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REAL PLEADINGS: MOL Sued for Failing to Inform Employee of Contractual Rights

The Ontario Ministry of Labour offers a service called Employment Standards Information Centre that provides telephone advise to workers who have questions about their entitlements under the Employment Standards Act.   Imagine this scenario:

A long term employee is terminated, and according to his employment contract, is entitled to ‘reasonable notice’.  For someone in a management position with over 20 years’ service, this period of notice will be in the outer high range courts order, which is up in the vicinity of 24 months.  The ESA lists minimum entitlements at the point of termination, and says that this employee would be entitled to at least 8 week’s notice, a small fraction of what the employee’s contract requires.  Yet all the employer gives the employee is this statutory minimum.  The employee calls the MOL info centre to ask about the employer’s provision of only 8 week’s notice, and is told by an MOL advisor that the ESA only entitles him to the 8 weeks, so everything is fine.  Unhappy that the law gives him so little protection, he walks away with the 8 weeks.  He’s never asked to sign a release.

Does the Employee have a legal basis to sue the MOL for not pointing out that the employer was clearly violating his contract by providing him with far less notice than he is contractually entitled?

These are the facts alleged in an interesting lawsuit filed recently in Ontario.  So far, we only have the employee’s side of the story.  For this post, we’ll just assume the allegations are all true and provable.  The case is called Mosey v. Ministry of Labour.  [An additional lawsuit with similar facts and allegations was filed simultaneously].  This is the latest instalment of Read Pleadings.

Check out the statement of claim here.

It’s an interesting read.  The lawsuit is framed in tort law, and in particular negligence.  It seeks damages for the lost esawages the plaintiff would have been entitled to under his contract, had proper reasonable notice been given.  The employer has since gone out of business, so the only chance of recovery is through the MOL.

Discussion

I love this case, because it touches on a series of issues I’ve often addressed on this blog relating to the relationship between statutory notice and contractual notice.  For my employment law students, a quick review:  For at least a century, when an employment contract is silent on how much notice of termination must be given, courts in Canada have implied a term requiring ‘reasonable notice’.  How much notice is reasonable is up to the courts, who apply certain well-known criteria, including most importantly length of service, type of job, age of the employee, and prospects for the employee finding other work.  An employee and employer won’t know for sure what a court will order at the time of the dismissal, but lawyers are able to estimate pretty closely what range the court will fall within.  The employee in this case is asking for 24 month’s notice, which is at the upper end, but certainly in the ballpark of what a court would order for an employee like this.

The ESA, on the other hand, says only what the absolute minimum amount of notice must be in Ontario.  It maxes out at 8 weeks for any employee with service beyond 8 years.  It is beyond doubt that the employee in the lawsuit was contractually entitled to WAY MORE notice than the statutory minimum.  Some employers just ignore the contractual requirement, and give the statutory minimum.  In recent years, courts have been unimpressed with this practice.  ( See, e.g., Dechene v. Dr. Hhurrun Ashraf Dentistry and Brito v. Canac Kitchens (Echlin’s ancillary damages award was overturned, but on the basis that it wasn’t pleaded).  When an employer does this, they are counting on the employee not speaking to a lawyer and/or not bothering to sue to recover their contractual notice entitlement.

In the new lawsuit, the argument is that the MOL had a legal duty to advise the employee that the statutory minimum is just that, a minimum, and that the contract could (and in this case definitely would) require far more notice.  What do you think of that argument?

Keep in mind that Section 5(2) of the ESA says this:

(2)  If one or more provisions in an employment contract or in another Act that directly relate to the same subject matter as an employment standard provide a greater benefit to an employee than the employment standard, the provision or provisions in the contract or Act apply and the employment standard does not apply.

One of the most important contract terms that usually provides a greater benefit to the employee than the ESA standard is the contractual notice term.  On the clear language of s. 5(2), the contract term requiring “reasonable notice” is a far greater benefit than the statutory minimum amount of notice. Therefore, pursuant to s. 5(2), the notice term that applied to the employee in the lawsuit was the contractual notice term (“reasonable notice”), and not the statutory notice term.  If that’s the case, then the advice alleged to have been given is just wrong: the amount of notice required by the ESA is not 8 weeks, but the much longer period of contractual notice.

The only way that this conclusion does not follow is if we pretend that crucial implied terms in employment contracts, like the duty to give “reasonable notice”, don’t really exist when we interpret the words “provisions in an employment contract” in the ESA.  That would mean only the written terms of contracts, terms that employers almost always write to serve their own interests, are recognized whenever the ESA references “terms of the employment contract”.  Should we pretend that lawmakers weren’t aware that the implied term requiring reasonable notice has existed in Canada since the beginning of the 20th century?  I’ve had employer counsel respond to this argument when I’ve made it in the past by saying that common law contractual terms shouldn’t be recognized by statutory tribunals.  I get why that argument would suit employers. I’d make it too if I were employer counsel.

The Legal Fiction Under the ESA That Implied Contract Terms Don’t Exist

I’ve discussed these points before.  The ESA makes multiple references to “the terms of employment contracts“, which on a plain legal reading must include the core, crucial “implied terms of employment contracts” so important in employment law.   Read with s. 5(2), that means the “implied terms” of contracts supplant the ESA standard whenever they provide a greater benefit.  So, the requirement to give “minimum notice” of termination in Section 54 and 57 must be read (because of s. 5(2)) as a requirement for the employer to provide the greater period of contractual notice.   And, since the definition of “wages” in the ESA includes any “remuneration payable by an employer to an employee under the terms of  an employment contract”, the requirement in the ESA to pay wages through the notice period (section 61) must mean pay wages through the contractual notice period, not the lesser period of statutory minimum notice.

On this reading of the ESA, I’ve queried before whether the ESA requires the employer to advise the employee at the point of termination how much reasonable notice they are giving the employee.  That’s not how the Act has been interpreted, though it could be interpreted that way, and there’s good reasons for doing so.  It would force the employer to consider how much notice is ‘reasonable’, to advise the employee of their estimate, and thus to allow the employee to turn her mind to the issue.  It would result in better compliance with employment contracts because it brings the notice term into the open, allowing for a rational discussion of an appropriate range of reasonable notice before lawsuits are filed.  I have also suggested that, on a straight reading of the statute, the ESA already allows an employee to recover ‘reasonable notice’ damages by filing an ESA complaint.  But that has not been argued before as far as I know.   In short, I’m saying the ESA already has language that could dissolve some of the confusion about the relationship of contractual notice and ESA minimum notice, were we inclined to let the ESA do more lifting.  Instead, what we do now is pretend that implied terms don’t exist whenever the ESA refers to “terms of the employment contract”.

Questions For Discussion

Do you think the lawsuit against the MOL has merit?

When the ESA incorporates “terms of the employment contract”, do you think this should be read to include or exclude “implied terms of the employment contract”?

Who benefits (employers or employees) from reading out “implied terms” from the ESA and, in particular, the rule (in s. 5(2) that contract terms that provide  greater benefits replace the ESA standards? 

 

 

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3 Responses to REAL PLEADINGS: MOL Sued for Failing to Inform Employee of Contractual Rights

  1. Fernando Reis Reply

    September 30, 2013 at 6:53 pm

    It is, without question, a problematic situation for this worker if the facts are proven. However, while the lawsuit may have merit, I don’t see it succeeding. This may be a case of “buyer beware”, for lack of a better analogy. I think the ESA should include implied terms on the basis that the legislation is remedial in nature and should be interpreted in a broad and purposive manner. Probably employers have the most to gain if implied terms are read out. Perhaps this is a good example of why an implied term of “good faith” should be read into all individual contracts of employment. If this were so, employers would be less likely to “hide” behind statutory minimums and de upfront with their employees.

  2. Jon Reply

    October 1, 2013 at 5:21 pm

    I’m fairly surprised that the MOL did not have an automated message that says something to the effect of “Please note that the Ministry of Labour cannot provide legal advice” (did they?). They have that when you call any of the courts in Ontario.

    • Doorey Reply

      October 1, 2013 at 6:45 pm

      Jon, or a line that all advisors are instructed to say that notes that any employment standard in the ESA is superseded by a contract term that provides a ‘greater benefit’, about which they should seek independent advise.

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