the Wallace damages, the Court of Appeal stated that What might seem to be a very generous extension must be seen in the circumstances of this employee. To that end, the Court of Appeal cited Mr. Keays vulnerability as an employee at the time of termination and his added vulnerability as a result of his disability. Commenting on Honda s lack of accommodation of Mr. Keays disability, the Court of Appeal stated that it is important that the accommodation process display more openmindedness and less prejudgment if disabled employees are to be accorded the dignity and equality to which they are entitled. The main issue on appeal was the lower court s award of punitive damages. The Court of Appeal agreed that Honda s conduct warranted punitive damages and characterized Honda s conduct as an attempt to avoid its duty to accommodate a disability whose legitimacy it could not accept. The Court of appeal stated further that, where [an employer] proceeds in bad faith and seeks to evade its legal obligation to accommodate those Page 6 Damages in the Employment and Labour Context: What s Happened in the Last Year

rendered vulnerable through disability by wrongfully terminating them, compensation and punishment are both justified. However, the Court of Appeal reduced the punitive damages to $100,000 on the basis that some of the trial judge s findings of fact were not supported by the evidence and that the award of $500,000 violated the fundamental principle of proportionality. Specifically, the Court of Appeal found that: (i) there was no evidence of a protracted corporate conspiracy; (ii) there was no evidence of malicious conduct or outrageous conduct persisting for up to 5 years, as described by the trial judge. The period between the deterioration of the relationship between Honda and Keays and Keays discharge was a mere 7 months; (iii) although Honda was sceptical about Keays disability, there was no evidence that he was considered a problem employee or that Honda made an example of him; (iv) the trial judge exaggerated and mischaracterized Honda s refusal to deal with Keays lawyer; (v) punitive damages in other wrongful dismissal cases are far more modest, rarely reaching up to $75,000; and (vi) the financial disparity between the parties did not warrant a larger punitive damages award in this case because Honda did not use its financial power to sustain a campaign against Keays and it could not be rationally concluded that a lesser award would fail to achieve deterrence. Implications Limits on Wallace damages and punitive damages awards can be implied by the Court of Appeal s decision. In upholding the award of 9 months Wallace damages, the Court of Appeal stated that such an award might seem to be a very generous extension, thereby implying that such an award is at the upper range of the spectrum. Further, in reducing the punitive damages award to $100,000, the majority of the Court of Appeal implied that such an award will normally be the upper end of the range in wrongful dismissal cases, unless the misconduct of the defendant persists for several years or there is a pattern of abuse by the defendant. Regarding the need for an independent actionable wrong, the decision reaffirms the principle that a civil action cannot be based directly on a breach of the Ontario Human Rights Code but that discriminatory conduct may serve as a separate actionable wrong giving rise to punitive damages in wrongful dismissal cases. Employers can continue to expect that some plaintiffs in wrongful dismissal suits will plead discriminatory conduct in support of their claims for punitive damages. The majority of the Court of Appeal did not disagree with the dissenting judge s finding that it was not reasonable for Honda to demand that Keays see a doctor who had already expressed scepticism about his diagnosis. Employers Page 7 Damages in the Employment and Labour Context: What s Happened in the Last Year

and their agents may be held to a high degree of scrutiny in determining whether they acted fairly regarding an employee s disability and accommodation process. It remains to be seen whether the Court s decision will be interpreted as raising the standard in this regard. Lane v. Board of School Trustees of School District 68 In Lane v. Board of School Trustees of School District 68 5, the plaintiff, the Superintendent of the School Board, was terminated without cause after (1) a number of disagreements with School Board trustees and (2) several public relations issues. The terms of the plaintiff s employment contract provided the School Board the authority to terminate the plaintiff s employment without cause provided that the School Board offer the plaintiff alternative employment. In the event that the plaintiff refused the alternate employment, the School Board could provide the plaintiff with 12 months working notice or continue to pay the plaintiff s salary and benefits for a period of 12 months. Upon termination, the School Board offered the plaintiff alternate employment as a school principal. The plaintiff refused the alternate employment and elected the payment option in accordance with her employment contract. However, the plaintiff commenced an action against the School Board for defamation and Wallace damages on account of the insensitive and callous manner in which her employment was terminated. At trial, the key issue was the plaintiff s claim for Wallace damages. The trial judge held that the plaintiff s claim for Wallace damages was not warranted. In its reasoning, the trial judge clarified that Wallace damages are only available to employees who are wrongfully dismissed, which the plaintiff was not. Since the trial judge was not determining the appropriate notice period for the purposes of assessing damages for wrongful dismissal, it could not extend any such notice period with respect to Wallace damages. Given the express term of a twelve-month notice period in Lane s employment contract, Wallace damages could not be awarded. Further, it was evident that the Board did not breach its obligation of good faith and fair dealing. Implications The trial court s decision reinforces the principle that Wallace damages can only be imposed in claims for wrongful dismissal. Employers appear to be somewhat protected from frivolous claims made by employees for Wallace damages where the issue before the court is not an allegation of wrongful dismissal. This case also underscores the importance of including notice provisions in written employment contracts. 5 (Nanaimo-Ladysmiht) 2006 BCSC 129 (B.C.S.C.) Page 8 Damages in the Employment and Labour Context: What s Happened in the Last Year

V. Arbitrator s Jurisdiction to Award Aggravated and Punitive Damages As the following decision highlights, unions are making more and more claims for a variety of damages in the grievance and arbitration context. OPSEU v. Seneca College of Applied Arts & Technology In OPSEU v. Seneca College of Applied Arts & Technology 6, Seneca College terminated the employment of a teacher and vice president of the union chapter, Larry Olivo, on the basis that Olivo had sent anti-semitic material to the College s Director of Employee Relations. Olivo denied any involvement in either creating or sending the material and OPSEU grieved his dismissal, claiming both aggravated and punitive damages on the basis of tortiouslike conduct. The collective agreement did not specifically address the conduct relied on by OPSEU to assert claims for aggravated or punitive damages, but it did not expressly preclude OPSEU from doing so either. The labour arbitration board ( the Board ) reinstated Olivo with full compensation, including seniority and benefits. Although OPSEU argued that the Board had the authority to adjudicate Olivo s claims of intentional infliction of mental suffering and defamation in connection with his dismissal, the Board concluded that the collective agreement did not provide the Board with the jurisdiction to award aggravated or punitive damages because the tortuous conduct on which OPSEU relied did not arise either expressly or inferentially under the collective agreement. OPSEU judicially reviewed the Board s decision. On judicial review, the Divisional Court determined that the Board s decision had to be reviewed on a standard of correctness on the basis that jurisdiction was a question of law. The Divisional Court ruled that the Board had incorrectly concluded that it had no jurisdiction to award aggravated and punitive damages because the essential character of the tortuous conduct on which OPSEU relied was based on Olivo s unjust dismissal, an issue which arises either expressly or inferentially under the collective agreement. Seneca College appealed. On appeal, the Ontario Court of Appeal determined that the Board was to be afforded deference when reviewing its decisions. Accordingly, the Ontario court of Appeal determined the standard of review to be patent unreasonableness. The Court of Appeal ruled that the Board s decision that it did not have the jurisdiction to award aggravated and punitive damages was not clearly irrational. The collective agreement did not give the Board the express authority to award these damages. Further, the Board had several policy justifications for why it should limit its authority. 6 [2006] O.J. No. 1756 (C.A.) Page 9 Damages in the Employment and Labour Context: What s Happened in the Last Year

Implications In this case, the decision of a Board of Arbitration that it did not have the authority to award aggravated and punitive damages unless clearly authorized to do so under the collective agreement was not be interfered with by the courts. In these circumstances, the grieving employee could still seek those damages, but would have to do so in a court. This is not the case in all arbitrations, where many arbitrators are allowing unions to advance such claims on behalf of grievors. Conclusion Gone are the days of a simple court action where the reasonable notice period is at issue. As these cases demonstrate, most cases involve a claim or claims for other types of damages. Although we see courts reining in some of these damages awards, employers are still being made liable for these other types of damages. Employers need to be cognizant of these risks when deciding how to treat employees both leading up to and at the time of termination. Page 10 Damages in the Employment and Labour Context: What s Happened in the Last Year

VANCOUVER P.O. Box 10424, Pacific Centre Suite 1300, 777 Dunsmuir Street Vancouver BC V7Y 1K2 Tel: 604-643-7100 Fax: 604-643-7900 CALGARY Suite 3300, 421-7th Avenue SW Calgary AB T2P 4K9 Tel: 403-260-3500 Fax: 403-260-3501 LONDON Suite 2000, One London Place 255 Queens Avenue London ON N6A 5R8 Tel: 519-660-3587 Fax: 519-660-3599 TORONTO Box 48, Suite 4700 Toronto Dominion Bank Tower Toronto ON M5K 1E6 Tel: 416-362-1812 Fax: 416-868-0673 OTTAWA The Chambers Suite 1400, 40 Elgin Street Ottawa ON K1P 5K6 Tel: 613-238-2000 Fax: 613-563-9386 MONTRÉAL Suite 2500 1000 De La Gauchetière Street West Montréal, QC H3B 0A2 Tel: 514-397-4100 Fax: 514-875-6246 QUÉBEC Le Complexe St-Amable 1150, rue de Claire-Fontaine, 7 e étage Québec QC G1R 5G4 Tel: 418-521-3000 Fax: 418-521-3099 UNITED KINGDOM & EUROPE 5 Old Bailey, 2nd Floor London, England EC4M 7BA Tel: 44-20 7489-5700 Fax: 44-20 7489-5777 Every effort has been made to ensure the accuracy of this publication, but the comments are necessarily of a general nature, are for information purposes only and do not constitute legal advice in any matter whatsoever. Clients are urged to seek specific advice on matters of concern and not rely solely on the text of this publication.

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Significant Changes to Labour and Employment Legislation Brian P. Smeenk and Brendon Pooran October 27, 2006 McCarthy Tétrault LLP Box 48, Suite 4700 Toronto Dominion Bank Tower Toronto ON M5K 1E6 www.mccarthy.ca

Significant Changes to Labour and Employment Legislation Introduction Over the past year, various changes in labour and employment legislation have occurred. This paper will highlight some of those amendments, focusing on providing employers with not only a substantive discussion but advice on how best to facilitate these changes in the workplace. 1. Amendments to the Ontario Employment Standards Act, 2000 Regarding Frustration of Contract 1 There are many reasons why an employer may wish to take the position that an employee s contract of employment has come to an end, without actually terminating the employee s employment. Termination by the employer may trigger statutory, common law and/or contractual termination obligations, whereas a deemed termination or frustration of contract may have different consequences. Consider, for example, the following situations: An employee has what the employer believes to be an excessive rate of absenteeism, without any clear prognosis for achieving satisfactory attendance; An employee s claim for long term disability benefits has been rejected, but the employee has failed or refuses to return to work; An employee requires permanent accommodation and has been offered suitable work, but has declined to perform it; An employee who was injured at work has been provided with labour market re-entry services by the Workplace Safety and Insurance Board; An employee who has been off work for several years because of a disability, suddenly resurfaces and demands to be returned to work. The Doctrine of Frustration Historically, where an employee is absent from work due to a disability or illness, the employer may be permitted to treat the employee s contract of employment as being at an end, if the contract is properly considered to be 1 This portion of the paper is based closely upon material previously prepared by Daniel Black, former Partner at McCarthy Tétrault LLP. Page 1 Significant Changes to Labour and Employment Legislation

frustrated. The key to whether an employment contract has been frustrated due to an employee s disability or illness is often whether the disability or illness that prevents the employee from working is permanent or temporary. If the disabling condition is clearly permanent, then there is frustration and the employment contract is at an end. If the employee is expected to be able to return to work after a period of sick leave, then the contract is not frustrated. The issue becomes complicated where the prognosis is unclear, or where recovery is not anticipated for a long time. The concern is not whether the incapacity is permanent in the medical sense, but rather whether it would put to an end to the business efficacy of the employment relationship. It may be anticipated that the employee will eventually recover fully, but the employee could still be considered permanently disabled, in the employment sense, if the disability or illness is of such a length or nature that the business efficacy of the employment relationship is destroyed. 2 The case of Marshall v. Harland & Wolff Ltd. 3 set out the following non-exhaustive list of factors that a tribunal should consider in deciding whether a contract of employment has been frustrated: (a) The terms of the contract, including the provisions as to sick pay. When the contract provides for sick pay, it is plain that the contract cannot be frustrated so long as the employee returns to work, or appears likely to return to work, within the period during which such sick pay is payable. But the converse is not necessarily true, for the right to sick pay may expire before the incapacity has gone on, or appears likely to go on, for so long as to make a return to work impossible or radically different from the obligations undertaken under the contract of employment. (b) How long the employment was likely to last in the absence of sickness. The relationship is less likely to survive if the employment was inherently temporary in its nature or for the duration of a particular task, than if it was expected to be long-term or even lifelong. (c) The nature of the employment. Where the employee is one of many in the same category, the relationship is more likely to survive the period of incapacity than if the employee occupies a key post which must be filled on a permanent basis if the employee s absence is prolonged. (d) The nature of the illness and how long it has already continued and the prospects of recovery. The greater the degree of incapacity and the longer the period over which it has persisted and is likely to persist, the more likely it is that the relationship has been destroyed. 2 Jackson v. Union Marine Ins. Co. (1874), L.R. 10 C.P. 125 at 145, [1874-80] All E.R. Rep. 317. 3 [1972] 2 All E.R. 715. Page 2 Significant Changes to Labour and Employment Legislation

(e) The period of past employment. A relationship which is of long standing is not so easily destroyed as one which has a short history. The legal basis is that, over a long period of service, the parties must be assumed to have contemplated a longer period or periods of sickness than over a shorter period. The first of the Marshall factors indicates that frustration cannot be found during the period in which an employee is eligible for, or on, sick leave. In addition, courts have subsequently expressed doubt as to the validity of the doctrine of frustration to employment contracts providing for short term sick leave and long term disability benefits. For example, the Ontario Court (General Division) has stated: 4 This is not a case in which it is appropriate to find that the contract of employment was frustrated, if only because the defendant offered its employees sick leave and long term disability plans. This is consistent with the conclusion that the contract of employment contemplated a lengthy period of absence by an employee, especially one with long service and who was injured on the job. However, if an employee would continue to receive long term disability benefits regardless of the employee s employment status, it is arguable that the fact that the employee is entitled to receive such benefits should not mean that the employee s employment contract cannot be frustrated, as the employer s intention in providing the long term disability benefits was to insure against a situation of frustration. Moreover, although the Marshall factors provide some guidance, in most cases it remains difficult to say with certainty whether a particular employee s incapacity has frustrated the employment contract, because the law in this area is not settled. There is no clear threshold for the period of disability or illness after which the employment contract will be considered frustrated. In the Yeager 5 case, the court applied the Marshall factors and held that a two-year period of disability did not, in the circumstances of that case, amount to frustration. Similarly, the Newfoundland Court of Appeal found that an absence of 18 to 24 months would be reasonably within the contemplation of the parties, and the employee s 10-month absence did not frustrate the employment contract. 6 Impact of the Duty to Accommodate The Human Rights Code (Ontario) (the Code ) provides that every person has a right to equal treatment with respect to employment without discrimination because of disability. Disability is given a very broad definition in the Code. 7 It is not, however, considered discrimination to refuse to continue an employee or exclude 4 Antonacci v. Great Atlantic & Pacific Co. of Canada, Ltd. (1998), 35 C.C.E.L. (2d) 1. See also Bohun v. Similco Mines Ltd. (1995), 12 C.C.E.L. (2d) 92 (B.C.C.A.). 5 (1984), 5 C.C.E.L. 266 (B.C.S.C.) 6 White v. F.W. Woolworth Co. (1996), 22 C.C.E.L. (2d) 110. 7 Code, subsection 10(1): disability means, (a) any degree of physical disability, infirmity, malformation or disfigurement that is caused by bodily injury, birth defect or illness and, without limiting the generality of the foregoing, includes diabetes mellitus, epilepsy, a brain injury, any degree of paralysis, amputation, lack of physical co-ordination, blindness or visual Page 3 Significant Changes to Labour and Employment Legislation

a person from a particular job if that person is incapable of performing the essential functions of the work because of the person s disability. But, before judging whether the person with the disability can perform the essential functions of the work, his or her needs must be accommodated up to the point of undue hardship by the person responsible for making the accommodation. This duty to accommodate persons with a disability is set out in section 17 of the Code: 17.(1) A right of a person under this Act is not infringed for the reason only that the person is incapable of performing or fulfilling the essential duties or requirements attending the exercise of the right because of disability. (2) The Commission, the Tribunal or a court shall not find a person incapable unless it is satisfied that the needs of the person cannot be accommodated without undue hardship on the person responsible for accommodating those needs, considering the cost, outside sources of funding, if any, and health and safety requirements, if any. Subsection 17(2) creates an obligation upon an employer to accommodate the restrictions of an employee with a disability to the point that it would create undue hardship on the employer, before the employer is relieved under subsection 17(1) from a finding of discrimination. The employer s statutory obligation to accommodate an employee is a duty independent of any obligations or entitlements the employer has with respect to the employee under workers compensation legislation, under the contract of employment or under a collective agreement. 8 In particular, an employer is not entitled to rely on the fact that an employee has participated in a Workplace Safety and Insurance Board sponsored labour market reentry program as a reason for failing to accommodate the employee in a position with the employer. 9 The term undue hardship is not defined in the Code. In deciding whether an employer has met the undue hardship standard, it will typically be asked whether the employer has done everything that could reasonably be expected of it in trying to accommodate the employee s needs. 10 While employees are not entitled to perfect impediment, deafness or hearing impediment, muteness or speech impediment, or physical reliance on a guide dog or other animal or on a wheelchair or other remedial appliance or device, (b) a condition of mental impairment or a developmental disability, (c) a learning disability, or a dysfunction in one or more of the processes involved in understanding or using symbols or spoken language, (d) a mental disorder, or (e) an injury or disability for which benefits were claimed or received under the insurance plan established under the Workplace Safety and Insurance Act, 1997; 8 Air Canada and I.A.M. (Petelka) (1998), 74 L.A.C. (4th) 233 (Dissanayake) note that the legislation at issue in this case was the Canadian Human Rights Act, R.S.C. 1985, c. H-6 and the Workers Compensation Act, R.S.O. 1990, c. W.11, the predecessor legislation of the Workplace Safety and Insurance Act, 1997, S.O. 1997, c. 16, Sch. A. See also Proboard Ltd. v. C.E.P., Loc. 49-0 (2002), 112 L.A.C. (4th) 371 (Kaplan). 9 In the Air Canada case (see note 11 above), arbitrator Dissanayake highlighted the fact that an employee s participation in board-sponsored retraining is not voluntary as the failure to participate may affect the employee s benefits. 10 See, e.g., Brown and Beatty, Canadian labour Arbitration (Aurora: Canada Law Book, 2003 (looseleaf)), at para. 7:6120. Page 4 Significant Changes to Labour and Employment Legislation

accommodation, more than minor inconvenience must be shown before the complainant s right to accommodation can be defeated. 11 Usually, the issue of accommodation involves looking at the ways in which the employer can bring the employee with a disability back to work. Where the employer establishes that it took reasonable steps toward accommodating and put forward a reasonable accommodation to the employee, the employee also has a duty to accept the accommodation. 12 In this respect, an employer would have a strong argument that it meets its accommodation obligations where it offers a suitable placement to an employee requiring permanent accommodation, and the employee fails to meet the employee s duty by declining the placement. The question of whether an employer may be required to accommodate an employee by allowing the employee to remain on a leave of absence is a difficult one. In theory, it may be difficult to establish that this would cause undue hardship. It is also difficult to gauge how a court of Human Rights Tribunal would react to such an argument. At the very least, the employer should ensure that it has a strong argument on the frustration issue before it could successfully argue that it could not accommodate an employee by allowing the employee to remain on a leave of absence. The employer should therefore wait at least until the employee has exhausted his or her right to short-term sick leave benefits and then seek updated medical information on the employee s prognosis. In fact, it would probably be prudent to wait considerably longer, depending on the employee s health status. Further, as noted above, the employer should also ensure that any termination would not impact on the employee s right to receive LTD benefits. Frustration and Entitlements Under the Employment Standards Act, 2000 ( ESA ) The law surrounding frustration of contract as a result of disability has changed several times over the past five years. Until 2001, employers had no obligation to provide pay in lieu of notice or severance pay to an employee as a result of frustration of contract arising from disability. In 2001, the ESA was amended to incorporate protections afforded to employees by the Code. Section 2 of Ontario Regulation 288/01 [ Regulation 288/01 ] provided that an employee was not entitled to notice of termination or pay in lieu thereof under the ESA where, subject to the Human Rights Code, [the employee s] contract of employment [had] become impossible to perform or [had] been frustrated by a fortuitous or unforeseeable event or circumstance. Similarly, section 9 of Regulation 288/01 provided that an employee was not entitled to severance pay under the ESA where the employee s contract of employment [had] become impossible to perform or [had] been frustrated unless the impossibility or frustration [was] the result of an illness or injury suffered by the employee, and the Human Rights Code prohibits severing the employment. As a result of the Ontario Court Appeal decision in O.N.A. v. Mount Sinai Hospital, 13 these regulations under the ESA regarding frustration of contract were amended in October 2005. The Ontario Court of Appeal held that the 11 Central Okanagan School District No. 23 v. Renaud, [1992] S.C.R. 970. 12 Ontario (Human Rights Commission) v. Simpson-Sears, [1985] 2 S.C.R. 536 at 555. See also D Andrea, note 6 above, at para 4:5700. 13 2005 CanLII 14437 (ON C.A.). Page 5 Significant Changes to Labour and Employment Legislation

predecessor provision (the pre-2001 legislation was before it in the case) to section 9 was unconstitutional on the basis that it violated section 15 of the Charter of Rights and Freedoms, the equality provision. The allegation was that employees with disabilities were not being given equal treatment under the law, regarding severance pay. The Court of Appeal stated, disabled persons as a group suffer from pre-existing disadvantage and stereotyping... The differential treatment has the effect of perpetuating the view that they are not likely to be member of the workforce in the future. The denial [of severance pay] affects an interest crucially important to one s dignity, namely, equal treatment and equal compensation in employment. As a result of the Mount Sinai decision and subsequent changes to the regulations under the ESA, an employer is now required to provide notice of termination or termination pay and severance pay to an employee whose contract of employment has become frustrated. The amendment of the regulation removed frustration as a result of disability from the list of exclusions entitling employees to notice and severance pay under the ESA. Page 6 Significant Changes to Labour and Employment Legislation

2. New Rules Regarding Smoking in the Workplace 14 Employers should ensure that their workplace smoking rules meet new standards and that they are being enforced. Employers should also ensure that they have posted the newest version of the poster that provides information about the ESA. New No Smoking Requirements On May 31, 2006, the Smoke-Free Ontario Act (the Act ) replaced the Smoking in the Workplace Act. Under the new law, employers must prohibit smoking in all enclosed workplaces. An enclosed workplace is essentially any place, building, structure, vehicle or conveyance where employees work or frequent in the course of their employment that has a roof. In essence, this means that, with certain very specific exceptions, smokingdesignated rooms are no longer permitted in any workplace. Employers are permitted to set up or maintain outdoor roofed smoking shelters, but only if those shelters have two walls or less, and employees do not work in or frequent the shelters in the course of employment. Employers must ensure compliance with the Act in the workplace. This includes ensuring that employees who do smoke in enclosed workplaces in contravention of the Act are not permitted to remain in that workplace. In addition, employers must give employees notice that smoking is prohibited in enclosed workplaces and must post prescribed signs throughout the workplace. Non-compliance can be costly: under the new Act, repeated contraventions may result in fines up to $5,000 for individuals. At present, the legislation does not impose any limits on the fines that corporations may be ordered to pay for contravening the Act. Since the new Act has come into force, inspectors appointed by the Minister of Health and Long-Term Care have been actively conducting inspections. Thus, employers are well advised to ensure that their workplaces comply with the new restrictions. 14 This portion of the paper is based closely upon material previously prepared by Karen Bock of McCarthy Tétrault LLP. Page 7 Significant Changes to Labour and Employment Legislation

3. New Version of ESA, 2000 Poster Must Be Posted Employers are required to post in every workplace a copy of the most recent poster providing information about the ESA. The poster is published by the Minster of Labour. The Ministry of Labour has announced that it has revised the poster and replaced version 2.0 with version 3.0. The Director of Employment Standards advises that the new version of the poster:... reflects recent changes to the ESA regarding hours of work provisions and provides new contact information, including a reference to ServiceOntario Centres as part of the Ministry's distribution network. Version 3.0 of the poster also has a special message aimed at young workers, directing them to the new Ministry of Labour website section dedicated to their needs. Employers were required to post Version 3.0 after June 9, 2006. Employment standards officers may use the full range of enforcement measures to ensure that employers are complying with the requirement to post Version 3.0. The poster is available on the Ministry of Labour s website at http://www.labour.gov.on.ca/english/es/poster.html. Page 8 Significant Changes to Labour and Employment Legislation

4. The End of Mandatory Retirement 15 On December 12, 2005, the Ending Mandatory Retirement Statute Law Amendment Act, 2005 received Royal Assent (the New Act ). The New Act amends various pieces of legislation, most notably the Ontario Human Rights Code (the Code ), which currently permits the mandatory retirement of employees beyond age 65. Ontario employers should be aware of the new legislation and of its potential ramifications on their mandatory retirement policies. The Old Law The Code prohibits discrimination due to age. Section 5(1) of the Code calls for equal treatment in regards to employment. Age was defined for the purpose of section 5(1) as eighteen years or more but is less than sixtyfive years. Thus, employers were able to establish obligatory retirement policies without breaching the Code. The New Law Effective December 12, 2006, the definition of age in the Code will be amended to read an age that is eighteen years or more. Consequently, the Code will prevent employers from forcing employees to retire merely because they are 65 or older. This amendment is not retroactive, therefore employers will not be required to rehire employees who were required to retire because they turned 65 prior to December 12, 2006. Bona Fide Occupational Requirements Mandatory retirement policies at age 65 could still be enforced if employers are able to demonstrate that being less than 65 is a bona fide occupational requirement ( BFOR ). A BFOR is an employment requirement or qualification that is required as a result of the character of the employment. Currently, the BFOR exemption is used in Ontario to justify mandatory retirement policies in certain cases for those under 65, such as firefighters. Employers will retain the ability to utilize this exemption under the new legislation. In order to establish a BFOR, an employer must meet both an objective and subjective test. The Supreme Court of Canada held in Large v. Stratford (City), 16 that an employer must demonstrate that the standard relates to the capacity of such employees to perform their jobs and/or that the standard furthers genuine concerns like the health and safety of others. That being said, employers should be aware that justifying a BFOR is usually difficult outside of the policing, firefighting or aviation arenas. Benefits Plans Under the current ESA, an employee pension plan, life insurance plan or disability plan which incorporates age restrictions does not breach the right to equal treatment under the Code. The New Act does not alter an 15 This portion of the paper is based closely upon material previously prepared by Tara McPhail of McCarthy Tétrault LLP. 16 Large v. Stratford (City), [1995] 3 S.C.R. 733 Page 9 Significant Changes to Labour and Employment Legislation

employer s ability to continue the operation of plans which define age as 18 years of age or more and less than 65 years so long as such differentiations are made on an actuarial basis. 17 (a) Pension Plans The New Act does not propose any amendments to the Ontario Pensions Benefits Act (the PBA ). Presently the PBA assists those employees who wish to work beyond the age of 65 by allowing them to continue membership in their pension plan and to continue accruing benefits beyond age 65, subject to any service or contribution caps as established by the employer. 18 The New Act does not propose any changes in this regard. Similarly, the New Act does not affect Ontarians eligibility to receive Canada Pension Plan ( CPP ) benefits at age 65. As is the case with Old Age Security and the Guaranteed Income Supplement, CPP is administered by the federal government and is not impacted by the New Act. (i) Defined Benefit Pension Plans The New Act does not alter an employer s right to use age on an actuarial basis under a defined benefit plan ( DB Plan ). However, once the New Act is in force, employees will be entitled to continue working beyond their 65 th birthday and the normal retirement age under the pension plan. Employees could therefore continue as a member in the DB Plan and would continue to accumulate pension credits under the DB Plan. However, for a significant number of employees participating in a DB Plan, working beyond their 65 th birthday and the normal retirement date in the DB Plan will not enhance the amount of their pension payments as their claim to an unreduced pension would likely be the same whether the employee retired at age 65 or older. As a result, there is a deterrent for many employees to continue working beyond age 65 under a DB Plan, as the New Act does not amend the PBA by calling for the revalorization of an employee s pension if the employee works beyond age 65. As a result, employees under a DB plan may simply choose to exit the workforce at age 65. Moreover, the federal Income Tax Act (the ITA ) does not allow an employee to simultaneously draw a pension and continue accruing a pension. The ITA obliges registered pension plan members to begin receiving pension benefits by age 69 with the result that employees aged 69 and older are unable to accumulate further pension benefits. It may be arguable that the duty to treat all employees fairly may compel payment to employees who continue working over the age of 69, of a comparable benefit outside of the pension plan. (ii) Defined Contribution Pension Plans Section 4 of the ESA Benefit Plans Regulation allows an employer to differentiate on an actuarial basis as a result of an employee s age for the purpose of payments by an employer and an employee to a pension plan. It is not evident, however, that this section applies to Defined Contribution plans ( DC Plans ) or that all DC Plans 17 O.Reg. 286/01, ss. 4, 7 and 8. 18 Pension Benefits Act, R.S.O. 1990, c. P.8, s. 35(1), (4). Page 10 Significant Changes to Labour and Employment Legislation

differentiate on an actuarial basis due to age. Employers should re-evaluate their DC Plans in order to determine the effect of ending mandatory retirement. It is possible that an employer may be required to allow an employee who works beyond age 65 to continue participating in the DC Plan. (b) Other Employee Benefits Sections 7 and 8 of the ESA Benefit Plans Regulation allow for actuarial differences based on age with regards to benefits or contributions under a life insurance plan and short or long-term disability benefit plan. Since the New Act will not amend this regulation, employers should theoretically be permitted to continue differentiating based on age. However, it is not evident that all life insurance plans and/or disability insurance plans presently make a differentiation on an actuarial basis for these purposes. While in the past, the presence of mandatory retirement corrected any failure to make such a differentiation, the abolishment of forced retirement means that employers should review their life insurance and disability policies to confirm whether they pose an issue. The government s stated intention is to maintain the status quo with respect to disability plans, life insurance plans and health benefit plans. The government has specifically stated: The provision of benefits to workers aged 65 and older will continue to be at the employer s discretion. 19 Much of the commentary that we have seen on the new Act supports the view that the new Act does not require employers to extend benefits to employees who choose not to retire at age 65. Nonetheless, the matter is not entirely free from doubt. If the government s position (as adopted by an employer) is challenged, an adjudicator may conclude the legislative scheme no longer permits employers to differentiate in respect of eligibility to participate in benefit plans between employees less than age 65 and those who are older. It could possibly be argued that the legal ability to restrict benefit eligibility to employees less than age 65 was based on the definition of age in the Code and that neither the Code, nor the ESA explicitly permits such differentiation. Thus, if the ESA Benefit Plans Regulation, if read as allowing differentiation once an employee has reached age 65, could potentially be found to be unlawful as being contrary to the Code. It would follow, if such an argument were upheld by a court or tribunal, that the change in the definition of age in the Code removes an employer s ability to restrict benefit participation to those less than age 65 or to charge differentiated premiums. The counter argument to this is that the Code, as amended by the New Act, states that an employee benefit, pension, superannuation or group insurance plan or fund that complies with the ESA and the ESA Benefit Plans Regulation thereunder does not infringe the right under section 5 to equal treatment with respect to employment without discrimination because of age. In turn, the ESA and the ESA Benefit Plans Regulation only prohibit a differentiation because of age where the age is 18 years or more and less than 65 years (with prescribed exceptions). Therefore, a benefit plan that differentiates between employees less than 65 years and employees 65 years of age and older does not infringe the Code. 19 See December 8, 2006 publication, FAQ: Mandatory Retirement. Page 11 Significant Changes to Labour and Employment Legislation

We believe the latter argument is the stronger one, especially given the government s pronouncements. On this basis we recommend that employers adopt the position that the New Act does not change the status quo regarding the employee benefit entitlement based on age, subject to obligations found in collective agreements. This would mean that employers do have discretion whether to provide benefits to employees above age 65, or whether to charge higher premiums to such employees. However, because this legal analysis is not free from doubt, we further recommend that employers monitor the law in this area as it develops, and assess the strength of maintaining this position as the case law emerges. Collective Agreement Provisions Mandatory retirement provisions in collective agreements will not be enforceable after December 12, 2006. However, collective agreements may contain provisions dealing with early retirement incentives in order to promote voluntary departures from the workforce. Employers must carefully review all applicable collective agreements to ensure their conformity with the new Act. As noted above, even if the legislative scheme does not require employers to provide benefits to employees who choose to work beyond age 65, employers must also consider whether they have an obligation to do so under their collective agreements. An employee covered by the collective agreement could readily argue that he or she has the same entitlement to benefits regardless of whether he is over 65 years of age or not, where the benefit plan contains no such differentiation. The new landscape for terminating older workers 20 One of the primary benefits of mandatory retirement in Ontario was the degree of certainty it afforded employers. It was not uncommon for an employer to retain a poorly performing employee nearing age 65 knowing that the employee would soon be forced to retire. Employers were not required to provide such an employee with common law reasonable notice of termination, or pay in lieu thereof. Under the new legislation, however, employers who choose to terminate older employees who do not elect retirement at age 65 will be required to either terminate for cause or provide such employees with notice or pay in lieu of notice. Employers may also be required to issue severance pay to employees who, upon having their employment severed, do not receive an actuarially unreduced pension benefit. Clearly, the prospect of having to terminate older workers may be a costly one for employers. The provision of common law notice will become more expensive both because age is a factor entitling older employees to greater periods of common law notice and because older employees are likely to have accumulated longer periods of 20 Please note that much of the material on the application of the new legislation to benefit plans was derived from an article written by my colleagues, Robb A. Macpherson and Karen Bock. Please see Robb A. Macpherson and Karen Bock, The End of Mandatory Retirement in Ontario? (Paper presented to the McCarthy Tétrault LLP External CLE Conference, Toronto, October 2005) Page 12 Significant Changes to Labour and Employment Legislation

service. Older employees with significant seniority are also likely receiving higher salaries than their younger counterparts, again augmenting termination and severance costs. There is, unfortunately, very little case law concerning the appropriate notice period entitlements of older employees. As noted by McShane and McPhillips, it is clear that age is a key factor in the calculation of reasonable notice, with the length of notice increasing by more than one month for every 10 years of age. 21 In Cohen v. Edwards, 22 an administrative assistant who had worked for a doctor for 20 years was dismissed at age 64. The trial judge awarded the plaintiff damages equivalent to 18 months notice. On appeal, the defendant claimed that the notice period should have ended when the plaintiff reached age 65 on the basis that most people retire at that age. The notice period as awarded by the trial judge was upheld, however, on the basis of the plaintiff s age, length of service, low level of education and lack of marketable skills. The Court noted that not everyone retires at age 65 and the fact that the plaintiff did not re-enter the workforce was not necessarily an indication that she planned to retire. The length of notice awarded in Cohen appears consistent with other case law involving older employees with significant service. In Jones v. CAE Industries Ltd., 23 a 62-year-old general manager with 18 years service was granted 22 months notice while in Turner v. Canadian Admiral Corp., 24 a 54-year-old accountant was awarded 21 months notice. In another case the court awarded an extended notice period when an elderly plaintiff with reasonable expectations of working beyond age 65 was unable to do so upon dismissal. 25 Importantly, even where the employee s length of service cannot be considered long-term, the employee s age will likely suffice to extend what would otherwise constitute reasonable notice. In Perrett v. Harrison Galleries, for example, an eight-month notice period for a 67-year-old employee was expressly extended to 11 months because of the employee s age. 26 With the impending labour shortage and the resulting need for elderly workers to remain in the workforce, courts may find that the plight of elderly workers has improved such that it is no longer necessary, or indeed desirable, to increase notice entitlements because of age. Other commentators have rejected this view, noting that some courts view age as an element of seniority with its own moral force necessitating its continued recognition as an important factor in the fashioning of notice entitlements. 27 Whatever happens in the long term, it is clear that with the passage of the New Act the termination of older workers will become a more expensive proposition. Will Wallace damages be awarded where age was a motivating factor for the termination? Employers will have to be cautious when terminating older workers so as to avoid any allegation that the decision to terminate was predicated upon age. Such an allegation could result in a finding that the dismissal was conducted in a bad faith or unfair manner. 21 S. McShane and D. McPhillips, Predicting Reasonable Notice from Canadian Wrongful Dismissal Cases (1987), 41 Ind. & Lab. Rev. 108, at 115. 22 Cohen v. Edwards, [2000] O.J. No. 2380 (Ont. Sup. Ct.) 23 Jones v. CAE Industries Ltd. (1991), 40 C.C.E.L. 236 (Ont. Ct. (Gen. Div.) 24 Turner v. Canadian Admiral Corp. (1980), 1 C.C.E.L. 130 (Ont. H.C.J.) 25 Moran v. Atlantic Co-Operative Publishers (1988), 23 C.C.E.L. 205 26 Perrett v. Harrison Galleries (2001), 18 C.C.E.L. (3d) 140 (B.C.S.C.) 27 Geoffrey England, Roderick Wood and Innis Christie, Employment Law in Canada, 4 th ed. (Toronto: LexisNexis, 2005) at 14.169. Page 13 Significant Changes to Labour and Employment Legislation

In its 1997 decision in Wallace v. United Grain Growers Ltd., 28 the Supreme Court of Canada held that if an employer handles a dismissal in a bad faith or prejudicial fashion, the reasonable notice period may be prolonged even if the employee s ability to conduct a job search has not been hampered by the employer s action. The more problematic the employer s conduct, the greater the extension of the reasonable notice period. Wallace damages have been awarded where an employee was dismissed because of his or her age. Not surprisingly, such terminations are considered particularly demeaning to an individual s personal dignity. In Galbraith v. Acres International Ltd. and Acres Inc., 29 the reasonable notice period was prolonged by three months when a 54-yearold employee was constructively dismissed after his duties were redirected to fresh young members. Best practice mandates that employers should be vigilant in documenting processes involving all employees, not simply older workers, in order to ensure that all employees and potential employees are treated equally and that there is no basis for a claim of discrimination on the basis of age. As seen, a successful claim of discrimination because of age resulting in termination may significantly increase an employer s obligations with regards to reasonable notice. The duty to accommodate age-related limitations and restrictions Employers must also be careful when evaluating the performance of older employees. An older employee may assert that the duty to accommodate requires the employer to adjust or lower performance standards based on the employee s age. There is at present a vacuum of case law on this particular point. However, with the end of mandatory retirement, employers must be vigilant to the possibility of age-related requests for accommodation. These requests may relate not only to the employee s own performance but to the need for time away from the workplace in order to care for an ill spouse. In anticipation of such demands, the duty to accommodate requires that the employer fashion a workplace that is inclusive of older workers. To achieve this objective, employers should consider the introduction of flexible work arrangements that both assist workers suffering a downturn in capacity and also facilitate the transition into retirement. Employers may wish to utilize measures like compressed work weeks, flex-time and tele-working (working from home), part-time arrangements, job sharing, and employing workers who have elected to retire on a short-term basis. In addition to overall structural changes, the Commission states that the duty to accommodate older workers will also require individual assessment and accommodation measures. These measures may, for example, be required where an elderly worker finds a physically intense task challenging, necessitating that the employer assign the task to another worker. 30 In short, employers are wise to continually assess employee capacities and re-deploy changing skills. 28 Wallace v. United Grain Growers Ltd., [1997] S.C.J. No. 94 29 Galbraith v. Acres International Ltd. and Acres Inc., [2001] O.J. No. 1036, aff d [2002] O.J. No. 3606 30 Ontario Human Rights Commission, Policy on Discrimination Against Older Persons Because of Age, (July 2006). Page 14 Significant Changes to Labour and Employment Legislation

Alternatives to Mandatory Retirement As mentioned, employers may wish to institute phased retirement programs premised on flexible work hours and part time arrangements. Such programs have the advantage of allowing those employees who wish to retire to do so with dignity, while providing continued employment to workers who prefer to remain on the payroll. Employers may also wish to consider creating employment opportunities for retired workers, such as occasional work in training other staff or through participation in the employer s charitable and/or marketing activities. Voluntary early retirement packages can also be used as an tool with which to encourage voluntary exit from the workforce. Employers must be careful, however, in an effort to avoid any age-based complaints of discrimination, to avoid pressuring employees to accept such packages and particularly, to refrain from associating early retirement offers with job loss. By avoiding these basic pitfalls the employer can avoid human rights concerns in regards to early retirement initiatives. Steps employers should be taking now Employers should review all company policies and related documents and delete or amend mandatory retirement requirements as necessary. They should also assess whether any job positions exist for which being less than 65 is a BFOR. Group insurance providers should also be contacted in order to confirm how the provider believes the employer s insurance policies will be affected by the New Act and to determine the cost of group insurance benefits when the New Act comes into force. Employers may also wish to seek competitive bids on group insurance benefit plans that would provide benefits to employees over the age of 65 and determine what other kinds of benefits would be appropriate for the enlarged employee population. One might also consider adding language to the benefit plan that would allow the company to modify its benefit plans from time to time. Employers must also contact bargaining agents to have mandatory retirement policies in collective agreements deleted or amended as necessary, as the New Act makes no exceptions for current mandatory retirement language within collective agreements. Collective agreements should be reviewed to determine whether they require the company to continue employee benefits for employees who work beyond age 65, despite the exemptions in the New Act, the Code and the ESA. Likewise, executive employment contracts should be reviewed to determine whether the company will have greater obligations under supplementary employee retirement plans and retirement compensation arrangements. Employers should also consider strategies to manage the risk of civil suits from employees over the age of 65 who suffer occupational injuries. Page 15 Significant Changes to Labour and Employment Legislation

Conclusion Employers need to begin preparing now as the New Act will be in force on December 12, 2006. All policies, practices, company resources, third party arrangements and the overall work environment should be carefully assessed in order to ensure compliance with the new legislation. Importantly, however, employers should keep in mind that the evidence from jurisdictions without mandatory retirement indicates that the vast majority of employees continue to retire by age 65, and often earlier. Employers may indeed find, despite the required preparation, that the workforce does not change significantly following enactment of the new legislation. Page 16 Significant Changes to Labour and Employment Legislation

VANCOUVER P.O. Box 10424, Pacific Centre Suite 1300, 777 Dunsmuir Street Vancouver BC V7Y 1K2 Tel: 604-643-7100 Fax: 604-643-7900 CALGARY Suite 3300, 421-7th Avenue SW Calgary AB T2P 4K9 Tel: 403-260-3500 Fax: 403-260-3501 LONDON Suite 2000, One London Place 255 Queens Avenue London ON N6A 5R8 Tel: 519-660-3587 Fax: 519-660-3599 TORONTO Box 48, Suite 4700 Toronto Dominion Bank Tower Toronto ON M5K 1E6 Tel: 416-362-1812 Fax: 416-868-0673 OTTAWA The Chambers Suite 1400, 40 Elgin Street Ottawa ON K1P 5K6 Tel: 613-238-2000 Fax: 613-563-9386 MONTRÉAL Suite 2500 1000 De La Gauchetière Street West Montréal, QC H3B 0A2 Tel: 514-397-4100 Fax: 514-875-6246 QUÉBEC Le Complexe St-Amable 1150, rue de Claire-Fontaine, 7 e étage Québec QC G1R 5G4 Tel: 418-521-3000 Fax: 418-521-3099 UNITED KINGDOM & EUROPE 5 Old Bailey, 2nd Floor London, England EC4M 7BA Tel: 44-20 7489-5700 Fax: 44-20 7489-5777 Every effort has been made to ensure the accuracy of this publication, but the comments are necessarily of a general nature, are for information purposes only and do not constitute legal advice in any matter whatsoever. Clients are urged to seek specific advice on matters of concern and not rely solely on the text of this publication.

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The Relationship Begins: Hiring Pitfalls Dean T. Palmer, Lorenzo Lisi and Kate McNeill October 27, 2006 McCarthy Tétrault LLP Box 48, Suite 4700 Toronto Dominion Bank Tower Toronto, ON M5K 1E6 www.mccarthy.ca

The Relationship Begins: Hiring Pitfalls Introduction You seem perfect for one another. But have you asked the right questions? Have you said too much? The pre-employment process is one of the most critical points in an employment relationship and is often overlooked by employers to their detriment. This paper outlines the eight most important things to consider in order to ensure that a potentially lasting relationship gets off on the right foot. Stage One Attracting The Right People Consideration #1 Job Postings and Advertising Today s employment marketplace is a competitive one in which employers and job applicants alike are vying for the next best opportunity. Whether it be a highly trained individual or someone with unique skills, employers are constantly competing to ensure that they have the best people available to meet their needs. In order to seek out such individuals, some employers have become very creative in the manner in which they advertise both themselves and the job opportunities that are available. While creativity is encouraged, it is important that employers keep in mind that there are limits that must be respected. The Ontario Human Rights Code (the Code ) aims to prevent discrimination and harassment on prohibited grounds such as race, ancestry, place of origin, colour, ethnic origin, citizenship, creed, sex, sexual orientation, age, marital status, family status or handicap. The Code applies directly to the employment experience and must be a key consideration in all stages of the pre-employment hiring process. With respect to the advertising of employment opportunities, s. 23(1) of the Code reads as follows: The right under section 5 to equal treatment with respect to employment is infringed where an invitation to apply for employment or an advertisement in connection with employment is published or displayed that directly or indirectly classifies or indicates qualifications by a prohibited ground of discrimination. As such, when drafting a job ad, employers must be careful not to directly or indirectly ask about any of the prohibited grounds listed above. While they may seem innocent, some qualifications contained in an advertisement can unfairly prevent or discourage people from applying for a job because of a perception that they are not welcome based on their race, gender, etc For example, the Ontario Human Rights Commission has indicated that even advertising that a job requires Canadian work experience may create a discriminatory barrier to employment. Page 1 The Relationship Begins: Hiring Pitfalls

Further, requirements or duties of employment as described in an ad should be reasonable, genuine and directly related to the job. For example, it is reasonable and job-related to require that a receptionist speak clearly in English, but it is not acceptable to require un-accented English. Finally, when creating a job posting or advertisement, employers must ensure that they are not inserting any sort of misrepresentation into the ad itself. As will be discussed in greater detail below, an employment relationship which is based on false promises and misrepresentations of any sort is bound to end unhappily and with potential legal exposure for the employer. It is important therefore that all job postings or advertisements be carefully reviewed prior to their release. Consideration #2 Recruiting One of the most popular recruiting tools used by employers today are head hunters. These employment agencies or search firms are a great way to reduce the employer s initial responsibilities when seeking new employees. However it is critical to remember that their use does not remove an employer s potential liability for who and how it hires. As a head hunter is technically an agent of the employer, the potential liability associated with improper pre-employment processes remains with the employer. In order to reduce the risk of liability, an employer should keep in mind the following guidelines when choosing to use the services of a head hunter: Get the facts - Make sure that the agency provides details of the manner in which it sources potential candidates. Ensure that the agency s recruiting policies and practices are not in violation of the Ontario Human Rights Code They are an extension of your company and their practices should reflect positively on you. Further, any violation of the Code by your agent is a violation by you. Make sure that the agency is informed Ensuring that the agency is provided with accurate and complete details of the job that is being offered means that you stand a better chance of finding well-suited candidates. Make sure that no misleading information is provided It is your responsibility to ensure that the agency understands that no misleading information concerning the job being offered or the company itself is to be provided to any potential candidates. Do not allow a breach of an existing employment contract - The agency must not engage in conduct that would result in a breach of any contracts of employment between the potential candidates and their current employer. Get informed regarding an applicant s choice to leave secure employment As an employer, it is in your best interest to make sure that the agency knows that if they are inducing or enticing an employee away Page 2 The Relationship Begins: Hiring Pitfalls

from secure employment, that they must inform you, the employer, of this fact. Inducement away from long term employment is one of the key hot spots in recruiting, and can often add significant expense in any future termination decision. Stage Two Making Sure That You Get The Right Person Consideration # 3 Creating the Job Application The job application is the employer s first opportunity to obtain information concerning prospective candidates. While the temptation to be as comprehensive as possible in the questions asked is great, it is critical to ensure that you balance your desire for information with your legal obligations. In keeping with the fundamental premise of protecting individuals from discrimination on prohibited grounds, the Ontario Human Rights Code imposes strict constraints on what employers are permitted to communicate or obtain in a job application. The Code states the following at s. 23(2): The right under section 5 to equal treatment with respect to employment is infringed where a form of application for employment is used or a written or oral inquiry is made of an applicant that directly or indirectly classifies or indicates qualifications by a prohibited ground of discrimination. On an employment application form, questions which inquire as to the following grounds of discrimination, either directly or indirectly, are expressly prohibited: race, gender, religion and/or creed, national or ethnic origin and/or ancestry, disability, sexual orientation, marital status, family status, and same-sex partnership status It should be noted that while direct questions pertaining to national or ethnic origin are prohibited, an employer can inquire as to whether the applicant is eligible to work in Canada. Also, while questions relating age or date of birth are prohibited, an employer can inquire as to whether the applicant is 18 years of age or older. Further, with respect to criminal records and convictions, while it is not permissible to ask whether an applicant has ever been convicted of any offence generally, an employer may ask whether they have ever been convicted of a criminal offence for which a pardon has not been granted. Finally, if information relating to convictions is necessary because of the nature of the job, a further inquiry may be appropriate. For example, if the job involves driving a truck, it is reasonable for the employer to ask whether the applicant has been convicted of any offences under the Provincial Highway Traffic Act. Questions that can be asked in the context of an employment application: What is your name, address and telephone number? Are you legally able to work in Canada? Page 3 The Relationship Begins: Hiring Pitfalls

Are you 18 years or older? What is your employment history? (It is permissible to ask for full details.) What is the highest level of education you have completed? Are you available for shift work? If not, what accommodations would you require? Have you ever been convicted of an offence under the Criminal Code which has not been pardoned? We require our employees to be bonded will this be a problem for you for any reason? Questions that cannot be asked in the context of an employment application: Do you have any disabilities? What is your nationality? What is your social insurance number? (This might contain information about a person s citizenship status or place of origin.) Which primary and secondary schools did you attend and why? (This could elicit identification of religious observance.) Are you married? Are you pregnant? If not, do you intend to have children in the near future? What is your religion? Do you have any memberships in clubs or other organizations? Consideration # 4 Conducting the Interview The job interview is key because it is an informative process. It is the employer s opportunity to assess whether the applicant brings the required skills to the job as well as the applicant s opportunity to gage whether this would be a workplace which they would be interested in joining. There are a number of problems that can arise in the context of an interview as it is an inherently subjective exercise where first impressions can sometimes cloud the otherwise better judgment of the participants. In order to ensure that the experience is positive and productive for both the employer and the applicant, there are a few things that should be kept in mind. Page 4 The Relationship Begins: Hiring Pitfalls

As with the job application, the job interview process is subject to the provisions of the Ontario Human Rights Code. The Ontario Human Rights Commission has indicated that at the interview stage of the employment process, the employer may expand the scope of job-related questions if it is necessary to determine, for example, the applicant s qualifications or their ability to perform the essential duties of the position being offered. That being said, the following caveats should be considered. With respect to race, ancestry, ethnic origin, place of birth and gender, questions are generally not permissible. However, some employers who provide special services may be permitted to ask questions where specific answers to those questions may be useful and necessary for the job. Questions concerning religion or creed are generally prohibited, however it may be permissible to deal with accommodation issues regarding an individual s religious observance. For example, a retail store may need to deal with the issue of whether an applicant s observance of the Sabbath will impact on their ability to work the hours required. Questions concerning disabilities during an interview will be permitted only to the extent necessary to establish whether an individual is capable of performing the duties of the job. If he or she is not, an employer must determine whether any accommodation could be made to allow the applicant to perform the essential duties of the job. Questions concerning an applicant s citizenship cannot be asked in most cases, and should be limited to whether the applicant is legally entitled to work in Canada. However, for some jobs, such as senior executives, further questioning about the applicant s citizenship may be appropriate as there may be restrictions on the applicant s ability to assume the position as an officer of the corporation based on provincial or federal corporate legislation. As with employment applications, if the job requires an employee to be bonded, it is certainly appropriate to ask questions to ensure that the applicant may be bonded. Questions that concern marital and family status or age are inappropriate and should be avoided. Employers should be aware that even by asking seemingly innocent questions on these subjects, they can be giving the applicant the impression that these are issues of concern to the employer. It may be appropriate for the employer to inquire into an applicant s marital and family status if the employer serves a particular group identified by marital status, such as single women. In order to ensure that a job interview process is efficient, appropriate and legally compliant, an employer should keep the following tips in mind: Establish objective criteria to govern the hiring decision A job interview is a dynamic environment and it is not only helpful to the interviewer, but a legally sound practice, to develop a uniform set of questions to be asked of every applicant. This ensures fairness and lends objectivity and credibility to an otherwise subjective endeavour. Page 5 The Relationship Begins: Hiring Pitfalls

Interview in pairs - Sharing the task of interviewing can be beneficial because you have two sets of eyes and ears to assess the candidate more objectively. Having two interviewers can also provide verification of what was said during the interview. It also increases the applicant s perception of fairness and assists in a defence to discrimination complaints should they arise. Invest in training interviewers Having interviewers who are familiar with techniques to elicit useful and appropriate information from candidates is invaluable. Not only will it put the applicant at ease and impress them with the competence and organization of your company, but having someone conduct the interview who is able to read and assess non-verbal communication and other nuances relating to how a candidate answers questions can provide insight into whether this candidate is the best person for the job. Select interviewers who are acquainted with the job requirements - The interview process is really a mutual one during which you not only assess whether the candidate is the best person for the job, but the candidate also assesses whether your workplace is the best place for them. It is helpful if there is someone knowledgeable about the requirements of the job who is available to answer a candidate s questions. Vet questions in advance of the interview Ensuring that your interview complies with the Ontario Human Rights Code is critical to ensure a successful and legally sound process. It is also important to ensure that the interviewers understand what they can and cannot ask during the course of the interview, and that they should avoid straying from the pre-approved script whenever possible. Take detailed notes of the interview - A written record of what was said may help differentiate candidates from one another, allow other people who were not present during the interview to provide input about who the best candidate is, and provide protection against allegations of unfair dealings. Consideration # 5 Conducting Reference & Background Checks Often employers do not go the extra step to confirm their initial impressions of a candidate, choosing instead to trust their intuition and the applicant. While in many cases this is successful, in others failing to follow up can lead to adverse consequences. Reference and background checks are a good way of ensuring that you have the right person for the job. Conducting a reference check is a relatively simple and productive way of confirming your impressions of a candidate with someone who has already worked with them. While the reference s opinion may not impact on your decision in the end, it will provide an added perspective that may warrant consideration. There is no legal obligation on an employer to conduct a reference check nor is there an automatic risk of legal liability for failure to check references. However, where the nature of the job offered is such that the employee could cause harm to a third party (such as bouncers, lifeguards or security guards), and where the employer Page 6 The Relationship Begins: Hiring Pitfalls

requests references, the employer may face liability if the references go unchecked and damage is suffered as a result. In 1991, an Ontario Court in Downey v. 502377 Ontario Ltd. held a tavern, as well as its management, liable for $2 million for not properly checking the references and potential criminal background of two of the bouncers that they employed. The two bouncers viciously beat a customer in the parking lot of the establishment, causing him permanent brain damage and rendering him unable to manage his own affairs. The Court noted that although the employer had made an effort to contact one reference, they had not followed through in an appropriate or sufficient manner. The Court held that had the employer properly checked the references, they would have known that the two bouncers posed a threat of violence or danger to patrons on their premises. The threat of liability as established in Downey was reiterated by the Supreme Court of Canada in 1999 when it held in Jacobi v. Griffiths that direct liability can be imposed on an employer who is negligent in hiring or supervising an employee who causes damage to another. Choosing to conduct reference or background checks, while often recommended, is not always a straight-forward decision. In many cases, the nature of the job available will dictate whether such checks are necessary, either because it is explicitly required by a particular piece of legislation or rules of a self-governing profession, or because the job carries a risk of harm to third parties. In other cases, it may simply depend on the preferences of the employer and their policies and practices. Either way, if you do choose to engage in background or reference checks, there are a few critical points to keep in mind: Always follow through - If you make a practice of asking for references, regardless of the nature of the job offered, it is in the best interests of all parties to always follow through with reference checks failure to do so brings an increased risk of liability if any harm occurs. Ensure that you are not in violation of the Ontario Human Rights Code - If you decide to require a comprehensive background check (i.e. criminal record checks, credit checks or attendance record checks), you must comply with the Code. Employers are restricted from basing employment decisions on certain prohibited grounds and these grounds may be disclosed in the context of a background check. Ensure that you are meeting all require notice and consent requirements - When obtaining a comprehensive background check, always remember to comply with the various notice and consent requirements. Legislation such as the Ontario Consumer Reporting Act requires that a candidate be informed of the background check prior to it being conducted and that such notice be displayed in a particular font with explicit wording. Be careful in making an offer - If you intend on conducting a background check after making an offer of employment, be sure that the offer is clearly conditional upon your obtaining a satisfactory background check. This practice will help to lessen the risk of breaching the Ontario Human Rights Code. Page 7 The Relationship Begins: Hiring Pitfalls

Stage Three Closing The Deal Consideration # 6 Conveying your Interest to the Applicant So you have found your ideal candidate and would like to be able to convey to them your interest. While this might seem like a straight-forward exercise, there are a number of issues to consider before communicating your intentions to the applicant. As was mentioned earlier, one of the most important things for an employer to avoid in the context of the hiring process are false promises and misrepresentations. There is a wealth of case law dealing with the concept of wrongful hiring. These cases often involve interviewers making inaccurate claims about a job in the course of heightening a potential employee s interest in the job. If the inaccurate claims result in the potential employee taking the job, the employer may have exposed itself to significant liability. In 1993, the Supreme Court of Canada in Queen v. Cognos Inc. held that an interviewer has a duty to take reasonable care to avoid making false or misleading statements to potential employees. If employers make such statements, they may be liable for negligent misrepresentation. In Cognos, the employer misrepresented the security of the job being offered and the nature of the position that the employee would have. Based on the employer s representations, the applicant accepted the offer of employment. Although the contract of employment between the parties contained a disclaimer which allowed the company to dismiss him on minimal notice, the company was nonetheless found liable for making false promises and was required to pay damages to the employee for lost income, the loss suffered on the purchase and sale of his new home, emotional stress, and the cost and expenses incurred in finding a new job. According to the Court in Cognos, the following five factors are necessary in order the establish negligent misrepresentation : (i) there must be a special relationship between the person making the representation and the job applicant sufficient to give rise to a duty of care; (ii) the representation must be untrue, inaccurate or misleading; (iii) the person making the representation must have been negligent; (iv) the job applicant must have relied on the misrepresentation in deciding to accept employment; and (v) the reliance must have caused the job applicant to suffer a loss. Accordingly, an employer is under a duty of care during the pre-employment interview to exercise reasonable care and diligence in making representations regarding the employment opportunity being offered. Prudent employers will not make over-reaching promises at the interview stage. If there are aspects of the employment position being offered which the employer is not certain about or which are subject to change or approval, the employer should Page 8 The Relationship Begins: Hiring Pitfalls

be candid with the job applicant about such circumstances. Further, it should be noted that although some written contracts of employment incorporate a term that requires the employee to waive any right to assert a claim based on any pre-contractual representations, negligent or otherwise, made by the employer, such provisions do not provide a guarantee against liability for negligent misrepresentation. The other key consideration when conveying your interest in hiring an applicant is the concept of enticement. Employers who recruit an employee from another employer may face added liabilities if they dismiss that employee without cause in the future. This increased risk of liability generally stems from the fact that individuals who are enticed away from one job to another may be sacrificing the security of their existing employment as well as giving up their seniority, benefits and a chance of advancement. In order to ensure that any communication of interest is above-board, the employer should keep the following tips in mind: Ensure that the individuals communicating with the applicant are consistent, truthful, candid and accurate in their comments This might require a written job description or in essence a script for them to rely on in order to ensure that they do not misrepresent the position that is available or the terms on which employment is being offered. Ensure that all communications made to the applicant are documented and reviewed This may help to ensure that if such representations are relied upon at a later date by the applicant, that the employer is prepared for them and has made provisions to ensure that they are met. Be sure to understand the applicant s situation - If a certain communication by the employer ends up enticing the employee away from secure employment, it is beneficial to know about this up front, rather than to be surprised by it at a later date. Consideration # 7 Making the Offer The offer of employment represents an employer s intention to be bound to a relationship with a candidate. It establishes the parameters by which that relationship will be governed and is the employer s first and often only chance to secure the employment relationship. As such, this critical step must be carefully thought out, controlled and well executed. Otherwise, an employer may find itself in a situation where an offer has been made and accepted, thus forming a contract of employment, before all of the intended elements of that contract have been established. The most important thing to keep in mind at this stage is that whatever conditions or promises the employer wants to be able to rely on in the future must be a part of the employment offer when it is first made. Further, any terms that an employer does not want to be bound to must be avoided at this stage. In order to ensure that this process goes smoothly and that both the employer and candidate are on the same page as to what the proposed employment relationship will look like, an offer of employment should be: Page 9 The Relationship Begins: Hiring Pitfalls

in writing offers made orally are difficult to confirm at a later date and make future conflicts troublesome to resolve. clear, concise, and tailored to the position being offered there should be no potential for misunderstanding as a result of poor drafting or undue length. accurate misrepresentations to a candidate at any point during the pre-employment process can be fatal to the employment relationship. reviewed and finalized by all appropriate personnel, including Human Resources and any relevant members of the management team if a party is going to be bound to the terms of the offer at a later date, they should have an opportunity to vet those terms at this stage. explained, understood and agreed to before acceptance it is in no one s best interests to communicate poorly at this or any other stage. Consideration # 8 Executing the Employment Contract It seems that you have found the perfect match you are keen to have the applicant join your team and they are willing to sign on. The last, but definitely not least, step in the pre-employment process is finalizing your agreement and executing the employment contract. While this might seem like little more than a formality, it is critical that this step be dealt with in the proper manner. One of the most common problems that occurs in the context of a new hire is caused by the so-called welcome aboard letter. Quite often employers offer the candidate employment without specifying the terms and conditions of that employment. Then, when the employee reports for his first day of work, he is given the details of his employment. By that point however, the employment contract may have already been formed and additional consideration may be required to make the later terms and conditions binding. Similar circumstances occurred in Francis v. Canadian Imperial Bank of Commerce where the Defendant bank sent the Plaintiff a letter offering employment which the Plaintiff accepted in writing. On reporting to work, the Plaintiff was then asked to sign numerous forms and documents including an Employment Agreement which included a provision stating that in consideration of employment by the bank, the Plaintiff agreed that his employment could be terminated upon stipulated advance notice or payment in lieu of notice. The Ontario Court of Appeal held that the employment contract was formed by the initial exchange of correspondence and that the Defendant had provided no consideration to make the terms of the Employment Agreement binding. In order to avoid this scenario, it is recommended that an employer turn their mind to papering the employment relationship at its outset. While it may seem like something that can be done upon arrival, it is worthwhile to not only establish the terms and conditions as described in the context of making the offer, but to execute a formal employment contract prior to the new employee s first day on the job. This ensures that all parties are on the Page 10 The Relationship Begins: Hiring Pitfalls

same page vis-à-vis the parameters of the job, as well as preventing any confusion upon the employee s arrival at the company. When putting together a formal employment contract, an employer must keep in mind that for any contract to be valid and binding, it must be entered into voluntarily, understanding the terms of the contract. In order to meet this requirement, employers should provide candidates with adequate time to carefully review, consider, ask questions, and if necessary, have an opportunity to obtain independent legal advice before entering into the employment contract. Finally, employers are often guilty of not having their employment agreements reviewed by legal counsel prior to execution. At the time of hiring when the parties are in agreement and on friendly terms, it may seem like an unnecessary cost to have the contract reviewed, but this can be quite costly in the end. The courts will resolve any ambiguity in interpreting an employment agreement against the author (the employer), therefore it is recommended that the agreement be reviewed by legal counsel. Legal counsel can also ensure that the employment agreement is valid and in compliance with statute and common law. Conclusion Compliance with the above recommendations will ensure that you have increased protection from a legal perspective and will provide a strong basis on which to found a long-lasting employment relationship. Attached is a checklist to assist in the process. Page 11 The Relationship Begins: Hiring Pitfalls

A Checklist For Hiring Employees Steps to Follow to Ensure a Successful Start to the Employment Relationship Job Postings and Advertising Recruiting Have I avoided the use of statements in the job posting or advertisement that violate the Ontario Human Rights Code by either directly or indirectly asking about a prohibited ground? Have I described the requirements or duties of employment in a manner that is reasonable, genuine and directly related to the job? Have I ensured that the job posting or advertisement does not contain any misrepresentation or false promise? Do I have all the details regarding how the head hunter is going to source potential candidates? Have I ensured that the head hunter s recruiting policies and practices are in compliance with the Ontario Human Rights Code? Have I provided the head hunter with an accurate and complete description of the job? Have I told the head hunter that they are to offer no misleading information about the job or the company? Have I ensured that the head hunter will not engage in conduct that would breach an existing employment contract between a candidate and their current employer? Have I told the head hunter to tell me immediately if a candidate is being enticed away from secure employment? Job Applications Have I avoided the use of questions in the job application that violate the Ontario Human Rights Code by either directly or indirectly asking about a prohibited ground? Have I appropriately tailored the questions to the job being offered? Page 12 The Relationship Begins: Hiring Pitfalls

Candidate Interviews Have I established objective criteria with which to govern the hiring decision? Have I provided these criteria to the interviewers? Have I scheduled at least two interviewers to conduct each interview? Have I ensured that the interviewers are properly trained, acquainted with the job requirements and are ready to conduct a formal interview? Have I vetted and approved all questions to be asked by the interviewers to ensure compliance with the Ontario Human Rights Code? Have I instructed the interviewers to take detailed notes throughout the interview? Reference and Background Checks Is this an appropriate position for which I should be asking for references and/or a background check? Does it involve issues of safety or potential risk. If I have asked for references, have I followed up on all references offered by the candidate? Have I ensured that I am in compliance with the Ontario Human Rights Code by not basing an employment decision on prohibited grounds via information obtained from a background check? Have I met all of the notice and consent requirements contained in the relevant legislation? If this is a position where a background check is appropriate, have I made the job offer conditional on obtaining a satisfactory background check? Conveying Interest to the Candidate Have I ensured that all individuals communicating with the candidate are consistent, truthful and accurate in their comments? Have I ensured that all communications made to the candidate are documented and submitted to me for review? Have I asked for and understood the candidate s reasons for being interested in the job being offered? Page 13 The Relationship Begins: Hiring Pitfalls

Job Offers Have I made the offer to the candidate in writing? Have I drafted the offer in a way that is clear, concise and tailored to the position being offered? Is the offer accurate and free of misrepresentations? Has the offer been reviewed and finalized by all appropriate personnel, including H.R. and any relevant members of the management team? Has the offer being explained to the candidate fully, so that the candidate understands and agrees to the offer prior to accepting it? Employment Contracts Have I ensured that all terms that I would like to be included in the contract of employment are included in the welcome aboard letter? Have I had legal counsel review the contract prior to its execution? Have I ensured that the candidate has a full and accurate understanding of the terms of the contract, and that they are entering into the contract voluntarily? Page 14 The Relationship Begins: Hiring Pitfalls

VANCOUVER P.O. Box 10424, Pacific Centre Suite 1300, 777 Dunsmuir Street Vancouver BC V7Y 1K2 Tel: 604-643-7100 Fax: 604-643-7900 CALGARY Suite 3300, 421-7th Avenue SW Calgary AB T2P 4K9 Tel: 403-260-3500 Fax: 403-260-3501 LONDON Suite 2000, One London Place 255 Queens Avenue London ON N6A 5R8 Tel: 519-660-3587 Fax: 519-660-3599 TORONTO Box 48, Suite 4700 Toronto Dominion Bank Tower Toronto ON M5K 1E6 Tel: 416-362-1812 Fax: 416-868-0673 OTTAWA The Chambers Suite 1400, 40 Elgin Street Ottawa ON K1P 5K6 Tel: 613-238-2000 Fax: 613-563-9386 MONTRÉAL Suite 2500 1000 De La Gauchetière Street West Montréal, QC H3B 0A2 Tel: 514-397-4100 Fax: 514-875-6246 QUÉBEC Le Complexe St-Amable 1150, rue de Claire-Fontaine, 7 e étage Québec QC G1R 5G4 Tel: 418-521-3000 Fax: 418-521-3099 UNITED KINGDOM & EUROPE 5 Old Bailey, 2nd Floor London, England EC4M 7BA Tel: 44-20 7489-5700 Fax: 44-20 7489-5777 Every effort has been made to ensure the accuracy of this publication, but the comments are necessarily of a general nature, are for information purposes only and do not constitute legal advice in any matter whatsoever. Clients are urged to seek specific advice on matters of concern and not rely solely on the text of this publication.

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Workplace Investigations Peter Brady, Ben Ratelband and Sarah-Jane Martin 1 October 27, 2006 McCarthy Tétrault LLP Box 48, Suite 4700 Toronto Dominion Bank Tower Toronto, ON M5K 1E6 www.mccarthy.ca 1 Student-at-Law.

Workplace Investigations INTRODUCTION 2 A wide variety of occurrences may be classified as "workplace incidents" requiring an employer to undertake some kind of investigation. Employee injuries, human rights complaints, theft, fraud and drug and alcohol abuse are just a few examples. The purpose of this paper is to provide employers with some general guidelines that will allow them to properly and appropriately investigate workplace incidents. While every aspect of workplace investigations cannot be covered here, this paper also aims to give employers some more specific tips for conducting workplace investigations in three contexts: disciplinary incidents, health and safety incidents and human rights complaints. Investigating Workplace Incidents: Preliminary Considerations The purpose of an investigation is to gather information in an organized, complete and fair manner in order to arrive at accurate findings of fact. If an investigation is performed with this purpose in mind, an employer will inevitably find itself in a better situation than if it had either turned a blind eye or proceeded in a rushed or unorganized manner. Investigating workplace incidents is not harassment. Indeed, in many circumstances, an employer has a positive duty to investigate, particularly those circumstances in which an employee alleges that another employee has engaged in conduct contrary to the Human Rights Code. 3 (1) Deal with Exigencies: The first step after any incident has occurred is to respond to the exigencies of the particular incident, not in the sense of punishing the alleged offender, but rather to bring any crisis brought about by the incident under control. 4 For example, in a situation where workplace violence has occurred, the medical and personnel needs of the victim should take immediate precedence. Further, the integrity of the workplace should be ensured; property should be protected and any effected workplace processes should be attended to. 5 2 Every effort has been made to ensure the accuracy and timeliness of this publication, but the comments are necessarily of a general nature. Clients are urged to seek specific advice on matters of concern and not rely solely on the text of this publication. 3 R.S.O. 1990, c. H.19. 4 This being said, depending on the nature of the incident, an employer may be warranted to suspend the alleged offender with pay, pending the outcome of the investigation. The suspension should not be done for punishment purposes, but rather, to protect the integrity and safety of other workers and the workplace. The best way to remove an employee from the workplace pending the outcome of an investigation is to place them on paid administrative leave. 5 N. A. Keith, Human Resources guide to Preventing Workplace Violence, (Aurora: Aurora Professional Press, 1999) at 187. Page 1 Workplace Investigations

(2) Consider the Nature of the Incident: The second step is to consider the nature of the incident. Is the incident on or off-duty? Is it criminal in nature? Are there potential human rights issues? Is the incident the subject of a specific employee complaint, and if so, what are the rights of the complainant? Beyond determining the manner in which an investigation is conducted, consideration of the nature of the incident may lead to the conclusion that the integrity of the incident scene should be preserved. The incident scene may provide the most invaluable source of evidence later on in the investigation. 6 (3) Note Legal Requirements that May Apply: The third step is to consider whether the employer is under any legal restrictions with regards to the manner in which the investigation is carried out. Any relevant legislation should be consulted. In addition, if a collective agreement is in place, it should be consulted to determine whether there are provisions that affect the investigation. For example, a collective agreement may require that an investigation be conducted prior to suspension or discharge, stipulate that investigations be conducted expeditiously, set out notice requirements, permit an employee to have the assistance of a union steward at the investigation, or require written notification of certain types of allegations. (4) Choose the Investigator(s): The final preliminary step is to identify the investigator and/or investigative team. 7 Care should be taken to ensure that the selected investigator(s) are unbiased and have the necessary expertise and authority to conduct a thorough investigation. As such, an employer may wish to seek external assistance if the investigation cannot be completed in an unbiased manner, or if some special expertise is required (such as forensic auditing experience or experience handling sexual harassment complaints). In an effort to ensure a fair and unbiased investigation, the investigator(s) should also be instructed to focus on fact-finding as opposed to fault-finding during their investigation. 8 Checklist Prior to commencing an investigation, the employer should consider the following questions: Is there a safe mechanism in place for employees to report information regarding the incident to management? What is the nature of the incident? Did the incident occur on or off-duty? Are human rights issues involved? 6 Ibid. Further, if investigating a health and safety incident, section 51(2) of the Ontario Occupational Health and Safety Act, R.S.O. 1990, c. O.1 s.51(2), stipulates that the scene of the incident cannot be disturbed until permission is given by the Ministry inspector. 7 Ibid. 8 Ibid at 186. Page 2 Workplace Investigations

Did the incident involve a threat to health and safety of the employee or other individuals? Does the incident involve a complaint by another employee who would like the company to enforce the employee s workplace rights? Is disciplinary action likely, and if so, may it involve termination of employment? Is the incident criminal in nature or does it involve allegations of a quasi-criminal nature? Choose an appropriate investigator. Consider whether external assistance is necessary. Ensure the investigator is relatively unbiased. Ensure the investigator has the requisite authority to conduct the investigation. Select an individual with suitable interpersonal skills. Ensure the investigator has the necessary training. Ideally, an investigator should be trained in investigative techniques, including fact finding, questioning, decision-making, assessing credibility, and documentation. In order to be prepared for a workplace incident, an employer would be wise to provide training in investigative techniques to those who will conduct workplace investigations well before an incident arises. If possible, the investigator should not be the individual who will be making the final decision regarding what to do about the incident. Is there is a collective agreement? If so, it is imperative to review the agreement and ensure that any relevant provisions are complied with. THE GENERAL INVESTIGATIVE PROCESS An investigation usually involves some or all of the following steps: Interviews of people who were involved in the incident or who witnessed some or all of the incident; Collection of documentary evidence, such as time cards, work records, e-mails, accounting or inventory records, invoices or sales documentation, or building access records; Collection of actual evidence, such as recovery of stolen property, taking photographs of any evidence such as stolen or damaged property, preservation of damaged or vandalized items; "Creation" of evidence by means such as video surveillance; and Production of an incident report. If the purpose of the report is to defend against existing or anticipated litigation, its creation should only be undertaken at the behest of legal advice, so as to invoke privilege. Further, the confidentiality and intended use of the report should be made clear throughout the investigation. The investigation process will vary depending on the type of incident. For example, an alleged incident of insubordination will likely involve primarily the interviewing of witness, and, possibly, collection of documentary evidence such as time cards or other relevant documents. A sexual harassment investigation will involve extensive interviewing of witnesses as well as of the complainant and alleged harassor, both of whom will likely be involved in more than one interview. Specific comments regarding investigations of disciplinary incidents, health and safety violations and human rights complaints follow at the end of this paper. I. The Matter of Privilege and Confidentiality Before undertaking an internal investigation of a workplace incident, an employer should be aware that the evidence collected and the report created may later have to be disclosed and/or produced if litigation is Page 3 Workplace Investigations

undertaken. 9 If the evidence is relevant to the issues in dispute, the arbitrator, court or regulatory body charged with hearing the matter may order its production to opposing counsel. An employer may be able to prevent this outcome if the investigation is conducted in a manner which affords privilege over the collected evidence and/or report. 10 Privilege means the right to refuse to disclose confidential information when giving testimony or producing documents. Although such evidence is relevant, probative and trustworthy, and would thus advance the just resolution of disputes, it is excluded because of overriding social interests. 11 The onus is on the party asserting privilege to establish its existence on a balance of probabilities. 12 There are two categories of privilege which could potentially be used to support non-production of an investigative report created during an employer-driven investigation: (1) solicitor-client privilege and (2) litigation privilege. To establish solicitor-client privilege, the party asserting it must prove, on a balance of probabilities, three factors: 1. That the information is a communication between solicitor and client; a. Canadian courts have held that in the context of a corporate client, protection is extended to communications of corporate employees, regardless of their position in the corporate hierarchy, who are engaged to pass on information to solicitors on the corporation s behalf. 2. The communication entails the seeking of legal advice; and 3. The communication is intended to be confidential. With regards to litigation privilege, protection is also extended to documents when two conditions are met: 1. Litigation is existing or reasonably contemplated; and 2. The documents were created with a view to such litigation, for the dominant or substantial purpose of either obtaining evidence to be used in litigation, or for obtaining advice in regards to said litigation. 13 Litigation privilege extends to documents prepared for litigation, including factual reports, opinions and memoranda. In addition, protection is also extended by litigation privilege to communications between a third party and a lawyer in relation to existing or contemplated litigation. However, attention must always be paid to what hat in-house or outside counsel is wearing when they are involved in the investigation. The Courts have 9 For instance, section 48(12)(b) of the Ontario Labour Relations Act, S.O. 1995, c.1, explicitly gives arbitrators the power to require the production of documents before or during arbitration. In the federal jurisdiction, section 16(f.1) of the Canada Labour Code, R.S.C. 1985, c. L-2., gives the Canada Industrial Relations Board the power to order production of any relevant document. Section 54(1)(c) of the Ontario Occupational Health and Safety Act gives Ministry inspectors the power to order production of documents, records and reports, etc. In the federal jurisdiction, section 141(h) of the Canada Labour Code gives health and safety officers the power to order production of any document related to health and safety. Section 33(3)(b) of the Ontario Human Rights Code, R.S.O. 1990, c. H.19, gives a person authorized to investigate a complaint the power to order production of documents. 10 However, it should be noted that a party cannot conceal a fact or piece of evidence merely by revealing it to his or her lawyer. Privilege extends only to communications and not to facts or evidence. 11 See Gorsky, Usprich and Brandt, Evidence and Procedure in Canada Labour Arbitration (Scarborough, Ontario: Carswell, 1991) at 11-72 to 11-87. 12 i.e. That there is more than a 50% probability that the document is covered by privilege. 13 The jurisprudence is unsettled with regards to the test for finding litigation privilege; depending on the context, courts have only given protection to documents created for either the dominant or substantial purpose of litigation. It appears that the former, dominant purpose, test is applied in the criminal context, while the latter, substantial purpose, test is applied in the civil context. Page 4 Workplace Investigations

found that communications with legal counsel who are acting as investigators, rather than lawyers, are not privileged. The differences between solicitor-client privilege and litigation privilege were succinctly highlighted by Robert Sharpe, in a speech entitled, Claiming Privilege in the Discovery Process, Summary 15 First, solicitor-client privilege applies only to confidential communications between the client and his solicitor. Litigation privilege, on the other hand, applies to communications of a non-confidential nature between the solicitor and third parties and even includes material of a non-communicative nature. Secondly, solicitor-client privilege exists any time a client seeks legal advice form his solicitor whether or not litigation is involved. Litigation privilege, on the other hand, applies only in the context of litigation itself. Thirdly, and most important, the rational for solicitor-client privilege is very different from that which underlies litigation privilege. The difference merits close attention. The interest which underlies the protection, afforded communications between a client and a solicitor is the interest of all citizens to have full and ready access to legal advice Litigation privilege on the other hand is geared directly to the process of litigation Its purpose is more particularly related to the need of the adversarial trial process. Litigation privilege is based upon the need for a protected area to facilitate investigation and preparation of a case for trail by the adversarial advocate. 14 Solicitor-Client Privilege Scope Applies only to confidential communications between the client and his solicitor. When it Applies Exists any time a client seeks legal advice from his solicitor whether or not litigation is involved. The Rational Geared toward the protection of the interest of all citizens to have full and easy access to legal advice. Aims to protect a relationship. Litigation Privilege Applies to communications of a nonconfidential nature between the solicitor and 3 rd parties and even includes material of a noncommunicative nature. Applies only in the context of litigation itself. Geared directly to the process of litigation; it is based upon the need for a protected area to facilitate investigation and preparation of a case for trial by the adversarial advocate. Aims to facilitate a process. 14 Robert Sharpe, Claiming Privilege in the Discovery Process, L.S.U.C. Special Lectures, 1984, at 164. 15 Janet Walker, ed. The Civil Litigation Process: Cases and Materials, 6 th ed. (Toronto: Emond Montgomery Publications Limited, 2005). Page 5 Workplace Investigations

Privilege in Action: R. v. Bruce Power Inc. A recent Ontario Court of Justice decision, R. v. Bruce Power Inc., highlights the importance of keeping the issue of privilege at the forefront when designing and conducting workplace investigations. 16 In that case, the court found that an investigative report produced by the employer was subject to solicit-client privilege and litigation privilege. 17 However, when reading the following case synopsis, it is important to keep in mind that the court was dealing with quasi-criminal charges under the Occupational Health and Safety Act. Rules of evidence, which are strictly applied in the criminal and quasi-criminal contexts, are somewhat relaxed in the civil context. Therefore, the advantageous precedent below may not be accepted in the civil context. Further, the chapter has not closed on this issue; the decision in R. v. Bruce Power Inc. is currently under appeal. Facts: On January 21, 2002, a serious accident occurred at the Bruce Power Nuclear facility that resulted in significant injuries to an employee. That same day, the Ministry of Labour was contacted and a Ministry inspector attended the site and began an investigation on behalf of the Ministry. The employer immediately sought legal advice from its in-house counsel, who advised the employer that it was very likely that the Ministry would lay charges against the company and some of its employees. On that same day, relying upon the advisement that charges would be forthcoming, the employer retained outside defence counsel. Upon hearing about the incident and resulting injuries, external counsel advised Bruce Power Inc. to immediately conduct an investigation, separate and apart from the Joint Health and Safety Committee investigation, for the purpose of preparing a defence to the anticipated charges. In-house and external counsel also discussed how to keep the report confidential, and thus, privileged. The employer appointed an investigative team, comprised of both management and non-management employees. The team was apprised that its mandate was to produce a report for the primary purpose of defending the company and individual employees from anticipated charges. At the beginning of the investigation and throughout, the employer and defence counsel repeatedly stressed to the team that the report was being prepared in contemplation of litigation, explaining what this meant and why it was important. The employer and defence counsel also stressed that the report was not to be released to anyone outside of the team or legal department. Further, when the report was finally drafted, terms of reference were included to ensure privilege was 16 R. v. Bruce Power Inc., (March 23, 2005), Owen Sound [Ont. Ct. J. (Prov. Off. Ct.)]. 17 In a recent British interlocutory decision, a similar finding was made with regards to a disciplinary investigative report. The investigation covered three individuals accused of various acts of harassment at a sales conference in the United States. Two of the individuals were employed in Canada by the parent company, and one in the United Kingdom by a subsidiary. The investigation was carried out by a Toronto law firm. The Company successfully argued that the report was privileged and it only had to produce a redacted version. The motion for production was based on the complainant s desire to obtain information about one of the accused employees. As such, if more than one employee is implicated in a workplace incident, an employer may wish to prepare separate reports for each alleged offender in case an order for an un-redacted version of a report is successful. Page 6 Workplace Investigations

maintained. 18 Once the report was completed, all team members were instructed to hand in any and all evidence collected and to destroy any copies of the evidence and/or report in their possession. As expected, in December 2002, charges were finally laid against Bruce Power Inc. and two of its supervisors. The Ministry inspector interviewed one of the investigative team members, who, in violation of the clear instructions given by the employer, gave the inspector a copy of the report that he had failed to destroy in accordance with his undertaking to do so. As part of the Crown s continuing duty of disclosure, this report was subsequently sent to the company s external defence counsel. Upon receiving the report, defence counsel immediately advised the Crown that it was the defence s position that the report should never have been produced for the Crown and that it was covered by solicitor-client and/or litigation privilege. Defence counsel then brought a motion to determine whether the report was privileged and, thus, whether the Crown could use it in the proceedings. Decision: Woodworth J.P., for the court, held that the report was in fact covered by both solicitor-client privilege and litigation privilege and, therefore, could not be used by the Crown against Bruce Powers Inc. The court found that the report was privileged for the following reasons: Of critical import to the finding that privilege existed, the court held that the report was created for the dominant purpose of preparing for anticipated litigation. Given defence counsel s specialization in health and safety matters and the nature of the incident at hand, it was not unreasonable to conclude on the day of the accident that charges would be laid and that preparation for this eventuality should be undertaken. Although the company had previously prepared reports regarding other health and safety incidents, this report differed in that it was undertaken at the behest of the legal advice that it was required to prepare for eventual litigation. Throughout the investigation, the employer s in-house counsel, along with external counsel, continued to stress to all those involved that the report was being prepared for litigation purposes and was to remain confidential. Interviewed parties were assured that the resulting report would remain privileged and confidential, only to be used by legal counsel in preparation of a defence to anticipated litigation. Further, the employees who were later charged with offences in connection with the incident were given such assurances before they made statements that could prove self-incriminating if the report was produced. 18 The following Terms of Reference were inserted in the draft report: Under the heading Manager Instructions In contemplation of litigation, the Bruce Power Accident Review panel was struck to investigate the accident that occurred on January 21, 2002. This is a company investigation. Under the heading Additional Comments To provide a system to ensure that consistent, comprehensive investigation is performed and that proper corrective action can be initiated to reduce the probability of similar incidents occurring it the future. The focus of the investigation shall be on improvement. It is not a purpose of an incident investigation to determine liability or provide a basis for disciplinary action against personnel involved it he incident. Furthermore, the information that comes to light solely as a result of the investigation shall not be used for disciplinary purpose. The notes taken by the investigation team, or statements obtained from personnel shall not be released to anyone outside the investigation team. All investigation notes and personnel statements, upon contemplation and full approval of the incident investigation and report will be sequestered in the Law Department and maintained confidential in anticipation of Litigation (i.e. MOL charges) The employer did not include the draft report or final report in the terms of reference as items not to be released to anyone other than the investigative team and legal department. While the court did not find this to be determinative of the issue, given other evidence that the report was to remain privileged and confidential, Woodworth J.P. did mention that, if included, it would have been of assistance in this regard. Page 7 Workplace Investigations

Privilege was not tainted by the composition of the investigative team; all members shared the same interest because both bargaining unit employees and management were likely to implicated in litigation. The report produced by the Company was not the only source of information about the incident. A report, which was openly critical of the company, was produced and provided to the Ministry of Labour by the Joint Health and Safety Committee. Further, the Ministry s Inspector was conducting a parallel investigation of the incident at approximately the same time. Although the report was subsequently released by the Company and defence counsel for educational purposes, this did not constitute a waiver of privilege in relation to litigation in a quasi-criminal proceeding. 19 As a result of finding that the report was privileged, the Court ordered the Crown to return it, along with any copies and/or notes made from it, to the defendants. Defence counsel then brought another motion to have the charges against the employees and the company stayed, alleging violations of the Canadian Charter of Rights and Freedoms, on the part of the Crown. 20 Further, the Defence alleged that, due to the Crown s previous possession and use of the report, a fair trial could no longer be guaranteed. 21 Finding that it would not be practical or possible to determine whether the Crown s future conduct at trial was being influenced by its knowledge of the report, the Court granted the motion and stayed all of the charges. II. Interviews Conducting post-incident interviews of involved employees is perhaps the most important part of any investigation for three reasons. First, interviews help the employer gain a clear and comprehensive picture of what occurred, providing valuable information that can be utilized to ensure the employer remedies the incident in an appropriate manner. Second, interviews, if conducted properly, provide an invaluable source of evidence if litigation later becomes involved; interviewees can be committed to a story and/or helpful admissions may be gathered. Finally, if the only evidence of a workplace incident are the two conflicting stories of the complainant and alleged offender, interviews provide the employer with a great opportunity to assess the credibility of both parties involved. Interviews should be conducted as soon as possible after the incident when memories are vivid. Before the Interview An interview is appropriate whenever an employer reasonably believes that it may yield relevant and necessary information. Where an interview is appropriate, it is prudent to obtain a general description of the incident prior to commencing the interview. Similarly, all relevant documents should be gathered and reviewed. 19 It appears that the court would have found that privilege had been waived if the proceedings had been civil, as opposed to criminal, in nature. The Court stated that the case law in respect of waiver indicates that in a civil context a waiver of privilege is in fact a waiver for all purposes. In the criminal context, however, after considering the overall effect on the fairness of the proceedings, waiver can be limited to that which is intended by the parties. 20 Part I of the Constitution Act, 1982, being Schedule B to the Canada Act 1982 (U.K.), 1982, c.; R. v. Bruce Power Inc., (February 17, 2006), Owen Sound [Ont. Ct. J. (Prov. Off. Ct.)]. 21 Page 8 Workplace Investigations

At the preliminary stages of the investigation, a list of potential interviewees should be made and then consideration should be given to whether there is any possible legal restriction or ramification from interviewing them. If some interviewees are members of the union, the employer should check to see if the collective agreement affects its ability to interview them or the manner in which the interview is conducted. For example, many collective agreements provide that the union steward should be present to represent the employee during interviews with management. 22 If any of the potential interviewees may be involved in a criminal prosecution, legal advice should be sought prior to meeting with them. Employers should ensure that witness meetings or statements do not undermine criminal charges, especially in very serious matters. Finally, if any of the interviewees are uncooperative, the employer should develop a strategy of how to deal with them, assess how crucial their evidence will be and determine whether the information can be obtained from alternate sources if necessary. For example, in the case of potentially difficult interviewees, consider having two persons attend. Technically, an employee is insubordinate if he or she unreasonably refuses to attend an interview. One arbitrator has held that an employer had a right to investigate an attack on the grievor in a public dining room. As a result, the grievor s failure to disclose his assailant and the circumstances of the attack warranted holding him or her out of service. However, given the employee s qualified right against self-incrimination, a refusal to attend an interview may be justified and/or merit only milder forms of sanction. An employer may wish to obtain legal advice if an employee refuses to attend an interview. The employer should take care to design an interview which suits the nature of the incident being investigated and the individual being interviewed (i.e. the complainant, the alleged offender or a witness). Further, attention to the interviewee s position in relation to the employer is imperative in designing the interview (i.e. is the interviewee management, unionized, a contractor or a member of the public). It is helpful to compile a list of points and/or questions to be covered in the interview, and to develop a strategy as to when and how various issues will be addressed. The employer should select an appropriate person to conduct the interview. Depending on the circumstances, an appropriate interviewer may be a member of management or an outside expert. With regards to the order in which interviews should be conducted, it is generally advisable to interview the complainant or injured party first, followed by any witnesses, concluding with an interview of the alleged offender. 23 Further, it is usually sound practice to interview alleged offenders after the main part of the investigation is complete. One reason is to ensure that the employee suspected of wrongdoing is not "tipped off" at a time when he or she may destroy evidence or otherwise thwart the investigation. A second reason is that the person conducting the interview will want enough background information so that he or she can ask directed questions and be able to assess the credibility and probability of the answers provided by the employee. By the time the alleged offender is interviewed, you should have a clear idea of the incident from interviews of witnesses 22 Even if not required by the collective agreement, it would be wise to have union representation present at the interview so as to help avoid any later argument that the interview was conducted in an unfair manner. 23 As an exception to this strategy, when conducting a human rights investigation, the alleged offender should be interviewed after the Complainant. Page 9 Workplace Investigations

and the collection of actual evidence. As well, you should assess the strength of the evidence in advance to consider whether the timing of the interview is appropriate. For example, with a theft or vandalism problem, if the company has only weak evidence, it should decide whether to engage in video surveillance, surveillance by a private investigator or other means of collecting evidence, before an employee is confronted. Checklist A list of potential interviewees has been made. Interviews have been scheduled as soon as possible. The time and the place of the interviews ensure confidentiality. A general description of the incident has been obtained. All relevant documents have been gathered and reviewed. An interview strategy has been developed. Legal advice has been sought if any interviewees may be involved in criminal prosecution. The collective agreement has been complied with. An appropriate interviewer or interview team has been selected. Ensure that the interviewer is a person with whom the interviewee will feel reasonably comfortable. At the Interview At the interview, the interviewer should commence by explaining his or her role, the purpose and structure of the interview, and relevant company policies. The interviewer should stress that confidentiality will be respected, but cannot be guaranteed. The interviewee should be advised to keep records of any relevant events. If interviewing a complainant, the interviewer should highlight who will be responsible for making decisions about the investigation and what remedies, if any, are potentially available. Further, the complainant should be kept appraised of the status of the investigation as it progresses. If interviewing an alleged offender, the allegations should be explained to the alleged offender and he or she should be given a copy of the written complaint, if one was made. The interviewee should be allowed to explain the incident in his or her own words. Open ended questions should then be used to elicit more information. Employers should avoid using leading questions, that is, questions which suggest the answer. For example, rather than asking whether the interviewee reported the incident immediately after it occurred, it would be better to ask what the interviewee did immediately following the incident. However, at later stages of the interview, once the interviewee has committed to a basic story, more pointed questions may be required to obtain the requisite amount of detail to conduct a thorough investigation. Likewise, the use of probing questions at the later stages of the interview may be helpful to test the employee s response against the evidence you have already collected. If you have documentary, photographic or video evidence, you should disclose that fact to the employee. If any employee has been filmed on video, it is effective to show the video and then ask the employee to provide an explanation. While the level of detail required will depend upon the nature and severity of the incident, aside from the expense, there is no downside to gathering too much information. The interviewer should elicit a description of the incident; the date, time and place that it occurred; whether there have been similar/related occurrences; who Page 10 Workplace Investigations

was involved, including who witnessed the incident; whether anyone else was informed of the incident and, if so, the details of their response; and so on. Care should be taken to press behind those statements which involve a conclusion rather than a statement of fact: for example, "He stole the torque wrench," when in fact what the witness saw was someone who looked like the suspect exit the side door of the building with a large rectangular cardboard box. Imprecise, exaggerated or vague witness statements may lead an employer to make a decision based on "evidence" that may later turn out to be less strong than was believed. The interviewer should also repeat the facts back to the interviewee to ensure accuracy, and clarify any discrepancies. With regards to interviewing the alleged offender, it is very important that he or she be given a fair opportunity to explain his or her side, to offer an explanation that shows his or her innocence, and to offer any mitigating explanation. Accordingly, either at the time of the interview or prior to it, the employee should be given adequate information of the allegation(s) against him or her, in order to permit the employee a full and fair opportunity to make a defence. The allegations should be briefly set out, having regard to who, what, where and when. It is not necessary to tell the employee the names of all the witnesses, or all of the details of the evidence that has been collected. In some circumstances, it is preferable to provide such a statement in writing, particularly if the alleged misconduct may lead to termination. All answers and comments made by the parties present at the interview should be recorded. Notes should also reflect when the interview was conducted, by whom and who was present. Accurate notes should be kept of all discussions (i.e., who the witnesses are, exactly what they saw or heard). As it is difficult to conduct an interview and take adequate notes at the same time, consider having someone there to take accurate and thorough notes. If there are any company forms previously designed to record the particular type of incident involved, they should be utilized whenever appropriate. Witness statements should be taken. If a person refuses to sign a statement, read their statement to them and ask that they sign an acknowledgement to that effect. Close the interview by asking the interviewee whether he or she has any other information that might be important, and whether there is anyone else who may have information about the incident. Checklist Interviewees have been allowed to bring a representative to the interview. The purpose and structure of the interview have been explained. At the opening of the interview with the alleged offender, it may be prudent to ask the following two questions: We have asked you to come in today to discuss a situation that has arisen in the workplace. It is extremely important that you answer the questions which we are going to ask you in an honest and forthright manner. Your future employment with the company may depend on the honesty of your answers to the questions which we plan to ask you. Do you understand? Do you have any questions? Confidentiality has not been guaranteed, or if the investigation is being undertaken with a view to litigation, confidentiality with regards to the report has been assured. All the relevant facts have been obtained. Use open-ended questions to elicit an overview of what the witness saw. Avoid asking questions that suggest the answer, otherwise you may "taint" the statements. Page 11 Workplace Investigations

Elicit adequate detail, having regard to distances, the location of the witness and suspect, what was actually observed. Remember to probe about "who, what, when, where and how." Have the interviewee describe his or her positioning and/or movements with the aid of maps or pictures of the scene of the incident. Press behind statements that are conclusions, particularly those asserting the guilt of a person, to get the facts that support the witness s conclusion. Ask the witness who else was present or may have any information. Where appropriate, obtain a map or diagram. The facts have been repeated to the interviewee to ensure accuracy; any discrepancies have been clarified. Witness statements have been taken and signed by the witness (or at least acknowledged). Prepare a written statement of the witness s evidence and have the witness sign it. Make sure the written statement is accurate and does not overstate the witness s evidence. All facets of the interview have been well documented. Have someone there whose sole task is to take accurate notes of everything said at the interview. The collective agreement has been complied with. End the interview with a "scoop" question, such as "Is there anything we haven t talked about which I should know about?" In addition. at the close of the interview, the following statement may also be prudent: We would like to have the opportunity to review carefully the answers to the questions which you have provided to us in this meeting. We may have further questions that we may wish to ask you. If we do, we will call you and ask you come back to see us. If you have any questions for us, or wish to provide us with any further information, please do not hesitate to telephone us. Thank you for meeting with us. After the Interview After the interview, a written report of the incident as outlined by the interviewee should be prepared. It should then be determined whether further investigation is required. If the interviewee has proffered any other potential sources of relevant information, further investigation should be conducted to obtain it. If the situation necessitates further interviews with the particular interviewee, they should be scheduled. 24 Checklist The interviewees have been kept apprised of the status of the investigation, if necessary. A report of the interview has been completed. Other sources of potential information have been followed up. III. Documents/Records Documents and records may be crucial evidence that can have significant impact on the veracity of evidence collected from witnesses. This evidence may include: notes; correspondence; memoranda; 24 When scheduling additional interviews it should be kept in mind that most investigations should be concluded within thirty day of the incident. Page 12 Workplace Investigations

e-mail; computer recorded data; pictures; video; floor plans; time cards; and Workplace logs. When collecting records or documentation kept independently by an employee, for example a human rights Complainant, ask detailed questions including: When and why the employee began making notes or collecting documentation; Whether the notes were made contemporaneous or after the fact; When and why the employee began making notes or collecting documentation; and Whether all relevant facts and/or additional incidents of a similar nature were recorded. Checklist Secure all documents (i.e., records, pictures and videos) that may relate to the incident. Carefully review all documents to determine their relevancy. IV. Employee Searches Arbitrators have generally insisted that an employer s right to search an employee s person or personal effects must give way to the employee s right to personal privacy unless there is a real and substantial suspicion of theft or wrongdoing. Even then, the search is permitted only so long as it is conducted reasonably. The employer must also be prepared to establish that adequate cause to justify the search existed, that available alternatives were exhausted, that reasonable steps were taken to inform the employee and that the search was conducted in a systematic and non-discriminatory manner. Searches based solely on circumstantial evidence, universal searches in the absence of reasonable suspicion of wrongdoing and purely random searches will all violate this rule. Even when an employer has reasonable grounds to suspect an employee of criminal conduct, it should ask for police assistance if its request to search the employee s person or personal effects is rejected. If employer policy is to not detain those who refuse a search, discipline cannot be imposed on those who refuse. Checklist: There is adequate cause to justify a search. All available alternatives have been exhausted. Reasonable steps have been taken to inform employees. The search was conducted in a systematic and non-discriminatory manner. Police assistance has been sought if a request to search has been denied. The collective agreement has been complied with. Page 13 Workplace Investigations

V. Surveillance There are many general surveillance devices and methods currently used to monitor employees. These include telephone accounting systems, monitoring employee telephone calls, video surveillance, computer "footprint" records that record the use of a computer, computer pass cards which monitor employees entrances and exits, and interception of electronic mail. It is generally accepted in Canada that employees are entitled to a certain level of privacy in the workplace. As a result, generally, surveillance evidence will only be admitted in arbitration if it was undertaken as a necessary response to a serious problem. Arbitrators will attempt to balance the employee s right to privacy against the employer s interests and right to investigate. To establish that the employer s interests outweigh the employee s right to privacy, the employer must demonstrate that it was reasonable to resort to surveillance and also that the surveillance was conducted in a reasonable manner. Arbitrators will consider the purpose of the surveillance; the location and type of surveillance (the more invasive and continuous the surveillance, the more it infringes the employee s privacy rights); the reasonableness of the surveillance; whether there were other ways to obtain the evidence; and the terms of the collective agreement. The employer has the burden of establishing that these conditions were met. The Disadvantages of Surveillance Aside from the legal issues involved, the decision to monitor employees in the workplace may present a variety of practical problems. For example, employee monitoring may be counterproductive by increasing job stress and decreasing morale and production. It can have a negative impact upon an employee s sense of dignity and selfesteem, which in turn may create an atmosphere of distrust in the workplace. Surveillance can also invoke disassociation from, and a lack of respect for, the employer. Another practical problem with surveillance is the potentially significant cost. In addition to the purchase price of surveillance equipment, computer hardware, software programs, etc., it can be costly to maintain the appropriate staff to do the monitoring. Given the variety of legal and practical problems with surveillance, it is important to understand both why and how it should be implemented. Why Use Surveillance? Surveillance is used to prevent workplace incidents. One of the primary reasons for using surveillance is prevention of theft, or the general misappropriation of company resources. Since the evidence obtained by surveillance enables an employer to document an action over a period of time, it can also be used to document employee behaviour that is otherwise difficult to intercept (since it is usually surreptitious), such as harassment and acts of aggression. One employer successfully used video surveillance to ensure that its employees conformed to health and safety standards. Video surveillance was also successfully used by an employer to dismiss a long-term employee who was sleeping during his night-shift. The tape was admitted as evidence that was probative of a matter in issue, and made in the context of the company s "legitimate right to investigate." Page 14 Workplace Investigations

Surveillance may be used to protect network security. For example, monitoring employees computers can prevent employees from downloading contaminated software through network-based terminals. Monitoring e-mail messages has revealed employees engaged in contractual relationships contrary to their employer s interests, employees who have compromised trade secrets, as well as the publication of copyright-infringing and confidential material. Similarly, surveillance can be used to prevent employees from using company e-mail and Internet access to visit sites and/or send external e-mail messages which could tarnish the company s image. Employers may also wish to prevent employees from utilizing corporate resources for actions that may incur legal liability such as sexual harassment, racial discrimination, trademark/copyright infringements, defamation/trade libel, electronic harassment and corporate espionage. Checklist Alternatives to obtain the evidence have been considered. The employee has been confronted with the suspicions. Surveillance is a necessary response to a serious problem. The purpose of the surveillance has been identified to employees, and the surveillance has been restricted to that use. The surveillance is necessary, reasonable and intrudes on employee privacy as little as possible. The surveillance documents the acts in question and portrays the facts clearly, without bias and without manipulation. The surveillance has not been edited. The collective agreement has been complied with. GENERAL POST-INVESTIGATION CONSIDERATIONS I. Admissibility of Evidence Evidence is admissible in a court of law if it is relevant and not excluded by any rule of evidence. To be relevant, there must be a relationship between the evidence and the issue before the trier of fact: evidence must be "probative of a matter in issue." However, not all relevant evidence is admissible; the probative value of the evidence must outweigh any prejudicial effect. Like the courts, the admissibility of evidence in arbitrations will depend, in part, on factors such as relevance, probative value, prejudicial effect and reliability. Unlike the courts, arbitrators enjoy considerable discretion in determining the admissibility of evidence. An out of court statement, either written or oral, uttered by someone other than the person testifying to it, is usually not admissible in court to prove the truth of its contents. The rationale for this rule of evidence is that this kind of hearsay evidence is often unreliable. As such, courts will exclude hearsay evidence unless it passes strict tests regarding its necessity and reliability. Unlike the courts, arbitrators in Ontario are not required to exclude hearsay evidence. However, employers should conduct all investigations as if the rule against hearsay will be strictly enforced. Again, due to concerns over reliability, arbitrators have generally refused to base a finding of Page 15 Workplace Investigations

critical facts on it, and will not generally ascribe much weight to it even when it is admitted. Moreover, an arbitral decision may be reviewed by the courts. There is an exception to the hearsay rule for business and medical records. Business and medical records are admissible notwithstanding their hearsay character, if adequate advanced notice is given to the other party, so as to provide it with the opportunity to inspect the records. The weight to be afforded to such evidence will vary depending upon the nature of the document, the detail that it contains, and the circumstances in which it was made and procured. While admissibility of evidence has been addressed here as a post-investigation consideration, it is also advisable for an employer to consider this issue when preparing investigative strategies. By keeping rules of admissibility firmly in mind at all times, an employer can increase the likelihood that the evidentiary value of collected evidence will be maximized during any possible litigation. Checklist: The evidence is admissible. The evidence is relevant, that is, it is probative of a matter in issue. The probative value of the evidence outweighs its prejudicial effect. The evidence is reliable. The evidence is not hearsay. Opposing counsel has been give notice that business or medical records will be relied upon. II. Reporting the Investigation If the incident requires an investigation, it also requires an investigation report. The report should include background information such as the names of those involved, the date of the incident, the names of those interviewed and any materials reviewed. The report should also detail the findings of the investigation. The findings should include a description of what happened, the seriousness of the incident, details of any harm or injury, whether anyone is culpable, the position of the parties involved, any previous warnings, the effect on the workplace and the type of evidence considered. Finally, the report should outline any recommendations generated from the incident or the investigation. Checklist An investigation report has been completed. The report includes all relevant information. The report details the findings of the investigation. The report outlines any recommendations. A copy of the report has been given to all those involved. Page 16 Workplace Investigations

III. Making a Decision At the conclusion of the investigation, a decision must be made. Generally, the standard of proof required with respect to work place incidents is proof on a balance of probabilities. 25 However, where the allegations are very serious and would constitute criminal conduct, the proof required will have to meet the higher standard of "clear and cogent" evidence. Checklist A final determination of the issue has been made. The final determination flows logically from the results of the investigation. THE DANGERS OF A FLAWED INVESTIGATION Whether workplace incidents are properly investigated can have serious implications for employers. A flawed investigation can lead to the inability of an employer to accurately determine how and why an incident occurred. Not only does such a result render an employer incapable of properly remedying the particular incident, it also inhibits an employer s ability to establish effective pro-active measures in order to prevent similar incidents from occurring in the future. For example, an inadequate and/or improper investigation of a health and safety incident may not identify the root cause of the incident, possibly exposing an employer to future occurrences of a like situation. Further, if a similar health and safety incident occurs again, a due diligence defence may be unsuccessful. If an employer acts on the results of a flawed investigation and terminates an employee, insurmountable evidentiary problems and/or harsh financial consequences for the employer may follow if litigation is undertaken. For example, an employer may not be able to establish just cause, and may even be penalized with further damages, if an employee s employment is terminated following a disorganized, incomplete investigation. If the integrity of the investigation is in question, it will become more difficult to uphold a dismissal, whether or not just cause exists. An employer is under an implied obligation of good faith and fair dealing when terminating an employee. 26 Pursuant to the Supreme Court of Canada s decision in Wallace v. United Grain Growers Ltd., the length of reasonable notice awarded to a dismissed employee can be increased if the employer handles the employee s termination in an unfair, discriminatory or bad faith manner. 27 Wallace Damages are awarded to compensate the employee for the manner of dismissal, rather than for the dismissal itself. For example, it could be inferred that an employer acted in an unfair, discriminatory or bad faith manner if they were to dismiss an employee without 25 i.e. It is more likely than not that X occurred. 26 In a unionized context, an employer is also under an obligation to exercise its management rights in a reasonable and fair manner. An employer who conducts a workplace investigation pursuant to this right must fulfill these obligations if the resulting discipline is to withstand arbitral scrutiny. 27 [1997] 3 S.C.R. 701. Damages in the form of an extended notice period are referred to as Wallace Damages. While it is true that sloppiness or an honest mistake does not amount to bad faith, it should still be kept in mind that this could lead to the conclusion that an employer is without an evidentiary basis establishing just cause. Page 17 Workplace Investigations

interviewing him or her first; taking the complainant s allegations at face value. 28 As such, undertaking a comprehensive and even-handed investigation is important if Wallace Damages are to be avoided. Not only must an investigation be fair, it must also be bona fide. An investigation cannot be undertaken for an improper purpose. 29 For example, an employer will likely be liable for Wallace Damages if it engages in a sham investigation, merely going through the motions in order to have an investigation on record if litigation arises in the future. Accordingly, an employer must always approach an investigation with an open mind. THE INVESTIGATIVE PROCESS IN FOCUS This section seeks to highlight various factors that should be kept in mind when conducting workplace investigations in the following three contexts: 1. Disciplinary Investigations; 2. Investigations of Human Rights Complaints; and 3. Health and Safety Investigations. It should be noted that a workplace investigation may not fall neatly into any one category. Depending on the nature of the incident at hand, an employer may have to undertake a blended investigation. For example, an incident of workplace violence may necessitate that the employer undertake an investigation which engages all three of the contexts above. A health and safety investigation will likely be necessary, as workplace violence usually effects the safety of some or all employees. Likewise, a disciplinary investigation will be necessary to properly deal with the employee who committed the violence. Finally, if the workplace violence arose from discrimination based on one of the prohibited grounds in the Ontario Human Rights Code, a human rights investigation will also have to be undertaken. I. Disciplinary Investigations 30 The relevant sections of the Employment Standards Act, 2000, should be consulted. In a unionized context, the Ontario Labour Relations Act, should also be consulted. Further, the applicable regulations of the relevant Act(s) should also be consulted. Act quickly! An employer risks condonation of the incident if they do not investigate and respond as soon as possible. If the investigation is likely to be lengthy, ensure that the alleged offender is notified of the investigation and its timeframe as soon as possible. When conducting interviews, the following considerations are important: Ensure the alleged offender has representation. In a unionized context, consider inviting a union representative even if one is not required under the collective agreement. 28 Likewise, an employer who takes a shoot-first-ask-questions-later approach will probably be unable to uphold any disciplinary action, as this is not a fair exercise of management rights. 29 Such purposes include, without limitation, anti-union animus; discrimination under the Ontario Human Rights Code; and reprisals under the Ontario Occupational Health and Safety Act or the Ontario Employment Standards Act, 2000, S.O. 2000, c. 41. 30 The following checklist is intended for provincially regulated businesses to which Ontario legislation applies. If the employer s business is federally regulated, reference must instead be made to Parts I and/or III of the Canada Labour Code. Page 18 Workplace Investigations

Ask the alleged offender about any mitigating circumstances, such as provocation, personal or health problems, economic circumstances, etc. Consider asking an impartial employee to act as a witness during interviews. In a unionized context, disciplinary investigations and/or imposed discipline is usually addressed in the collective agreement. Make certain that the collective agreement is thoroughly canvassed to ensure that its provisions are followed during the investigation and/or imposition of discipline. For example, care should be taken to determine whether the collective agreement contains any time limits regarding investigations and discipline. Some collective agreements stipulate time limits at the investigation stage, e.g. No discipline shall be enacted after 5 days from the date of the incident or the date the Company becomes aware of the incident. In addition, some collective agreement also stipulate time limits once an investigation is complete, e.g. No discipline shall be imposed more than 5 days after the conclusion of the Company s investigation. II. Investigating Human Rights Complaints 31 The relevant sections of the Ontario Human Rights Code, and applicable regulations should be consulted. An internal investigation into human rights complaints is advisable because the regulated complaint process may be lengthy and an employer may not be advised of its outcome for quite some time. An internal investigation can help the employer decide how to conduct itself in the meantime. For example, an internal investigation may highlight that a particular workplace policy is required to prevent similar incidents from occurring in the future. An investigation should be complete within ninety days. 32 Treat the matter in as confidential a manner as possible, to protect both the privacy of the employee filing the complaint and the reputation of the employee against whom the complaint is made. However, do not guarantee confidentiality. Further, when interviewing employees regarding the complaint, inform the interviewee that the investigation is confidential and that they must treat it confidentially. As human rights complaints involve allegations of bias, selection of an appropriate investigator to look into a human rights complaint is critical. For example, when investigating allegations of sexual harassment, it is advisable to strike an investigative team comprised equally of both sexes. Not only must an investigator be as independent and objective possible, they must be viewed as such. 33 The perception of bias can be just as damaging as actual bias. If possible, the investigator should not be in a position of authority over anyone involved in the complaint but, rather, should report to the person in authority. If not, the Human Rights Commission has stated that the process will be seen to be weak and without teeth. 34 The order in which interviews are conducted is different than when investigating other types of incidents The Complainant should be interviewed first. When conducting the interview, if possible, ensure that all those present are individuals who will put the complainant at ease. The accused employee should be interviewed second. When conducting interviews the following points should be taken into consideration Always describe to the interviewee the internal discrimination and/or harassment investigation procedure, including the timeframe involved, who will investigate the complaint and who will be responsible for decisions related to the complaint. 31 The following checklist is intended for businesses to which Ontario legislation applies. Even f the employer s business is federally regulated, the Ontario Human Rights Code applies to an employer s operations located in Ontario. 32 Ontario Human Rights Commission, Developing Procedures to Resolve Human Rights Complaints within your Organization, online: Ontario Human Rights Commission, http://www.ohrc.on.ca/english/publications/internal-proceduresguide.shtml. 33 Ibid. 34 Ibid. Page 19 Workplace Investigations

When interviewing the Complainant, it is advisable to undertake the following strategies: The Complainant should be asked whether they confronted the accused employee concerning his or her conduct and asked that it stop. Probe for reasons or ulterior motives that may have caused the Complainant to file a complaint, e.g., a poor performance view given by the accused employee. Consider asking the Complainant to reduce the complaint to written form. If the Complainant refuses to do so, consider doing so and providing the document to the Complainant for a defined period within which he or she can review and provide comments on the document. Ask the Complainant what he or she hopes will result from the complaint. When interviewing the accused employee, it is advisable to undertake the following strategies: Provide the accused employee with sufficient information to enable him or her to understand the specific nature for the complaint. Give the accused employee the opportunity to respond to allegations and to provide other relevant information, including the names of other persons who may have information, an ulterior motive the Complainant may have in making a complainant, etc. When interviewing witnesses, it is advisable to undertake the following strategies: Provide the potential witness with sufficient information to enable him or her to understand the specific nature of the complaint and to answer questions about it. Limit the information provided to potential witnesses to a need to know basis. Circumscribe information where possible to protect the identities and reputation of the Complainant and the accused employee. Consider whether there is a human rights policy or other applicable policy in place, which affects the investigation. Consider whether criminal charges may arise or have arisen from the alleged conduct. In such a situation, care must be taken not to undermine criminal charges. Consult relevant policy manuals produced by the Ontario Human Rights Commission. 35 Two publications are of particular relevance to the employer: (1) If you Receive a Human Rights Complaint: A Respondent s Guide; 36 and (2) Developing Procedures to Resolve Human Rights Complaints within your Organization. 37 III. Health and Safety Investigations 38 For the purposes of this section investigations refer to internal health and safety inquiries conducted by the employer, other workplace parties, or invited third parties. They do not include occupational health and safety investigations or inspections by federal or provincial regulators. A wide scope of investigations are conducted in the workplace some are required by statute (i.e. critical injury or fatality, Joint Health and Safety Committee monthly inspections, work refusals and certain environmental spills) and others are performed by the employer voluntarily (i.e. audits, due diligence measures, management system audits, discipline). All investigations present both opportunities to advance health and safety knowledge and due 35 See http://www.ohrc.on.ca/english/publications/index.shtml#plain. 36 Ontario Human Rights Commission, If you Receive a Human Rights Complaint: A Respondent s Guide, online: Ontario Human Rights Commission, http://www.ohrc.on.ca/english/publications/respondents-guide.shtml. 37 Supra note 32. 38 The following checklist is intended for provincially regulated businesses to which the Ontario Occupational Health and Safety Act, R.S.O. 1990, c. 01, applies. If the employer s business is federally regulated, reference must instead be made to Part II of the Canada Labour Code. Page 20 Workplace Investigations

diligence as well as creating the likelihood that documents, reports or written statements or notes are drafted and created that can expose the corporation or individuals to liability. Care must be taken when conducting an investigation that any document that is created (from notes or emails to more formal reports) are drafted in such a way so as to minimize the possibility of the document being used by regulators as evidence against the company or individuals in either administrative proceedings or criminal charges 39. All documents created following a workplace accident have the potential to be construed as admissions and statements of fact by the employer. It is common for such documents, including accident investigation reports, to be heavily relied upon by Ministry of Labour prosecutors during court proceedings concerning charges. The irony is that the employer s own careless words become a central piece of evidence used to convict the employer and often individuals, of offences under the Occupational Health and Safety Act, ( OHSA ) when such words were never required to be written. All documents created following a workplace accident should be drafted based on the assumption that they will be seen and reviewed by either the Ministry of Labour, the courts or both. In the unfortunate event of a critical injury or fatality in the workplace, there is a common misconception that the employer is required to conduct an investigation and generate a report of its findings. In fact, OHSA only requires that the employer provide immediate notice of the incident with a written notice within 48 hours 40. There is no statutory requirement for the employer to provide any further documentation or to create a more comprehensive report. Care should be taken when drafting the section 51 notice so that the description of the accident does not create liability. Health and safety managers who are responsible for completing the notices should be trained in how to properly draft them so as to minimize liability. Consideration should be given to having in-house or external legal counsel review or assist with such notices. OHSA does require that the members of the Joint Health and Safety Committee representing workers designate one member to conduct an investigation into a critical injury or fatality 41 and report to the Ministry of Labour. Some employers decide for due diligence, labour relations, or convenience reasons, to conduct an investigation jointly with the worker representative. If an employer decides to conduct such a joint investigation, care should be taken in the drafting of any report. As with any document, if the employer is signing on to it (even if jointly drafted) the document may be relied upon in court as admissions by the corporation. If at the conclusion of a joint investigation there is disagreement as to conclusions, the employer should not compromise or negotiate wording in an effort to have a joint investigation report. The prudent course of action is to note the disagreement and simply allow the worker representative to file the report without being a joint report. Although OHSA does not require that the employer conduct an investigation and create a report following a workplace accident, employers may choose to do so for due diligence or other business or labour relations reasons. If an investigation is conducted and a report created care should be taken to be factually accurate do not speculate or guess as to any factual issue or the cause of the accident. Consider involving in-house or external legal counsel in the drafting of the report. 39 See earlier commentary under the heading of Privilege in Action 40 See section 51 of OHSA. The content of the written notice is minimal and is specifically set out in the relevant regulations (industrial or mining). There is no requirement to provide more information that is specifically prescribed in the regulations. 41 See section 9(31) Page 21 Workplace Investigations

Some point to consider: The relevant sections of OHSA and applicable regulations should be consulted. The notice requirements under the OHSA need to be met [see ss.51 53]. The regulations give more specific guidance. For example, Regulations 851 and 854 (ss. 5 and 21 respectively) outline specific requirements for industrial establishments and mines and mining plants. If you are investigating a critical injury 42 or fatality, the relevant sections of the OHSA should be consulted. The proper parties must be notified [see s.51(1)]. The scene of the incident cannot be disturbed until permission is given by the Ministry inspector [see s.51(2)]. Notify in-house or external legal counsel about the accident. Consider undertaking the investigation at the direction of the Company s lawyer, in an effort to preserve privilege. Consider whether counsel should attend at the accident scene. If the Company s lawyer will be attending at the accident scene, depending upon how long it will take the Company s lawyer to attend, the Ministry of Labour may or may not be willing to suspend its investigation. At a minimum, the Ministry inspector should be asked to refrain from interviewing management witnesses until the Company s lawyer arrives. If the client is located at a distance, in general the Ministry of Labour will proceed to initiate its investigation, but will cooperate with the employer to the extent that employer witnesses will not be interviewed until the arrival of counsel. Consider the issue of representation of the employer and others who may be prosecuted. For fatal, critical or other serious accidents, if possible, the Company s lawyer should interview and prepare any management witnesses before the Ministry inspector conducts interviews. The investigation should include references to anything that will assist in the defence that the incident was not foreseeable. For example, Joint Health and Safety Committee minutes, prior policies, worker training, review of work refusals, etc. should be canvassed. It is recommended that the employer review documentation generated three to five years prior to the accident. Ministry inspectors have a great deal of discretion in recommending that charges be laid. Cooperation and communication with the Ministry inspector may benefit the employer. Consider whether the Company has information in its possession that indicates steps were taken to prevent the specific occurrence (e.g. minutes of the Joint Health and Safety Committee, completed work orders, etc.). If so, the Company should consider compiling the information to highlight its conduct to the Ministry of Labour. Before voluntarily providing documents or information to the regulator consult legal counsel. Consider the pros and cons of preparing an internal written investigation report. Keep in mind when preparing the report that it may have to be disclosed. As such, am employer should vet the report for incriminating statements or admissions before it is finalized. If there is a reasonable likelihood that charges will be laid under the OHSA, consider following the strategy taken by the employers in R. v. Bruce Power Inc. and assert privilege over the investigative report. For example, conduct an employer-driven investigation, separate and apart from that of the Joint Occupational Health and Safety Committee, for the purpose of obtaining legal advice and preparing for litigation. 42 For the purposes of the Act and the Regulations, "critically injured" means an injury of a serious nature that, (a) places life in jeopardy, (b) produces unconsciousness, (c) results in substantial loss of blood, (d) involves the fracture of a leg or arm but not a finger or toe, (e) involves the amputation of a leg, arm, hand or foot but not a finger or toe, (f) consists of burns to a major portion of the body, or (g) causes the loss of sight in an eye; O. Reg. 351/91, s.1. Page 22 Workplace Investigations

Conclusion The goal of a workplace investigation is to obtain accurate facts about a workplace incident. The key to ensuring that the investigation is conducted properly is ensuring that it is, and is perceived to be, organized, complete and fair. This means following predetermined policy, collecting adequate information, allowing employees to respond to any allegations against them and making a decision that is supported by the results of the investigation. Page 23 Workplace Investigations

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The Break-Up: Termination of Employment Robb Macpherson, Karen R. Bock and Tara McPhail October 27, 2006 McCarthy Tétrault LLP Box 48, Suite 4700 Toronto Dominion Bank Tower Toronto, ON M5K 1E6 www.mccarthy.ca

The Break-Up: Termination of Employment Introduction In this paper we address some of the issues employers commonly face when terminating the employment of employees. Terminations are difficult for everyone involved: the employee whose employment ends, the managers who have to make and carry out the decision to terminate, and the employee s family, whose lives can be significantly disrupted when the employee s employment status changes. In the first section of this paper we provide a brief overview of the types of damage claims employers may face if the termination goes wrong and we will look especially at the case law in regards to Wallace damages. In the second section we provide an overview of the process of dismissal, including best practices to follow before, during and after the termination interview, for terminations with and without cause. I. Why sweat it? Doing it Wrong Can Cost You When a termination goes wrong, an employer may face 3 major categories of damages claims: aggravated damages, punitive damages and Wallace damages. In addition, there have been a few instances where the employee s spouse and/or children have made claims against the employer for damages for intentional infliction of mental distress resulting from the employer s termination of the employee s employment. Aggravated Damages The purpose of aggravated damages is to compensate a plaintiff where the employer s conduct has been found to constitute an independently actionable wrong. An independently actionable wrong refers to a tort or breach of contract separate from the wrongful dismissal of an employee without appropriate notice. Independently actionable wrongs include defamation; fraud; negligent, innocent or fraudulent misrepresentation; inducing breach of contract; breach of a collateral contract; and intentional infliction of mental distress. In the context of employment terminations, courts award aggravated damages in order to compensate for the often intangible injuries caused by an employer s breach of one or more of such actionable wrongs. Thus aggravated damages have been awarded as compensation for defamatory statements issued by an employer, as well as for the humiliation and distress suffered by an employee when the employee was terminated in a particularly injurious manner. Aggravated damages are in addition to any damages an employee may receive for wrongful dismissal. Page 1 The Break-Up: Termination of Employment

Punitive Damages Unlike aggravated damages, the goal of punitive damages in theory at least is not to compensate the employee, but to punish the employer who has committed serious infractions in terminating an employee, and to deter other employers from acting in a similar manner. The Supreme Court of Canada has described punitive damages as an exception to the general common law rule that damages are designed to compensate the injured, not to punish the wrongdoer. As with aggravated damages, however, the employer s conduct must be found to constitute an independently actionable wrong before an award of punitive damages can be made. The most recent case in which the Ontario Court of Appeal has addressed the issue of punitive damages in the context of a wrongful dismissal case is the well-known Keays v. Honda 2006 CanLII 33191 (C.A.) In this muchawaited decision, the Court of Appeal significantly reduced the amount of punitive damages awarded from $500,000 to $100,000. Just as significant, however, was the Court s decision to uphold the punitive damages award itself. Kevin Keays joined Honda in 1986 and began receiving LTD benefits in 1996 and was diagnosed with Chronic Fatigue Syndrome in 1997. His LTD benefits ceased after December 1998 following a work capacity evaluation conducted on behalf of the insurer. Following his return to work, Honda exempted Keays from its attendance-related progressive discipline policy. However, Keays was required to provide a medical note for each and every absence, which was not required of employees suffering from mainstream illnesses. Mr. Keays sporadic absences continued and Honda hired Dr. B. to assess Mr. Keays. Keays retained a lawyer, who wrote a letter that the trial judge characterized as conciliatory in the extreme. The lawyer sought clarification of the purpose of the meeting with Dr. B. Honda, however, refused to deal with Keays lawyer, refused to clarify the purpose of the meeting with Dr. B. and unilaterally cancelled the accommodation, thus making Keays subject to the attendance-related discipline policy. When Keays continued to refuse to meet with Dr. B. without Honda clarifying the purpose of the meeting, Honda terminated Keays employment for insubordination. On appeal, the majority of the Court reduced the quantum of punitive damages from $500,000 to $100,000. While the Court questioned many of the trial judge s findings of fact (thereby reducing the quantum of punitive damages), the Court agreed that an award of punitive damages was a rational response to Honda s conduct, which the Court characterized as a bad-faith attempt to avoid Honda s legal obligations vis-à-vis Honda s disabled employee. The Court held: [An employer] must engage in this [accommodation] process reasonably and in good faith. Where it proceeds in bad faith and seeks to evade its legal obligation to accommodate those rendered vulnerable through disability by wrongfully terminating them, compensation and punishment are both justified. Page 2 The Break-Up: Termination of Employment

Wallace Damages While claims for aggravated and punitive damages are becoming more common in wrongful dismissal cases, since 1997, the more familiar form of extra or punishment damages in the context of wrongful dismissal damages is Wallace damages, named after the Supreme Court case of Wallace v. United Grain Growers Ltd. [1997] 3 S.C.R. 701. In the Wallace case, Justice Iacobucci found that employers are to be held to an obligation of good faith and fair dealing when terminating an employees employment. A breach of that obligation can result in a claim for Wallace damages. A review of the Wallace decision is instructive: The employer, Public Press, a wholly owned subsidiary of United Grain Growers Ltd., decided to update and expand its printing operations. Jack Wallace, having worked for 25 years for a competitor, had the experience Public Press was looking for. Wallace, however, was 45 years old and was unwilling to leave his current job without a guarantee of job security and assurances of fair treatment and compensation. Public Press assured Wallace that if he performed as expected he would have employment until retirement. On the basis of these assurances Wallace joined Public Press and was the top salesperson at the company every year he was with the company. Fourteen years later, however, he was summarily dismissed, and only days after being complimented on his work by management. Wallace was told the main reason for his dismissal was his inability to satisfactorily discharge his responsibilities. Justice Iacobucci, writing for the Court, described the obligation of good faith and fair dealing as follows: The obligation of good faith and fair dealing is incapable of precise definition At a minimum, I believe that in the course of dismissal employers ought to be candid, reasonable, honest and forthright with their employees and should refrain from engaging in conduct that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive. The Court went on to find that a breach of this duty could result in an increase in the notice period that a wrongfully dismissed employee would otherwise be entitled to at common law (Wallace was awarded 24 months notice). Despite the ubiquity of Wallace claims, it is noteworthy that an employee is not entitled to Wallace damages simply because he or she was terminated. Instead, entitlement to Wallace damages arises when the employer s conduct during the course of the termination braches the employer s good faith obligation. When deciding whether to award Wallace damages courts will analyze the following: a) the nature of the employer s bad faith conduct and b) the impact of this conduct on the employee and his or her ability to find alternate employment. Page 3 The Break-Up: Termination of Employment

The Wallace Conundrum Although Wallace damages have been around since 1997 and are now generally a standard feature of plaintiffs Statements of Claim, the application of this form of damages remains problematic and difficult to predict. In the nine years since the Wallace case was decided, the cases in which Wallace damages have been awarded are inconsistent. Unfortunately, the Supreme Court in Wallace did not clarify the precise circumstances entitling an employee to an award of Wallace damages, nor did the Court clarify what length of time should be added to the notice period where Wallace damages are awarded. According to a recent empirical study of the cases conducted by mediator and arbitrator Barry Fisher, the average length of a Wallace extension is 33 per cent of the basic reasonable notice period. Over the course of the intervening years since Wallace, it has become evident that the obligation of good faith and fair dealing created by Justice Iacobucci in Wallace does not mean that evidence of intentional bad faith on the part of the employer is a prerequisite for an award of Wallace damages. In the case of Saunders v. Chateau des Charmes Wines Ltd., [2002] O.J. No. 3990 (Sup. Ct.), Saunders began an action for constructive dismissal after being subjected to a series of confrontational conversations and email exchanges with a vice-president of the company. The court found the vice-president to have acted in a hostile, aggressive, rude, demeaning, intimidating and abusive fashion and found that Saunders was constructively dismissed. The court then extended Saunders notice period by 3 months, holding that although the vice-president had not intended to humiliate or embarrass Saunders, the employee was nonetheless humiliated and embarrassed by the employer s actions and was entitled to Wallace damages. Terminations Gone Wrong Where Wallace Damages Have Been Awarded Wallace damages have been awarded against employers in the following circumstances: Where the employee is blind-sided by a termination which in turn is communicated in a cold and callous manner: George v. Imagineering Ltd. [2001] O.J. No. 4315 (S.C.J.) aff d [2002] O.J. No. 4919 (C.A.) An employee with 22 years of service wanted to work part-time after suffering 2 heart attacks. The employee thought he had reached a verbal agreement with his employer to this effect. The employer denied any verbal agreement and claimed instead that at a subsequent meeting the employee agreed to a 1- year term of employment. When the employer confirmed this in writing to the employee the latter was devastated and took the position that he was constructively dismissed. The Court agreed with the employee, finding that the news of the employee s dismissal was sprung upon the employee in a brusquely Page 4 The Break-Up: Termination of Employment

worded letter in a manner that offended the employee s dignity and selfrespect. The employee was awarded 5 months in Wallace damages. Barakett v. Levesque Beaubien Geoffrion Inc [2001] N.S.J. No. 103 aff d [2001] N.S.J. No. 426 (C.A.). An employee with 4 years of service was awarded 17 months (Wallace portion unspecified) after being dismissed without warning or reasons following a merger of the company. The Court found that the cold and impersonal letter of termination, combined with the employer s refusal to discuss any aspect of its decision with the employee or its severance package, as well as the employer s refusal to provide a letter of reference where the employee had discharged his obligations faithfully and honestly, amounted to unfair treatment. The Court added that while the employer might have had legitimate reasons for wanting to keep its actions confidential leading up to the merger, this did not entitle the employer to disregard the human element involved. Where the employee is fired while off on leave: Kaiser v. Dural, a division of Multibond Inc. [2001] N.S.J. No. 352 aff d [2002] N.S.J. No. 249 (C.A.) This employee of 3 years of service was never told that the employer was unhappy with his performance. The employer made the decision to fire the employee 2 months before the employee s heart surgery, but did not actually carry out the termination until the employee was off work recovering from his operation. In addition, the employee was called to a restaurant for the termination meeting and thus was fired in public. The employee received 9 months notice but the Court did not specify how much of the notice award was for Wallace damages. Skoptiz v. Intercorp Excelle Foods Inc. [1999] O.J. No. 1543 (Gen. Div.) An employee who had 10 years of service took sick leave as a result of a back problem. Fifteen months after her injury, she asked to return to work parttime, with a view to returning full-time. The employer refused. When the employee, who understood she was being terminated, requested severance the employer refused this request as well, claiming no severance was owing. The employer insisted the employee s full-time job remained open and that it could not accommodate her return to work on a part-time basis. The Court found that the employer s conduct amounted to a termination of the employee while she was at a particularly vulnerable period in her life (i.e. on disability) and that this was demonstrative of unfair dealing. The employee s notice period was therefore increased from 10 to 12 months. Page 5 The Break-Up: Termination of Employment

Where the termination occurs in front of the employee s colleagues causing the employee unnecessary embarrassment and humiliation: Tanton v. Crane Canada Inc. [2000] A.J. No. 1369 (A.B.Q.B.) A warehouseman with 25 years of service was awarded 2 months of Wallace damages, for a total of 24 months notice, after he was dismissed in a manner not entirely unalike to the bum s rush. The bum s rush treatment included being deliberately left off the coffee break list and being informed, without prior notice or clarification and in the presence of other employees, that he was being moved from an position inside the warehouse to one outside the warehouse. Where the termination is based on trumped-up charges of misconduct and especially where the employee s reputation in the industry is negatively impacted as a result of those charges: Geluch v. Rosedale Golf Assn., Ltd. [2004] O.J. No. 2740 (Sup. Ct.) The general manager of a golf club was dismissed after approximately 12 years service. A board member, after hearing that a former employee who had recently quit had several complaints about the plaintiff, brought those complaints before the Board which in turn voted immediately to dismiss the plaintiff. The next day the plaintiff was hauled out of a staff retirement party and was dismissed in front of several employees without explanation before being escorted out of the building without the offer of out-placement counselling or the provision of a letter of reference. The employer also claimed at trial, although it had never communicated this to the plaintiff, that the latter had abused and sexually harassed staff, improperly charged personal expenses to a club credit card and had taken food and wine without authorization. The employee s reputation in the industry was negatively impacted. The plaintiff was awarded 17 months notice plus an additional two months on account of Wallace damages. Where the employer fails to undertake an investigation to determine cause: Robinson v. Fraser Wharves Ltd., [2000] B.C.J. No. 212 (B.C.S.C.) An employee with 10 years service was fired after being charged by the police with trafficking in narcotics without being afforded the opportunity to explain prior to the discharge. The Court held that even if the police were satisfied with the employee s guilt the employer is not absolved from conducting its own investigation in order to determine whether or not just cause exists. The Page 6 The Break-Up: Termination of Employment

employee was awarded 15 months notice plus an additional 3 months on account of Wallace damages. Where the employer engages in hardball tactics: English v. Alcatel Networks Corp. [2002] O.J. No. 2398 (S.C.J.). Alcatel enticed the plaintiff away from Bell Mobility where he had enjoyed secure and relatively long-term employment only to be terminated 9 months after beginning his new job. The Court found that the termination letter, which provided payment of one weeks salary and an offer of another two weeks if a release was signed, amounted to callous brinkmanship. The Court awarded the employee 6 months notice but the specific amount of Wallace damages was not specified. Where the employer fails to act fairly, reasonably and decently in the manner of termination: Antidormi v. Blue Pumpkin Software Inc. [2004] O.J. No. 3888 (Sup. Ct.) Employee received 2 months Wallace damages on top of 10 months notice when her employment was dismissed only 6 months after she was lured away from another job with the promise of job security at Alcatel. After termination the employer ignored her repeated requests for information about the commissions owing to her, delayed in providing the employee with her T-4 slip and separation papers, failed to participate in the mandatory mediation, did not provide a letter of reference and did not offer any outplacement assistance. The Court found the employer had failed to act fairly, reasonably and decently. The decided cases also demonstrate that Wallace damages may be awarded where: the employee is escorted out of the building in a public display (and security concerns do not warrant this); the employee is prevented from collecting his personal belongings (and security concerns do not warrant this); the employee is embarrassed in front of her colleagues (i.e. the termination occurs in front of them) the employer does not explain the reasons underlying the termination nor the terms of its severance package; Page 7 The Break-Up: Termination of Employment

the employer unreasonably withholds a letter of reference; the employer persists in maintaining its false allegations against the employee until the time of trial; the employer otherwise conducts itself in an unfair manner that shows disregard for the employee s interests (e.g. refusing to cooperate with the employee post termination with regards to monies owing to the employee). II. Best Practices for Terminations of Employment Whether terminating with or without cause, an employer should always invest time and attention to the termination process, in order to avoid or at least minimize the possibility that the employee will later make claims against the employer for aggravated, punitive or Wallace damages. The following is an overview of some best practices to follow when it becomes necessary to terminate an employee s employment. Preparing for the Termination Avoid impulsive dismissals: all terminations of employment should be planned in advance. All pertinent information should be gathered in advance. Relevant documents should be reviewed (i.e. employees length of service and statutory entitlements, etc.) before preparing a separation package. A written notice of termination should be provided in every case, in order to satisfy the statutory requirement to provide written notice. The letter should outline the reasons for the dismissal in a succinct manner. The termination letter should also inform the employee as to the payment of monies owed to the employee up to and including the date of termination, in addition to any conversion privileges with regards to benefits. The employee should also be informed as to the date when benefits will terminate. The employer must consider whether it is appropriate to offer a severance package. If so, the structure of the package needs to be considered. Employers are encouraged to obtain legal advice as this may reduce costs and prevent future litigation. If a severance package is offered, the terms and conditions should be clearly outlined. The severance offer should be made conditional on the employee signing a comprehensive release of the employer (including any directors, officers, employees, etc.) of any further liability regarding employment and termination of employment. Any confidentiality obligation should also be set out. A copy of the release should be included in the severance package. The employee should be informed both verbally and in writing that he/she is free to have the package reviewed by a lawyer. Page 8 The Break-Up: Termination of Employment

The employee should be given time, usually not less than one week, to obtain independent legal advice. If the employer is laying off a number of employees within a short period of time, the employer should review the relevant statutory provisions relating to mass terminations. In Ontario, for instance, special provisions in the Employment Standards Act, 2000 apply when an employer terminates the employment of 50 or more employees within a 4-week period. Where the employer is terminating a number of employees within a short period, the employer may wish to treat the termination/severance package as non-negotiable. The employer may not want to give the impression that it is willing to negotiate with each and every terminated employee. The Termination Meeting The employer should conduct the termination meeting in person. Rehearse the conversation ahead of time. Write your thoughts down in advance to reduce the likelihood of becoming tongue-tied. It is advisable to have 2 members of the management team at the termination meeting (for instance, the employee s immediate supervisor and the Human Resources professional). One person should take the lead and do the talking; the other should take careful notes. If the employer is down-sizing its workforce and terminating a large number of employees simultaneously, it may not be practical to meet with every employee individually. If so, the employer may have to forgo any sort of meeting and rely instead upon the letter of termination or the Form 1 notice under the Employment Standards Act, 2000 (in Ontario). The employer should also consider holding meetings with groups of employees to explain the reason for the terminations and the basics of the separation package. If there is a concern that an employee will respond poorly in the termination meeting, the employer may wish to have an out-placement counsellor available. The counsellor can be introduced the employee at the end of the meeting and accompany the employee while he or she gathers their belongings. If the employee is particularly upset after the meeting, the counsellor should be able to refer the employee to a medical specialist or to the employer s employee assistance program. The jury is still out on the best day in which to hold the termination meeting. Scheduling the meeting later in the week may reduce the risk of distress and provide for better planning. However, some lawyers and human resources professionals believe that by terminating an employee on a Friday you are merely sending him or her home to stew for the weekend. You many want to conduct the meeting towards the end of the day to avoid causing the employee any unnecessary embarrassment when vacating the premises. If possible, you may wish to wait until the majority of the employees have left before meeting with the employee. Page 9 The Break-Up: Termination of Employment

If possible, avoid terminating the employee on her birthday, wedding anniversary or other significant date. Pick a neutral site for the meeting, such as a conference room. Don t hold the meeting in the manager s office because if the employee becomes upset he may not be willing to leave, causing disruption. Conduct the interview in a location away from the eyes and ears of other employees. One human resources publication relates the story of an employee who was fired on bring your son/daughter to work day. The boss came in and fired the employee in front of his son! Obviously, this is not appropriate always treat the employee with dignity. Minimize the inconvenience of the meeting to the employee, i.e., don t terminate the employee in a different city where the employee doesn t have family, friends or professional advisors available for immediate support. The interview itself should be brief and should not last for more than 10-15 minutes. Avoid the following kinds of remarks during the course of the meeting: How s the family? You should get to the point of the meeting without delay. Small talk only delays the blow and any superfluous comments will feed the employee s resentment later on when she relives the conversation. I know how you feel or I m sorry to have to do this Such comments tend to be interpreted by employees as rubbing salt in the wound. Respect the employee and talk business this doesn t mean you have to be cold and distant - but don t rob the employee of his dignity with half-hearted comments. Explain your honest reasons for the termination, show your sincere sympathy, indicate this is a final decision, and bring the meeting to an end. Let me know how I can help Unless you plan on giving the employee a solid reference or you re willing to make calls on his behalf this type of remark undermines the message you ve just delivered. Take all the time you need If you ve made your decision that today is the employee s last day, then stick to it. Don t negotiate with the employee or engage in a debate the decision is made. Don t become angry or hostile you are only increasing your chances of having the employee file a lawsuit against you. Page 10 The Break-Up: Termination of Employment

Avoid any interruptions during the termination meeting. Turn off your cell phone. Review the details of the termination letter with the employee and provide the employee with the original and a copy of the termination letter. Consider offering employee assistance program support or career counselling support for employees who may require such counselling. Since it s generally in the employer s best interest for the employee to find alternate employment as soon as possible, consider providing outplacement counselling even if the employee does not accept the separation package offered at termination. Require the employee to return any company property including credit cards, access cards, and keys. If the employee has use of a company car consider allowing the employee to retain access to the car for a short period to permit her to secure other means of transportation. If so, verify that your insurance carrier will continue to provide coverage for the terminated employee until the car is returned. If the employee does not comply with the instructions to return company property, the employer may be able to obtain an Anton Piller Order. An Anton Piller Order is granted ex parte and can be used by an employer to enter a former employee s residence and search for documents or materials referred to in the order. If the materials or documents are found, the employer may remove them for safe keeping during the normal discovery and trial process. The order can be extremely valuable where an employer has alleged unfair competition against a former employee because the employee has seized confidential material, such as client lists. Allow the employee to return to her office to retrieve her personal belongings. This can be done immediately after the termination meeting in the presence of the outplacement counsellor or the human resources manager. Do not have security staff accompany the employee as this signals that the employee is untrustworthy. The employee should be blocked from computer and system access immediately following notice of termination unless in the presence of company computer personnel. Don t block the employee before the termination meeting, and don t announce expressly or implicitly the employee s departure before the employee has been advised of the termination of his employment. After the Termination Meeting Place notes of what transpired at the termination meeting in the employee s file, including all comments made by the employee during the meeting. Ensure that your payroll staff has properly prepared and provided the employee with her Record of Employment. Page 11 The Break-Up: Termination of Employment

Ensure that employment benefits, such as life or disability insurance and health care are either continued or discontinued in accordance with the termination letter. If benefits are continued, ensure that this is acceptable to your benefits carrier as some carriers do not provide coverage for inactive employees. Ensure that the employee is advised in writing of conversion privileges for group insurance benefits. Announcing the Employee s Departure: Issue a neutral announcement without stating reasons unless a announcement has been agreed to with the employee. Any public announcement of the employee s termination of employment should be made shortly after the employee s departure, and should be brief and to the point. No confidential details regarding the departure should be communicated to other employees, nor should any hint of bitterness or rancour be apparent in the employer s message. It may be advisable to simply state: Jim Smith has left X & Y Company to pursue other activities and Sally Jones will be handling Jim s portfolio until a suitable replacement is found. By betraying confidential information or spreading malicious information about the departed employee the employer is only setting itself up for a subsequent lawsuit. In response to questions from other employees, give answers that are consistent with the announcement. Reference Letters: If the termination is without cause the employer s best interest is to assist the employee in finding other employment. This allows the employee to mitigate her damages and reduces the company s financial exposure for wrongful dismissal. The letter of reference should be truthful and not disingenuous. Some recent court cases have awarded several months of additional salary and damages where a judge finds that a reference should have been provided to a departing employee but wasn t. Avoid defamatory statements or negligent misrepresentations in letters of reference. A letter is defamatory where statements contained therein are false, harm the employee s reputation and are shared with another party. Negligent misrepresentations may be actionable by a third party who relies on them in deciding to hire the employee. If possible, you may wish to obtain agreement from the departing employee as to the contents of the reference letter and the details of what will be communicated to potential employers. Refer all telephone inquiries to one or two designated employees within the company (ideally in the Human Resources Department) who will restrict their comments to the letter of reference. Page 12 The Break-Up: Termination of Employment

Remember honesty is the best policy if you can back up your reference letter, whether the comments contained therein are positive or negative you will assist yourself in avoiding a claim for negligent misrepresentation. Terminations For Cause Special Considerations Terminating an employee s employment for cause can be particularly difficult and stressful. All of the considerations mentioned above apply to a termination for cause, but there are additional, special considerations as well. Preparing for the For Cause Termination: Terminations for cause must be planned in advance. If an employee must be removed from the workplace immediately, suspend the employee with (or in certain circumstances, without) pay pending further investigation. As we have noted above, some case law suggests that employers have an obligation to conduct their own investigations (instead of merely relying on the police to do so where criminal activity is alleged). Before deciding to terminate an employee for cause all pertinent information should be gathered: witnesses should put their statements in writing and relevant documents must be reviewed. In most cases, the employee should be interviewed as part of the investigation, and should be asked to respond to allegations. The termination letter should clearly indicate the employee is being terminated for cause and should outline the grounds for the dismissal in a succinct manner without resorting to inflammatory language or character assassination. If cause is not alleged in the termination letter, the employer will have great difficulty relying on cause allegations later in the process. If the employer has good cause the termination should not come as a surprise to the employee. If performance is the reason underlying the termination, the employee should have been advised clearly and unequivocally some time before the termination decision is made that her performance was in issue. Also, there should be a paper trail documenting the poor performance and showing that the employee has been advised of performance expectations, failure to meet performance expectations, attempts to assist the employee to meet performance expectations, and regular follow-up meetings. Notwithstanding the fact that the employee is being terminated for cause, the employer may wish to provide the employee notice pay and/or severance pay in an attempt to avoid litigation. Any such offer should be made strictly on a without prejudice basis. Where the employer is able to establish good cause and/or does not wish to negotiate a package, the employer s letter of termination should specify the details of the payment of monies owing up to and including the date of termination, and the date as to when benefits will terminate. The employer may Page 13 The Break-Up: Termination of Employment

also wish to state that because the employee is being terminated for cause the employee will not be in receipt of notice and/or severance pay. The For Cause Termination Interview: The termination interview may be particularly uncomfortable where the employee is terminated for cause. It is especially important, therefore, to rehearse the conversation ahead of time. As with any termination, 2 members of the management team should attend the meeting. If the employee has exhibited violent tendencies in the past, or if the employer has legitimate security concerns, it may make sense to have security personnel on the premises and easily accessible. These personnel could be in plain clothes so as to avoid causing the employee any unnecessary embarrassment should their services not be required. The fact that the employee is being terminated for cause does not justify treating the employee in a callous and disrespectful manner and security staff should not be employed as a matter of course. Don t say to the employee if the employee is being terminated for performance reasons: I m sure you re surprised. The employee should not be surprised if she is being terminated because of poor performance. In most cases, a series of progressive disciplinary measures should have already been enacted. Be honest when the employee asks, Why me? you should be ready with a good answer. For example: The last time this incident occurred you were suspended without pay for 3 days. You were advised at that time that if such behaviour occurred again, your employment would be terminated for cause. Require the employee to return any company property including credit cards, access cards and keys. Reference Letters: If the termination is for cause it may not be appropriate to provide a letter. The most the employer may be in a position to do is to provide a letter of employment verification detailing the dates of employment and positions held without commenting on the performance or the reasons for the termination. In certain, generally very limited circumstances, the employer may have an obligation to advise prospective employers about the reason for termination. If the employer is defending a wrongful dismissal lawsuit for cause, the employer should generally not provide a positive letter. Terminating Employees Who Have Abandoned Their Jobs: Sometimes an employee will simply stop showing up for work and will not advise the employer of any reason for the absence. In this situation, the employer should attempt to contact the employee to Page 14 The Break-Up: Termination of Employment

determine whether there is a legitimate reason for the employee s absence from work. If the employer is unable to identify a legitimate reason for the absence, the employer may wish to send a letter of termination to the employee s residence indicating the employee s employment is being terminated for job abandonment. In these circumstances, the employer is not obligated to provide notice pay and/or severance pay. The employer should double-register the letter so as to avoid any subsequent complaint by the employee that she did not receive it. Terminating Employees: Human Rights Risks Our previous overview of the types of situations in which employees have been awarded Wallace damages indicate that employers must be very careful when terminating an employee who might have grounds for a human rights complaint (i.e., when terminating a disabled employee). In such circumstances the employer must be able to demonstrate that the termination was in no way related to the employee s disability, or age, or sex, or any other ground of discrimination prohibited under the relevant legislation. Proper and complete documentation is essential here (i.e. the employer should have a proper paper trail demonstrating the employee s poor performance record if performance was the issue). Employers should be very careful about terminating employees when off on disability or other types of leave. If the employer is engaging in major downsizing, the employer may wish to inform employees on leave that although the employer has terminated a number of employees, the disabled employee s employment will be re-assessed when the employee is deemed fit to return to work. In the case of an employee on a time-limited leave, like pregnancy or parental leave, the employer may wish to advise the employee at some point during the leave that her employment will be terminated on her return to work. In this way the employer will be seen to have treated the employee fairly while the employee is undergoing a vulnerable period, while at the same time the employee know that due to factors beyond the employer s control the employee s job may not be secure upon the latter s return to work. Please note: if an employee on pregnancy or parental leave is advised that his employment will terminate upon his return to work, this does not constitute notice of termination. That is, the employer does not get credit for the time between the employee learning of the termination of his employment and the time his employment actually terminates at the end of his leave. Terminating Unionized Employees: If a collective agreement applies, the employer must be careful to abide by the terms of the collective agreement when carrying out any terminations of bargaining unit members. This includes abiding by requirements for union representation, termination by seniority, and any super-seniority provisions for union stewards. Page 15 The Break-Up: Termination of Employment

Conclusion As the song so memorably says, breaking up is hard to do. However, if you make sure that you re informed about legal requirements and if you prepare appropriately, terminating an employee s employment need not lead to bitter, protracted and expensive legal proceedings. While termination meetings will probably never be pleasurable for anyone concerned, they can be conducted efficiently, respectfully. and in a manner that does not increase an employer s legal liability. Page 16 The Break-Up: Termination of Employment

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Mediation & Arbitration: Getting Results Arbitrator/Mediator Christopher Albertyn Paul Boniferro Joanna Carvalho October 27, 2006 Box 48, Suite 4700 Toronto Dominion Bank Tower Toronto ON M5K 1E6 Canada www.mccarthy.ca

DISPUTE RESOLUTION CONCEPTS negotiation, assisted negotiation, conciliation, mediation, med-arb, arbitration, litigation potential advantages of ADR: more confidential less adversarial more flexible as to timing and process more control by the parties less expensive more expedient

WHY MEDIATION OR ARBITRATION? a) Rule 24.1 of the Rules of Civil Procedure b) Labour Relations Act, 1995 (Ontario) (i) Grievance Arbitration (ii) Collective Bargaining c) Human Rights Code (Ontario) Optional occurs prior to investigation 65% to 70% of mediated cases are settled d) Because it makes sense

SELECTION OF MEDIATOR/ARBITRATOR maintain a current list of mediators/arbitrators candidates with various backgrounds, skills, expertise different candidates for different cases, depending upon the facts, law, strategies and industry at issue review previous decisions on similar issue

NATURE OF CONFLICT Destructive Conflict (Victory / Competitive Based) Tendency to expand and escalate: Number of issues Number of parties Number of principles at stake or their importance The cost of a victory or loss The use of negative behaviour

NATURE OF CONFLICT Constructive Conflict (Creative / Cooperative Based) Foundation of interest-based negotiation as opposed to position-based Narrowed issues Less important issues are tabled or prioritized Parties must be able to see some correlation between their goals One reason for hiring lawyers is to interpose an objective point of view

Sources of Conflict Data(or lack of it) Interests Relationships Values Structures

Sources of Conflict Adversarial v. Non-Adversarial Thinking Adversarial thinking (i) Traditional North American litigation the other side is the enemy Non-adversarial thinking Factors affecting when a Non-Adversarial Approach is Appropriate (ii) (iii) (iv) (v) (vi) (vii) ongoing relationships; nature of the dispute; amount at stake; speed and cost; need for confidentiality; power balance.

COMMUNICATION SKILLS AND TECHNIQUES The better communicator will likely be successful The better communicator is the person who knows when to keep their mind open and their mouth shut Four categories of knowledge What you know What you don t know you know What you know you don t know What you don t know you don t know

Active Listening Allows for the possibility of learning information unknown to you Not merely listening to spoken words but also paying attention to non-verbal cues (for example, facial expression, body language, physical interaction, nervous habit, direction of gaze) One of the keys to active listening is participation Reframe what has been said Use your body to show interest and comprehension Do not just repeat what has been said rephrase it in your own words Demonstrate you have actually heard and have assimilated the information

Proper Questioning Technique Yes and no questions should be used only when you don t want more information, or want to direct or change the flow of communication Avoid should it is a directive Avoid why it is a challenge Use what, when, how, where, who, explain and describe ; then reframe the answers and circle back to make sure nothing is missed

Proper Questioning Technique Reframing has other advantages takes sting out of a negative statement and reroute conversation to positive interest positive phraseology is a powerful tool Goal is to disarm the aggressor peacefully be giving credence to their state of mind if not their position

Do Not Let Emotion Hijack Your Process Feelings and emotions arise faster than logical thought Crafting a precise plan and choosing words carefully is of utmost importance Carefully laid plans can be lost with a careless word Anger has negative consequences Three main techniques to diffuse anger Let the party vent (provided no real damage is or can be done) Take a break and separate the parties Reframe the anger and ask appropriate questions to expose the cause of it

STRATEGIC AND TACTICAL CONSIDERATIONS Start with a goal Establish the goal as early as possible in the process The goal is the mile stone that will tell you when you have achieved the desired result The goal may be changed with good reason, if it supports your interest

STRATEGIC AND TACTICAL CONSIDERATIONS Planning, planning, planning Work backwards from the theory of the case Learn what you need to know Use everything that you know to achieve your goal

BATNA/WATNA Engage in a rigorous analysis of possible outcomes BATNA = Best Alternative to a Negotiated Solution Consider not just benefits but also: Financial costs Time Dislocation of resources Other relevant considerations (e.g., emotional toll) WATNA = Worst Alternative to a Negotiated Agreement Engage in the analysis of the BATNA and WATNA for all parties

SIX KEY CONCEPTS 1. Separate the problems from the personalities 2. Employ an interest-based approach 3. Search for mutually beneficial options 4. Discard the concept of only one right answer 5. Employ objective criteria 6. Know your, and anticipate the other side s, BATNA/WATNA

TYPICAL TACTICS 1. Agenda: a list of the issues or topics to be addressed 2. Fair Offer: based on thorough analysis of the issue 3. False or Unimportant Demands: to distract other side from your real demands 4. Brinkmanship: delay and stall until the outside limit of the established deadline 5. Concessions: make early concessions to the other side 6. Good Cop, Bad Cop: offset being reasonable and fair while co-negotiator stands firm or is unreasonable

TYPICAL TACTICS 7. Questions: ask open-ended questions (why do you say my client is liable?), closed or yes-no questions (are there any witnesses to the incident?), clarifying or leading questions (there is no case support for that head of damage, is there?) 8. Split the Difference: useful when parties are near agreement 9. Trial Balloon: float an idea or position to determine if it will receive support 10. Unrealistic Demand: make an offer, set out a position, or request something that is unreasonable

TYPICAL TACTICS Additional Techniques Anger (feigned or real) Poker face First offer / large demand Car dealer Lack of authority Draftsperson Threats

REACHING SOLUTIONS Focus on non-contentious points first Obtain buy-in to the process and resolutions Adapt Agreement

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McCarthy Tétrault LLP Canadian Immigration Issues for Employers A webinar presentation On September 21, 2004, McCarthy Tétrault presented a live webinar geared to assist participants on a broad range of legal issues relating to immigration. View the webinar to gain important insight into such topics as: Work Permits Business Visitors Skilled Worker Permanent Residence Applications in the Federal System Provincial Nominee Programs (PNP) How to Fill Skill Shortages on a Long-Term Basis Immigration Issues in Québec A Distinct Society Tax Issues for Employers in Canadian Immigration Cases U.S. Immigration Issues for Business Travelers Visit: http://www.mccarthy.ca/pubs/publication.asp?pub_code=1680 VANCOUVER CALGARY LONDON TORONTO OTTAWA MONTRÉAL QUÉBEC LONDON, UK MCCARTHY.CA

Our Immigration Practice Group McCarthy Tétrault s Immigration Group helps companies and individuals by developing effective strategies that take into consideration the legal aspects as well as the personal nature of migration. We have considerable experience providing advice on a wide range of business immigration matters. Members of the group include practitioners with extensive knowledge of immigration-related matters as well as personnel formerly with Immigration Canada. Members of our group assist clients in acquiring temporary status as well as securing and maintaining Canadian permanent residence, Canadian citizenship, and obtaining Canadian citizenship certificates and passports. Together with other practitioners in the firm, our immigration lawyers advise on the employment, custom and tax issues that may arise in transfer situations. We also assist clients in applying for government approval to overcome inadmissibility problems based on health or criminal issues. McCarthy Tétrault s Immigration Group works with immigration authorities to ensure the most efficient processing possible for workers arriving from overseas. Working in collaboration with immigration officials, we will propose arrangements that will meet the expectations of the governments involved. Our Immigration Group s client base is very broad and includes major entertainment and sports companies, leading Canadian companies in the fields of engineering, mining, high tech and financial services. To learn more about our Immigration Practice Group, contact: Calgary Cheryl L. James 403-260-3602 cjames@mccarthy.ca Montréal Martine St-Louis 514-397-5450 mstlouis@mccarthy.ca Toronto Shanon O.N. Grauer 416-601-7664 sgrauer@mccarthy.ca Naseem Malik 416-601-8218 nmalik@mccarthy.ca Vancouver Michael E. Mitchell 604-643-7937 mmitchell@mccarthy.ca VANCOUVER CALGARY LONDON TORONTO OTTAWA MONTRÉAL QUÉBEC LONDON, UK MCCARTHY.CA

Navigating the Minefield: Understanding the Income Tax Rules Applicable to Amounts Paid to Employees Lorraine Allard and Trevor Lawson October 27, 2006 McCarthy Tétrault LLP Box 48, Suite 4700 Toronto Dominion Bank Tower Toronto, ON M5K 1E6 www.mccarthy.ca

Navigating the Minefield: Understanding the Income Tax Rules Applicable to Amounts Paid to Employees Introduction The income tax rules applicable to amounts paid to employees are a minefield in which many an employer has felt lost from time to time. The following is a summary of the income tax rules affecting amounts which are commonly paid to employees, both during employment and upon or following the termination of the employment relationship. Income From Employment 1. What is income from employment? An amount paid to an employee on termination of employment may be either employment income or a retiring allowance for income tax purposes. Amounts paid that are salary or wages owing for periods ending on or before the date of termination (or vacation pay in respect of accumulated vacation leave not taken) constitute employment income. A taxpayer is taxed on employment income pursuant to sections 5 and 6 of the Income Tax Act (Canada) (the ITA ). Subsection 5(1) reads as follows: Subject to this Part, a taxpayer's income for a taxation year from an office or employment is the salary, wages and other remuneration, including gratuities, received by the taxpayer in the year. Section 6 lists specific benefits which must be brought into income as employment income such as board, lodging, personal living expenses, allocations under employee profit sharing plans, employee benefit plan benefits, reimbursements, awards and salary deferral arrangement benefits, among others. 2. What is the tax treatment of income from employment? A taxpayer who is paid an amount which is properly characterized as employment income must include this amount in income. An employer who pays an amount which is properly characterized as employment income must withhold and remit at the normal rate of income tax from such payment and withhold and remit the employee s and employer s contributions to the Canada Pension Plan and Employment Insurance. Page 1 Navigating the Minefield: Understanding the Income Tax Rules Applicable to Amounts Paid to Employees

Retiring Allowance 3. What is a retiring allowance? A retiring allowance is defined at subsection 248(1) of the ITA as an amount received by an employee or by the employee s dependant or relation or legal representative after the employee s death: (a) on or after retirement from an office or employment in recognition of the employee s long service, or (b) in respect of a loss of office or employment of the employee, whether or not received as, on account or in lieu of a payment of, damages or pursuant to an order or judgment of a competent tribunal. 1 Therefore, there must be a retirement or loss of employment. Two key questions to be answered in this regard are: (i) But for the loss of employment would the amount have been received? (ii) Was the purpose of the payment to compensate a loss of employment? Only if the answer to (i) is no and the answer to (ii) is yes will the amount received be considered a retiring allowance. A retirement or loss of office or employment does not include a situation where: (a) the employee is transferred to another office or position with the same or an affiliated employer (except where the employee is retained as a director of a non-public company for nominal compensation), or (b) the employee is re-employed with the same or an affiliated employer pursuant to an arrangement entered into prior to the termination. 2 1 2 See subsection 248(1) of the ITA. See paragraphs 6 and 8 of IT-337R4 (Consolidated) Retiring Allowances (February 1, 2006) ( IT-337R4 ). Canada Revenue Agency ( CRA ) may consider some re-employment scenarios still as a loss of an office or employment, but it is recommended that the employer and the affected employee apply jointly for an advance income tax ruling on the matter. Page 2 Navigating the Minefield: Understanding the Income Tax Rules Applicable to Amounts Paid to Employees

4. What is the tax treatment/what are the withholding rates? A taxpayer who is paid an amount which may be characterized as a retiring allowance must include this amount in income when received. However, the rate of income tax withholding on an amount which qualifies as a retiring allowance is different from the rate of income tax withholding on an amount which does not so qualify. Current withholding rates in Ontario are: Amount of Payment Rate 3 $0 to $5,000 10% $5,001 to $15,000 20% over $15,000 30% In addition, amounts paid as a retiring allowance will not attract Canada Pension Plan 4 or Employment Insurance 5 contribution obligations from either the employee or the employer. The lower withholding rates and the absence of Canada Pension Plan and Employment Insurance contribution obligations may continue to motivate the characterization of an amount as a retiring allowance even though the tax advantages of characterizing an amount as a retiring allowance are slowly disappearing (as discussed at #5.(a)). If the retiring allowance is paid in instalments, each instalment is taxable as it is actually received. (See #8.) The withholding rate for a retiring allowance paid to a non-resident is 25% (or a lower rate provided under the relevant tax treaty.) 6 RRSP 5. What payments can an employer pay directly into a former employee s RRSP without withholding? (a) Rollover of retiring allowance A portion of a retiring allowance which does not exceed an amount equal to (i) plus (ii) below (the eligible portion ) may be rolled over directly into a former employee s RRSP or registered pension plan without withholding (and without need for RRSP contribution room) pursuant to subsection 60(j.1) of the ITA. (i) $2,000 multiplied by the number of years before 1996 (including years before 1989) during which the employee was employed by the employer or a person related to the employer, plus 3 4 5 6 See subsection 103(4) of the ITA Regulations. A retiring allowances is not considered contributory salary and wages under subsection 12(1) of the Canada Pension Plan (Canada) since it does not constitute employment income under the ITA. A retiring allowance is specifically excluded from the definition of insurable earnings under subsection 2(1) of the Employment Insurance Act (Canada) by virtue of paragraph 2(3)(b) of the Insurable Earnings and Collection of Premiums Regulations (SOR/97-33). See subsection 212(1)(j.1) of the ITA. There are situations on which the non-resident withholding tax may be waived. See paragraph 26 of IT-337R4. Page 3 Navigating the Minefield: Understanding the Income Tax Rules Applicable to Amounts Paid to Employees

(ii) $1,500 multiplied by the number of years before 1989 during which the employee was employed by the employer or a person related to the employer but no employer contributions were made on the member s behalf to a pension plan or a deferred profit sharing plan or vested in the employee. 7 A person related to the employer includes, for this purpose, a person whose business was acquired or continued by the current employer and a previous employer if service with that employer is counted in the determination of the employee s pension. Years are calendar years and part years count as full years. 8 Although Form TD2 was once required for this purpose and may still be used, it is no longer required. No other documentation is required to achieve a rollover. (b) Direct RRSP contribution In addition to the portion of the retiring allowance which may be rolled over to the RRSP or registered pension plan (the eligible portion ), withholding is not required in the following circumstances. The payor of a retiring allowance need not withhold on the portion of the retiring allowance which may not be rolled over to an RRSP or registered pension plan (the ineligible portion ) to the extent that the employer pays the amount directly to the employee s RRSP and believes on reasonable grounds that the ineligible portion can and will be contributed by the former employee to his or her RRSP. 9 It is recommended that an employer request that the former employee produce a Notice of Assessment which will indicate the employee s available RRSP contribution room. 10 No documentation is required to achieve this direct contribution. 6. What is the penalty for transferring an amount in excess of the eligible amount and who is liable? The penalty applicable where an amount greater than the eligible portion of a retiring allowance is rolled over to an RRSP or where an amount greater than the amount that can be contributed to an RRSP is paid directly to the RRSP consists of the penalty applicable for failure to withhold on such amount. An employer who fails to withhold from a retiring allowance is liable to a penalty equal to 10% of the amount that ought to have been withheld plus interest at the prescribed rate, compounded on a daily basis, accrued from the 15 th of the month following the month during which the amount was required to be withheld to the earlier of the date the payment is made and April 30 of the following year. For a retiring allowance paid to a non-resident, an employer is liable to pay as tax on behalf of the non-resident the whole of the amount that ought to have been withheld plus interest at the 7 8 9 10 See subsection 60(j.1) of the ITA. See paragraph 22 of IT-337R4. See paragraph 100(3)(c) of the ITA Regulations. See T4001 - Employers Guide to Payroll Deductions (Basic Information). Page 4 Navigating the Minefield: Understanding the Income Tax Rules Applicable to Amounts Paid to Employees

prescribed date, compounded on a daily basis, accrued until the tax which should have been withheld is paid to the Receiver General. However, an employer may recover the tax so paid. 11 The CRA has an administrative position whereby it will apply the 10% penalty to the part of the amount you failed to withhold or remit that is more than $500 but may elect to apply the penalty in cases of fraud or gross negligence. 12 Characterizations of Various Payments 7. What is the characterization of the withholding requirements on the following payments: (a) Wages Wages owing constitute income from employment and will be taxed as such. (b) Vacation pay A payment for accumulated vacation pay constitutes income from employment and will be taxed as such. 13 (c) Payment in respect of accumulated sick leave credits A payment for accumulated sick leave credits qualifies as a retiring allowance and may be taxed accordingly. 14 (d) Bonus payments Bonus payments (including a retention bonus) constitute income from employment and will be taxed as such. 15 (e) Deferred profit sharing plan payments Payments under a deferred profit sharing plan ( DPSP ) are not made by the employer. They consist of distributions from the DPSP trust and are taxed as such. The plan trustee is required to withhold at the normal rate of income tax from such payments. 16 11 12 13 14 15 16 See subsections 227(8), 227(8.3), 227(8.4) and 248(11) of the ITA. See RC4157 - Deducting Income Tax on Pension and other Income, and Filing the T4A Slip and Summary Form. See paragraph 15 of IT-337R4. See paragraph 3 of IT-337R4. See paragraph 15 of IT-337R4. See subsection 147(10) and paragraph 153(1)(h) of the ITA. Page 5 Navigating the Minefield: Understanding the Income Tax Rules Applicable to Amounts Paid to Employees

(f) Employee profit sharing plan payments Payments under an employee profit sharing plan ( EPSP ) are not made by the employer. Members of an EPSP include amounts allocated to them under the EPSP in income on a yearly basis and are generally not subject to tax on distributions from the EPSP trust. 17 (g) Statutory termination payment The CRA has long considered that pay in lieu of notice paid pursuant to employment standards legislation constitutes income from employment as it does not qualify as a retiring allowance. 18 As stated in a technical interpretation Requirements of employment standards legislation are terms of the employment contract and a payment relating to the legislation's minimum notice requirement is therefore also a term of the employment contract 19. In the most recent revision of its interpretation bulletin on retiring allowances, the CRA has stated both that: payments in lieu of earnings for a period of reasonable notice of termination by virtue of the terms of the taxpayer s employment (explicit or implicit) are considered income from employment, 20 and, where a payment of damages arising from the loss of office or employment includes an amount in respect of the period of reasonable notice, this amount will be considered a retiring allowance. 21 Presumably, this means that any amount paid in respect of statutory notice, pursuant to a court order or settlement, qualifies as a retiring allowance. (h) Statutory severance payments Severance pay payable under the Ontario Employment Standards Act, 2000 can be properly characterized as a retiring allowance and taxed accordingly. (i) Pay in lieu of common law notice The CRA has long considered that pay in lieu of common law notice constitutes income from employment as it does not qualify as a retiring allowance. 22 As stated in one technical interpretation The payment is not made to 17 18 19 20 21 22 See subsections 144(3), (6) and (7) of the ITA. This position has been stated many times. For example, see the answer to question 34 at the 1993 Canadian Tax Foundation Conference Round Table, and document #2000-0059975, dated February 8, 2001, from the Financial Industries Division. See document #9801025, dated May 26, 1998 from the Financial Industries Division and document #9919535, dated October 13, 1999 from the Financial Industries Division. See paragraph 14 of IT-337R4. See paragraph 14 of IT-337R4. For example, see document #9801025, dated May 26, 1998, from the Financial Industries Division, document #9624655, dated August 2, 1996, from the Financial Industries Division and paragraph 14 of IT-337R4. Page 6 Navigating the Minefield: Understanding the Income Tax Rules Applicable to Amounts Paid to Employees

recognize the long service of the employee, nor is it made to somewhat compensate the employee for the loss of employment. The payment is made because the employer is required by contract or law to provide a reasonable notice of termination of employment and did not do so. 23 The rationale behind this position appears to be that, if the employee had worked out the notice period, the amounts received during this period would have been employment income. This means that the common practice of characterizing the amounts paid in lieu of the statutory period of notice as employment income and the amounts paid in lieu of the common law period of notice as a retiring allowance does not correspond to the CRA s stated position and may open the payor to reassessment (although the risks of reassessment may be low as we do not believe that a court would necessarily agree with the CRA s position). In the most recent revision of its interpretation bulletin on retiring allowances, the CRA has stated both that: payments in lieu of earnings for a period of reasonable notice of termination by virtue of the terms of the taxpayer s employment (explicit or implicit) are considered income from employment, 24 and, where a payment of damages arising from the loss of office or employment includes an amount in respect of the period of reasonable notice, this amount will be considered a retiring allowance. 25 Presumably, this means that any amount paid in respect of common law notice, pursuant to a court order or settlement, qualifies as a retiring allowance. (j) Contractual payment upon termination The CRA generally considers that payments made upon termination pursuant to a contractual obligation constitute income from employment and should be taxed as such. 26 As stated in one technical interpretation A payment in lieu of earnings for a period of reasonable notice which is made by virtue of the terms of an employment contract (whether implied or explicit) will be treated as employment income and not as a retiring allowance. 27 (k) Payment for general damages There is no distinction made by the CRA or the courts between amounts paid pursuant to a settlement or an award. The tax treatment is the same regardless of how the payment comes about. The CRA considers that damages (be they general, special, aggravated or punitive) awarded for, or paid on account of, loss of self-respect, humiliation, mental anguish, hurt feelings, etc. caused by a loss of employment qualify as a retiring allowance (unless the employee s employment is retained or reinstated) if the payment arises 23 24 25 26 27 See document #2000-0050444, dated November 22, 2000, from the Policy and Legislation Branch. See paragraph 14 of IT-337R4. See paragraph 14 of IT-337R4. See for example document #2003-0021465 dated September 29, 2003 from the Business and Partnerships Division. See document #9801025, dated May 26, 1998 from the Financial Industries Division, document #9919535, dated October 13, 1999 from the Financial Industries Division and paragraph 14 of IT-337R4. Page 7 Navigating the Minefield: Understanding the Income Tax Rules Applicable to Amounts Paid to Employees

from a loss of office or employment. 28 If, however, a human rights tribunal awards an amount for general damages, such amount may be excluded from income and is therefore not taxable. Similarly, if a loss of employment involving a human rights violation is settled out of court, the CRA agrees that a reasonable amount (not exceeding the maximum amount that can be awarded by the human rights tribunal) may be excluded from income and is therefore not taxable at all. Any amount in excess of a reasonable amount will be taxed as a retiring allowance. 29 Also, in a recent technical interpretation, CRA has stressed that for an amount to be exempted from taxation the loss of employment must be clearly due to the contravention of human rights legislation. 30 There are cases where taxpayers, following reassessment, have successfully argued that certain amounts paid coincidentally upon termination of employment were paid as damages in respect of an independent tort, as opposed to being paid in respect of the loss of employment. For example, in Louis-Philippe Bédard (TCC), [1991] 1 C.T.C. 2323, 91 D.T.C. 573 the court found that an amount paid to the taxpayer in addition to the equivalent of six months of salary was paid partly to compensate the taxpayer for defamation suffered at the hands of his former employer. In Sylvia Mendes-Roux (TCC-Informal procedure), [1998] 2 C.T.C. 2274, the court found that half of the amount paid to the taxpayer was in respect of mental distress caused by her former employer s heavy handed treatment of her during her employment. The CRA has recently recognized the possibility that: Where personal injuries have been sustained before or after loss of employment (for example, in situations of harassment during employment, or defamation after dismissal), the general damages received in respect of these injuries may be viewed as unrelated to the loss of employment and therefore non-taxable. 31 The rationale behind the taxation of damages is that if the damages relate to an independent tort (i.e. they do not relate to the loss of employment, although the tort may have been committed during the period of employment), then the damage amount may be non-taxable. Therefore, where it can be shown that amounts are not paid to compensate the taxpayer for general damages caused by the termination of employment itself but rather for general damages suffered during or even after the period of employment caused by something other than the termination of employment, such amounts may be non-taxable. (l) Payment for mental distress 28 29 30 31 See paragraph 11 of IT-337R4 as well as document #2002-0172217 dated January 29, 2003 from the Business and Partnerships Division and document #2002-0121305 dated February 27, 2002 from the Business and Partnerships Division. See paragraph 12 of IT-337R4. See document #2003-0021465 dated September 29, 2003 from the Business and Partnerships Division. See paragraph 12 of IT-337R4. Page 8 Navigating the Minefield: Understanding the Income Tax Rules Applicable to Amounts Paid to Employees

See (k) above. (m) Payment for harassment See (k) above. (n) Monies paid in respect of a human rights complaint See (k) above. (o) Monies paid in settlement of a defamation allegation See (k) above. (p) Damages awarded by a court for wrongful dismissal These damages should qualify either as a retiring allowance or employment income. See (g), (i) and (k) above. (q) Damages awarded by a court for negligent misrepresentation Although we know of no case law or CRA published views dealing with damages awarded by a court for negligent misrepresentation in the employment context, based on the rationale behind the tax treatment of other damage payments, these awards should qualify as a retiring allowance. They could conceivably also be non-taxable, based on the independent tort theory. (r) Damages awarded by a court for mental distress See (k) above. (s) Damages awarded by a court for defamation See (k) above. (t) Damages awarded by a court for punitive damages As indicated in (k) above, the CRA considers that punitive damages awarded for, or paid on account of, loss of selfrespect, humiliation, mental anguish, hurt feelings, etc. caused by a loss of employment qualify as a retiring allowance unless they stem from an independent tort. 32 (u) Damages awarded by a court for aggravated damages 32 See document #2002-0121305 dated February 27, 2002 from the Business and Partnerships Division. Page 9 Navigating the Minefield: Understanding the Income Tax Rules Applicable to Amounts Paid to Employees

As indicated in (k) above, the CRA considers that aggravated damages awarded for, or paid on account of, loss of self-respect, humiliation, mental anguish, hurt feelings, etc. caused by a loss of employment qualify as a retiring allowance unless they stem from an independent tort. 33 (v) Damages awarded by a court for Wallace bad faith damages Although we know of no case law or CRA published views dealing with damages awarded by a court for bad faith damages in the employment context, based on the rationale behind the tax treatment of other damage payments, these awards should qualify as a retiring allowance. (w) Legal fees The reimbursement for legal expenses paid to collect or establish a right to a retiring allowance (including a right to damages for wrongful dismissal), whether such reimbursement is paid to the former employee or to his or her lawyer, are not considered to be part of the damages and therefore do not qualify as a retiring allowance. The former employee must include a reimbursement for legal expenses in income pursuant to paragraph 56(1)(l.1) of the ITA. However, such eligible legal expenses may be deducted under subsection 60(o.1) of the ITA up to the amount of the lesser of the legal expenses and the taxable portion of the retiring allowance. Any portion of such eligible legal expenses which cannot be deducted in the first year may be carried forward and deducted in any of the seven subsequent years to the extent of any further retiring allowance received by the former employee. 34 Not only does a reimbursement for legal expenses not qualify as a retiring allowance but it does not constitute remuneration from which tax must be withheld at source (and is not reported on any tax slip). 35 Therefore, withholding is not required on such amounts. 36 (x) Pre-judgment interest Pre-2004 Pre-judgment and pre-settlement interest in situations of wrongful dismissal where the settlement is reached or the court order is issued prior to January 1, 2004, is non-taxable and need not be brought into income. This is based on a CRA administrative position which has been recently revised. Post-2003 33 34 35 36 See document #2002-0172217 dated January 29, 2003 from the Business and Partnerships Division. See paragraphs 25-27 of IT-99R5 Legal and Accounting Fees (December 11, 1998), paragraph 23 of IT-337R4 and paragraph (c) on page 4 of Income Tax Technical News No. 19 dated June 16, 2000. See section 153(1) of the ITA and the definition of remuneration in subsection 100(1) of the ITA Regulations and document #2002-0119865 dated February 7, 2002 from the Business and Partnerships Division. See also document #2003-0022515 dated June 17, 2003 from the Financial Industries Division. Page 10 Navigating the Minefield: Understanding the Income Tax Rules Applicable to Amounts Paid to Employees

Pre-judgment and pre-settlement interest in situations of wrongful dismissal where the settlement is reached or the court order is issued after December 31, 2003 will be taxable as interest income 37. The former employee will be required to include this amount in income but the paying employer is not required to withhold on this amount. The paying employer will, however, be required to report the amount of pre-judgment interest on a T5 slip. Please note, however, that pre-judgment and pre-settlement interest paid in respect of retroactive workers compensation awards retains its character as a non-taxable payment. (y) Interest paid after the date of settlement Post-judgment and post-settlement interest in situations of wrongful dismissal must be brought into income and qualifies as a retiring allowance. 38 (z) Out-of-pocket expenses CRA has opined that special damages for out-of-pocket expenses (e.g. cost of having a resume typed, reimbursement of tuition fees when the training is primarily for the benefit of the employee) arising from an employee s retirement or loss of employment will be treated as a retiring allowance and taxed as such 39. (aa) Payment in consideration of giving up right to reinstatement CRA has expressed the view that an amount received for giving up the right to reinstatement is taxable as a retiring allowance. 40 Although there is no tax case law directly on point, the rational in the Merrins case also suggests that the receipt of a payment in consideration of giving up a right to reinstatement (whether under human rights legislation, the Canada Labour Code or discharge grievance arbitration) is likely to be treated as a retiring allowance and taxed as such. 41 37 38 39 40 41 See paragraph 12(1)(c) of the ITA as well as document #2003-0038025 dated October 6, 2003 from the Financial Industries Division based on CRA s position released at the 2003 CTF Conference and document #2004-0060321E5 dated February 13, 2004 from the Business and Partnerships Division. The CRA s administrative position was confirmed in Issue 30 of the Income Tax Technical News dated May 21, 2004. See paragraph 12 of IT-396R Interest Income (May 29, 1984) and document #2003-0021465 dated September 29, 2003 from the Business and Partnerships Division. See for example document #9925615 dated October 19, 1999 from the Business and Publications Division and document #2003-0022515 dated June 17, 2003 from the Financial Industries Division. See document number 2004-0067181I7 dated June 15, 2004 from the Business and Partnerships Division. See Merrins v. Minister of National Revenue, [1995] 1 C.T.C. 111 (FCTD) in which a taxpayer filed a grievance, after being laid off, seeking reinstatement for breach of the collective bargaining agreement s seniority provisions. The arbitrator had awarded the taxpayer a lump sum amount which the taxpayer contended was a payment made in consideration for the extinguishment of his right to have the grievance arbitrated. The Court rejected this argument and treated the payment as a retiring allowance as a result of the connection between the loss of employment and the receipt of the payment. Justice Pinard stated at paragraph 5 that Had there been no loss of employment, there would have been no grievance, no settlement, no award and, therefore, no payment of the sum to the plaintiff. However, in the case of R. v. Plasse, 2000 CarswellNat 2548 (F.C.A.), the Federal Court of Appeal held, in a wrongful dismissal action, that in a settlement encompassing both a repayment of lost wages and a renunciation of a right to reinstatement, the amount paid in respect of the renunciation of a right to reinstatement did not constitute earnings Page 11 Navigating the Minefield: Understanding the Income Tax Rules Applicable to Amounts Paid to Employees

(bb) Payment in consideration of agreeing to a restrictive covenant Payments in consideration, or partial consideration, for a covenant that refers to what an employee is, or is not, to do after the termination of employment will be brought into the employee s income, as employment income, pursuant to paragraph 6(3)(e) of the ITA. Any excess paid over the consideration for the covenant may, however, qualify as a retiring allowance as long as it meets all other criteria. 42 (cc) Debt forgiveness or in-kind transfer Debt forgiveness or an in-kind transfer (such as the transfer of a company car) can qualify as a retiring allowance in the same way as can a cash payment. However, there is no withholding required where a retiring allowance consists of the forgiveness of a debt or an in-kind transfer unless part of the retiring allowance is paid in cash in which case withholding on the full amount of the benefit (i.e. cash and non-cash portion) is required on the cash portion 43. Method of Payment 8. If a payment in respect of loss of employment is made as a periodic payment, is it taxed at the rate of the global amount or of each periodic payment? (a) Salary Continuation and Pre-Retirement Leaves Since a retiring allowance can be paid in instalments, the fact that more than one payment is being made is not determinative in and of itself. Where lump sum or instalment amounts are paid which are treated as employment income for purposes of computing EI premiums, CPP benefit accruals and/or benefit accruals under a registered pension plan 44, such amounts do not qualify as a retiring allowance. Therefore, where the employee is on salary continuation and the amounts paid to him or her during this period are dealt with as described above, such amounts do not qualify as a retiring allowance because he or she is not yet considered to have terminated employment. 45 42 43 44 45 for the purposes the Employment Insurance Act (Canada). It should be noted, however, that the issue in this case was not the proper characterization of a payment for tax purposes and that the tax authorities and the tax court might not reach a similar conclusion in determining whether a payment made for the renunciation of a right to reinstatement should be taxed as a retiring allowance or not. See paragraph 3 of IT-196R2 Payments by Employer to Employee (November 23, 1981). See document #9620485 dated August 21, 1996 from the Business and Publications Division and document #9406560 dated March 21, 1994. Please note, however, that in document #9620485, CRA opined that an amount cannot be recharacterized as a retiring allowance solely by reason of the fact that the settlement of the debt only occurs upon termination of employment without cause. See paragraph 17 of IT-337R4. See paragraph (b) on page 4 of Income Tax Technical News No. 19 dated June 16, 2000. Page 12 Navigating the Minefield: Understanding the Income Tax Rules Applicable to Amounts Paid to Employees

Similarly, where the employee is on a pre-retirement leave (in which case all the indicia of employment described above continue to exist) the amounts paid to him or her during this period do not qualify as a retiring allowance. 46 (b) Early Retirement Incentive Plans The CRA considers that payments received under an early retirement incentive plan qualify as a retiring allowance because the purpose of the plan is to eliminate the employee s office or employment. 47 (c) Anticipatory Payment A payment that otherwise qualifies as a retiring allowance is not re-characterized as employment income just because it is paid before the actual termination of employment. There must be evidence that the loss of employment, however, is not speculative or contingent and that the severing of the employment relationship will occur on a specific date. 48 9. What is the penalty for getting it wrong? (a) Failing to deduct and remit See 6. above. Allocation of Settlement Amounts 10. What should employers be careful of when allocating settlement funds? How does the amount of each claim affect allocation if at all? Amounts allocated as a retiring allowance should be supported by the facts and the allocation clearly documented. In other words, there has to be a rational connection between the claim and the allocation. If a claim is made for a non-taxable payment based on an independent tort, this payment should not reduce the amount otherwise payable for the loss of employment (i.e., statutory and common law pay in lieu of notice) below a reasonable level. The CRA has indicated that where such a claim is made, the amount of severance that the employee would reasonably be entitled to will be taken into consideration. 49 46 47 48 49 See Serafini v. MNR 89 DTC 653 (TCC). See paragraph 6 of IT-337R4. See paragraph (a) on page 3 of Income Tax Technical News No. 19 dated June 16, 2000. See paragraph 12 of IT-337R4. Page 13 Navigating the Minefield: Understanding the Income Tax Rules Applicable to Amounts Paid to Employees

Conclusion As is evident from the summary above, the income tax rules applicable to amounts paid to employees, both during employment and upon or following the termination of the employment relationship, are detailed and complex. In addition however, when considering these issues, employers should remain mindful of the fact that these rules are subject to change from time to time. It is important to remain up to date regarding these rules, and to consult your legal counsel where necessary, prior to navigating this minefield. Page 14 Navigating the Minefield: Understanding the Income Tax Rules Applicable to Amounts Paid to Employees

VANCOUVER P.O. Box 10424, Pacific Centre Suite 1300, 777 Dunsmuir Street Vancouver BC V7Y 1K2 Tel: 604-643-7100 Fax: 604-643-7900 CALGARY Suite 3300, 421-7th Avenue SW Calgary AB T2P 4K9 Tel: 403-260-3500 Fax: 403-260-3501 LONDON Suite 2000, One London Place 255 Queens Avenue London ON N6A 5R8 Tel: 519-660-3587 Fax: 519-660-3599 TORONTO Box 48, Suite 4700 Toronto Dominion Bank Tower Toronto ON M5K 1E6 Tel: 416-362-1812 Fax: 416-868-0673 OTTAWA The Chambers Suite 1400, 40 Elgin Street Ottawa ON K1P 5K6 Tel: 613-238-2000 Fax: 613-563-9386 MONTRÉAL Suite 2500 1000 De La Gauchetière Street West Montréal, QC H3B 0A2 Tel: 514-397-4100 Fax: 514-875-6246 QUÉBEC Le Complexe St-Amable 1150, rue de Claire-Fontaine, 7 e étage Québec QC G1R 5G4 Tel: 418-521-3000 Fax: 418-521-3099 UNITED KINGDOM & EUROPE 5 Old Bailey, 2nd Floor London, England EC4M 7BA Tel: 44-20 7489-5700 Fax: 44-20 7489-5777 Every effort has been made to ensure the accuracy of this publication, but the comments are necessarily of a general nature, are for information purposes only and do not constitute legal advice in any matter whatsoever. Clients are urged to seek specific advice on matters of concern and not rely solely on the text of this publication.

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Disability and Attendance Management: Statutory Framework and Practical Examples Sunil Kapur and Daniel Pugen October 27, 2006 McCarthy Tétrault LLP Box 48, Suite 4700 Toronto Dominion Bank Tower Toronto, ON M5K 1E6 www.mccarthy.ca

Disability and Attendance Management: Statutory Framework and Practical Examples Introduction 1 The employment relationship is premised on an employee actively providing his/her labour in exchange for wages or other remuneration. Accordingly, employees in both union and non-union workplaces have a duty to be present for work at assigned times. This duty can be modified by the terms of an employment contract (or collective agreement) and legislation, particularly where an employee becomes sick or disabled. There are few areas of labour and employment law that present more problems for employers than that of employee absenteeism and disability. The problem of absenteeism on its own is often simple - absenteeism can result in discipline. However, when the absenteeism is caused by an employee s disability various issues arise which make dealing with absenteeism considerably more complex, particularly in the context of the duty to accommodate as provided for in the Ontario Human Rights Code (the Code ). When an employee cannot meet attendance standards due to disability (or pregnancy, religious beliefs or other grounds protected under the Code) adverse consequences to the employee flowing from this sort of absence may be challenged as being discriminatory and in breach of the Code. In such circumstances, the duty to accommodate may arise and those employers having that duty may have to consider and grant accommodations to the point of undue hardship, by, for example, tolerating periods of absence, not taking certain absences into account when calculating the accrual of competitive seniority and modifying work duties or schedules in a manner which addresses the absenteeism problem. The duty to accommodate may also result in the employer having to consult with different parties including employees, unions, the Workplace Safety and Insurance Board, ergonomics specialists, insurance companies, and doctors. Below we will be highlighting the statutory framework under which this area of the law is governed in Ontario. We will then review some important terms and concepts and finally provide some relevant and practical examples of scenarios where these issues present themselves. I. Statutory Framework The statutory framework in Ontario is varied and gives rise to rights and obligations for both employees and employers. 1 This paper is based, in part, on previous papers prepared by Lorenzo Lisi, Karen Sargeant and Brian Smeenk of McCarthy Tétrault LLP Page 1 Disability and Attendance Management: Statutory Framework and Practical Examples

Human Rights Code The Human Rights Code prohibits discrimination on a number of prohibited grounds (race, ancestry, place of origin, colour, ethnic origin, citizenship, creed, sex, sexual orientation, age, record of offences, marital status, family status, disability). Disability is broadly defined. (a) any degree of physical disability, infirmity, malformation or disfigurement that is caused by bodily injury, birth defect or illness and, without limiting the generality of the foregoing, includes diabetes mellitus, epilepsy, a brain injury, any degree of paralysis, amputation, lack of physical co-ordination, blindness or visual impediment, deafness or hearing impediment, muteness or speech impediment, or physical reliance on a guide dog or other animal or on a wheelchair or other remedial appliance or device; (b) a condition of mental impairment or a developmental disability; (c) a learning disability, or a dysfunction in one or more of the processes involved in understanding or using symbols or spoken language; (d) a mental disorder, or (e) an injury or disability for which benefits were claimed or received under the Workplace Safety and Insurance Act. (f) Disability has also been interpreted as including alcohol and drug addiction. Employers are prohibited from discriminating against both applicants for employment and employees based on disability, unless the person is incapable of performing or fulfilling the essential duties or requirements of the position because of his or her disability. An employer can only establish that an employee is incapable of performing the essential duties or requirements of his or her position after the employer has met the duty to accommodate the employee to the point of undue hardship. Undue hardship is a difficult standard to meet. Under the Code, the factors most often considered in connection with the duty to accommodate up to the point of undue hardship are costs and health and safety requirements. Examples of the duty to accommodate: (a) Modifying workstation. Page 2 Disability and Attendance Management: Statutory Framework and Practical Examples

(b) Providing special equipment. (c) Rescheduling shifts. (d) Removing more taxing parts of the job. (e) Bundling tasks. (f) Light hours. An employer cannot impose a requirement, qualification or factor that indirectly excludes disabled persons from employment ( Indirect/Constructive Discrimination ) (e.g. a requirement that an employee has a driver s licence discriminates against those who are blind except where the licence is a bona fide occupational requirement). Exceptions apply where the requirement, qualification or factor is reasonable and bona fide in the circumstances, or if the Code specifically permits the discrimination. A requirement, qualification or factor will not be reasonable and bona fide unless the person cannot be accommodated without undue hardship. The Ontario Human Rights Commission has published guidelines setting out its view of an employer s duty to accommodate. It is based largely on the Supreme Court of Canada s decision in the Meiorin 2 case (described below). The Workplace Safety and Insurance Act, 1997 The Workplace Safety and Insurance Act, 1997 provides for the payment of benefits to workers of employers whose activities are covered by the Act. The Act provides for the payment of benefits to workers who suffer a workplace accident or an occupational disease. Employers have a duty to co-operate in the early and safe return to work of an injured worker by: (a) contacting the worker as soon as possible after the injury and maintaining communication during the worker s recovery; (b) attempting to provide suitable employment that is available and consistent with the worker s functional activity and that, when possible, restores the worker s pre-injury earnings; (c) giving the Board such information as the Board may request concerning the worker s return to work; and 2 British Columbia (Public Service Employee Relations Commission) v. BCGSEU [1999] 3 S.C.R. 3 Page 3 Disability and Attendance Management: Statutory Framework and Practical Examples

(d) doing such other things as may be prescribed by regulation. Employees have a duty to co-operate in an early and safe return to work by: (a) contacting his/her employer as soon as possible after the injury occurs and maintaining communication throughout the recovery; (b) assisting the employer, as required or requested, to identify suitable employment that is available and consistent with the worker s functional abilities and that, when possible, restores pre-injury earnings; (c) giving the Board the information the Board requests concerning the worker s return to work; and (d) doing such other things as prescribed by regulation. Reinstatement obligation on the Employer An employer (who regularly employs more than 20 employees) has a duty to reinstate a worker who has been unable to work due to a workplace injury and who, at the time of the injury, had been employed continuously for at least a year. When a worker is medically able to perform the essential duties of the pre-injury employment, the employer is to offer to re-employ the worker in the position held on the date of injury or offer to provide the worker with alternative employment of a nature and at earnings comparable to the worker s employment on the date of injury. When a worker is medically able to perform suitable work (if not the pre-injury employment) the employer is to offer the worker the first opportunity to accept suitable employment that becomes available. The employer is to accommodate the work or the workplace to the worker to the point of undue hardship. The obligation to re-employ continues until the earlier of: (a) two years from the date of injury. (b) one year after the Board notifies the employer that the worker is medically able to perform his or her essential duties of the pre-injury employment. (c) or the date the worker reaches 65. 3 3 Although the provincial government is amending the definition of age in the Code to delete the upper age restriction of 65 (thus ending mandatory retirement) this does not apply to the Workplace Safety and Insurance Act Page 4 Disability and Attendance Management: Statutory Framework and Practical Examples

Failure to Comply An employer that fails to comply with its pre-employment obligations is subject to a penalty not exceeding the amount of the worker s net average earnings during the year preceding the injury. The Board may also make payments to the worker for a maximum of one year. Employment Standards Act, 2000 ( ESA ) Emergency Leave, Family Medical Leave, Declared Emergency Leave Employees can take up to 10 days of unpaid emergency leave per year for the following reasons: (a) The employee s personal illness, injury, medical emergency. (b) The death, illness, medical emergency, or an urgent matter that concerns the employee s spouse; a parent, step-parent, or foster parent of the employee or the employee s spouse; a child, step-child or foster child of the employee or employee s spouse; a grandparent, step-grandparent, grandchild or stepgrandchild of the employee or of the employee s spouse; the spouse of a child of the employee; the employee s brother or sister; or a relative of the employee who is dependent on the employee for care or assistance. An employer may require an employee who takes emergency leave to provide evidence reasonable in the circumstances that the employee is entitled to the leave. Employees can take up to eight weeks (in full week increments) of unpaid family medical leave 4 to provide care for or support various family members including the employee s spouse, parent, child, sibling, grandparent, in-laws, nephews, nieces, foster parents, and a person who considers the employee to be like a family member. This leave is available to employees who must provide care or support to a family member who has a serious medical condition with a significant risk of death occurring within 26 weeks. Employees may be entitled to a leave of absence without pay if the employee will not be performing the duties of his or her position because of an emergency declared under section 7.0.1 of the Emergency Management and Civil Protection Act 4 Though employment insurance benefits are available Page 5 Disability and Attendance Management: Statutory Framework and Practical Examples

Occupational Health and Safety Act An employer has an obligation to take every precaution reasonable in the circumstances for the protection of a worker. Consequently, an employer has a duty to ensure that an employee who is at work or returning to work can perform his or her duties safely. II. Application of the Statutory Framework The Duty to Accommodate In Meiorin the Supreme Court of Canada defined expectations employers must meet in fulfilling their duty to accommodate. A discriminatory standard can be justified if it is a bona fide occupational requirement ( BFOR ). The test for establishing a standard as a BFOR is stringent as the employer must prove that: (a) It adopted the standard for a purpose or goal that is rationally connected to the function being performed; (b) It adopted the standard in good faith, in the belief that it is necessary for the fulfillment of the purpose or goal; and (c) The standard is reasonably necessary to accomplish its purpose or goal, in the sense that the employer cannot accommodate persons with the characteristics of the claimant without incurring undue hardship. Questions that a court, tribunal or arbitrator will ask where an employer is being judged on whether it has met the duty to accommodate: (a) Has the employer investigated alternative approaches that do not have a discriminatory effect, such as individual testing against a more individually sensitive standard? (b) If alternative standards were investigated and found to be capable of fulfilling the employer s purpose, why were they not implemented? (c) Is it necessary to have all employees meet the single standard for the employer to accomplish its legitimate purpose or could standards reflective of group or individual differences and capabilities be established? (d) Is there a way to do the job that is less discriminatory while still accomplishing the employer s legitimate purpose? Page 6 Disability and Attendance Management: Statutory Framework and Practical Examples

(e) Is the standard properly designed to ensure that the desired qualification is met without placing an undue burden on those to whom the standard applies? (f) Have other parties who are obliged to assist in the search for possible accommodation fulfilled their roles? The duty to accommodate requires that reasonable measures by the employer be taken. These measures must be highly individualized and tailored to meet the particular circumstances and needs of the disabled employee. The duty to accommodate is a two way street the employee is required to: (a) Make his/her needs known to the best of his/her ability. (b) Participate in discussions regarding possible accommodation solutions. (c) Answer questions or provide information regarding relevant restrictions or limitations (including information from doctors where appropriate and needed). Absenteeism Culpable Absenteeism vs. Non-culpable absenteeism (Innocent Absenteeism). Although each should be treated differently, the end result may be the same if the person is incapable of performing the essential duties of the position. Culpable Absenteeism: inability to fulfill attendance requirements because of factors within the control of an employee: (a) Absent without reasonable excuse (e.g. sleeping in). (b) Absent without leave or permission from the employer. (c) Lateness/tardiness. (d) Failure to call in and report for work. (e) Leaving work without permission. (f) Abuse of emergency leave (e.g. improper medical documentation). Page 7 Disability and Attendance Management: Statutory Framework and Practical Examples

Responses to culpable absenteeism may include oral warnings, written warnings, transfer/demotions, suspensions, or discharge for cause. The concept of progressive discipline should be remembered by the employer. Innocent Absenteeism: inability to fulfill attendance requirements because of factors beyond the control of an employee: (a) Justified absence on medical grounds. (b) Other personal excuses. (c) Statutorily protected absences (e.g. 10 days of emergency leave under the ESA). An employee can usually not be disciplined if poor performance is the result of non-culpable absenteeism. In certain circumstances an employee can be terminated for innocent absenteeism (on a non-disciplinary basis) where (a) the employee s past record of absenteeism is undue or excessive; and (b) there is no reasonable prospect for improvement in the foreseeable future. However, there should be warnings given and the employer must have fully discharged its duty to accommodate short of undue hardship. If no accommodation could permit an employee to return to work, the employer may be able to dismiss for innocent absenteeism. Applying a disciplinary absence policy to a disabled employee without regard for his/her conditions or the possibilities of accommodation may be discriminatory. Request for Medical Information Purpose for request of information To ensure a safe return to work. To address the employee s needs and to confirm the extent of an employee s limitations, restrictions, and capabilities, and make workplace changes accordingly. To balance the employee s privacy and the employer s need for information. What medical information can the employer request? Generally, there is no right to compel disclosure of personal medical information from an employee or a medical professional or require an employee to submit to a medical examination without the employee s express consent. Page 8 Disability and Attendance Management: Statutory Framework and Practical Examples

An employer may require medical information: (a) to verify whether an absence is legitimate, (b) to verify a claim for sick pay or disability benefits, (c) to verify entitlement to workers compensation benefits, (d) to verify fitness to return to work, (e) to ensure the safety of the employee, other employees, clients and the environment, (f) to determine what forms of accommodation might be necessary, (g) to determine the anticipated duration of the accommodation.. What Should an Employer Request and How? An employer should only request medical information about an employee where that information relates to the employer s legitimate interests and is necessary to assess how the employee can or cannot perform legitimate work-related functions. (e.g. to identify the full extent of the individual s job related limitations and capabilities, so that the employer can properly address the employee s needs and identify appropriate accommodation). The request must be fair and reasonable in the circumstances. Medical information can be obtained through a healthcare professional where the employee signs a consent authorizing the release of the medical information to the employer. The healthcare professional can be asked, through the employee, to provide specific information. If the healthcare professional is unfamiliar with the job, the employer should provide the job description or a physical demands analysis. Consent should be express, written and informed. Consent must relate to the information being disclosed. Medical information must be kept confidential. Appropriate collection and use of the medical information Confine the use of the information to that authorized by the collective agreement, employment contract, statute or the employee s consent. Protect the employee s privacy by ensuring that the information is only disclosed to those who need to know it. Ensure that the information is stored securely, taking measures to prevent unauthorized copying, modification, or destruction; the security measures should reflect the sensitivity of the information. 5 5 The Ontario Human Rights Commission has indicated that medical documentation should be kept separate from the person s general corporate or personnel file and maintained in a secure filing system. Page 9 Disability and Attendance Management: Statutory Framework and Practical Examples

Ensure that all employees who are given access to confidential medical information understand their obligation to keep the information confidential. Be especially careful not to base decisions about an employee based on inaccurate or out of date information or consents. Under the Personal Health Information Protection Act, if an employer receives medical information from a health information custodian (e.g. a doctor), the information may only be used or disclosed for the purpose to which the employee has consented. If the purpose is to accommodate the employee, the employer may not then use the information for another purpose without the employee s consent (e.g. insurance purposes). This does not apply if the information is received directly from the employee. Assessing the medical information In assessing the medical information, employers should ask several questions and may consider retaining an expert to review the opinion: (a) Do the doctor and the employee have an established doctor-patient relationship or is there a concern that the employee is doctor-shopping? (b) Does the doctor know the workplace and the employee s duties? (c) Did the doctor respond to the questions asked? (d) Is the doctor s opinion consistent with other information in the employer s possession? (e) Is the doctor qualified to give an opinion, i.e. is the doctor a specialist? Independent Medical Examinations Asking an employee to engage in an independent medical examination may be appropriate: (a) If the employer has concerns or doubts about the medical information provided by the employee, they may ask for another opinion or for an outside expert s assessment. (b) The focus should remain on the functional limitations and abilities for the purposes of accommodation not the condition or nature of the disability. (c) Less invasive methods should first be utilized by the employer to obtain sufficient information (e.g. requesting further or additional details concerning job-related restrictions and abilities). Page 10 Disability and Attendance Management: Statutory Framework and Practical Examples

III. Examples Example #1 An employee is absent for an extended period because of shoulder, back and arm injuries. The employee s regular job involved working on an assembly line. Until very recently, the employee was receiving insurance benefits. One week after the employee s insurance benefits were cut off, he produced a doctor s certificate stating that he was fit to return to his regular work no restrictions. Example #2 An employer had an Attendance Management Policy (AMP) whereby employees were monitored for absenteeism. An absenteeism record in excess of 25 days missed per year triggered a meeting with management. If the employee s rate of absenteeism then continued to exceed this standard, the employer reserved the right to discharge the employee. Over a 10 month period an employee had been off work on 8 separate occasions for 29.75 days. Included in the absenteeism record were 3.75 days missed due to a workplace injury and 2 days missed due to the employee taking family medical leave under the ESA. Example #3 An employer had terminated the employee for excessive culpable absenteeism after progressive discipline. The employee grieved the termination and the matter was settled pursuant to a last chance agreement whereby the employee was reinstated subject to certain conditions contained in the agreement. A provision in the last chance agreement stated that the grievor will be terminated if he is absent for any reason for a total of 10 days in any 3 month period or for a period longer than the company average. The employee returns to work and over the next 3 months misses: 5 days of work as a result of a workplace injury, 5 days of work due to personal reasons, and 7 days of work to attend in drug rehabilitation program. Example #4 The employer gave its employees a monthly attendance bonus if they maintained perfect attendance during the month. In order to discourage only certain types of absences, the bonus plan listed exceptions allowing employees to participate in the bonus plan even if they were absent due to bereavement leave, vacation, workplace injury, jury duty, statutory holidays, medical or legal appointments, and religious commitments. An employee took 3 days of emergency leave under the ESA during an otherwise perfect attendance week. The employee did not receive his monthly attendance bonus and claimed that he should be entitled to the bonus. Page 11 Disability and Attendance Management: Statutory Framework and Practical Examples

Example #5 The employer has a requirement that all employees work from 9:00 a.m. to 5:00 p.m., Monday to Friday. A new employee has approached her supervisor requesting that she be allowed to start work at 8:00 a.m. each day and leave work at 4:00 p.m. each day. This employee is a single mother of two young children, who must pick up her children from daycare before 4:30 p.m. when the daycare closes. It is well known that this employee observes the practices of Orthodox Judaism, which requires that she be home before sunset on Friday nights. In order to accommodate this employee in the manner requested and to ensure that production quotas are met, it would be necessary for the supervisor to ensure that there is someone available to complete her work between 4:00 p.m. and 5:00 p.m. each day. The supervisor is concerned though that accommodating the employee in this manner might be perceived as favouritism and could, therefore, result in poor morale among her co-workers. The supervisor is also concerned that such accommodation could result in a series of similar requests by your other employees. Page 12 Disability and Attendance Management: Statutory Framework and Practical Examples

VANCOUVER P.O. Box 10424, Pacific Centre Suite 1300, 777 Dunsmuir Street Vancouver BC V7Y 1K2 Tel: 604-643-7100 Fax: 604-643-7900 CALGARY Suite 3300, 421-7th Avenue SW Calgary AB T2P 4K9 Tel: 403-260-3500 Fax: 403-260-3501 LONDON Suite 2000, One London Place 255 Queens Avenue London ON N6A 5R8 Tel: 519-660-3587 Fax: 519-660-3599 TORONTO Box 48, Suite 4700 Toronto Dominion Bank Tower Toronto ON M5K 1E6 Tel: 416-362-1812 Fax: 416-868-0673 OTTAWA The Chambers Suite 1400, 40 Elgin Street Ottawa ON K1P 5K6 Tel: 613-238-2000 Fax: 613-563-9386 MONTRÉAL Suite 2500 1000 De La Gauchetière Street West Montréal, QC H3B 0A2 Tel: 514-397-4100 Fax: 514-875-6246 QUÉBEC Le Complexe St-Amable 1150, rue de Claire-Fontaine, 7 e étage Québec QC G1R 5G4 Tel: 418-521-3000 Fax: 418-521-3099 UNITED KINGDOM & EUROPE 5 Old Bailey, 2nd Floor London, England EC4M 7BA Tel: 44-20 7489-5700 Fax: 44-20 7489-5777 Every effort has been made to ensure the accuracy of this publication, but the comments are necessarily of a general nature, are for information purposes only and do not constitute legal advice in any matter whatsoever. Clients are urged to seek specific advice on matters of concern and not rely solely on the text of this publication.

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Labor v. Labour: Similarities and Differences Between U.S. and Canadian Employment Law David C. Hagaman, Brian P. Smeenk and Sarah Armstrong October 27, 2006 Box 48, Suite 4700 Toronto Dominion Bank Tower Toronto ON M5K 1E6 Canada www.mccarthy.ca

WRONGFUL DISCHARGE 2 USA At will employment New concept Exceptional cases CANADA implied common law contracts decades of common law every case

ANTI-DISCRIMINATION LAWS 3 USA Title VII of the 1964 Civil Rights Act Age Discrimination in Employment Act (ADEA) Americans with Disabilities Act (ADA) The Equal Pay Act CANADA Provincial and federal human rights codes; Charter of Rights & Freedoms As above; and employment standards statutes As above Pay Equity Act [Ontario]; Federal Human Rights Act

WAGE & HOUR LAWS 4 USA The Fair Labor Standards Act (FLSA) Minimum Wage Overtime Pay Exemptions CANADA Employment Standards Acts [federal and provincial] Minimum wage Hours of work Overtime pay Overtime limitations Holiday pay Vacation pay Termination notice Severance pay etc

EMPLOYEE LEAVE 5 USA The Family and Medical Leave Act (FMLA) CANADA Employment standards statutes Emergency Leave Family Leave Sick leave [some jurisdictions]

UNIONS 6 How a Union Gets Bargaining Rights with an Employer Elections Voluntary Recognition Election Timing and Procedure Unfair Labor Practices Right to Work Laws

HEALTH & SAFETY 7 USA CANADA OCCUPATIONAL SAFETY AND HEALTH ACT (OSHA) OCCUPATIONAL HEALTH AND SAFETY ACT (OHSA)

EMPLOYEE BENEFITS 8 USA The Employee Retirement Income Security Act (ERISA) High degree of regulation CANADA Benefits regulations under employment standards statutes Minimal regulation

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WRONGFUL DISCHARGE The traditional U.S. rule is unless the duration of employment is fixed by an employment contract or agreement, employment is at-will, and a private employer in almost every jurisdiction in the U.S. can terminate a non-unionized employee without notice or cause. This at-will employment rule has been interpreted in many jurisdictions with the axiom that an employer may fire an employee for a good reason, a bad reason, or no reason at all. I. Wrongful discharge. Wrongful discharge is a relatively new concept under U.S. law and encompasses several theories: public policy, contract, and tort. Not all are recognized in every state. The vast majority of wrongful discharge law is created state-by-state with each state s laws having numerous doctrines and exceptions to the general rule of employment at-will. All states have recognized at least some exceptions to the rule of employment at-will. The most common exceptions to the employment at-will doctrine are: A. Public policy cases, such as terminating an employee for filing a workers compensation claim. B. Breach of an express or implied employment contract. C. Breach of an implied covenant of good faith and fair dealing. D. Intentional infliction of emotional distress. E. Tag along common law claims such as: invasion of privacy, assault, battery, fraud, interference with contractual relations, false imprisonment, negligent hiring, negligent retention.

ANTI-DISCRIMINATION LAWS I. Title VII of the 1964 Civil Rights Act (Title VII) protects individuals from discrimination on the basis of race, sex, color, national origin and religion. A. Coverage. Title VII covers employers with fifteen or more employees, employment agencies, and labor organizations. The law prohibits discrimination against a job applicant, current employee, or former employee with respect to hiring, firing, compensation, and terms and conditions or privileges of employment. B. Sex Discrimination. 1. In General. A sex discrimination claim under Title VII may be based on either disparate impact or disparate treatment. In a disparate impact allegation, the plaintiff claims that a facially neutral employment practice affects one sex more harshly than the other sex (sex discrimination claims are usually filed by women, but can also be filed by men). In a disparate treatment claim, the plaintiff must show that her employer treated her differently from similarly situated men because of her sex. (These claims can also be filed by men.) 2. Pregnancy Discrimination. Title VII as amended by the Pregnancy Discrimination Act of 1978 (PDA) prohibits employment discrimination on the basis of pregnancy, childbirth or related medical conditions. It is unlawful to discharge or refuse to promote or hire women due to their pregnancy. a. The PDA. The PDA requires that women affected by pregnancy and related conditions be treated in the same manner as other applicants and employees on the basis of their ability or inability to work. A woman unable to work for pregnancyrelated reasons is entitled to disability benefits or such leave on the same basis as employees unable to work for other medical reasons. b. Pre-Employment Inquiries. An employer may not exclusively question female applicants regarding issues of pregnancy, childbearing and childcare. If, however, a bona fide occupational qualification bears directly upon pregnancy, the employer may inquire about pregnancy. c. Related statutes. Employers should remember that the Americans with Disabilities Act (ADA) and the Family and Medical Leave Act (FMLA), as well as the PDA might cover pregnancy and certain medical conditions related to pregnancy. 3. Discrimination Based on Sexual Orientation or Gender Identity. Title VII does not prohibit discrimination based on sexual orientation or gender identity. However, same-sex sexual harassment is illegal and actionable under Title VII.

ANTI-DISCRIMINATION LAWS CONTINUED C. Harassment. 1. In General. Harassment that is based on a protected category, such as race, sex, disability, or age is illegal. Although Title VII does not specifically prohibit sexual harassment, the U.S. Supreme Court held that harassment because of a person s sex is a form of sex discrimination that violates Title VII. 2. Supervisor Harassment. Harassment liability depends on the identity of and status of the harasser, rather than the specific type of harassing conduct. Where a supervisor engages in harassment that results in a tangible employment action, the employer is strictly liable for the conduct. If there is no tangible employment action, the employer is not liable if it can show that it used reasonable care to prevent and promptly correct the harassment and that the complaining party unreasonably failed to take advantage of any preventative or corrective opportunities provided by the employer. a. Supervisor. Person with immediate (or successively higher) authority over the employee. b. Tangible employment action. To establish liability for conduct that results in a tangible employment action, a plaintiff must prove that she is a member of a protected class and that she was subjected to actionable harassment in the form of advances or requests for sexual favors that were a condition for receiving job benefits or that refusal to submit to a supervisor s demands resulted in a tangible job detriment. If the plaintiff meets these requirements, the employer is liable for the supervisor s actions. b. Not all tangible employment actions are adverse employment actions. An adverse employment action is a tangible employment action, such a demotion or termination, which a reasonable person in the plaintiff s position would view as adverse. Remember that not all adverse employment actions are immediately recognizable. Transfers, loss of prestige and diminishment of responsibilities all may qualify as adverse employment actions. 3. Co-worker Harassment. Where the actionable hostile work environment harassment is perpetrated by co-workers, the employer will be held liable for the harassment where it knew or should have known of the harassment and failed to take prompt remedial action reasonably calculated to end the harassment.

ANTI-DISCRIMINATION LAWS CONTINUED a. Prompt Remedial Action. Prompt remedial action is action that is reasonably designed to end the harassment. The employer is not required to take the action the complaining party wants, nor is it always necessary to discharge the alleged harasser. The reasonableness of the employer s actions is determined on a case- by-case basis. 4. Actionable Harassment. Actionable harassment is unwelcome conduct based on a protected category that is offensive to a reasonable person and affects the terms and conditions of employment. In determining whether conduct is actionable, courts will examine the totality of the circumstances, including the nature of the conduct and the context in which the alleged incidents occurred. This determination is fact based and made on a case-by-case basis. D. Race Discrimination 1. In General. Discrimination based on race is prohibited by Title VII of the 1964 Civil Rights Act. 2. Racial Harassment. Courts recognize that racial harassment, like sexual harassment, violates Title VII. Consequently, an employer can violate Title VII by tolerating racially offensive or derogatory language or conduct in the workplace. Violations generally will not be found where the challenged conduct is isolated, where the plaintiff has engaged in similar language or conduct or where the conduct at issue only slightly affects the complaining employee. However, failure to take reasonable steps to prevent a barrage of racist acts, epithets, and threats can make an employer liable if management-level employees knew, or in the exercise of reasonable care should have known about the harassment. II. Age Discrimination in Employment Act (ADEA). The ADEA promotes the employment of older personas based on ability rather than age, prohibits arbitrary age discrimination in employment, and helps employers and employees deal with issues particular to an aging workforce. A. Coverage. The ADEA applies to private employers who employ 20 employees or more as well as to the federal government. The ADEA applies to employees who are American citizens controlled by an American employer. American citizens working abroad for companies not controlled by an American company are not protected. 1. Reverse Discrimination Claims Under the ADEA. The U.S. Supreme Court has held that the ADEA does not prohibit employers from favoring older workers over younger ones, even if the younger workers are in the ADEA s protected age group.

ANTI-DISCRIMINATION LAWS CONTINUED 2. Protected Age Group Under the ADEA. The age of forty is the threshold for discrimination under the ADEA. 3. Hiring Concerns. An employer cannot refuse to hire a person because that person is over forty. 4. Involuntary Retirement. The ADEA prohibits mandatory retirement based on age. There is a bona fide executive exception where the ADEA permits involuntary retirement of employees who are at least sixty-five years old and who for the two-year period immediately before retirement were employed in a bona fide executive or high policy-making position, and are entitled to an immediate non-forfeitable annual retirement benefit. The income level that triggers executive exemption is $44,000. 1. Remedies. A successful plaintiff may be awarded liquidated damages in an amount equal to the back pay she would have earned if the violation is determined to be willful. III. The Americans With Disabilities Act (ADA). The ADA prohibits discrimination against individuals with disabilities in employment and other areas. Title I of the ADA concerns employment. A. Overview. 1. Coverage. Title I of the ADA applies to all employers, public or private, that have fifteen or more employees for each working day in each of twenty or more calendar weeks in the current or preceding year. 2. Definition of Disability. The ADA defines disability as [a] physical or mental impairment that substantially limits one or more of the major life activities of [an] individual. This is a fact-specific and individualized inquiry that has sometimes led to inconsistent results in court decisions. There is no laundry list of per se disabilities. An impairment or diagnosis alone, without a showing of a substantial limitation on the individual s major life activities, will no confer protection under the ADA. a. Physical or mental impairment. A physical or mental impairment is a physiological or mental disorder. Impairment has also been defined as a condition having a diminishing effect on an individual. Temporary conditions, impairments, or transitory injuries have not been considered disabilities. a. Major life activities. The EEOC defines such functions such as caring for oneself, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning and working. The U.S. Supreme Court equates major life activities to tasks central to most people s daily lives.

ANTI-DISCRIMINATION LAWS CONTINUED 3. Qualified Individual With a Disability Under the ADA. The ADA protects a qualified person with a disability. As defined by the ADA, such an individual is an individual with a disability that, with or without reasonable accommodation, can perform the essential functions of the employment position tat such individual holds or desires. a. Essential Functions. EEOC regulations define essential functions to mean the fundamental job duties and does not include marginal functions of the position. The employer has substantial leeway in determining a job s essential functions. B. The Reasonable Accommodation Concept. 1. In General. The ADA requires employers to make reasonable accommodations to give otherwise qualified disabled persons equal opportunity to work. Accommodations do not require the abandonment of expectations to which other employees are held. Accommodations are steps designed to enable the otherwise qualified individual to perform the essential functions of the job. 2. Hiring. The accommodations obligation means employers cannot choose a non-disabled applicant over a disabled applicant simply because the disabled applicant needs a reasonable accommodation to fulfill the requirements of the position. Employers must notify applicants of the obligation to make reasonable accommodations. 3. The Definition of Reasonable. Whether an accommodation is reasonable depends largely on (1) whether it is effective, meaning it actually would enable the individual to perform the essential functions of the job; and (2) whether the employers can demonstrate that making the accommodation would create an undue hardship, in view of cost and degree of disruption associated with the accommodation, compared with the size and type of business, financial strength, and structure of operation. An employer must show objective evidence of undue hardship. C. Posting and Reporting Requirements. 1. In General. The ADA requires no reporting and no affirmative action plans, but it does require posting of notices describing the provisions of the ADA. IV. The Equal Pay Act. The Equal Pay Act of 1963 (EPA), a portion of the FLSA, prohibits sex-based discriminatory rates of pay. Men and women are protected equally. A. Coverage. The Equal Pay Act applies to all employers covered by the FLSA. B. Wage Differences. The EPA permits differences in wages if paid pursuant to: (1) a seniority system; (2) a merit system; (3) a system which measures earning by quantity or quality of production; or (4) a differential based on any other factor than sex.

WAGE AND HOUR LAWS I. The Fair Labor Standards Act (FLSA) governs the minimum wage as well as overtime pay and is the basic wage and hour law under which most problems and litigation arise. The FLSA is administered by the U.S. Department of Labor, Wage & Hour Division (DOL) and sets minimum wage rates, establishes overtime requirements, contains record keeping provisions and imposes child labor standards and penalties. A. Coverage. 2. In General. Coverage of employees under the FLSA is determined by the type of work performed by the individual employee, or by the volume or type of work performed by the employer. An employee is covered if he or she is employed by an enterprise engaged in commerce or the production of goods for commerce. The result is that all employees of a business may be covered under the enterprise concept, but if they are not, one or more employees may still be covered by individual employee coverage. 3. Commerce Defined. Commerce means trade, transportation, transmission, or communication among the several states or between any state and any place outside the state. For an employee to be covered by the FLSA, the employee must engage in interstate commerce on a regular and recurring basis. 4. Enterprise Defined. Enterprise is defined as related activities performed by any person or persons for a common business purpose. Merely establishing and maintaining separate corporations will not avoid FLSA coverage. For most businesses, all employees of the enterprise are covered by the FLSA if two tests are met. The commerce test is met if the following conditions are satisfied: a. First, two or more employees must be engaged in one of the following: interstate or foreign commerce; producing goods for transportation in interstate or foreign commerce; or handling, selling, or otherwise working on goods or materials that have been moved in or produced for interstate or foreign commerce by any person. b. Second, the threshold level for FLSA coverage is gross revenue of $500,000 on a twelve-month basis. Hospitals, nursing homes, schools and public employers are covered regardless of their gross receipts. The dollar test applies to annual gross income or receipts, exclusive of excise taxes at the retail level that are separately stated, and that may be determined by a rolling four-quarter test. It is likely that the Wage & Hour Division will assert coverage based on a an employee handling interstate mail, telephone calls, credit card transactions, or receipt of interstate shipments of merchandise.

WAGE AND HOUR LAWS, CONTINUED B. Minimum Wage. 1. Generally. The current federal minimum wage that went into effect in 1997 is $5.15. The minimum wage requirement does not have to be met through the payment of an hourly wage rate. The law requires only that all compensation for a given workweek average the applicable minimum wage rate if the workweek does not exceed 40 hours. 2. Workweeks over 40 hours. If the hours of work in a week exceed forty, the employee must be compensated for each hour worked and must be paid an additional one-half the employee s regular rate for each hour of overtime worked. Minimum wage and overtime provisions of the FLSA may not be waived through collective bargaining. C. Overtime Pay. 1. Generally/Regular Rate. One and one-half times a covered nonexempt employees regular rate (not merely one and one-half times the minimum wage or hourly rate) must be paid for overtime work. 2. Effect of Bonuses on Regular Rate. Production, incentive, and attendance bonuses generally constitute earnings that must be included in the regular rate computation. Only bonuses that are discretionary with the employer as to the amount and fact of payment and not announced ahead of time, or that are based on a percentage of the employee s total earnings (both straight-time and overtime pay), or are paid under a formal approved profit sharing plan, may be excluded from the regular rate calculation. If not excluded, the bonus payments have the effect of increasing the regular rate, which in turn increases the amount of overtime pay owed. 3. Exemptions from overtime pay. The FLSA provides an exemption from the minimum wage and overtime provision of the Act for salaried persons who are employed in a bona fide executive, administrative or professional capacity, widely known as the white collar exemption. The FLSA also provides an exemption for certain computer occupations within the professional exemption. 4. White Collar exemption. The designation white-collar employee appears nowhere in the FLSA, but the term is recognized shorthand for the general class of executive, administrative, professional, and outside sales employees that are exempt from the overtime requirements of the FLSA. Each of these exemptions have three basic requirements in common: (1) the employee must perform work of an exempt nature, (2) the employee must spend sufficient time performing exempt work or, in the case of highly paid executive, administrative, and professional employees, the exempt

WAGE AND HOUR LAWS, CONTINUED work must constitute that employee s primary duty, and (3) the employee must be paid compensation in a specified form (for example, on a salary or fee basis), and in at least a specified amount. (For example, $500 a week.) This requirement does not apply to the outside sales exemption. a. Executive employees. Executive employees are exempt if they meet the following tests: (a) compensated on a salary or fee basis at not less than $455.00 per week, (b) primary duty is management, (c) customarily directs the work of two (2) or more employees, (d) has authority to hire or fire other employees. b. Administrative employees. Administrative employees are exempt if they meet the following tests: (a) compensated on a salary or fee basis of not less than $455.00 per week, (b) primary duty is the performance of office or non-manual work directly related to management or general business operations of the employer, (c) primary duty includes exercise of discretion and independent judgment with respect to matters of significance. c. Professional employees. These employees are exempt if they meet the following requirements: (a) compensated on a salary or fee basis not less than $455.00 per week, (b) primary duty requires knowledge of an advanced type in a field of science or learning acquired by a prolonged course of specialized intellectual instruction, (c) job required invention, imagination, originality or talent in a recognized field of artistic or creative endeavor. d. Outside sales. The FLSA recognizes the difficulty in controlling the hours of salespersons who spend their time calling on customers and prospects outside the office. The outside sales exemption applies to any employee who is employed for the purpose of and who is regularly engaged away from his employer s place of business in (a) making sales, (b) obtaining orders or contracts for services or for the use of the facilities for which a consideration will be paid by the customer, and (c) whose hours of work are of a nature other than that described in (a) or (b) and do not exceed 20% of the hours worked in the workweek by nonexempt employees of the employer, (d) who is customarily and regularly engaged away from the employer s place of business in performing work. e. Computer professional exemption. The DOL intended, and Congress appears to require that the computer professional exemption should apply to employees who are highly skilled in computer system analysis, programming, or related work in software functions. Job titles that may be encompassed by this exemption include computer programmer, systems analyst, computer systems analyst, applications programmer, applications systems analyst, software engineer, software specialist, systems engineer and system specialist.

WAGE AND HOUR LAWS, CONTINUED This list is not all-inclusive, however, nor are job titles alone determinative of exempt status.

EMPLOYEE LEAVE I. The Family and Medical Leave Act (FMLA). Of the many laws that may apply to an employee s leave of absence, the FMLA has the broadest reach. The FMLA entitles eligible employees to take a total of twelve weeks of leave during a twelve month period due to a serious health condition that makes the employees unable to perform the functions of the position of such employee. When an employee completes FMLA leave, he is generally entitled to be restored to the position occupied before taking that leave. A. Coverage 1. In General. The FMLA applies to private-sector employers who employ fifty or more employees in twenty or more calendar work weeks in the current or preceding calendar year, and who are engaged in commerce or in any industry or activity affecting commerce, including joint employers and successors of covered employers, and all public agencies. 2. FMLA Eligibility. Eligible employees are those who have been employed for at least twelve months (not necessarily consecutive months), have worked for at least 1,250 hours during the twelve-month period immediately preceding the leave of absence, and work in an office or worksite at which fifty or more employees are employed. All employees within a seventy-five mile radius of the particular facility are counted to determine whether an employer has fifty or more employees. Circumstances Under Which Employees May Take FMLA Qualified Leave. An employees may take FMLA leave for any of the following reasons: (1) birth of a child and to care for the newborn child; (2) placement with the employee of a child for adoption or foster care; (3) caring for the employee s spouse, child under the age of eighteen, or child over age eighteen who is incapable of self-care because of a mental or physical disability, or parent (not parent in-law) with a serious health condition; and (4) for a serious health condition that makes the employee unable to perform the essential functions of the employee s job with or without reasonable accommodations. This is intentionally similar to the language in the ADA and employers must remember that when an employee s physical or mental condition is at issue the employer must consider FMLA and ADA obligations.

UNIONS I. How a union gets bargaining rights with an employer. A. NLRB Representation Elections. NLRB representation elections are the most common manner in which a union gains the right to bargain. Generally, a union will ask employees to sign cards stating that they would like to be represented by the union. The union will then present the cards to the employer, and when, as is usually the case, the employer refuses to voluntarily recognize the union as the exclusive collective bargaining representative of the employees, the union will present the cards to the National Labor Relations Board (NLRB) and demand an election. Unions must present cards for at least thirty percent of the employees for their to be a showing of interest significant enough to warrant an election, but they usually aim for a far higher percentage before requesting an election. The Board will then usually order an election for a defined unit of employees. If the union gains a majority of votes of the employees voting, it has the right to represent the defined bargaining unit in the collective bargaining. B. Voluntary Recognition. The employer may also voluntarily recognize the union when the union presents the employer with cards signifying that a majority of the employees would like a union. Failure to adequately ascertain the majority status of the union can cause the employer to be found guilty of unlawfully assisting a union in violation of 8(a)(2) of the National Labor Relations Act (NLRA). C. NLRB Election Timing and Procedure. Once the Union files a petition with the NLRB with cards signed by at least 30% of the employees in the bargaining unit, the path to the election takes one of two courses. First, the parties can agree to the details of the election (date, time, place, scope of bargaining unit). The second approach is that the company and the union can go to a representation hearing and put on evidence regarding the scope of the bargaining unit. The NLRB s Regional Director will then decide the appropriate bargaining unit, and in consultation with the employer and the union will require the employer to abide by other election arrangements that could have been agreed upon in the stipulation (date, time, place of vote). In almost all circumstances the NLRB will conduct a vote no more than 42 days from the filing of the petition. On the day of the vote, employees cast ballots in secret. The NLRB counts the votes at the close of the voting period. In order to receive representation status, a union must obtain a majority of the valid votes cast. Either party may file objections to the conduct of the election but most do so within seven (7) days after the votes have been counted. If neither party files objections to the election, the NLRB will certify the union as the employee s bargaining representative if the union won the election, or the employer as the winner if the union did not obtain a majority of valid votes cast. If the employer is certified as the winner, no union, including the petitioning union, may petition for an election to be held within one (1) year of the date of the valid election. If the union wins the election, a legal presumption exists for a minimum of one (1) year that the union represents a majority of the employees.

WAGE AND HOUR LAWS, CONTINUED D. Unfair Labor Practices. Both the employer and the union are legally required not to commit unfair labor practices as established by federal law. While both the company and the union may commit unfair labor practices, in practical terms U.S. labor laws are written to protect unions and employees who support unions. Some common union unfair labor practices are: acts or force of violence on a picket line, threats to do bodily injury to non-striking employees, threats to employees they will lose their jobs unless they support the union, fining employees for crossing a picket line after they resign from the union, refusing to process a grievance, causing an employer to discharge an employee who opposed the union, refusing to bargain in good faith, engaging in a secondary boycott. Common employer unfair labor practices include threatening employees, interrogating employees, promising employees, fining employees, discharge of employees who support the union, refusing to bargain in good faith. E. Right To Work Laws. The term right to work is a total misnomer in U.S. labor law. The term right to work laws refers to laws passed by individual states that prohibit an employer and a labor union from agreeing to a union contract that contains a provision requiring employees to become members of the union and pay union dues. Section 14(b) of the Taft Hartley Act (a U.S. labor law) provides that individual states may prohibit these union shop agreements in that particular state. Most U.S. states are right to work states. About 15 states primarily in New England, Mid-Atlantic, and the far west including Hawaii, are not right to work states, and in those states companies and unions may force employees to become union members as a condition of employment.

OCCUPATIONAL SAFETY AND HEALTH ACT (OSHA) A. Purpose. 1. In General. The purpose of OSHA is to assure all working people in the U.S. safe and healthful working conditions. OSHA applies to all employment performed in any workplace within the U.S. as long as the employer has one or more employees. 2. Liability. OSHA may find an employer liable even when there is no traditional employeeemployer relationship under the theory of joint employer liability. For example, when an owner of a worksite hires a contractor, the contractor s employees (while not technically employed by the owner) may be deemed the employees of the owner and the owner can be held liable for a violation if she exercised sufficient control over those employees. 3. OSHA Inspections. Initial contact with OSHA is often an inspection. An inspection may be triggered by: (1) a complaint made by an employee or civilian about health or safety concerns at the employer s job site; (2) notification of an accident at the employer s job site; or (3) random selection of an employer job site by OSHA. 4. Violations. After an inspection, a citation may be issued. If a citation is issued, the employer is required to post it for three working days or until the violation is corrected, whichever is longer. An employer must comply with posting requirements even if the employer contests the citation. After receipt of a citation, the employer may request an informal conference to resolve the citation. If the conference does not result in an amicable solution, the employer may timely file a notice of contest and the matter will proceed to litigation. 5. Citations. Citations inform the employer of the specific regulation and standard that was allegedly violated.

EMPLOYEE BENEFITS: THE EMPLOYEE RETIREMENT INCOME SECURITY ACT A. Purpose. 1. In General. The Employee Retirement Income Security Act (ERISA) regulates most employee benefits plans offered by employers to their employees and imposes a number of responsibilities on employers who sponsor employee benefit plans. 2. What is a plan? ERISA governs two classes of employee benefit plans : (1) pension benefit plans, and (b) welfare benefit plans. The U.S. Supreme Court has held that an ERISA plan exists when: (a) an employer establishes an administrative system that requires protracted, individual payments to employees based on a determination of their eligibility to participate in the plan; and (b) the employer must engage in administrative interpretation to determine an employee s eligibility for benefits (for example, whether an employee was terminated for cause ). ERISA does not apply to a one-time, lump-sum severance payment triggered by a single, external event, which requires the employer to do little more than write a check. 3. Pension Plans. ERISA defines an employee pension plan as a plan, fund, or program that provides retirement income to employees or that defers employee income for periods extending to the termination of employment or beyond. 4. Welfare Benefit Plans. An employee welfare plan is defined under ERISA as any plan, fund, or program that provides any of the following types of benefits: medical benefits, sickness or accident benefits, disability benefits, death benefits, unemployment benefits, holiday or vacation benefits, apprenticeship or other training programs, day care centers, scholarship funds, or prepaid legal services. 5. ERISA requirements. ERISA imposes a number of responsibilities on employers. ERISA requires employers to: 1. File annual information returns 2. Provide summary plan descriptions and summary annual reports to participants 3. Retain plan records 4. Satisfy minimum participation, vesting, and benefit accrual requirements 5. Comply with rules regarding the timing and form of benefit payments 6. Observe applicable minimum funding rules 7. Establish written plan documents and hold plan assets in trust 8. Establish and follow reasonable claims procedures 9. Refrain from interfering with an employee s exercise of her rights 10. Provide health care continuation rights to qualifying individuals 11. Comply with limits on preexisting condition exclusions 12. Avoid discriminating against individuals based on their health status 13. Pay premiums to the Pension Benefit Guaranty Corporation for defined benefit plans