Tales from the Electronic Workplace

Whether it's social media usage or just 'old-fashioned' email, some people still seem to underestimate the impact that misuse can have on their personal and professional lives (as well as the lives of others).  Some recent cases illustrate the point.

Labour Arbitrators Gail Misra and Elaine Newman recently had to deal with grievances brought by firefighters in the City of Toronto who were terminated for posting offensive comments on Twitter, which ultimately came to the attention of and were publicized by the National Post.  The employees had posted or re-tweeted comments or jokes that were disparaging of women, the disabled and visible minority groups. The tweets were discovered by the National Post, which then questioned how inclusive the Toronto Fire Service actually was.  This was particularly problematic for the employer, as it was in the midst of launching a diversity campaign to recruit women and other groups in accordance with the make-up of the community it serves.  The City was of the view that the tweets in question, from individuals who had identified themselves as Toronto firefighters, not only violated the City's policies, but also did harm to the City's reputation.

In the first of the grievances to be heard, Arbitrator Misra found that the employer had cause for some form of discipline, but ruled that discharge was too harsh.  It was common ground between the parties that the grievor had made the comments in his off-duty time, but that the grievor would have been aware of the importance of not bringing discredit to the Fire Service.  The Arbitrator found that the tweets were shared with co-workers, and had a connection with the workplace, and that their appearance in the National Post article did have potential ramifications for the City's reputation.  The Arbitrator also rejected the grievor's argument that he was unaware that his tweets were accessible to the public, given that he had an opportunity to review the terms of use for Twitter when he signed up.  Moreover, Twitter was designed to allow individuals to communicate publicly (in 140 characters or less) on timely topics.  The grievor may not have been aware of the Standard Operating Guideline specifically directed to social media use, but he knew that there were stringent expectations of firefighters whenever they were in the 'public eye'.  Accordingly, his inappropriate tweets (about 'swatting' a young woman in the head to "re-set her brain") did amount to cause for discipline.  With respect to two other tweets, however, the employer did not establish that the grievor's use of language had been offensive, within the context that he used the 'objectionable' terms.  Although the grievor did not fully understand why any of his comments on Twitter were inappropriate, he did apologize to the employer and his colleagues for the media storm that he had created.  In the result, the Arbitrator held that the penalty of discharge was excessive, substituting a 3-day unpaid suspension.

On similar facts, however, Arbitrator Newman found that discharge was warranted with respect to the other firefighter (decision not yet reported).  After reviewing the arbitral case law on off-duty conduct, Arbitrator Newman observed that the grievor ought to have known that his behaviour on Twitter was inappropriate.  Not only did it potentially bring discredit to the Toronto Fire Service, but it also violated the employer's anti-discrimination policy. At the hearing, the grievor's testimony suggested that he still lacked any insight into how improper his conduct had been, particularly for a firefighter.  In particular, Arbitrator Newman found that the grievor appeared to be incapable of behaving in a way that "brings honour to the uniform," and that his behaviour would reflect poorly within the community that the Fire Service was obliged to serve.  Given the damage that his actions had done to the employer's reputation, Arbitrator Newman upheld his discharge

In R. v. Dewan, the Ontario Court of Appeal was considering an appeal by the accused on his sentence for criminal mischief and harassment.  The appellant had tried to strike up a relationship with a co-worker which was rejected. The appellant continued to pursue the co-worker, until she advised him that she had contacted the police.  At that point, the appellant sent an email out that purported to come from the co-workers.  In the email (that was sent to 9 other co-workers) "degraded the co-worker professionally, sexually, and physically".  The appellant was also convicted of harassment with respect to similar behaviour toward a woman with whom he'd had a romantic relationship, after relations soured.  The appellant had served the equivalent of 2 months in jail, and was given a suspended sentence and 2 years' probation on the mischief charge, as well as 90 days (to be served intermittently) on the harassment charge.  The Ontario Court of Appeal dismissed his appeal, finding:

Having regard to the nature and seriousness of these offences, we are of the view that, even taking account of the appellant’s positive prospects and five months’ time served, imposing a conditional discharge would be contrary to the public interest. Intimate partners must be free to terminate a relationship without fear of abuse, whether physical or psychological, or retaliation of any kind. Even taking account of five months’ time served, imposing a conditional discharge would not reflect the level of denunciation these offences deserve.

These cases demonstrate that context is key in assessing what, if any, disciplinary response is appropriate when an employee engages in off-duty, online conduct that violates workplace rules.  Even pejorative terms in Facebook or Twitter posts should be carefully be reviewed to determine whether they would be offensive to a "reasonable person".  Where an employee's behaviour can be traced to a lack of understanding of the rules or even to the nature of how social media works, employers should be prepared to weigh these factors before doling out punishment.  However, where an employee engages in aggressive behaviour toward a co-worker (such as was the case in R. v. Dewan), whether in person or via email, an employer should take strong action to address the misconduct.  The Court of Appeal's denunciation of the appellant's conduct should serve as strong support for an employer imposing harsh sanctions, including termination.

Do you have questions about implementing social media policy or addressing inappropriate online behaviour?  Contact Lance Ceaser for expert guidance.  

 

 

 

Zero Tolerance ≠ Automatic Suspension for Any Violation of Safety Policy

Employers have very significant duties with respect to protecting the health and safety of their employees, and the potential liability to the employer in the case of an injury or fatality can be overwhelming.  As a result, many employers have adopted 'zero tolerance' policies to ensure that employees work in a safe manner.  But what does 'zero tolerance' really mean, and how enforceable are such policies?

In a recent arbitration decision, Arbitrator Paul Craven had the opportunity to comment on these concepts.  In U.S. Steel - Hamilton v. United Steelworkers, Local 1005, the grievor was by all accounts a good employee with a clean disciplinary record.  As he was leaving the plant one day, he was selected for a random vehicle search.  Plant security found a partial bottle of vodka in the trunk of the car, beneath some camping equipment.  The Company had a 'zero tolerance' policy that prohibited the possession of alcohol on company property, and provided for a 3-day suspension for a first violation.  The employee explained to the employer that he was driving his wife's vehicle that day, and that his daughter had previously used the car for a camping trip, and failed to unload the trunk.  A phone call to his daughter, in the presence of security staff, confirmed this to be the case, and the employer did not disbelieve this explanation. However, relying on the policy, the employee was still given a 3-day suspension, which he grieved.

At arbitration, the parties agreed that the Hamilton steel plant was a "safety-sensitive" environment and that alcohol and drugs should be kept out of the workplace, but the union argued that an unintentional violation of the policy which had no impact for plant safety should not have attracted such a serious form of discipline (the last step in the disciplinary process short of termination). The employer argued that strict and consistent enforcement of the policy was necessary to ensure that employees did not become confused about the rules against alcohol in the workplace.

Arbitrator Craven began his analysis by reviewing the decision in Re Lumber & Sawmill Workers’ Union, Local 2537, and KVP Co. Ltd. ("KVP"), which describes the test to be applied in assessing employer policies that have not been negotiated with and agreed upon by the union.

1. It must not be inconsistent with the collective agreement.
2. It must not be unreasonable.
3. It must be clear and unequivocal.
4. It must be brought to the attention of the employee affected before the company can act on it.
5. The employee concerned must have been notified that a breach of such rule could result in his discharge if the rule is used as a foundation for discharge.
6. Such rule should have been consistently enforced by the company from the time it was introduced.

Looking solely at the policy, and the company's evidence that it had been consistently enforced (with only one or two anomalous situations), the Arbitrator was of the view that the policy was generally reasonable and that the employer was entitled to rely on it to impose some form of discipline.  However, the Arbitrator then went on to consider whether the level of discipline imposed was appropriate considering the nature of the employee's policy violation.  Arbitrator Craven observed that if 'zero tolerance' means not only discipline for every violation, but the "automatic application of ... a significant penalty" (such as a one-week suspension) in every case, without this being part of the written policy, then the policy would fail the reasonableness test on the 2nd, 3rd and 4th prongs of the KVP test.  In short, if specific violations are to be subject to automatic penalties, those must be set out in the policy itself and brought to employees' attention.  Arbitrator Craven went on to state that 'zero tolerance' in the sense of a set penalty for any violation of the policy has also been held to violate the just cause provisions of a collective agreement (by not considering individual circumstances and by imposing discipline that is not "progressive"), and therefore would fail the test in KVP for that reason.

In looking at how the employer applied the policy to the grievor, the Arbitrator found that the punishment did not fit the crime. The employer had mechanically applied a set penalty without first considering the employee's disciplinary record and his blamelessness in unwittingly violating the policy.  The three-day suspension was found to be too severe, and was to be removed and replaced with a written warning.

The message to unionized employers should be clear.  In the absence of an agreed-upon specific penalty clause in the collective agreement, the employer should not impose automatic disciplinary sanctions for policy violations, even where there is a legitimate and pressing reason for insisting on 'zero tolerance'.  Zero tolerance should only be applied at the stage of determining whether there has been a violation of policy (i.e., an investigation should occur, and measures taken to address every violation).  Once a policy violation is found, the employer must assess the seriousness of the violation, considering the actual or potential harm to the organization, the presence or absence of intent, the employee's disciplinary record, the level of discipline previously applied for similar violations, etc.  Only by performing this analysis before taking corrective action can an employer later justify its actions.

Do you have questions about instituting new policies or the imposition of discipline?  Contact Lance Ceaser for expert advice.





 

 

 

 

 

Forfeiture and Repayment Clauses - Do they have to be justified as being in "restraint of trade"?

Typically, employers have encountered difficulty in enforcing covenants restricting employees from competing with the employer after their employment ends. Restrictive covenants, which typically deal with post-termination confidentiality, solicitation of employees and clients, and competition with the former employer.  Such restrictions are viewed by the courts as unenforceable, as they constitute a "restraint on trade", that is, an unfair impediment to an individual being able to ply his or her trade and earn a living. 

However, if the covenants can pass a number of tests for reasonableness, the courts will find them enforceable.  First, the employer must be able to establish that the restrictions are reasonably necessary to protect its legitimate business interests, and that the measures imposed are the least restrictive that would meet that objective.  If a non-solicitation provision would provide adequate protection, the courts will not uphold a non-competition agreement.  If the employer can establish the necessity of the restriction, it must still prove that the limitations imposed are reasonable, in terms of the temporal and geographic scope of the covenant, as well as the nature of the activity that it captures.  Again, less is more - a covenant that is not tailored bearing in mind the employee's job duties, their level of responsibility vis-a-vis the employer's business, and the risk posed by their competition with the former employer, it is unlikely to be enforced.

The courts have taken varying views on other types of clauses that are triggered upon termination and which may impact an employee's post-termination activities and entitlements.  Two recent decisions illustrate how some of these clauses work, and what the courts think of them.

In Levinsky v. The Toronto-Dominion Bank, the employee was a Vice President in the securities trading area for several years, before resigning to start up his own hedge fund.  For several years, he participated in the Bank's Long-Term Compensation Plan (the "Plan"), which provided grants of Restricted Share Units ("RSUs") each year.  Each grant of RSUs would vest three years from the date of grant, but any unvested RSUs were forfeited in the event that an employee resigned prior to their vesting date.  The plaintiff claimed that the RSU awards were a form of “earned compensation” for past services, and that the forfeiture provision in the Plan amounted to an unreasonable restrictive covenant, as it was actually designed to discourage employees of the Bank from leaving and going to work for a competitor.  His claim was for approximately $1.6 million in unvested RSUs.  Although the plaintiff was subject to a non-competition agreement, the Bank waived any restriction on his activities and did not challenge his starting a potentially competitive business after he left.

In the Ontario Superior Court of Justice, Justice Brown considered the law on restrictive covenants, including the fact that whether a provision amounts to a restraint of trade is to be determined “by the effect of the clause in practice”, not just its form.  After reviewing those cases in which an employee was denied future compensation in the event of his/her resigning and taking on employment with a competitor, the Court summarized the case law as follows (at para. 80):

 

From this review of the jurisprudence placed before me at the trial, the following legal principles emerge:

(i)      No binding decision was put before me which dealt with facts substantially similar to those raised by the present case;

(ii)   However, the decision of the Court of Appeal in Inglis, which does bind me, held that a clause in an employment contract under which the entitlement to post-termination future commissions would be forfeit in the event the employee engaged in a competing business was not in restraint of trade because it did not preclude the employee “from going anywhere and doing anything he chose to do”. The Court of Appeal viewed the clause as attaching a contingency to the entitlement to future income, but not the forfeiture of a vested right;  

(iii)   This Court, in Nortel Networks v. Jervis, did not regard as a restraint of trade a clause in an employment contract which required an employee to reimburse the employer benefits he had received from the exercise of stock options prior to leaving the company in the event that after leaving he went to work for a competitor, again on the basis that it did not preclude the employee “from going elsewhere or from doing whatever he chose to do”;

(iv)   The weight of authority from other jurisdictions regarding the treatment of clauses which defer compensation for a period of time and require an employee to remain in service at the time of maturity in order to receive the compensation suggests two principles:

a. If the entitlement depends upon the continuation in service and does not tie eligibility to the nature of the employee’s commercial activity after he leaves his employer, the clause is not viewed as a restraint of trade, but simply a condition for entitlement to part of the employee’s compensation package and a reasonable condition designed to secure the employee’s loyalty through continued service; but,

b. If the deferred compensation has already vested in the employee prior to his termination, a forfeiture provision might be regarded as a restraint of trade if forfeiture was tied to post-termination commercial activity, not simply to the employee’s continuation in service.

Because the Plan in Levinsky did not tie post-termination entitlement to the RSU grant to refraining from taking up employment with a competitor, but was tied solely to his continued employment with the Bank for a specified period of time, the Court viewed it as a retention scheme rather than a restraint of trade.  Moreover, it was clear from the terms of the Plan that the compensation at issue had not yet been earned, and was not a vested right that the employee could demand after resigning.  In the result, the claim was dismissed.

Similar issues were more recently litigated in Rhebergen v. Creston Veterinary Clinic Ltd., at the British Columbia Court of Appeal.  In that case, a veterinary practice retained the plaintiff under an “Associate Agreement” immediately after she completed her veterinary schooling.  It was agreed that the plaintiff would work for the clinic for three years, during which time she would receive further hands-on training and mentoring.  Under the contract, the plaintiff was subject to a repayment obligation if she “set up” a veterinary practice in the town where the clinic was located or within 25 km of the town.  After 14 months of employment, the plaintiff advised the clinic that she intended to leave, and her employment was terminated for cause.  She then applied to the court for a declaration that she was not obligated to make any repayment to the clinic if she started her own mobile vet practice, as the provision of the contract was alleged to be in restraint of trade and unenforceable.

In the B.C. Supreme Court, the plaintiff was successful.  The Court was of the opinion that the terms of the repayment provision were vague and ambiguous, and that the repayment amounts set out therein were a penalty, rendering the provision unenforceable.  The employer appealed.

At the B.C. Court of Appeal, the majority of the Court (Justice Lowry dissenting) found that the trial judge had erred in finding that the repayment provision was ambiguous as to when compensation would be triggered.  Given that the former employee had brought her application for a declaration on the basis that she intended to “set up a veterinary practice” in the prescribed area, it was clear that the parties had a mutual understanding of what the clause meant.  The Court was unanimous in finding that the repayment obligation did not constitute a “penalty”, and that whether or not it was a penalty was not per se determinative of whether it was unreasonable, where the employee had agreed to the amounts to be repaid. 

Perhaps most interestingly, however, the B.C. Court of Appeal was also unanimous in finding that its responsibility in reviewing a clause of this nature was to look at the functional or practical effect, rather than focusing on the form of the provision (as was the case in many of the Ontario cases cited). The Court also observed that the decision in Levinsky supported taking a functional approach, where the courts must focus on whether the clause creates a disincentive for the employee to compete post-termination, even if there is no express prohibition of competition.  The Court had no hesitation in finding, on the basis of this functional analysis, that the repayment obligation in the Agreement amounted to a restrictive covenant.  However, in the end, it was found that its terms were reasonable and, therefore, enforceable.

These recent cases highlight the variety of approaches that are possible, but also provide some clarity on what types of provisions will be enforceable and which won’t.  In most instances, ‘retention’ schemes that tie entitlement to an employee continuing in employment for some period of time, and which do not disentitle the employee on the basis of competitive activity post-termination, will not be found to be in restraint of trade.  Accordingly, an employer will not have to justify these provisions on the basis of the ‘reasonableness’ test referred to above.  However, if the program provides a vested right, which is then taken away at termination, this may offer another basis for challenging the refusal to pay.  Where an employee is required to repay or will lose a significant piece of compensation as a result of post-termination competition, such measures will likely be viewed as a disguised restrictive covenant on the basis of the functional analysis, and will have to be justified as reasonable.  In looking at a repayment obligation, it will be necessary to establish that it is not unduly onerous or punitive, and it would be advisable to be able to connect the amount to any costs involved in the loss of the employee, such as foregone training and equipment costs and/or the loss of clients to the employee’s competition (as was the case in Rhebergen).  In all cases, however, care must be taken to ensure that the language used is clear and unambiguous – any clause that takes away some component of the employment bargain or which imposes financial obligations will likely fail if it is vague or open to multiple interpretations.

Do you have questions about forfeiture or ‘penalty’ clauses in an employment agreement or other employment-related compensation scheme?  Contact Lance Ceaser for professional guidance.