While there were many legislative updates and important judicial decisions in 2023, this newsletter will cover four key and interesting developments that are important for employers to be aware of.

Ontario Working for Workers Act

In October 2023, Bill 79 Working for Workers Act received royal assent. This Bill included the following changes:

  • Employees who work remotely from home will be included in the count for mass termination provisions under the Employment Standards Act, 2000 (“ESA“).
  • The maximum fine that may be imposed on a corporation convicted of an offence under the Occupational Health and Safety Act will increase from $1.5 million to $2 million.
  • Employers will be required to provide employees starting a new job with information about their job, such as pay, work location and hours of work, as well as the date by which that information needs to be provided.

The intention of Bill 79 is to strengthen protections for workers in Ontario.

Changes in Licensing Requirements for Temporary Help Agencies in Ontario

In July 2023, the ESA was amended to require temporary help agencies to obtain a license to operate in Ontario as of January 1, 2024. The Ontario government also published Reg. 99/23: Licensing – Temporary Help Agencies and Recruiters in May 2023. Regulation 99/23 allows businesses and prospective employers to confirm a temporary help agencies’ license through an online government database. There are also penalties for temporary help agencies that fail to obtain a proper licence. If the temporary help agency provides false information in their license application, they may face a fine of $15,000-$50,000. In addition, employment officers can issue penalties to temporary agencies who operate without a license.

The Changed Substratum Doctrine

In 2023, the Ontario Court of Appeal upheld an award of over $400,000 to an employee on the basis of the changed substratum doctrine. The changed substratum doctrine provides that where the foundation of an employment agreement has fundamentally changed over time, the terms of conditions of the written employment agreement should no longer apply.

In Celestini v Shoplogix Inc., the employee signed an employment agreement in 2005 for his role held at the time. That employment agreement limited his termination entitlements. Over the course of his employment, his role and responsibilities evolved. In 2017, the employer terminated the employee’s employment without cause, relying on the employee’s entitlements noted in the 2005 employment agreement. The employee claimed that the employment agreement was not enforceable based on the changed substratum doctrine and sought common law damages for reasonable notice.

The Judge stated that “Mr. Celestini’s duties changed substantially and fundamentally over the course of his employment.” The Judge clarified that the employee received new responsibilities that were “substantial and far exceeded any predictable or incremental changes to his role that reasonably would have been expected when he started as CTO in 2005.” Accordingly, the Court of Appeal agreed that the changed substratum doctrine applied and awarded common law reasonable notice to the employee.

Punitive Damages for Employer’s Conduct

In 2023, the Ontario Superior Court awarded significant punitive damages against an employer, citing their “scorched earth” defence strategy.

In Griffon Integrated Security Technologies et al. v Valley Associates Inc. et al, the employee worked for the employer as the Vice-President and General Manager for over 12 years. The employee was unfortunately diagnosed with cancer and was undergoing treatment for his condition. The employee stated that he continued to “discharge his responsibilities to the extent he was able to do so.” The employee was terminated without cause and subsequently filed a lawsuit against his former employer for wrongful dismissal and sought punitive damages. The employer defended the lawsuit by accusing the employee of financial irregularities and arguing after-acquired cause for the dismissal without evidence. The employer also brought a counterclaim accusing the employee of breach of contract, fraud and defamation.

The Court awarded the employee with 20 months of reasonable notice, stating that this was the high end of the appropriate range because the employer knew that the employee was experiencing financial difficulties at the time of dismissal since the employer had not paid him accrued bonuses and commissions. The court also awarded $75,000 in punitive damages, stating, “It is apparent from the discoveries and from the subsequent conduct of the defendants in the litigation that there was never any substance to the counterclaim and no basis to any defence… There are no documented performance issues, no warnings and no termination event.”

Takeaway

These updates to the ESA are a reminder to Ontario employers to be aware of their obligations under the ESA and Occupational Health and Safety Act. Temporary help agencies should also ensure that they are properly licensed as now required by the ESA.

The changed substratum doctrine is a reminder for employers to renew their employees’ employment agreements throughout the course of their tenure. Failure to do so may result in the application of the changed substratum doctrine. Further, the “scorched earth” defence strategy is a lesson for employers to act in good faith throughout an employee’s employment and even after their termination. If an employer breaches the duty of good faith, they may be liable for further damages or punitive damages to the employee.

To learn more about these case law and legislative updates, visit our HV on HR newsletter or click on the links above. If you have any questions regarding employment matters, the lawyers at Heeney Vokey LLP are happy to help.