Report from the legal front lines

Canadian HR Reporter recently met with lawyers in the Toronto offices of the employment law firm Filion Wakely Thorup Angeletti to discuss some of the employment law issues that have recently caught the attention of the courts in Ontario.

Some of the trends topping the hot topic list include: employee stress claims, non-competition clauses and employer liability. Each of these areas will be covered in depth in the coming months.

Employee stress claims
Work-life balance has become a hot HR issue as employees report more work-related and on-the-job stress and employers struggle to deal with this problem. While everyone may experience stress to varying degrees, stress can sometimes fall under a disability and require employers to accommodate to a certain degree.

“If stress becomes a severe or ongoing problem affecting the daily workplace functions of the affected employee, or if the employer perceives the stress to have this effect on the employee’s performance, then it may constitute a disability,” says Joseph Morrison, a lawyer with Filion.

Under the Ontario Workplace Safety and Insurance Act, employees cannot make claims for mental stress except under “very limited circumstances,” specifically stress caused by “an acute reaction to a sudden and unexpected traumatic event arising out of and in the course of his or her employment.”

The act also protects employers from stress claims based on a decision to fire or lay off employees. However, as Morrison points out, “(the Workplace Safety and Insurance Board) has noted that workers may be entitled to benefits for mental stress due to an employer’s actions or decisions that are not part of the employer’s employment function, such as violence or threats of violence.”

The board’s strict position may soon change significantly. A new policy is being reviewed that may expand mental stress claims and “provide allowance for the cumulative effect of a series of traumatic events,” said Morrison. The WSIB opened its policy for review after the issue surfaced with a group of female prison guards who claimed they suffered mental stress after repeatedly being harassed on the job. Ultimately their claims were denied but the case did prompt the board to review its restrictive stance on mental stress claims.

“It could open the floodgates for employee stress claims,” says Morrison.
In the meantime, employers looking to manage these claims need to concentrate on identifying the source of the stress and finding ways to accommodate the employee.

“Employers should focus less on how to remove the chronically stressed employee and more on identifying the underlying causes of stress and the ways in which the employee can be integrated into the workforce,” said Morrison.

“Simply dealing with stressed employees in accordance with fixed and rigid policies is not appropriate or successful.”

Morrison suggests these practical tips:
•focus on prevention by minimizing stress factors (for example, provide more control over work and limit job demands);
•monitor claims diligently from the beginning to the end, tracking things like doctor’s visits; and
•develop good return-to-work programs, the “cornerstone” of managing disability in the workplace.

Non-compete clauses
With the continuing war over talent, and extraordinary turnover of a highly mobile workforce, companies often have employees sign non-competition clauses to protect against business information and clients from leaving the company with departing employees.

A non-compete clause prohibits a former employee from working in the employer’s industry, subject to certain time and space restrictions.

While these clauses, “a more drastic weapon in the employer’s arsenal,” are popular with employers, the courts generally don’t like to enforce them, says Filion lawyer Carol Nielsen. That sentiment was recently affirmed and strengthened by the Ontario Court of Appeal, which stated that non-competition clauses will only be enforced in “exceptional circumstances.”

“Courts will enforce restrictive covenants relating to non-solicitation and non-competition, if at all, only if there is a specific temporal and geographic limitation on the covenant which is reasonable and rationally related to the interests being protected,” says Nielsen.

What is considered “reasonable” will depend on the specific circumstances of the industry. As Nielsen points out, the court will generally consider these three factors when deciding the reasonableness of a non-compete clause:
•whether the employer has a proprietary interest (for example, trade secrets, customer names, confidential information) entitled to protection;
•whether the temporal or spatial features of the clause are too broad, the courts have generally considered up to 12 months after termination as reasonable; and
•whether the restrictive covenant is unenforceable in that it prohibits competition generally and not just solicitation of clients of the former employee.

Employers need to be aware that signing a non-compete clause in and of itself won’t necessarily protect their interests. Nielsen suggests the following to maximize the likelihood of the courts upholding these clauses:
•Have new hires sign non-compete clauses before starting employment. Signing these contracts after an employee has already started working requires the employer to offer the employee some additional consideration, like a bonus or raise. The courts are aware of the unequal bargaining advantage in favour of employers and are reluctant to enforce agreements signed after the employee begins working. However, the courts are more likely to enforce a non-competition agreement if the employer has compensated the employee, but there are no guarantees, warns Nielsen.
•Employees asked to sign non-compete agreements should be given at least seven days to review the terms and to obtain legal advice before signing. This could counter the argument that there was undue pressure to sign the agreement.
•Deterrence value. “Many individuals who (sign) these types of agreements abide by them simply because they do not want to become involved in a legal dispute with their present or former employer.”

Most employers have employees sign both non-competition and non-solicitation clauses, which instead of prohibiting employment, prohibits the departing employee from soliciting a former employer’s clients or customers. The courts are less restrictive in enforcing non-solicitation clauses.

“This type of clause is less likely to be attacked on the basis that it is in restraint of trade, and, in most cases, can adequately protect an employer’s legitimate business interests,” says Nielsen.

Employer liability
In some cases an employer can be held responsible for the actions of its employees, whether they ordered them or not. An Ontario court recently found a real estate agency partially responsible when one of its employees, who had been drinking at a Christmas office party, drove home drunk and severely injured herself. The employee had also stopped at another bar and kept drinking.

“The reasoning behind this doctrine in the employment context is that the employer is seen as having a certain amount of control over its employees, and, therefore, ought to be held liable for the wrongful acts committed by its employees in the course of their employment. Moreover, the employer will often play a role in the creation of the circumstances of the wrongdoing, further supporting the notion that some liability should rest with the employer,” say Filion lawyers Paul Young and Shannon Kyriakopoulos.

Employers may be held vicariously liable for the acts of employees that are either:
•authorized by the employer; or
•unauthorized, but so connected with authorized acts that they may be regarded as modes of doing an authorized act.

“If the employer’s business contains inherent risks and there is opportunity afforded to employees to commit a wrongful act, the employer must be aware that the ultimate responsibility for the acts of its employees may rest with it.”

Joseph Morrison, Carol Nielsen, Paul Young and Shannon Kyriakopoulos can be reached at (416) 408-3221 or visit www.filion.on.ca for a list of e-mail addresses.

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