Getting a dismissed employee’s last meeting right

by Karen M. Sargeant and Donovan G. Plomp
Spring will soon be upon us, and with it may come the urge to do some “spring cleaning” in the home and the workplace. This might mean ending an employment relationship that isn’t working out.

In Canada, which has no concept of “at will” employment, it’s particularly important that employers handle the delicate issue of termination carefully. Messing it up can increase your liability substantially.

The termination meeting is awkward for everybody. It’s obviously tough on the employee. Facing an employee and telling him that he is dismissed is also difficult and stressful. Emotions can get the better of people. Mistakes get made.

The termination meeting is even more difficult in Canada because in recent years Canadian courts have established the principle that employers have a duty to act fairly and in good faith when dismissing an employee. If an employer fails to do this, a court may extend the period of reasonable notice of termination or pay in lieu of notice to which an employee is entitled. (See Don’t let ‘enhanced’ severance be a surprise during terminations Northern Exposure blog entry.)

What to do
This concept of fairness and good faith in handling a termination is a vague concept that can be confusing for employers. The following are some tips on how employers can meet their duty of good faith and fair dealing when conducting a termination meeting.

• If at all possible, conduct a face-to-face meeting. Avoid informing the employee of the termination by telephone, e-mail, or courier.
• Provide an employee with a letter confirming the termination including the employee’s last day of work and a summary of amounts to be paid to the employee.
• In Canada, employees must be issued a document called a “Record of Employment” upon termination to establish whether they are entitled to government Employment Insurance benefits. The termination letter should confirm that the dismissed employee will be provided with a Record of Employment.
• Inform employees accurately regarding all entitlements they may have upon termination, including insurance conversion and pension entitlements.
• Employment standards laws in most provinces in Canada provide for minimum severance upon termination unless the termination is for “just cause.” Don’t ask an employee to sign a release for amounts to which they are entitled under such laws.
• Have two members of management attend the meeting. One person should take extensive notes of what is said and by whom.
• Hold the meeting in a private location. Minimize attention from other employees to avoid interruptions and embarrassment to the employee being terminated.
• Try to avoid conducting the meeting on or near significant events such as birthdays, weddings, graduations, important religious holidays, or vacations.
• Consider offering outplacement counseling. Consider having outplacement counselors on site to meet with the employee afterwards for difficult terminations or particularly sensitive employees.
• Provide brief reasons for the termination, but don’t engage in a debate. The decision has been made. Arguments should be avoided.
• Don’t allege cause for dismissal if you can’t prove it.
• Keep the meeting short.
• Keep the meeting professional.
• Consider whether you really need to escort the employee off your premises. Where practical, allow the terminated employee to remove personal belongings, speak to co-workers, and leave your workplace in the least embarrassing or humiliating way possible.

In conclusion, follow the Golden Rule: Do unto others as you would have them do unto you.

Health and safety legislative and regulatory responses

by Daniel M. Pugen

Workplace violence has become a hot topic among labor, employment, and health and safety regulators in Canada. Of course, workplace violence is hardly a new phenomenon. Certain workers like police officers have an inherent risk of workplace violence. Also, put enough people in an enclosed area under stressful conditions (i.e., the typical office scenario) and some form of conflict is bound to result.

Whether it’s actual physical aggression or other forms of workplace violence like threats or harassment, some research suggests that such conduct is on the rise.

Some stats
The statistics on workplace violence are revealing.

The Canadian Initiative on Workplace Violence found that 66 percent of employers surveyed reported an increase in aggressive acts in their workplace over the past five years. On February 16, 2007, Statistics Canada released a report titled Criminal Victimization in the Workplace. Some of the findings:

• Nearly one-fifth of all physical and sexual assaults in Canada in 2004 happened in the workplace.
• Of the 356 violent incidents that occurred in Canadian workplaces in 2004, 71 percent were physical assaults.

These statistics, and various high-profile incidents at Canadian and U.S. universities and workplaces, have prompted legislators and regulators to take action. In Canada, the result has been:

• imposing duties and liabilities regarding workplace violence on employers under health and safety legislation; and
• requiring employers to implement standards and practices to reduce the risk of workplace violence.

What is workplace violence?
Workplace violence is not limited to acts of physical aggression. The Canadian Centre for Occupational Health and Safety defines workplace violence as:

• Threatening behavior – such as shaking fists, destroying property, or throwing objects.
• Verbal or written threats – any expression of intent to inflict harm.
• Harassment – any behavior that demeans, embarrasses, humiliates, annoys, alarms, or verbally abuses a person and that is known or would be expected to be unwelcome. This includes words, gestures, intimidation, bullying, or other inappropriate activities.
• Verbal abuse – swearing, insults, or condescending language.
• Physical attacks – hitting, shoving, pushing, or kicking.

The Ontario Ministry of Labour has defined workplace violence as “the attempted or actual exercise of any intentional physical force that causes or may cause physical injury to a worker. It also includes any threats that give a worker reasonable grounds to believer he or she is at risk of physical injury.”

Workplace violence may occur within a traditional workplace or off-site at conferences, work-related social events, or even at a home office via telephone or e-mail.

Regulation of workplace violence
Federal and provincial occupational safety legislation, like the U.S. Occupational Safety and Health Act, contain general prohibitions to ensure that the workplace is safe. These prohibitions may be broad enough to recognize (and impose liability for) violence, threats, or any such conduct that makes the workplace unsafe. Such legislation also usually contains provisions protecting persons who work alone or in remote locations.

More specifically, employees in Quebec are also protected against “psychological harassment” in the workplace. The Canadian provinces of Alberta, British Columbia, Prince Edward Island, and Saskatchewan also have enacted specific provisions on workplace violence in their health and safety laws.

In addition, there is a proposed federal regulation and a proposed amendment to Ontario’s health and safety law. These provisions go further than the general provisions and spell out specific standards and requirements for employers. Under most of these laws employers must generally:

• create a comprehensive workplace violence prevention policy;
• conduct “risk assessments”;
• to the extent reasonably practicable, develop “controls” and “procedures” to eliminate or minimize workplace violence;
• provide training for managers;
• develop procedures for investigating and reporting incidents and calling for assistance when required;
• allow employees to refuse to work where they reasonably believe they may be in danger of workplace violence; and
• maintain various records.

Regulators taking note
Regulators have taken their cue from the increased legislative action.

For example, the Ontario Ministry of Labour, in a joint effort with the Ontario Workplace Safety and Insurance Board, has made workplace violence a priority through their workplace violence prevention initiative.

Health and safety officers have been instructed to make orders and issue directives to employers in certain industries either because there is no workplace violence prevention program in place or because the program is lacking in some way.

Government health and safety officers have broad powers under health and safety legislation to allow them to enter a workplace and perform various activities to enforce compliance with health and safety legislation.

For example, officers may conduct safety audits and inspections. They may also investigate the circumstances surrounding the report of a contravention, work accident, refusal to work, or hazardous occurrence. Offenses can lead to significant fines, and in some cases, imprisonment.

What should employers do?
Unfortunately, workplace violence seems to be on the rise. In addition to the legal risks, incidents of workplace violence take their toll on organizations in other ways. These may include lower worker morale, turnover, blemished company image, and loss of clients.

Some things that employers should consider doing are as follows:

• Review legislative and regulatory requirements to ensure compliance.
• Establish a comprehensive workplace violence policy.
• Undertake the risk assessment and other measures outlined above.
• Offer a confidential Employee Assistance Program to allow employees subject to workplace violence or those with personal problems to seek help.
• Ensure that proper security measures are in place.
• Keep detailed records of any workplace violence, investigation or work refusal.
• In short, as employers you should be vigilant and you should ask your employees to be vigilant.

What to do when U.S. national security, Canadian employment laws clash

by Rachel Ravary

No one can deny that security concerns have taken on monumental proportions in the post-9/11 era. Buzzwords like national security, homeland security, border security, supply chain security, perimeter security, and security threats have become part of our daily vocabulary. National security is also high on the list of priorities of our respective lawmakers.

In the past several years, the U.S. State Department has become increasingly strict in its enforcement of export and transportation controls, most importantly the International Traffic in Arms Regulations (ITAR).

Unfortunately, these controls are often at odds with Canadian employment laws especially those dealing with privacy and human rights – leaving companies whose business depends in whole or in part on trade in ITAR-controlled materials between a rock and a hard place.
What are the issues? Could you be exposed? What is being done to resolve them? How can you limit your risks in the meantime? Those are some of the questions that this week’s blog will address.

Q. What are the ITAR?

A. The ITAR were adopted under the U.S. Arms Export Control Act, which essentially regulates the export of U.S. defense articles and services. Among other things, the ITAR impose strict licensing requirements before any non-U.S. person or company can come into contact with ITAR-controlled materials.

To be granted a license, the person or company must guarantee that no citizen of any one of the 25 “embargoed countries” will be permitted access to or contact with ITAR-controlled materials. This includes individuals who are Canadian citizens but who hold dual nationality with an embargoed country.

Companies who violate the ITAR by failing to restrict access to unauthorized individuals expose themselves to hefty fines, not to mention contractual liability and the resulting damage to their business.

Q. Who must comply with the ITAR?

A. Don’t be misled by the title – the ITAR have a far wider reach than military arms dealers. By definition, the restrictions apply to any company involved in the export or import of U.S. defense-related articles and services. This obviously includes such things as firearms and military equipment, but it also extends to less likely suspects such as protective personal equipment, training manuals and materials, fire control equipment, radiological devices, air and spacecraft, to name a few.

As well, the regulations cover any components, parts, accessories, and technical data used in those articles and any related services, for example, training, design, assembly, testing, repair, and maintenance. To date, the aerospace, transportation, and telecommunications industries seem most affected.

Q. Why should we be concerned by the ITAR?

A. The ITAR controls clash with Canadian human rights laws, which generally prevent an employer from discriminating against an employee on the basis of nationality or country of origin. As well, compliance with ITAR raises issues of infringement of privacy to the extent that employers will have to ask about their employees’ national origins, whether they still hold citizenship in those countries, etc.

Finally, complying with ITAR could put some employers in direct conflict with their employment equity or affirmative action obligations.

Q. Is it possible to comply with ITAR without violating Canadian employment laws?

A. The ITAR have a lot of Canadian critics, and most of them seem to be saying, “No.” More revealing is the position of Canada’s Department of National Defence (DND), which has clearly said that compliance with ITAR restrictions would be inconsistent with the Canadian Charter of Rights and Freedoms and human rights legislation.

Q. How have the Canadian authorities responded?

A. To date, human rights complaints have been filed in Quebec, Ontario, and Manitoba by employees or former employees who were either fired, reassigned, or denied professional opportunities because of the application of ITAR restrictions. Without exception, the provincial human rights commissions have taken the firm position that the ITAR restrictions are discriminatory and violate human rights laws.

Presumably, fear of the larger implications has led all of these cases to be settled before hearing. As such, we don’t have the benefit of any decision on the merits of the issue – in particular whether the application of the ITAR rules could be viewed as a bona fide occupational requirement.

Q. What is being done to resolve the problem?

A. Talks between the Canadian Minister of Foreign Affairs, DND, and the U.S. State Department began in 2006 and have recently resulted in an agreement to allow DND personnel who are Canadian citizens, including dual nationals, to access ITAR-controlled materials on a need-to-know basis, subject to a minimum secret-level security clearance. Discussions are continuing to try to reach a similar arrangement for private Canadian businesses.

Q. What can you do in the meantime?

A. There are no easy answers to this one. While we wait for a politically negotiated arrangement to address the difficulties raised by the ITAR, the best advice we can offer is:

• Clearly identify the parts of your activities that are subject to the ITAR and the affected employees as narrowly as possible.
• Ensure that your U.S. parent or U.S. business partners are aware of the challenges that the ITAR pose with respect to Canadian employees.
• To the extent possible, offer employees work on projects that are subject to the ITAR on a voluntary basis, specifying that ITAR compliance is a condition of the assignment.
• Specifying ITAR compliance as a job requirement at the recruitment stage may discourage some candidates who don’t meet the requirements from applying. However, because human rights and privacy laws generally prohibit you from asking an applicant about national origin, and discrimination protections typically apply to the hiring stage, this approach has its limits.
• Avoid at all costs firing, demoting, or otherwise compromising the professional advancement of an employee as a result of ITAR constraints.
• If problematic situations arise, deal with them on a case-by-case basis, and attempt to resolve them in a way that is satisfactory to the affected employee.

Releases you can rely on

by Joanna M. Carvalho and Donovan G. Plomp

Does your Canadian business ask employees to sign releases in exchange for their severance packages? Imagine if an employee took the severance package, signed the release, then sued your company anyway.

That’s exactly what Douglas L. Titus did to his former employer — and he won at the trial level. Thankfully for employers, the Ontario Court of Appeal overturned this decision.

Facts
Titus was a lawyer with 25 years of experience. He started working for William F. Cooke Enterprises Inc. on March 28, 2000. His employment was terminated 18 months later because of downsizing. At the termination meeting, the employer offered him a severance package of three months salary and some continued benefit coverage in exchange for a release of all claims:

Although Titus was given seven days to consider the severance package offer, he insisted on signing the release right away. The release meant that he released his employer and its related companies from all actions, causes of actions, suits, and complaints arising from his “hiring by, employment with and cessation of employment with the Employer.”

Above the space for the signature, the release concluded with the following words in highlighted capital letters:

I HAVE READ THIS DOCUMENT AND I UNDERSTAND THAT IT CONTAINS A FULL AND FINAL RELEASE OF ALL CLAIMS THAT I HAVE OR MAY HAVE AGAINST THE RELEASEES. I AM SIGNING THIS DOCUMENT VOLUNTARILY.

A few weeks after Titus’ termination, he started a new job, although for less pay.
Approximately six months later, Titus filed a wrongful dismissal suit against William F. Cooke and successfully asked the trial court to set aside the release. The employer appealed the decision to the Ontario Court of Appeal.

Appeal decision
The Court of Appeal found that the trial judge was mistaken in setting aside the release and said that a release should only be set aside if it is “unconscionable.” The court applied the following test for unconscionability:

1. a grossly unfair and improvident transaction;
2. a victim’s lack of independent legal advice or other suitable advice;
3. an overwhelming imbalance in bargaining power caused by the victim’s ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility, or similar disability; and
4. the other party’s knowingly taking advantage of this vulnerability.

Let’s take a look at those four factors:

Grossly unfair transaction. The Court of Appeal found that the employer’s offer of three months’ salary was not grossly unfair even though the trial judge had ultimately determined that the reasonable notice period was 10 months. The Court of Appeal relied on the following reasons:

• the employer had sought legal advice regarding the reasonableness of its offer;
• Titus’ previous stints working for William F. Cooke didn’t serve to increase the reasonable notice period because he had received separate severance payments each of those times;
• upon acceptance of the offer, the money was payable immediately;
• a dismissed employee normally must make efforts to avoid or “mitigate” lost pay and benefits by finding new employment, which Titus wasn’t required to do;
• by accepting the offer, Titus avoided the delay, costs, and uncertainty of litigation;
• although making a reference letter conditional upon acceptance of the offer could support a claim of “unconscionability,” Titus didn’t request a reference letter and obtained new employment quickly; and
• making the severance offer conditional on the release was not grossly unfair because the release contained standard terms and it was fair for the employer to propose such an exchange.

Absence of legal advice. As a senior lawyer with extensive experience in contract and employment law, Titus didn’t want or need legal advice.

Imbalance in bargaining power. The Court of Appeal acknowledged that an employer has more bargaining power than a dismissed employee. Titus claimed the imbalance was magnified because his finances were terrible and his father had just died. The court rejected those two arguments. William F. Cooke had given Titus time to deal with his father’s death. The court found Titus’ evidence regarding financial hardship to be unconvincing.

Exploitation of vulnerability. The court found that William F. Cooke had not taken advantage of Titus’s vulnerability because:

• the employer had sought legal advice before making its offer;
• the offer was not unreasonable;
• the termination was conducted in a private office;
• the termination was conducted in a polite and professional manner;
• the employer gave Titus the opportunity and urged him to take time to consider the offer;
• upon acceptance of the offer, Titus was paid immediately; and
• the employer quickly complied with Titus’s request for payment of the severance money directly into his tax deferred savings plan.

Lessons for employers
When you offer a severance package to an employee, it’s usually prudent to have the employee sign a release in exchange. To help ensure that the release will be enforceable, it will be helpful if you:

• give the employee a reasonable period of time to consider the offer and, if desired by the employee, to seek independent legal advice;
• advise the employee in writing that he or she has the right to seek independent legal advice;
• seek legal advice regarding the reasonableness of the severance package;
• conduct the termination in private;
• conduct the termination in a polite and professional manner;
• don’t make a reference letter conditional upon acceptance of the offer; and
• once an offer is accepted, process payment of severance funds promptly.

Effective and streamlined bargaining preparation

By Daniel M. Pugen

It’s been a cold, wintry start to 2008 (at least in Canada). The cobwebs from New Year’s Eve have passed and New Years’ resolutions already have been broken. As February began, the groundhog indicated six more weeks of winter and Ontario employees were counting down the days until Family Day (February 18, 2008), Ontario’s new statutory holiday.

People are back from vacation and work is in full swing. Phones are ringing, faxes are churning, e-mails are popping up on computer screens. In the midst of the hum of the office as you think of the priorities for the year ahead, it occurs to you that your current collective agreement is set to expire in 2008.

Even if the expiration date is months down the road, it’s important to be prepared and ready for collective bargaining.

Collective bargaining takes up significant time, effort, and resources, and it often seems like you’re just settling one collective agreement before you’re back for the next round. As a result, it’s common that employers start too late to prepare for collective bargaining.

However, to get the best results, it’s important to be prepared as early as possible. What can you do at an early stage to prepare for bargaining? What can you do to streamline the bargaining process?

Below we have set out some tips and strategies that may help to ensure that your next round of collective bargaining goes smoothly (and in your favor), taking into account the Canadian legal regime for bargaining:

1. Do your homework. Consider:

• collecting and reviewing internal data on grievances/arbitrations;
• collecting data with respect to the bargaining unit and relevant cost issues, such as benefits costs, sick leave costs, or overtime costs;
• obtaining a legal review of the existing collective agreement and determining whether anything needs to be revised to reflect changes in legislation;
• gathering and reviewing current information on terms of settlement, including wage increase information, pay and benefit surveys, and the terms of other collective agreements in your industry; and
• reviewing the company’s short-tem and long-term business goals to ensure alignment of bargaining positions and goals.

2. Develop company goals and proposals for bargaining in advance.

3. Review with management all problems and concerns with the existing union agreement.

4. Develop a strategic plan for the bargaining process. To ensure you are ready for any steps the union may take, consider issues such as:

• whether you (not the union) should give notice to bargain;
• the timing of any required notices to government authorities;
• whether conciliation and/or mediation is mandatory prior to a strike or lockout;
• the length of time it takes to schedule conciliation or mediation with the government;
• how likely it is that a strike or lockout will occur (and therefore what contingency plans should be in place and when);
• depending on which province or federal jurisdiction you’re in, whether you can have replacement workers and what the complement of replacement workers could look like;
• whether your organization can continue operations during a strike or lockout;
• the best timing of a strike or lockout to occur; and
• what the labor board processes for dispute resolution will be.

5. Develop a communications strategy to deal with all types of communications, including:

• internally among the management team;
• during bargaining between the two negotiating committees;
• between the employer and the bargaining unit employees; and
• by the employer to third parties such as customers, clients, suppliers, and the media.

6. Prepare for the bargaining process and logistics. Where will the bargaining take place? How many people will be on the negotiating teams? How will employees on the union’s team be released from work? How will they be paid?

It’s most important to recognize that under Canadian labor laws, the required process will vary from one jurisdiction to another. There is variation in terms of notices that must be given to the government at various stages of the bargaining process and whether and when one must seek government assistance for conciliation or mediation prior to a strike or lockout.

These requirements will significantly affect the timing and pace of your bargaining process. You must therefore understand them and build them into your planning process at an early stage.

Maternity benefits – no legal right for adoptive mothers

By Kate McNeill

Across Canada, employment standards laws provide for job-protected maternity leave for pregnant employees and parental leave for parents generally. In addition, the federal government provides financial benefits during these leaves through its Employment Insurance Act (EIA).

The Supreme Court of Canada recently declined to review an appeal of a decision of the Federal Court of Appeal that stated that the right to maternity leave and employment insurance benefits is restricted to biological mothers and excludes adoptive mothers.

Maternity and parental benefits
In the Canadian context, there are two key forms of statutory benefits available to new parents – leaves of absence and employment insurance benefits.

While the two forms of statutory benefits serve different purposes (income replacement versus job protection) and arise out of separate pieces of legislation (the EIA versus employment standards laws), both forms of statutory benefits aim to support individuals who take time off work to fulfill their parenting obligations.

Maternity benefits under the EIA and maternity leave provide income replacement and job protection, respectively, for pregnant employees to support them during the time that they’re unable to work as a result of pregnancy and childbirth.

Parental benefits under the EIA and parental leave, on the other hand, provide income replacement and job protection, respectively, for parents during the time that they’re off work as a result of their child-care obligations immediately after the birth or adoption of a child.

The key distinction between maternity protection and parental protection is that while parental benefits and leave are available to any parent – male or female, adoptive or biological – maternity benefits and leave have in the past been available only to biological mothers.

Case before the court: Tomasson v. Attorney General of Canada
In 1999 and again in 2003, Patti Tomasson and her husband adopted a newborn infant. After the adoption of each child, Tomasson applied to the Employment Insurance Commission for maternity and parental benefits. In both cases, she was granted parental benefits but was denied maternity benefits.

The Commission’s rulings were guided mainly by a decision of the Ontario Court of Appeal in Schafer v. Canada (Attorney General) where the court held that pregnancy and childbirth “constituted an inescapable biological reality” and that compensating biological mothers for not being able to work as a result of the physical condition of pregnancy didn’t constitute discrimination against any other person, including adoptive parents.

Tomasson challenged the Commission’s decision to deny her request for maternity benefits on the basis that the statutory maternity benefits provisions in question had a dual purpose: (1) recovery from the physical elements of pregnancy and (2) bonding/attachment between parent and child.

Tomasson argued that the Commission’s application of the statutory maternity benefits provisions resulted in differential treatment between adoptive and biological mothers, allowing biological mothers to spend more time bonding with their child and providing child care than adoptive mothers.

She further claimed that not allowing adoptive mothers the opportunity to bond with their children was an affront to the dignity of adoptive parents and was unconstitutional and contrary to the Canadian Charter of Rights and Freedoms.

Decision of the Federal Court of Appeal
In lengthy reasons, the Federal Court of Appeal ruled that adoptive mothers aren’t entitled to maternity benefits, for the following reasons.

First, the fact that the EIA contained separate provisions for maternity benefits and parental benefits showed a clear legislative intention to distinguish between the two purposes of physical recovery and child care. Had the maternity benefits provisions been intended to cover familial bonding as argued by Tomasson, there would have been no need to include birth mothers in the scope of the parental benefits provisions.

Further, while the court acknowledged that there is a statutory distinction between biological and adoptive mothers, that distinction was legitimate as it seeks to accommodate the needs of pregnant women as a disadvantaged group in the workforce.

The court stated that if adoptive mothers were entitled to maternity benefits, that would “implicitly constitute a finding that birth mothers deserved no more time off work than adoptive mothers, even if they must go through the burden of pregnancy and childbirth.”

Finally, the court noted that “by reason of the physiological and psychological experience resulting from pregnancy and childbirth, biological mothers are deserving of special benefits so as to accommodate their particular needs.” As a result, the court held that no reasonable adoptive mother would feel “demeaned by the granting of maternity benefits to biological mothers.”

Decision of the Supreme Court of Canada
On January 24, 2008, Tomasson’s legal battle for maternity benefits came to an end when the Supreme Court of Canada refused to hear her appeal of the Federal Court of Appeal’s decision. As a result, the state of the law in Canada remains the same – only biological mothers are entitled to maternity benefits coverage.

Law protects workers’ wages when employer is insolvent

by Kate McNeill and Brian P. Smeenk

Canada’s federal parliament has passed a law to protect workers when their employers become insolvent

A key component of Bill C-12, passed December 14, 2007, is the creation of the Wage Earner Protection Program (WEPP). The WEPP provides statutory wage protection for workers when their employer becomes bankrupt or subject to a receivership and their employment is terminated as a result.

Prior to the WEPP, such workers were at risk of losing wages earned in the weeks before the declaration of bankruptcy or receivership because they were unsecured creditors.

Industry Canada asserts that previously only 21% of the workers affected by a corporate bankruptcy or receivership received payment of their wage claims and that those employees received, on average, a recovery of only 13 cents on the dollar. Others have questioned these statistics since secured lenders often voluntarily agree to the payment of many wage claims.

The WEPP provides those workers with government assurance that upon application to the federal government, they will receive unpaid wages and earned vacation pay for a maximum period equal to four weeks of insurable earnings under the Employment Insurance Act (approximately $3,000).

The federal government, which is the payer under the WEPP, then assumes the worker’s position as a preferred unsecured creditor and continues with the bankruptcy or receivership proceedings in the worker’s stead, leaving the worker free to pursue new employment without the burden of a fight for earned, unpaid wages.

From the perspective of an employer, the WEPP provides the comfort of having its employees taken care of, but it also adds an additional dynamic to the bankruptcy or receivership proceedings in that the federal government becomes a substitute unsecured creditor.

Who qualifies for the WEPP?
The WEPP aims to provide increased protection to employees who are rendered unemployed by the bankruptcy or receivership of their employer and who have unpaid wages and compensation at the time the bankruptcy or receivership is declared.

Not all individuals will qualify for payment through the WEPP. The following groups are not eligible to receive payment through the WEPP:

• individuals who were officers or directors of the insolvent employer;
• individuals who had a controlling interest in the business of the insolvent employer;
• individuals who occupied a managerial position with the insolvent employer; or
• individuals who were not dealing at arm’s length with the individuals listed above.

It would also appear that the WEPP doesn’t assist employees where a company is insolvent but there is no appointment of a receiver or trustee in bankruptcy. Two common examples where this would appear to be the case would be (1) where a business simply shuts down in the absence of such appointment, and (2) where there are wage claims in the course of proceedings under the Companies’ Creditors Arrangement Act.

When will the WEPP begin?
The WEPP only applies to bankruptcies or receiverships on or after the date on which the WEPP comes into force. It’s likely that the WEPP will not be in force for several months in order to allow the Federal Ministry of Human Resources and Social Development adequate time to set it up.

How does the WEPP work?
Prior to the WEPP, many secured creditors voluntarily agreed to allow the debtor employer to satisfy outstanding wage claims ahead of their superior priority claims.
In other instances, however, employees who found themselves out of pocket in the wake of a corporate bankruptcy or receivership were on their own to determine how much they were owed and how they should go about recouping their losses.

There was no positive obligation on the employer, the trustee in bankruptcy, receiver, or any other involved insolvency professional to assist employees in that regard. The WEPP has addressed these practical concerns in the following ways.

Under the WEPP, the employee may apply to the federal government for arrears of wages and compensation earned within the six-month period immediately prior to the bankruptcy or receivership. The employee assigns his or her claim to the federal government to pursue with the insolvent employer.

The WEPP also requires that the trustee in bankruptcy or the receiver proactively assist employees by attempting to determine the value of their wage and/or compensation entitlements and by informing them of their rights and entitlements under the WEPP. Specifically, the legislation requires that the trustee in bankruptcy or the receiver exercise due diligence to:

• identify all employees who are owed wages and compensation within six months of the declaration of bankruptcy or receivership;
• determine the amount of wages and compensation owed to each individual in respect to those six months;
• inform each affected employee about the WEPP and the conditions under which payments may be made;
• provide the federal government with information about what is owed to each employee; and
• inform the government once the trustee or receiver has been discharged from its duties.

Impact of the WEPP
The substantial shift in the amount and kind of information provided to employees, paired with the relative speed with which employees should be able to obtain reimbursement through the WEPP, could have a significant impact on the number of wage- and/or compensation-based claims facing a bankruptcy trustee or receiver.

However, the WEPP may compel many participants in the insolvency process to avoid bankruptcy or receivership proceedings because of the new administrative obligations imposed on bankruptcy trustees and receivers.

For further advice concerning insolvency issues, contact Kevin McElcheran of our Bankruptcy & Restructuring Group and/or Brian Smeenk or Kate McNeill of our Labour & Employment Group.

How will your business respond to Family Day?

by Brian P. Smeenk

A new statutory holiday, Family Day, has been declared in the province of Ontario. It will be celebrated on February 18. In subsequent years, it will fall on the third Monday of each February.

Employers should begin considering how their organization will respond. In particular, employers should begin reviewing existing employment contracts and collective agreements to determine whether they will treat Family Day as an additional holiday for employees.

Many employers already provide employees with more contractual public holiday rights and benefits than required by the minimum employment standards laws of Ontario – the Employment Standards Act (ESA). For example, a number of employment contracts and collective agreements provide “floater days” in addition to the original eight statutory holidays.

Employers should be aware that under the ESA, if the provisions of an employment contract or collective agreement provide a “greater right or benefit” than those provided by the ESA for the same subject matter, the contractual provisions apply and the ESA doesn’t apply. Read the rest of this entry »

Compassionate care benefits for Canadian employees

by Donovan Plomp

In Canada, employees are entitled to certain government-provided benefits under the federal Employment Insurance Act, including “compassionate care benefits.”

The introduction of these benefits in January 2004 prompted almost all provinces and territories to introduce job-protected compassionate care leave in their respective minimum employment standards laws.

Employers in Canada must grant this leave in accordance with applicable provincial or federal law. In this Q&A, we provide answers to some of the more commonly asked questions about compassionate care leave and benefits.

Q. What are “compassionate care benefits”?

A. Money paid under the Employment Insurance Act to qualifying employees. Employees may qualify if absent from work to provide care or support to a gravely ill family member who is at risk of dying within 26 weeks. Unemployed persons receiving other employment insurance benefits can also ask for these types of benefits.

Q. When are compassionate care benefits available? Read the rest of this entry »

Big Brother is here: Ontario’s integrated approach to enforcement

by Daniel M. Pugen

Ontario’s new Regulatory Modernization Act, 2007 may sound like a bland piece of regulatory updating, but it actually contains significant changes to regulatory enforcement processes, including those in the employment field.

Passed by the Ontario legislature on May 17, 2007, and going into effect on January 17, 2008, this law will have real consequences for companies operating in Ontario.

The new law significantly affects the scope of government workplace investigations. It also affects the penalties and sentences for noncompliant employers by broadening the powers of all of the Ontario government’s enforcement branches, including the Ministry of Labour.

Most importantly, the Act permits government departments, or “ministries,” to:

• Share information collected and observations and findings made in the course of their investigations;
• Consider an employer’s compliance record including previous convictions and penalties imposed under other legislation when determining appropriate sentences for legislative violations; and
• Make available to the public the information collected in the course of workplace investigations, including the employer’s compliance record. Read the rest of this entry »