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Job Candidates Deserve Fair Treatment of Their Applications

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job-search-276893__180I have applied for many jobs in both the private and public sectors in Canada. Some were full-time, most were part-time. Several employers follow a long, drawn-out application process involving several phases: asking for numerous personal and work experience referees;written examinations; telephone calls;  and occasionally requiring flights out of province or drives to other cities for interviews (sometimes at my own expense). Often about eight months later, all contact with the prospective employer stopped. No one returned my calls and I am still waiting nine years later to hear whether I got the job.

For several other part-time, unpaid positions with public agencies, I spent two to three days away from my regular job travelling to Ottawa for interviews. I had to produce four original reference letters from supervisors and colleagues who were asked to comment on a list of things. I brushed up my French, read all I could find on my agency and put my best foot forward. I did not hear from the Government of Canada for almost one more year, which was several months after I read on the website the name of the successful candidate. She was, by the way, the person who was serving in the role on an interim basis. This was the same outcome several other times I applied for jobs. I did not have the impression my application was considered seriously. Rather, I was mere fodder fed into a formal process that always had a pre-ordained conclusion.

My theory is that job competitions ought to be treated in law in the same way as commercial project tendering processes. Employment agencies can be guilty of the same disregard of applicants. Recently, I was in a law recruitment office applying for a part-time volunteer position (lawyers even compete to volunteer). While I was waiting in the reception area, I noticed several paid job postings that tweaked my interest. When the search consultant (who also headed the firm) completed her interview with me about the volunteer position, I asked about a few of the other listed positions. She seemed dismissive. When I pressed her, she admitted without a whiff of impropriety, that the positions had been filled, in some cases years earlier. Her objective was to attract as many interested candidates to her firm, even with the bait of attractive job openings that were no longer active. There is no economic or legal incentive to communicate with applicants and to remove stale postings, even though today, valuable ongoing communication with applicants and maintaining up to date job listings has never been easier to achieve.

On another site, I discovered that more than half of the advertised jobs were not open. The employer or agency left the listings up to continue to attract job seekers to their sites in the same way a realtor would leave the ‘For Sale’ sign standing months after the new buyers have moved in.
I have applied for many jobs listed online with employers and search firms. One job apparently required that applicants live in another city, although this was not stated in the job description. Other jobs had hidden requirements and other employers changed the job requirements after I applied.

The job applicant invests significantly in the search process and always is in a weaker position relative to the prospective employer who controls the process from start to end.Once, I made it to the final round for a part- time appointment to another public agency. I had already gone through months of formal process. I had to sit and pass a challenging written exam at a specific time and place set by the employer. The interview was held out of town at my expense and I juggled to get the time off. The interview was a few silly role play exercises which struck me as odd for a quasi-judicial decision-maker position. Several months later I received the standard rejection letter. This time I followed up and was told I did not get the position because I did not say one specific magic word (“administrative”) during the interview. It was irrelevant that no one prompted me for that word, and that I had used that word all over my cover letter and written exam.
As the economy becomes more challenging for job seekers, uncaring or unaware employers can add to the job searchers’ expectations and wastage of time and resources. What can job applicants do about unresponsive and unfair job recruiting organizations which engage applicants in significant time and efforts to apply for their jobs?

The Problem

Many job hunters are disappointed not only to miss out getting hired for jobs they earnestly seek, but also for the often shoddy treatment at the hands of recruiting employers that seems to have become acceptable. Thirty years ago, most people applied for jobs in person or by mail. Their applications were acknowledged and they were told if they did not get the job. Ironically today, when communications can be more easily facilitated, job seekers seem to be generally less informed about the progress of their applications.

Applying for a job, even online, can take a significant expenditure of time and effort on the part of the applicant. You may have to obtain the permission (or original letters) of several references and customize and focus your resume and cover letter to the specific position. You run the risk that your current employer will learn that you are looking for another employer. There may be aptitude, qualification or judgment exams or other pre-qualification testing. If you make the first cut, you may have to take time off for interviews and sometimes travel to them at your own expense. You have to psychologically prepare yourself for the candidate process and the possibility that you get the job.

What can job applicants do about unresponsive and unfair job recruiting organizations which engage applicants in significant time and efforts to apply for their jobs?The job applicant invests significantly in the search process and always is in a weaker position relative to the prospective employer, who controls the process from start to end. Employers may already have an individual in mind for the job before it is posted. They may want to test the waters of the market to see how many people would be willing to work for them, what their qualifications and experience levels look like and the compensation packages they would accept. Employers can use the hiring process to probe prospective employees for business ideas and competitive intelligence, or develop rosters of candidates for other (and future) opportunities. An employer’s recruitment process can be a sham and most of the time prospective employees would never know.

The law has long recognized that employees have vulnerabilities and corresponding rights during employment and at termination. The law has been less attentive about protecting job applicants during the recruitment process. Most employees who fail to get the job never know the reasons why or what happened in the process. They cannot prove any legal wrongdoing and are not aware of any legal remedy. Most likely, while disappointed, they just want to move on with their lives.

Given my own numerous opportunities to observe how even reputable employers may callously disregard the interests of prospective employees, I believe employers do have a legal duty of good faith and fairness to all job applicants. My theory of a remedy arises from the commercial world of tendering, to which I will now turn.

Theory of a Legal Solution

When a company puts a project, such as the construction of a building, out for tenders and calls for bids to be sent in, a system of fair process for all participants in the tender is required. Individual, private, sealed bids in response to public tender terms are a mainstay of a competitive and efficient commercial marketplace for pricing and allocation of projects. Bidding companies will spend considerable time and money – in some cases a million dollars or more – to develop their bids and adjust their resources and capacities in contemplation of possible success.

In 1981, the Supreme Court of Canada described the law of tendering in contracts in the Ron Engineering decision [http://canlii.ca/t/1lpk8]. Submitting a bid in response to a call for tenders creates a contract with its own rights and obligations apart from the ultimate project contract. This first legal relationship of fair process is called Contract A, which arises when someone submits a valid bid in response to a tender. It is based upon good faith, equal treatment of all bidders, and legal enforceability of actions by both sides. Owners calling for tenders owe all bidders a duty of fairness. Contract A emerges as soon as one makes a proper bid. Owners cannot favour or disfavour any bidder. Contract B is the actual project contract awarded to the winning bidder.

Contract A is breached if the tendering organization calling for bids changes the rules of the competition in a way that unfairly benefits a bidder, enters into closed negotiations with a bidder, does not make a contract with any bidder, accepts a bidder who is not the most qualified, etc. A breach and liability on Contract A can be avoided if the tendering organization makes it clear at the time the tender is published that there are special exceptions to fairness and the rules. This is called a “privilege clause” but it must be upfront in the tender documents so that everyone contemplating putting in a bid knows the process may not be fair or follow the rules. Even then, the courts have said privilege clauses cannot be so broad as to make the whole bidding process meaningless.

Conclusion

One would think employers would want to treat all job applicants like customers – an opportunity to make a positive impression to promote the company and win them over. However, that is not the case and many employers from all sizes and sectors take job applicants for granted and that will need to be tested. It is an extension of the equitable business principles of good faith and fair dealing toward vulnerable individuals. It is a simple principle of commercial morality. The law protects the self-esteem interests of human beings in jobs – this is a small expansion of that thinking.

No one returned my calls and I am still waiting nine years later to hear whether I got the job.My theory is that job competitions ought to be treated in law in the same way as commercial project tendering processes. A complete job application today calls for reflection, organizing time, and effort, much like a bid on a commercial project. Bidders and job applicants invest in the application process and are vulnerable in relation to how their bid is treated by the organization conducting the tender or job recruitment. The Contract A common sense duty of fairness, equality and good faith can be applied to job applicants in the same way it is applied to bidders on construction jobs in the commercial world along the lines of Ron Engineering. If an employer wants to operate by a different playbook, it can indicate its intention to do so by invoking a privilege clause. Then fewer applicants will participate and invest in that process. The result will be self-correcting, as it is in the tendering world. Use of privilege clauses will be reduced in order to attract the best bidders and bids.

Most people will always assess the stakes of wasted efforts on ineffective job recruitments and insensitive employers as too small. They will not seek any legal recourse. On the other hand, if this model is accepted and is enforced by monetary damages, one might expect employers to be more transparent and caring in recruitment campaigns in the future, aware that job recruitment and applications encompass human processes with profoundly human impacts.

Independent Contractor or Employee

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photo of man working on a stack of filesWith business culture evolving, we see increasingly varied means to manage one of the most expensive and critical components of a business – human capital.  Whether a business is motivated to reduce labour costs, streamline available skills, or minimize staff during slower periods, At first blush, it may appear easy to determine whether individuals are employees or ICs.businesses are tending to engage independent contractors (ICs) as compared to employees.  For the purposes of this article, unless otherwise stated, an IC is a self-employed individual, whether incorporated or not.  Note that this discussion may not apply to contracts entered into in Quebec.

How do I know if I am an employee or IC?

At first blush, it may appear easy to determine whether individuals are employees or ICs.  Have they signed an employment contract?  Did they receive a T4 Statement of Remuneration Paid from the payer?  Do they report ‘employment income’ or ‘business income’ on their tax returns?

However, simply examining these factors is not sufficient to determine the actual nature of the relationship.  Interested parties, such as CRA and the courts may look beyond surface indicators to determine the legal nature of the relationship.  They most commonly begin by examining the intention of the worker and the payer.

A common intention can be communicated in a number of ways – for example, in emails, an informal verbal arrangement, or a formal written agreement. If the worker or payer is unsure of the relationship, either party can request a ruling from CRA to have the status determined.  In other words, a contract between the worker and payer may assist in providing support to CRA or a court of a certain intention.  However, quite often these contracts may not be afforded much weight if the nature of the relationship is not consistent with the expressed intention.

That said, a contract can provide another very important role in documenting the terms of the relationship.

After considering the intention of the worker and payer, CRA and the courts normally consider the following five main factors:

1. Control

Control is the ability, authority or right to determine the manner in which a worker performs the work to be done.  More control is generally exercised over employees than ICs.  Control is often the most critical element in these decisions. The degree of control a payer has over a worker may indicate whether the worker is an IC or employee (though the industry may also impact type and degree of control).

It is the right of a payer to exercise this control that should be considered, rather than whether or not they actually exercised it.  More control is generally exercised over employees than ICs.  Control is often the most critical element in these decisions.

Factors that may indicate an employment relationship include:

  • the payer directs, schedules and controls the work;
  • the payer determines the specific tasks the worker will perform;
  • the payer has the final say on all decisions and actions;
  • the payer trains the worker on how to do the work;
  • the relationship is one of subordination;
  • the worker requires permission of the payer to work for others.
2. Equipment and Tools

Consider who owns, rents or leases the tools to do the work.  A worker who has made a significant investment in a tool is likely to retain significant rights over the tool, thereby diminishing a payer’s control.

Tools can range from the equipment required for the work, Consider who owns, rents or leases the tools to do the work. to the workspace used to do the work and even intellectual tools such as training and experience.

Factors that may indicate an employment relationship include:

  • the payer supplies most tools and is responsible for repairs, maintenance and insurance;
  • the payer reimburses the worker for supplying their own tools.
3. Opportunity for Profit

Consider whether a worker can realize a profit or incur a loss.  ICs have the ability to pursue and accept contracts, whereas employees are not normally in a position to realize a business profit or loss.  Even if employees are paid based on commissions, or provided a production bonus, the increase in income is not usually considered profit.

Factors that may indicate an employment relationship include;

  • the worker cannot accept or reject projects;
  • the worker cannot schedule their own work;
  • the worker is entitled to benefit plans normally only provided to employees;
  • the worker cannot hire a substitute, or the payer pays for the substitute;
  • the worker is assigned other tasks at no extra remuneration so the efficiency of completing their work does not enhance their income.
4. Financial Risk

Consider any ongoing costs the worker may bear.  Employees do not usually bear financial risk, as costs they incur may be reimbursed, and they do not have fixed ongoing costs.

Factors that may indicate an employment relationship include:

    • the worker is not usually responsible for operating costs;
    • the worker is not financially liable if he does not fulfill obligations of the contract. For example, deficiencies in the work are not corrected at the worker’s own cost or time;
    • the payer determines and controls the method and amount of pay.
5. Integration

Consider integration of the worker’s job in the payer’s business.  An employee is generally more integrated into a business, as compared to an IC, which is more ancillary to the business.

If the worker or payer is unsure of the relationship, either party can request a ruling from CRA to have the status determined.

Further discussion on these considerations can be found on the CRA website and in their Guide RC4110 – Employee or Self-employed.  CRA also provides specific commentary on certain industries (eg. real estate and construction) that tend to trigger more questions.

The Impact of an IC being considered an Employee – What’s the Downside?

The debate over whether an individual is an employee or IC may seem insignificant at first, however, for those affected, it can be crippling.  Though the tax costs can be high, other non-tax considerations can also significantly impact a payer and worker.

Payers are not required to withhold certain source deductions such as the Canada Pension Plan (CPP) and Employment Insurance (EI) premiums for ICs.  However, subject to a few certain exceptions, employers are required to withhold these amounts for employees.   CRA will often assess the payer with CPP and EI premiums (for both employer and employee portions) when they consider an individual to be an employee rather than an IC.  This can be a costly bill. The debate over whether an individual is an employee or IC may seem insignificant at first, however, for those affected, it can be crippling. For example, a corporation engages 10 ICs for many years paying them $50,000 annually.  If CRA assesses all ten workers as employees for the preceding three years (which is commonly the case), the bill for the CPP would exceed $130,000. CRA may also assess EI, and penalties and interest on the total balance due.   Often, these disputes arise when an IC is terminated and applies, perhaps incorrectly, for EI.

The financial costs do not necessarily end with the tax bill, however.  Individuals considered employees may be entitled to benefits and rights, such as overtime pay, vacation pay, and minimum wage, included in their province’s respective Labour Standards or Employment Standards Codes.

Take, for example, the $180 million class-action lawsuit brought against the Canadian Hockey League (CHL) alleging that the junior hockey players are in fact employees and not ICs.  The lawsuit claims that, as employees, the players are entitled to a minimum wage, as well as certain other benefits such as holiday, overtime and vacation pay,and is claiming punitive damages.  Further, if the workers are found to be employees, the CHL may also be liable for additional amounts (if challenged by CRA), such as CPP and EI.

The Impact of an Employee being considered an IC – What’s the Downside?

In some cases, an individual may apply to Service Canada for certain employment benefits, such as employment insurance (EI), maternity or paternity leave or disability benefits, only to be  denied on the basis he or she is an IC.  For example, individuals may believe they are entitled to maternity or paternity benefits and budget accordingly.  When the baby arrives, and benefits are denied, the family may suffer significant financial costs and stress.

Also, should workers be considered ICs and not employees, they could face GST/HST issues due to failure to collect and remit this tax.

Incorporated Independent Contractors (ICs) – The Personal Service Business (PSB) Issue

One common way payers try to avoid being considered an employer is to require their workers to incorporate.  The corporation then provides the worker’s services.  This may offer benefits to both parties: the payer is not subject to ‘employment’ benefit rules, and the worker may enjoy tax advantages unavailable to employees.  However, if the relationship would be one of employment, absent the corporation, the arrangement may be considered a PSB, attracting significantly higher taxes.

Incorporated workers must be diligent to ensure that they are not engaged in an ‘employment-like’ relationship.  Similar considerations as those mentioned above would determine whether a PSB exists.  However, the courts may not consider the intention of the parties in analyzing such relationships.

Conclusion

As the above indicates, the classification as an employee or IC carries significant implications for both parties.  Both should take proper care to ensure appropriate treatment.

 

You Can’t Do or Say That: Constraining individual conduct in a public and commercial world

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picture of man with hand over his mouth. Title: You can't do or say that: Constraining individual conduct in a public and commercial worldGreek triple-jumper, Voula Papachristou, was expelled from the 2012 London Olympic Games because of a disparaging and racist tweet she broadcast days before the Games. European soccer players making negative comments about officials on or off the field now face suspension. An 18-year-old Canadian junior water polo athlete received a two-year suspension from the national sport organization for his role in the 2011 Stanley Cup riots in Vancouver. According to Water Polo Canada, “The message [of the suspension] is, you’re an athlete and you’re representing Canada all the time, whether you’re on the field of play or you’re out at a restaurant or in the general public.” (Canadian water polo player suspended two years for role in Stanley Cup riot, Sep.27, 2011) These examples reflect a seeming increase in measures aimed at censoring the conduct of athletes, on the field and off. Indeed, this trend affects not just athletes, and other celebrities, but can be seen increasingly in employment relationships. A number of factors can be identified as influencing this pattern, but perhaps most important is the exponential growth of social media and its instantaneous communication and global reach.

Public focus on morality clauses is a relatively recent phenomenon, even though they have been in use for some time.

Control over peoples’ conduct is typically done through the use of what are referred to as morals, or morality clauses – a contractual provision prohibiting a person’s immoral, illegal or otherwise disparaging conduct.  These clauses commonly appear in endorsement-type contracts of athletes, performers, and other famous personalities, but actually go beyond this sphere. Companies and organizations typically insist on morality clauses to protect their reputation and interests from being affected by the improvident conduct of people with whom they have contracted.

First, a little history

Public focus on morality clauses is a relatively recent phenomenon, even though they have been in use for some time. They had their origin in the movie industry of the 1920s as a response to the scandalous and often excessive behavior of some of the most famous movie stars of the time. At about the same time, Major League Baseball went through the aftermath of the Black Sox scandal. Eight White Sox players were accused of intentionally losing games in exchange for money from gamblers when the Chicago White Sox lost the 1919 World Series to the Cincinnati Reds. All were subsequently banned for life from organized baseball.

The use of morality clauses spread beyond the sports and movie industries when companies discovered the concept of “branding”.

Both groups were faced with having to stem increasing public criticism of seemingly lascivious and scandalous behaviour and threats by the U.S. Congress of censorship and greater regulatory control over their activities. Inserting strongly worded morality clauses into contracts, with the ability to terminate the contracts if the clauses were breached, was a way for these industries to start to control the conduct of these personalities.

Morality clauses again came to public attention in the movie industry in the late 1940s during the so-called McCarthy era. The U.S. Congress was holding hearings into “un-American activities”, generating huge public outcry and front-page editorials exclaiming a communist “infestation” of the movie industry. Studios once again used morality clauses, by then a mainstay in talent agreements, to terminate and disassociate themselves from scandalized actors, producers and other ‘undesirables’ within the industry.

The use of morality clauses spread beyond the sports and movie industries when companies discovered the concept of “branding”. Proctor & Gambling (P&G), with its Ivory Soap product, first pioneered this concept promoting the idea that there were differences in similar products produced by different companies. They also quickly learned that using a celebrity to promote their brand could be a double-edged sword. In the early 1970s, P&G hired model Marilyn Briggs to be the “Ivory Soap girl” on boxes of Ivory soap, posing as a mother holding a baby under the tag line “99 & 44/100% pure”. Millions of boxes of the soap with her picture on them hit store shelves the same week her X-rated film was released. The effect was catastrophic for P&G. Ivory’s association with ‘purity’ and ‘home values’ was disastrously undermined.

Morality clauses saw a third public resurgence in the early 2000s, when social networking really exploded. Indiscreet or disparaging comments could be broadcast to millions of recipients by the tap of a finger and a tweet or video could go viral in a flashThe primary concern for both parties drafting a morality clause is in describing the language around unacceptable conduct; that is, conduct that could lead to the termination of a contract.. At the same time, the value of endorsement deals skyrocketed and the exposure of companies and organizations in terms of reputation and brand value increased exponentially. For example, it is estimated Tiger Woods’ marital scandal cost the three sports-related companies (Tiger Woods PGA Tour Golf, Gatorade, and Nike) a 4.3-percent drop in stock value, equivalent to about $6 billion (Tiger Woods Scandal Cost Shareholders up to $12 Billion, Dec. 29, 2009). Companies and organizations responded by seeking greater protection from such unintended exposure. Indeed, the drafting of morality clauses has now become an important and increasingly sticky part of contract negotiations.

Issues facing morality clauses

The primary concern for both parties drafting a morality clause is in describing the language around unacceptable conduct; that is, conduct that could lead to the termination of a contract. The company or organization wants to have the greatest flexibility to determine inappropriate conduct so as to deal with even a whiff of a scandal. The endorsee (i.e., the athlete, personality or employee), on the other hand, wants to have as strict and narrow a definition of (mis) conduct as possible.  The company or organization would favour language in the clause making it the sole judge of whether conduct violates the language of the morality clause.  For example, the company or organization would be more likely to use language allowing it (but not necessarily requiring it) to take action should the endorsee bring him or herself into public disrepute, contempt, scandal or ridicule, or bring the company or organization into disrepute. The endorsee, however, would argue for wording requiring a much more serious degree of misconduct, such as a criminal conviction (as opposed to simply being charged with a criminal offence), before any action could be taken to terminate the agreement. He or she would also argue for more objective (and interpretable) language. What constitutes ‘disrepute’ or a ‘disparaging’ comment? This is definitely a debatable circumstance.

The bargaining strength, or leverage, of each party significantly influences the balance of the clause. The greater the apparent leverage of the endorsee, the more weak or lenient the morality clause. For example, Lance Armstrong, in spite of his past liabilities stemming from repeated allegations of doping, commanded a powerful position until his self-admission of doping in 2013, because of his ability to sell products through his image. For example, sales of Trek road bikes rose 143% from 2000 to 2005 largely, if not almost exclusively, due to the performance of Lance Armstrong, a key endorsee (Albergotti, R. & O’Connell, V.; Wheelmen, Gotham Books, 2013).

The wording of the morality clause raises a related issue: who decides, for example, when a comment is disparaging and when it is not? What is the test, if there is one? Would political comments be considered offside? What about comments or commentary directed at the business or organization itself, or its sponsors? The company or organization would favour language in the clause making it the sole judge of whether conduct violates the language of the morality clause. This certainly would disadvantage the endorsee, increasing with the vagueness of  the language (i.e., what constitutes public disrepute?). The endorsee would likely attempt to negotiate an arbitration clause whereby an independent third party would interpret the conduct in question in light of the language of the morality clause.

Variations in morality clauses

The wording of the morality clause raises a related issue: who decides, for example, when a comment is disparaging and when it is not?

Some morality clauses are drafted specifically to the individual. The Callaway Golf Company included a clause in an endorsement agreement with John Daly, a professional golfer, allowing it to terminate their agreement if he engaged in any gambling or drinking activities. This was no doubt done in light of Daly’s previous public conduct. In fact, Calloway did subsequently terminate its contract with Daly, relying on that particular clause.

Since the 1980s, it has become fairly commonplace to see reciprocal, or two-way, morality clauses, which allow the endorsee to terminate an endorsement agreement if the company or organization engages in fraud or some other criminal activity. Indeed, corporate malfeasance has meant endorsees have had to increasingly protect their own reputations and brands. For example, in 2008, the Houston Astros had no reverse morals clause in its endorsement agreement with the corrupt and bankrupt energy and financial trading company Enron Corp., which, at that time, was the seventh largest corporation in the United States. The Astros, faced with a huge public relations backlash, was forced to pay $2.1 million to the company’s creditors in order to sever its relations with the company.

Following alleged bribery and other improprieties by members of the International Olympic Committee (IOC) in 1999, a number of sponsors threatened to pull major sponsorship commitments for the 2002, and subsequent Games, unless the IOC agreed to include detailed reverse morality clauses in their sponsorship contracts.

Similar stories can be found with individual, as opposed to corporate, endorsees. Professional golfers, Vijay Singh, Camilo Villegas, David Toms and Morgan Pressel all wore the logo of the Stanford Financial Group on their clothing. In 2009, Stanford Financial Group and its principle, Allen Stanford, were alleged to have led a $7 billion fraud scheme. Without a reverse morality clause, none of the golfers could have removed the logo from their clothing and disassociated themselves from the disreputable company.  Most endorsement agreements now contain some form of reverse morality clause, albeit not necessarily a mirror image clause, which would depend upon the leverage, or negotiating power, of each party.

Conduct policies as an alternative

… professional and Olympic athletes’ conduct, and other employees’ conduct, can be narrowly controlled through conduct policies using language similar to that found in morality clauses…

So far, we have focused on morality clauses in endorsement contracts. Morality clauses are also found in employment contracts and other types of contracts such as, athlete agreements used by Olympic, and other sport organizations, and contracts for other professional services. But more particularly and typically, conduct in employment situations is regulated by way of a conduct policy. In such circumstances the company or organization has significant authority over the content of the policy. Note, however, that the British Olympic Committee was forced to retract a provision in its athletes’ agreement prohibiting athletes from commenting on human rights matters leading up to and during the Beijing 2008 Summer Olympic Games in the face of a ferocious athlete and public outcry. Nonetheless, professional and Olympic athletes’ conduct, and other employees’ conduct, can be narrowly controlled through conduct policies using language similar to that found in morality clauses not to bring the company or organization into disrepute (which is often vague and ill-defined and thus weak from a legal perspective).

Apart from athlete agreements and organizations’ conduct policies, the speech of Olympic athletes is further curtailed by way of Rule 50 of the Olympic Charter, which states, “No kind of demonstration or political, religious or racial propaganda is permitted in any Olympic sites, venues or other areas.” This rule could well be used to stop any athlete from supporting LGBT Russians at the 2014 Sochi Winter Olympic Games or speaking out against Russian anti-gay legislation at the Games.

Conclusions

The face of businesses and organizations is often portrayed by others hired to do the job, whether athlete, celebrity or employee. Their conduct can reflect upon the company or organization – and vice versa. It is understandable that parties would want to protect their reputation and brands. However, restrictions on conduct and freedom of speech can be onerous and overly controlling where they impinge on issues of ethical and social belief. Determining the bounds of control is a matter of negotiating leverage and reasonable accommodation, but must also be informed by principles of individual belief and human rights.

 

Changing Terms of Employment

By and

employmentlawIntroduction

Darrell Wronko started work at Western Inventory Service Limited (WIS) in 1987, right after graduating from university. He worked at the company for 17 years, including four years as Vice President of National Accounts and Marketing. In 2000, he signed an amended employment contract, which included a significant improvement to his termination clause. The new provision would give him two years of salary and bonus on termination.

In 2002 under a new corporate President, Wronko received a new contract that reduced the termination provision to 30 weeks of salary. Wronko refused to sign the new contract and continued working. WIS gave two years written notice to Wronko that the termination clause in his contract would change to a maximum of 30 weeks’ salary.

Over the next two-year period Wronko remained employed by WIS, and continued to oppose the amended contract. In 2004 Wronko was told the new termination provision of 30 weeks was in effect, and if he did not accept the new terms of employment, he no longer had a job at WIS. Wronko walked off and asked for his severance package of two years. The case went to court.

Constructive Dismissal

Employers may make life very difficult for employees without expressly dismissing them. They may humiliate them in public, ask for their resignations, lock them out of their workplace or suddenly demote them or transfer them to a location to which the worker does not want to move. The employer’s sudden, unilateral change of the job may be more subtle, such as significantly changing one’s job responsibilities, title, working conditions, benefit packages or restrictive covenants. If the average person would view this as an act that renders continued employment intolerable, the employee may consider himself to have been dismissed, even though dismissal language was never used. The law views this as a termination without cause and the employee is entitled to compensation for a reasonable notice period. Wronko argued that WIS constructively dismissed him in 2004 when it unilaterally varied the termination clause in his contract. He sought damages of two years’ salary.

Ontario Court of Appeal Ruling

In 2008, Wronko’s case reached the Ontario Court of Appeal (Wronko v. Western Inventory Service Ltd., 2008 ONCA 327). Did the 2004 letter (reducing the notice period) from WIS constitute a termination, and if so, what consequences flowed from the termination? The Court said a reasonable person would have regarded the concluding statement in the 2004 letter, “… then we do not have a job for you” as a WIS termination. The Wronko case was not a constructive dismissal because the unilateral change did not have an immediate change on Wronko. Rather, the 2002 notice was an anticipatory breach of contract. WIS knew Wronko was opposed to the change in severance terms and, by continuing the employment, WIS must be taken to have agreed to Wronko’s position. Therefore WIS’s unilateral change of a fundamental term of the employment contract, the termination clause in 2004 was wrongful and Wronko was entitled to two years of salary based on the existing contract. The Supreme Court of Canada refused leave to hear an appeal brought by WIS in October 2008.

Options

The Appendix chart summarizes the possible options when an employer proposes a unilateral change to a fundamental term in an employment contract:

376EmploymentChart

Option 1: Employer announces change; employee accepts change.

Option 2: Employer announces change and employee rejects change. Employer allows employee to continue working. Employer accepts there is no new agreement and the employee can assume employment continues under old terms. This is the conclusion in the Wronko case and the reason why the judge awarded damages. The lesson here for employers is if they want to avoid wrongful dismissal claims, when the employee rejects the contract change, the employer must provide proper notice of termination (and award any severance) rather than continuing the employment relationship.

Option 3: Employer announces changes and employee rejects change. Employer allows employee to continue working. If the employer persists in treating the contract as changed, the employee can quit and sue the employer for damages on the basis of constructive dismissal.

Options 4 and 5: Employer announces changes and employee rejects change. The employer should respond by terminating the employee with proper notice and offering re-employment on the new terms. The employee will either accept or reject the new offer.

Conclusion

When employers want to introduce new terms that are less favourable to the employee, the lessons from Wronko are clear. The employer must:

  • obtain the employee’s consent and provide fresh consideration; or
  • provide reasonable notice of termination, and offer re-employment under the new contract terms at the end of the period.

A final lesson is for the employee to immediately and clearly oppose the change, if the employee objects to the changes in the revised contract. Doing otherwise might be considered as an acceptance of the new terms, and the employee will have no subsequent claim to constructive dismissal or damages for breach of contract.

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