We’ve been talking about implied terms in employment contracts in my courses. These are terms that judges have made up over the years and incorporated into employment contracts. The requirement to give reasonable notice of termination of the contract is the most famous example, but there are loads more that shape a very particular form of employment in Canada.
One issue the comes up is whether statutory requirements in employment standards legislation are implied contract terms. For example, if the requirement to pay overtime pay after say 8 hours per day in employment standards legislation is also an implied contract term, then the employee has the choice of pursuing recovery of that benefit by filing an employment standards complaint before a tribunal or a breach of contract lawsuit in a court. Often it is easier, faster, and cheaper to go the tribunal route, but sometimes it may make sense to seek the benefit in a lawsuit. For example, there are often time limits in employment standards legislation (such as 6 months) by which time an ESA complaint must be made. If an employee misses that time period, the option of suing for the overtime as a breach of contract may come in handy.
This issue was considered recently in a number of BC cases. In Macareag v. E Care Contact Centres, Madam Justice Wedge of the BC Supreme Court refused to follow a line of cases finding that an employee can’t recover statutory benefits in a contract case under the common law. She ruled that the overtime provisions of the employment standards legislation are an implied term of employment contracts, and therefore an employee can recover unpaid overtime by suing the employer for breach of contract. After a thorough summary of the case law, she ruled:
Employment rights of employees conferred by statute are implied by law into employment agreements irrespective of the parties’ subjective intentions.
However, the B.C. Court of Appeal overturned that decision, and the Supreme Court of Canada recently refused leave to hear an appeal of that Court’s ruling. The Court of Appeal ruled that, as a general principle, rights created by a statute do not become implied terms of employment contracts and they are not enforceable in an action for breach of contract unless it is clear that the statute in question permits that to happen. Since the B.C. employment standards legislation provides a comprehensive mechanism to claim overtime pay, there is no basis to include the intent was to permit workers to recover overtime entitlements in a breach of contract lawsuit. This reasoning seems consistent with the Supreme Court’s decision in Seneca College v. Bhaudaria, in which it was ruled that that implied term prventing discrimination in employment should not be read into employment contracts, since the Human Rights legislation provides a comprehensive regime.
Postscript: Thanks to one of the fine lawyers at the Toronto law firm of Heenan Blaikie for pointing out the recent Ontario Court of Appeal decision in Evagalista v. Number 7 Sales, in which the Court ruled that the limitation period in section 96(3) of the ESA for recovery of statutory vacation pay does not apply to a civil suit alleging breach of contract. Although the Court does not actually rule that entitlement to statutory vacation and holiday pay is an implied term of the employment contract, does that appear to you to be the inference?
