Copyright © 2004 McGraw-Hill Ryerson Limited 1 PART 5 – SPECIAL CONTRACTUAL RELATIONS  Chapter 19 – Employment Relationship Prepared by Douglas H. Peterson, University of Alberta

Copyright © 2004 McGraw-Hill Ryerson Limited 2 EMPLOYMENT RELATIONSHIP Contract of Employment Nature of the Relationship Form of the Contract Duties of the Employer Duties of the Employee Termination of the Contract of Employment Dismissal and Wrongful Dismissal Employer Misrepresentation Employer Liability to Third Parties Employer Liability for an Employee’s Injuries

Copyright © 2004 McGraw-Hill Ryerson Limited 3 CONTRACT OF EMPLOYMENT Originally based on master-servant relationship Unequal bargaining power Mix of common law and statute Common law gradually imposed additional duties or limitations Statute now governs basic minimum protections for the employee

Copyright © 2004 McGraw-Hill Ryerson Limited 4 NATURE OF THE RELATIONSHIP A contractual relationship whereby an employer provides remuneration to an employee in exchange for work or services One party – employer – authority to direct and control the work of the other party - employee

Copyright © 2004 McGraw-Hill Ryerson Limited 5 TESTS TO DETERMINE EMPLOYMENT Control test – degree of control that one person exercises over another Degree of control exercised over an employee is greater than over an independent contractor Traditional test to determine employment Where employer has the right to direct what work was to be done and the manner in which it was done Inconclusive as employment relationships took on a variety of forms

Copyright © 2004 McGraw-Hill Ryerson Limited 6 TESTS TO DETERMINE EMPLOYMENT New Test – 4 Part Test More complicated test devised to meet complex interpersonal relationships that had arisen in modern business Control Ownership of tools – who owns the tools Chance of profit – who benefits Risk of loss – who bears the risk 4 part test also had limitations

Copyright © 2004 McGraw-Hill Ryerson Limited 7 TESTS TO DETERMINE EMPLOYMENT Compare employee with agent and independent contractor Need to distinguish independent contractor – a person who is in a working relationship that does not meet the criteria of employment An agent enters into legal relationships with others on behalf of a principal An agent may be an employee or an independent contractor Test of function

Copyright © 2004 McGraw-Hill Ryerson Limited 8 TESTS TO DETERMINE EMPLOYMENT Organizational Test - Is person an essential part of employer’s organization Degree of integration with employer’s organization Examines relationship in relation to business itself Used to distinguish between employee and independent contractor Traditional - Initiative to do the work and the manner in which work is done are both under control of contractor (blurred today) Whether work done is part of business or something outside of it Liability will be determined by nature of the relationship

Copyright © 2004 McGraw-Hill Ryerson Limited 9 FORM OF THE CONTRACT Written or oral Statute of Frauds: If for a term of more than one year must be in writing Courts take a narrow interpretation Contracts of indefinite hiring Termination by proper notice in less than one year; or No fixed term Statute of Frauds does no apply Informal writing will meet requirements

Copyright © 2004 McGraw-Hill Ryerson Limited 10 FORM OF THE CONTRACT Restrictive Covenants Not enforceable unless restriction is reasonable and necessary to protect employer from serious loss Not restrict employee from exercising skills learned on the job May limit employee’s use of secret or confidential information

Copyright © 2004 McGraw-Hill Ryerson Limited 11 DUTIES OF THE EMPLOYER IMPLICATIONS Employees have certain statutory rights and benefits Employee may sue for wrongful dismissal, but this avenue is not available to an independent contractor Employer responsible for the torts of an employee in the course of employment but not for those of an independent contractor Divided into 2 areas Health and Safety Legislation Employment standards Laws

Copyright © 2004 McGraw-Hill Ryerson Limited 12 HEALTH AND SAFETY LEGISLATION Deals with physical aspects Sanitary facilities Control of dust, fumes Equipment has proper safety standards Proper safety equipment supplied to employees Employee may refuse work if not provided Proper training of employees Occupational Health and Safety Legislation Enforced through government inspections Fines and penalties Purpose is to avoid a hazardous work environment

Copyright © 2004 McGraw-Hill Ryerson Limited 13 EMPLOYMENT STANDARD LAWS Provides minimum standards of employment contracts Provincial employment codes Parties to an employment contract can not usually opt out of these Minimum wages Maximum hours of work Overtime Holidays and vacation pay

Copyright © 2004 McGraw-Hill Ryerson Limited 14 HUMAN RIGHTS LEGISLATION Prevents discrimination in hiring and employment practices Federal and provincial codes must be consistent with Charter Marital status Race Color Physical or mental disability Religion or creed Sex Age Past criminal record

Copyright © 2004 McGraw-Hill Ryerson Limited 15 HUMAN RIGHTS LEGISLATION Workplace – applies to workplace as well as hiring procedure Treating someone differently on the basis of a prohibited ground Adverse effects discrimination – discrimination that occurs as a result of a rule that appears neutral but in its affect is discriminatory Systemic discrimination – discrimination that results from the combined effect of many rules, practices, and policies

Copyright © 2004 McGraw-Hill Ryerson Limited 16 HUMAN RIGHTS LEGISLATION Equality pay – females must be paid the same as males for same job Some provinces have equal pay for equal value legislation Pubic-sector employers to ensure that certain types of positions traditionally filled by women are assessed vis-à-vis positions traditionally filled by men in terms of value using job-related criteria: Skill, ability, education, working conditions, effort

Copyright © 2004 McGraw-Hill Ryerson Limited 17 HUMAN RIGHTS LEGISLATION Bona Fide Occupational Requirement (BFOR) A defense that excuses discrimination on a prohibited ground when it is done in good faith and for legitimate business reasons Duty to Accommodate The duty of an employer to modify work rules, practices, and requirements to meet the needs of individuals who would otherwise be subjected to unlawful discrimination Scheduling to accommodate someone’s religious activities

Copyright © 2004 McGraw-Hill Ryerson Limited 18 COMMON LAW REQUIREMENTS Compensation Pay wages for work Compensate for expenses incurred in course of employment Provision of Tools Provide employee with sufficient tools to perform required tasks Provision of Information Provide employee with sufficient information when remuneration is based on a system other than hourly wage or salary

Copyright © 2004 McGraw-Hill Ryerson Limited 19 DUTIES OF THE EMPLOYEE Implied duties Obey reasonable orders that fall within scope of employment Use information and property of employer in reasonable manner Keep confidential information confidential during and after employment Devote agreed hours of employment to employer’s business Employer entitled to profits earned by employee during business hours but not during employee’s spare time

Copyright © 2004 McGraw-Hill Ryerson Limited 20 DUTIES OF THE EMPLOYEE Employee has special skill or professional qualification Perform work in accordance with the standard required of such skill or profession May be liable for negligence in performance Fiduciary Duty Senior employees owe a fiduciary duty to employer Devote all energy, initiative and talents to employer Failure is grounds for termination Normal Duty Employees have duty to act in best interests of employer Cannot earn secret profits

Copyright © 2004 McGraw-Hill Ryerson Limited 21 TERMINATION Statute – employment standard codes provide a minimum notice period for both employer and employee Common law – reasonable period of notice required Factors to determine reasonableness Nature of contract Method of payment Position held Length of service Industry customs Age of employee

Copyright © 2004 McGraw-Hill Ryerson Limited 22 DISMISSAL AND WRONGFUL DISMISSAL Primary – look to terms of contract Secondary – common law Where no just cause, reasonable notice of termination is required of both employer and employee Employer is required to give reasonable notice or pay in lieu of notice May dismiss an employee with notice for any reason unless it violates human rights legislation Reasonable notice - legislation sets minimum standard

Copyright © 2004 McGraw-Hill Ryerson Limited 23 JUST CAUSE Employee conduct that amounts to a fundamental breach of the employment contract Just cause dismissal requires no notice. Must be based on employee wrongdoing or a failure to perform the job

Copyright © 2004 McGraw-Hill Ryerson Limited 24 JUST CAUSE Grounds Serious absenteeism Consistent tardiness Serious misconduct Willful disobedience in a matter of substance Open disobedience Habitual negligence of duty Incompetence Harassing other employees Drinking on the job Immoral conduct

Copyright © 2004 McGraw-Hill Ryerson Limited 25 JUST CAUSE Serious Misconduct Intentional, harmful conduct of the employee that permits the employer to dismiss without notice Progressive discipline policy – a system that follows a sequence of employee discipline from less to more severe punishment Condonation – employer behavior that indicates to the employee that misconduct is being overlooked

Copyright © 2004 McGraw-Hill Ryerson Limited 26 JUST CAUSE Habitual Neglect of Duty Customary failure to perform employment duties Incompetence Lack of ability, knowledge, or qualification to perform employment obligations Conduct Incompatible Personal behavior that is irreconcilable with employment duties Willful Disobedience Deliberate failure to carry out lawful and reasonable orders

Copyright © 2004 McGraw-Hill Ryerson Limited 27 WRONGFUL DISMISSAL Wrongful dismissal arises when: No just cause Notice given, but employee claims notice is inadequate Constructive dismissal Employee has a duty to mitigate losses Duty requires that employee take reasonable steps to find comparable employment Failure to mitigate will result in a deduction from the damage award Purpose is to put employee in same position had proper notice been given

Copyright © 2004 McGraw-Hill Ryerson Limited 28 WRONGFUL DISMISSAL Manner of Dismissal “Bad faith” dismissals may make an employer vulnerable to additional damages Wrongful dismissal damages – court determines how many months notice should have been given times salary and benefits for that period May also receive out-of-pocket costs, aggravated, and punitive damages less money earned or received during notice period

Copyright © 2004 McGraw-Hill Ryerson Limited 29 WRONGFUL DISMISSAL Constructive Dismissal Employer termination of a contract by a substantial, unilateral change in terms or conditions of employment Employer conduct that amounts to a fundamental breach of the employment contract Fundamental term – the employer must make a significant change to a fundamental term of the contract Most constructive dismissal cases involve demotions or pay cuts

Copyright © 2004 McGraw-Hill Ryerson Limited 30 EMPLOYER MISREPRESENTATION (WRONGFUL HIRING) When Hiring, Employers may expose themselves to certain risks Vicarious liability – employer is responsible for the torts of employees committed in the ordinary or usual course of employment Negligent hiring – if the employer is careless in hiring, training, or supervising there may be an action against the employer in negligence

Copyright © 2004 McGraw-Hill Ryerson Limited 31 WRONGFUL HIRING Overstatement of importance or status of position Employee must show: Misrepresentation Statements made were inducement or fundamental to employee’s decision to accept position Injury – employee suffered a loss Relocation expenses Loss flowing from leaving previous employment

Copyright © 2004 McGraw-Hill Ryerson Limited 32 EMPLOYER LIABILITY TO THIRD PARTIES Vicarious Liability Employer liable for the negligence or failure of performance of an employee Test: acts of employee that occur within the scope of the employee’s employment Not include acts of negligence that occur outside employer’s normal duties

Copyright © 2004 McGraw-Hill Ryerson Limited 33 EMPLOYMENT LAW LIABILITY OF EMPLOYER IN TORT EMPLOYER IN COURSE OF EMPLOYMENT EMPLOYEE THIRD PARTY Employer and Employee Liable for Tort Employment Commits Tort In Course of Employment NOT IN COURSE OF EMPLOYMENT Relationship EMPLOYEREMPLOYEE THIRD PARTY Employment Commits Tort Not In Course of Employment Relationship Only Employee Liable for Tort

Copyright © 2004 McGraw-Hill Ryerson Limited 34 EMPLOYER LIABILITY FOR EMPLOYEE’S INJURIES Dealt with through Workers Compensation legislation An insurance scheme All employees covered by act, and injured on the job have no need to bring an action against employer Employees entitled to compensation without requirement to prove fault Employers must contribute to a fund Employee gives up right to sue employer and must look to the compensation scheme for compensation

Copyright © 2004 McGraw-Hill Ryerson Limited 35 SUMMARY Employment contract Governed by common law and statute Issue: employment versus agency or independent contractor Test: 4 part test Implied duties of employer and employee Set out by common law Minimum standards set by employment codes

Copyright © 2004 McGraw-Hill Ryerson Limited 36 SUMMARY Dismissal Just cause – no notice required Without cause – notice required Common law – reasonable notice based on several factors Statute – minimum periods of notice set out Constructive Dismissal – fundamental change in pay or conditions Vicarious Liability Employer responsible for acts of employee that take place during course of employment