When Will an Employee’s Misconduct Justify Dismissal Without Notice?

In the recently-decided case of Czerniawski v. Corma Inc., Mr. Czerniawski’s employment was terminated without notice after 19 years of service because of alleged misconduct. The court had to address the question of whether or not the misconduct justified such an extreme measure.

Mr. Czerniawski was an assembler in a company that manufactured products in the corrugated plastic pipe industry. During his 19 years with the company, he was a good worker, and there had been no issues with his job performance. The only performance review he had ever received concluded that he was a solid, steady worker who was competent, dependable, and hard-working.

Unfortunately, Mr. Czerniawski had an angry exchange with a co-worker concerning items missing from his work station. There was evidence before the court that in the course of the encounter Mr. Czerniawski was screaming, pointing, and waving his arms. Both Mr. Czerniawski and the co-worker were angry, and voices were loud. There was no physical contact between these individuals and no threats were exchanged.

Mr. Czerniawski was asked to leave the workplace. He asked to be informed as to why he was being sent home, but no answer was provided and he refused to leave. The police were called in to escort him out of the building. He was told that his employer would conduct an investigation and that he was not to return to work until that process had been completed.

He went back to the workplace several days later to deliver a letter at the reception desk. The letter put forward Mr. Czerniawski’s side of the story.

Mr. Czerniawski was never consulted during the course of the investigation and when it was completed, Mr. Czerniawski’s employment was terminated without notice. Mr. Czerniawski then commenced this lawsuit, claiming that his employment had been wrongfully terminated and that he was entitled to reasonable notice of termination.

The trial judge had found that Mr. Czerniawski’s failure to go home when told to do so was insubordinate, but she also took into account the fact that he had asked why he was being sent home and that his question had not been answered.

She also felt that his attendance at the reception desk to deliver the letter was ill-advised, but noted that this had taken place four days after the incident had occurred, during which time no one from the company contacted him to discuss the issue or get his version of the facts. Furthermore, while he did go to the factory to deliver the letter, he made no attempt to go into the plant.

The trial judge concluded that had Mr. Czerniawski been permitted to respond to the allegations of misconduct with his side of the story as part of the investigation, the employer’s decision to terminate may have been different. In essence, she felt that the decision to terminate was out of proportion to the actual misconduct. As a result, she ruled that Mr. Czerniawski had been wrongfully dismissed and awarded damages equal to the notice to which he was entitled at common law.

There is no doubt that there are circumstances in which misconduct, including insubordination, can amount to just cause for termination without notice. The Supreme Court of Canada has made it clear that in arriving at this determination, the entire context must be considered. The misconduct has to be so grievous that “it intimates the employee’s abandonment of the intention to remain part of the employment relationship.” As a result, one must consider the particular facts of the alleged misconduct as well as the employee’s tenure and discipline history. A balance must be struck between the severity of the misconduct and the penalty that is imposed.

In this case, given the employee’s long and clean record and the extenuating circumstances surrounding his behavior and starting from the moment he was asked to leave the factory, the judge felt that termination was a disproportionate response to Mr. Czerniawski’s behaviour. Instead, the employer should have imposed some form of progressive discipline for the incident such as a disciplinary letter or a suspension in order to send the message that the behavior was unacceptable, including a warning that further behaviour of this nature could result in a dismissal. This is an important lesson for employers confronted with this type of situation. Where a long term employee, with a clean record, behaves unacceptably, it is critical that the employer ensure that the employee understands the nature of any disciplinary action being imposed, and that the employee is given every opportunity to tell his or her side of the story before a decision is made as to any penalty to be imposed. It is difficult to imagine how an employer can impose a penalty that is in proportion to the offence without first obtaining the employee’s side of the story and thereby obtaining a complete understanding of the events in issue. An employer who fails to take this step may end up making a costly mistake.

Zoom Mediations: Are They Any Different Than What We Have Become Used To?

Since beginning my mediation practice in 2014, I have had the pleasure of assisting a significant number of lawyers and their clients in resolving their disputes with all parties present, either in a reporter’s office or in my law firm’s offices at Minden Gross LLP. Over the last year, of course, all of that has changed as every one of my mediations has taken place virtually, using Zoom.

While there is certainly no reason not to mediate using Zoom, I have observed some differences to which lawyers and their clients might wish to be sensitive. In no particular order, I have come up with the following observations.

  1. Opening statements have gone from mostly unnecessary to downright dangerous. My normal practice has always been to discourage opening statements. I always conduct a pre-mediation telephone conference with each counsel, separately, to gauge their interest in making opening statements and attempt to persuade them not to do it. As a general rule, they tend to be inflammatory and almost never contribute anything productive to the process.

    At least it could be said that when making an opening statement to someone sitting across the table, one is typically on one’s best behavior. As unhelpful as some of these statements have been, lawyers and their clients (who often insist on saying something as well) can usually be counted on to restrain themselves when their opponent is sitting in the room.

    On Zoom, all bets are off. Nobody is speaking to anyone across a table. Instead, one is speaking to a face in a little square on a screen. Unfortunately, this seems to result in considerably less self-restraint. As a consequence, people tend to get carried away and allow their emotions to run rampant. I end up starting off the mediation with two strikes against me before I have even come up to bat.

  2. It is far easier to become distracted. When in person, there is a limit to the amount of activity one can indulge in while sitting in a break-out room waiting for the mediator to return from a caucus with the other side. There is quite literally no limit to things that the client can get involved in during a mediation on Zoom. In my last mediation, one client spent some of his time meeting with his lawyer and me while driving with his phone angled up towards him from its perch on the passenger seat.

    Resolving legal disputes is rarely easy. A mediation will generally give a party to its dispute his or her best chance to settle. It is a process that deserves attention and focus. When I act as counsel to a party at a mediation, I always make a point of reminding my client that this is not a time to pick up children from school or take the dog for a walk.

  3. Exchanging new information can be challenging. As a general rule, I find myself mediating disputes after the exchange of productions and the conduct of discoveries. Usually, this makes good sense since parties are rarely equipped to engage in mediation without having all of the relevant information in hand. However, it is not uncommon for a party to come up with new information in the form of a previously unproduced (and possibly recently discovered) document. In a traditional mediation, a copy of the document can simply be handed to the mediator to be brought into the opponent’s caucus room. On Zoom, this process is significantly more complicated. For clients who are technologically savvy, such documents can be screen-shared with the mediator. The question as to how the mediator transmits that document to the other side may not be quite so simple.

    It follows that for a Zoom mediation, it is more important than ever to ensure that all of the documents that may be required for an intelligent and informed negotiation are produced in advance and circulated among all parties.

There is no doubt that Zoom mediations can be just as effective as in-person mediations. As a somewhat evaluative mediator, I often find it necessary to explain to a party exactly what it is that the other side is saying and to offer my own perspective. As my perspective is often not completely aligned with the views of the party with whom I am speaking, some element of advocacy becomes involved in the process. I have found that my effectiveness in conducting this part of the process virtually is no different than in person. In other respects, however, there are differences and Zoom mediations can be more difficult. I have tried to illustrate some of those differences above. Attention paid to these issues, in my view, will invariably contribute towards the success of any mediation.

When Does the Use of Social Media become Internet Harassment?

There is no shortage of commentary about social media’s potential to be used for improper purposes. Everyone knows that there is a whole world out there of crazy people who say crazy things on Twitter and other such media. Some of these people are under the impression that because they can express themselves with anonymity, they can say anything they want, and even if what they say is defamatory, they can get away with it.

It is true that suing someone over a defamatory Tweet, for example, can pose difficulties when the statement was made anonymously. It is difficult and it can be expensive to go through the steps necessary to identify the perpetrator. However, it is possible. The law will respond in the same way as it would if the defamatory statement had been made, for example, in a newspaper.

Somewhat more disturbing is the apparent trend towards what is now considered internet harassment. Until very recently, a victim of internet harassment could do nothing more than to sue for damages for defamation. In some circumstances, that is simply not an adequate remedy.

In the recent case of Caplan v. Atas, a judge of Ontario’s Superior Court granted a summary judgment against a defendant found to have carried out an online campaign of malicious harassment and defamation against a series of plaintiffs and their families for many years. The defendant had published thousands of anonymous internet posts on a number of online sites, accusing the plaintiffs of a variety of types of misconduct, including criminal activity.

The Court found that the defendant had acted with intent to harass the plaintiffs and others and cause them “fear, anxiety, and misery.” The Court concluded that the common law of defamation was simply not adequate for such circumstances. The Court noted what it characterized as an epidemic of online harassment and that while other jurisdictions have legislation dealing with this type of activity, Ontario does not.

Accordingly, the Court proceeded to create a new tort, that of internet harassment. The Court adopted the American legal test and determined that this tort can be proven where the defendant maliciously engages in conduct that is so outrageous and extreme as to go beyond all possible bounds of decency, with the intent to cause fear, anxiety, emotional upset, or to impugn the dignity of the plaintiff.

In this case, the question of a remedy was the most difficult of all. The defendant had already refused to comply with past injunctions and other court orders and had spent time in jail. A damage award was not a useful remedy because the defendant was bankrupt. As a result, the Court granted a permanent injunction prohibiting the defendant from posting anything about the plaintiffs or about their friends, families, and associates, and made an order that would facilitate the plaintiffs having all of the malicious posts removed.

It makes perfect sense that new developments in communications between people should give rise to new developments in the law governing those communications. While the new tort of internet harassment may be difficult to define, I rather suspect that one will know it when one sees it. Hopefully the Courts will take a liberal approach and make it abundantly clear that this type of conduct will no longer be tolerated.

Unreasonable Arbitration Clauses: There is Hope for the Little Guy After All

In my blog post of March 9, 2018, I commented on the case of Uber Technologies Inc. v. Heller, an action in which the validity of an arbitration clause in an Independent Contractor Agreement was in issue.

Heller was an Uber driver who had signed an agreement with Uber. The agreement provided that any dispute would have to be resolved by arbitration, and would have to take place in Holland. Holland is the location of the head office of Uber’s parent company.

For obvious reasons, the idea of arbitrating in Holland would not appeal to a Canadian driver in almost any circumstances. Presumably, that was the idea behind Uber’s drafting of the clause in that manner.

Heller commenced an action against Uber notwithstanding the arbitration clause and attempted to persuade the Court that the clause should be ignored. He was not successful. The Court hearing the matter referred to numerous Supreme Court of Canada decisions that made it clear that where a mandatory arbitration clause appears in an agreement, it is to be given effect.

Nevertheless, Heller took his case to the Supreme Court of Canada. On June 26, 2020, the Supreme Court of Canada ruled that the arbitration clause in his agreement was not valid.

The Court noted that there was a substantial upfront cost that would be incurred by any party seeking to commence the arbitration process as contemplated by the agreement. That upfront cost was not disclosed in the agreement itself. In addition, as would have been obvious to anyone, the cost to arbitrate in Holland would have been exorbitant compared to a typical driver’s annual gross earnings, effectively creating a financial barrier for drivers wishing to pursue a dispute with Uber.

The Court ruled that in limited circumstances, an arbitration clause can be considered invalid. One such circumstance involves a finding of unconscionability.

Unconscionability requires both an inequality of bargaining power and a resulting improvident bargain. An inequality of bargaining power exists when one party cannot adequately protect its own interests in the contracting process. A bargain is improvident if it unduly advantages the stronger party or unduly disadvantages the more vulnerable party.

With standard form contracts, there is a real potential to create an inequality of bargaining power and to enhance the advantage of the stronger party, more particularly through elements such as arbitration clauses that deprive the weaker party of a remedy as a practical matter. When arbitration is realistically unattainable, it amounts to no dispute resolution mechanism at all.

On that basis, a majority on the Court found the arbitration clause to be unconscionable and therefore invalid. A concurring judge added that the arbitration clause was invalid because it violated the public policy that exists in favour of providing Canadian citizens with meaningful access to justice.

Unconscionability is an argument that, in my experience, is often attempted but rarely succeeds. The idea that such an argument would succeed in circumstances involving a mandatory arbitration clause, which is almost always regarded by the Court as beyond challenge, is quite surprising. Nevertheless, it is clear that the justice of the matter cried out for a remedy for Mr. Heller and it is interesting to note that the Supreme Court of Canada agreed.

Can an Employer Enforce Onerous Clauses in an Employment Agreement?

The recently-decided case of Battiston v. Microsoft Canada Inc. is a useful reminder to employers to specifically draw a prospective employee’s attention to clauses in a proposed employment or related agreement that might later be found by a Court to be unusually onerous.

In this case, Battiston was employed by Microsoft for almost 23 years until his employment was terminated without cause in 2018.

Every year, in addition to his salary, Battiston had received benefits such as pay increases, bonuses, and stock awards.

When he was terminated, Microsoft took the position that Battiston was no longer entitled to the vesting of any stock awards that were granted but had not yet vested.

While the lawsuit involved several issues, the one of particular interest has to do with whether or not Microsoft’s position on the unvested stock awards was justified. Battiston took the position that he was entitled to all previously-granted stock awards that would have vested during the notice period had proper notice been given.

The stock awards were an integral part of Battiston’s compensation. In considering whether the loss of that benefit was recoverable, the Court pointed out that a two-step analysis is required. Firstly, the Court will determine the employee’s common law right to damages for breach of contract by assessing the amount to which the employee would have been entitled had proper notice been given. Secondly, the Court will consider the terms of the relevant employment agreement or plan to determine whether any clauses are taking away what would otherwise be the employee’s common law rights.

In this case, Microsoft issued Stock Award Agreements annually. They provided for stock awards vesting in various increments each year. At the date of his termination, Battiston had over 1,000 awarded but unvested shares. Had he been given proper notice, they would have vested during that time period.

The Stock Award Agreements included a provision that, in the event of the termination of Battiston’s employment, his right to unvested stock awards would terminate and would not be extended by any contractual or other notice period

At trial, Battiston testified that he did not read these Agreements, nor did Microsoft draw his attention to the termination provisions in them. He stated that he had been under the impression that he would be eligible to cash out his granted but unvested stock awards in the event of a termination without cause.

Microsoft relied on the termination provisions in the Stock Award Agreements, arguing that they specifically removed Battiston’s common law entitlement to the unvested stock awards.

The Court found that without a doubt, the provisions excluded his right to vest his stock awards following termination. However, that is not the end of the story. The Court referred to a number of Court of Appeal cases decided over the last number of years in which exclusion clauses in contracts were found to be unenforceable because the party submitting the document for signature failed to draw to the other party’s attention to terms that the Court would consider to be harsh and oppressive.

This philosophy applies to employment relationships, as well.

In this case, the Court determined that the termination provisions in the Stock Award Agreements were harsh and oppressive. They had not been brought to Battiston’s attention. For that reason, they could not be enforced against Battiston and he was entitled to damages in lieu of the unvested shares.

Unfortunately for employers, it is not always easy to predict what provisions will be found to be harsh and oppressive by a Court. Given that, presumably, stock awards are granted as an incentive to an employee to do what they can to increase company profits, there would be some logic behind Microsoft’s position in this case. Nevertheless, this case is a reminder to employers that, if an employment contract or plan document extinguishes the right of an employee to benefits immediately upon termination, very serious consideration should be given to specifically pointing out those provisions to the employee at the outset of the relationship.

Consumer Contracts and Arbitration Clauses: As Usual, the Devil is in the Details

Some time ago, I wrote a blog post about contracts that include arbitration clauses that make it a practical impossibility for a complainant to assert his or her rights. For example, when the arbitration clause specifies that the arbitration will take place in some far away country.

In consumer contracts, such clauses are often included in the vendor’s terms and conditions. While I have never done a survey, I am fairly confident in saying that the vast majority of consumers never read a vendor’s terms and conditions, even though they are available to be read. Most consumers simply click on the box that confirms that they are prepared to proceed with the transaction under those terms and conditions without a second thought. If those terms include an arbitration clause, which in turn provides for something that makes it a practical impossibility for the consumer to press forward with a complaint, the consumer will be left without a remedy unless the Court can be convinced to ignore the arbitration clause.

In the recent decision of a US Court in Nicosia v. Amazon.com, Inc., a United States Court of Appeals considered an appeal from a lower court judgment requiring a consumer with a complaint against Amazon to proceed by way of arbitration rather than through the court system. The Court of Appeal affirmed that decision.

In this case, Amazon’s conditions of use included an arbitration clause. The question before the Court was whether or not the plaintiff was bound by it in the face of his evidence that he had never read the clause, received notice of it, or demonstrated through his conduct that he agreed to it.

The Court ruled that the fact that the plaintiff denied ever reading the terms and conditions, including the arbitration clause by making his purchases, was irrelevant. The Court ruled that as in the case of paper contracts, to be bound to an arbitration clause, an internet user does not actually have to read the terms and conditions or click on a hyperlink that makes them available as long as the consumer has notice of the existence of the terms and conditions.

From the perspective of a consumer, this decision makes clear that there is a risk involved in simply ignoring the terms and conditions put forward by a seller in any transaction of any materiality.

When is a Settlement not a Settlement?

The recent decision of the Ontario Court of Appeal in Deschenes v. Lalonde provides an example of one of those very rare occasions when a party to a settlement can obtain an order setting the settlement agreement aside.

As one might expect, a party to a settlement who is merely stricken by “buyer’s remorse” because he or she thinks that a better deal could have been achieved is not going to be able to undo a binding settlement agreement.

However, there are circumstances in which a settlement can be set aside.

In this case, Ms. Deschenes alleged that she was sexually assaulted as a child by a priest in the early 1970s. She sued the priest and the local diocese, claiming it was vicariously liable for the priest’s actions and also liable in negligence for failing to prevent the assaults. The diocese insisted that it had no knowledge of the priest’s prior abuse of others until many years after the assaults on Ms. Deschenes had ended. A finding that the diocese had or should have had knowledge of prior misconduct was critical to a successful claim in negligence. Therefore, given this representation by the diocese and the uncertainty of the law on the issue of vicarious liability, Ms. Deschenes felt that she had no choice but to settle the action in 2000 for a payment by the diocese of just $100,000.

In 2006, it came to light that in the early 1960s, the diocese had received police statements alleging that the priest had assaulted several girls long before Ms. Deschenes was assaulted. Shortly after this information came to light, Ms. Deschenes commenced a new action against the diocese asking that the original settlement agreement be set aside. The parties brought the matter to a motion judge seeking summary judgment to determine the enforceability of the settlement agreement.

The motion judge agreed with Ms. Deschenes and set aside the settlement agreement. The Court of Appeal has now affirmed that decision.

It is a well-established matter of public policy that settlement agreements and the releases typically signed upon settlement should be enforced unless doing so creates a real risk of injustice. The courts place a great deal of emphasis on the need for finality in litigation.

In this case, in order to establish that the diocese failed to take reasonable steps to stop the priest from committing these assaults, Ms. Dechenes would have had to establish that the diocese knew or ought to have known of the priest’s past misconduct, and done nothing to stop it from happening again. Her claim for vicarious liability was highly problematic because an employer is generally only vicariously liable if the employee’s conduct is within the scope of the employment.

Throughout the documentary and oral discovery process, the diocese maintained that it had no idea that there was a problem and that there was no basis upon which it could be said that it ought to have known that there was a problem. The motion judge was satisfied that Ms. Deschenes relied upon this representation in her ultimately agreeing to the settlement. He accepted that she would not have settled had she known about the earlier police statements, which clearly proved that the diocese did have knowledge of the priest’s pattern of sexual misconduct.

The motion judge was satisfied that while the denial by the diocese of this knowledge amounted to a misrepresentation, it was innocent in nature. Nevertheless, he concluded that this was a material misrepresentation, upon which Ms. Deschenes had relied in entering into the settlement agreement.

The law is clear that a party has the right to rescind a contract for a false or misleading representation that induced him or her to enter into the contract. The misrepresentation must relate to a matter that is relevant and material and the innocent party must show that he or she did rely on the misrepresentation, at least in part. This is true even if the misrepresentation is made innocently, that is, by a party who believes that the incorrect statement is actually true.

While it is true that there are public policy considerations that favour the finality of settlements, there are overarching considerations of fairness and justice that take precedence.

Accordingly, the motion judge set aside the settlement agreement, and the Court of Appeal affirmed that decision. Clearly, the interests of fairness and justice prevailed in this case.

Settlement agreements are very rarely set aside, but it does happen.