2008
  RETIREMENT AGREEMENTS: THE NEXT FRONTIER IN EMPLOYMENT CONTRACTS? 
With the elimination of mandatory retirement in most provinces, employers cannot require retirement at age 65, nor compel their employees to make decisions on retirement. Consequently, employers will be looking for ways to bring some certainty to human resource planning; retirement agreements, if drafted carefully, can be a tool which helps achieve that objective. On January 1, British Columbia became the latest province to eliminate mandatory retirement. Employers who previously relied on the ability to require retirement at age 65 to manage (and predict) employee turnover will be looking for new ways to do both without breaching provisions of applicable human rights laws. Further, most employers will have conflicting objectives regarding their older workers: some employees will be encouraged to stay in order to retain valuable skills and experience, while other employees will be encouraged to retire for operational needs, or poor performance and/or productivity. Given the conflict between rights of employees to choose their retirement date, and the need of employers to have some degree of certainty on their employees’ plans in this regard, employment lawyers will be looking at how retirement agreements can bridge the conflict. Employment lawyers have long recommended employment contracts to their employer-clients as a way to ensure clarity as to important terms of the employment relationship and, in particular, to limit an employer’s liability for notice or pay in lieu of notice in the event the employer decides to terminate an employee without cause. Similarly, provided they are truly voluntary, retirement agreements can be used to confirm a fixed date an employee will retire, and/or changes in employment terms and conditions leading up to a retirement date. Over the years the courts have considered numerous disputes regarding the interpretation and enforceability of employment contracts, with the result that certain principles have evolved that make employment contracts more technical than an unsuspecting lawyer or client realize. Also, employers and employees are not permitted to contract out of employment standards, labour codes and human rights laws. Consequently, lawyers will want to ensure retirement agreements are drafted with these principles and laws in mind. Given the unequal bargaining power of employers and employees, employers should carefully consider their communications to employees surrounding the entering into of these agreements, so there is no doubt that employees freely entered into the agreement to fix their retirement date. As a first step, employers may want to consider sponsoring retirement planning seminars to encourage employees to think about their own circumstances, and to better equip them to make informed decisions regarding planned retirement dates. Voluntary or not, however, agreements by employees to blanket mandatory retirement policies will be void if they are deemed to be an attempt to contract out of the legislation referred to above. There must be some real consideration flowing to the employee in order to make employment agreements enforceable, and this is equally true for retirement agreements. It will not be enough to promise ‘status quo’ in employment terms and conditions in exchange for an employee’s promise to retire on a certain date. Employers who want to actively encourage retirement (or retention) of their older work force will need to consider incentives to encourage the desired result by offering such things as phased-in retirement, financial bonuses, new benefits, or other perquisites designed to appeal to older workers. Because unilateral material changes to the employment relationship can expose an employer to a claim of constructive dismissal, it will be important to document in writing an employee’s agreement to any changes to title, work responsibilities or hours of work. Also, what may seem like an attractive decrease in workload or stress to a senior employee, may in practice result in a loss of influence or prestige that an employee did not anticipate. Consequently, employers will want to ensure their employees have faced up to these possible consequences at the outset and (preferably) documented their agreement in the retirement agreement itself. Prior to the legislative changes which prohibited mandatory retirement, it was common for employers faced with under-performing employees to simply put up with the performance problems if the employee was close to retirement age. Now more than ever, it is important to manage performance proactively. If employers do not already have performance review processes and practices which include performance improvement agreements with employees, they will want to consider implementing one because employers will not be able to institute performance management measures or criteria only on their older employees. Employers should always be alert to the possibility that some performance problems may be based on a disability or illness (which triggers legal obligations on the employer to accommodate the employee to the point of undue hardship). As the average age of employees increases, it is expected that requests for accommodation will increase. While ‘age’ per se is not considered a disability, employers will be expected to accommodate reasonable age-based limitations on performance and productivity, provided employers can do so without undue hardship. Done carefully, retirement agreements which provide for changed or phased reduction in work responsibilities, can be a way for an employer to meet its duty to accommodate these employees. This article was published in a recent edition of The Lawyers Weekly
GWENDOLINE ALLISON JOINS GROWING TEAM
Gwendoline’s experience in labour and employment law is extensive. Since her call to the Bar in 1995, she has advised employers and employees on a wide range of employment and human rights issues, from pre-hiring to post-termination advice and litigation. Gwendoline has taken cases at all levels of court and at various tribunal levels. Gwendoline regularly works with clients requiring assistance in the following areas:
Specific examples of Gwendoline’s recent experience are available in her profile on Clark Wilson’s website, at www.cwilson.com, under “Our People”. “I am very excited to join this dynamic group of lawyers”, says Gwendoline. “Our broad diversity of experience at all levels allows us to provide timely and responsive advice to our clients.” The group’s chair, Nicole Byres, adds “With the addition of Gwendoline Allison to our group, we are pleased that we can ensure that our clients receive prompt and practical advice at the appropriate level for their needs.” Gwendoline can be reached at 604.643.3166 or gca@cwilson.com. JUNE 24: PLANNING FOR CHANGE
Save the date! Registration information and a complete seminar agenda will be provided soon.
BORDER CROSSING: DIFFERENCES BETWEEN CANADIAN AND U.S. EMPLOYMENT LAW
For many American organizations, growing their business into Canada is a logical and “easy” expansion of their operations. However, in spite of their many similarities, the two countries have many significant differences in how employment relationships are governed. Employers wishing to do business in Canada should be aware of these differences before entering into any employment arrangements north of the border. 1. Forget “At Will” Employment Many of the employment relationships in the U.S. are “at will” employment. “At will” employment means that either the employee or the employer may terminate the employment at any time, for any reason and without any notice. “At will” employment does not exist in Canadian employment law. Canadian law provides that an employer can only terminate an employee without cause where it provides the employee with “reasonable notice” of the termination or compensation in lieu of notice. An employee’s minimum rights to notice are regulated by provincial statute, and vary from province to province. These rights may be modified by contract. However, any contract which provides for notice which is below the statutory minimum will be unenforceable and the court will act as if there is no contract at all. Further, if no written contract of employment exists, or the contract of employment is silent or not enforceable on the issue of what the employee is entitled to upon termination, a court will imply a term of “reasonable notice”. In doing so it will award damages equal to the total compensation the employee would have received during the notice period, including bonus, options, benefits, commissions as well as salary. What is considered “reasonable notice” will vary depending on the employee’s length of service, age and other factors. If the employee finds re-employment during the “reasonable notice” period, any earnings he or she received during that period act to reduce the employer’s obligation. 2. Reconsider Restrictive Covenants U.S. courts are generally more willing to enforce post-employment, non-competition and non-solicitation agreements where the agreement is reasonable in time and scope, and if the agreement is protecting the trade secrets or other proprietary rights of the company. In Canada, as a starting point, non-compete agreements are unenforceable unless they protect a legitimate business interest. Even then, the restrictions must be reasonable in time, geographic scope and given the nature of the business to be protected. The underlying premise is that such restrictions limit economic activity and are therefore against public policy. 3. Say No to Unilateral Changes to Employment Terms In the U.S., employment terms are generally subject to change or modification “at will”. In Canada, an employer cannot unilaterally impose new terms into an employment contract without the employee’s consent. In order to do so, an employer is required to provide new consideration, such as a small raise or bonus. While in the U.S., “continued employment” may be deemed to be sufficient consideration, it is never sufficient consideration in Canada. 4. Ditch Random Drug and Alcohol Testing In the U.S., it is common practice to require pre-employment drug/alcohol testing or random post-employment drug/alcohol testing. In Canada, pre- and post-employment drug/alcohol testing are considered to be violations of an employee’s human rights and therefore not permitted. There are some exceptions to this general rule if the employer is able to demonstrate that the testing can be justified as a necessary and reasonable component to the employer’s other policies aimed at protecting the safety of employees and third parties. 5. Pension and Benefits The benefit regime in Canada is different from the regime in the United States. Because Canadians have access to public health care for basic services, employers’ benefit programs often include benefits which are not covered under the public system. Generally, employers will offer extended health care coverage which includes drug, dental and eye care plans. The costs of the extended health coverage may be at the employer’s expense or a shared expense with the employee. The cost of providing such a health care plan is typically much less than plans provided in the United States. There is federal and provincial legislation which governs pensions for employers, and which employers must comply with if establishing pension plans in Canada. For this reason, an employer is unable to extend or offer their U.S. pension benefit plans to their Canadian employees. 6. Meet the Minimum Employment Standards Canada has federal and provincial legislation which sets out certain minimum terms and conditions of employment for employees working within Canada. The legislation sets standards for several conditions of employment, including wages, pregnancy leave and parental leave. 7. Be Cautious of Human Rights Canada has both federal and provincial human rights legislation to protect employees or potential employees from discrimination based on race, colour, ancestry, place of origin, religion, marital status, family status, sex, sexual orientation, physical or mental disability, age (19 years and over), criminal conviction, and political belief. This protection is intended to ensure equal access to employment opportunities and fair treatment in the workplace. The legislation has a dramatic impact on the hiring and firing practices of employers since it prevents an employer from asking employee questions based on protected grounds including age and martial status. It also prevents employers from requiring criminal checks on potential employees, unless the employer can demonstrate that the criminal check is reasonably necessary for the position. Conclusion The above are just some examples of the differences between employment laws in Canada and the United States. Before commencing operations in Canada, prudent U.S. employers should consult with a Canadian employment lawyer to avoid the missteps most commonly made by U.S. employers expanding their operations north of the border. Dianne Rideout
CW EMPLOYMENT LAWYERS TO ARGUE IMPORTANT CASE BEFORE SUPREME COURT OF CANADA
The Labour & Employment Group is proud to announce that David Buchanan Q.C. and Valerie Dixon of Clark Wilson have been granted leave to appeal to the Supreme Court of Canada in the case of KRG Insurance Brokers (Western) Inc. v. Shafron. The case will be heard in December 2008 and concerns the issue of whether a Court may alter a vague or ambiguous non-competition clause in an employment agreement so as to render it enforceable. Mr. Shafron was employed by KRG from 1987 until 2000. His employment agreement included a non-competition clause which purported to restrict him from carrying on the business of insurance broker for a period of three years within the “metropolitan City of Vancouver”. At trial, the restrictive covenant was found to be unenforceable, due in part to the fact that the spatial area over which the covenant was to apply was uncertain. The Court of Appeal overturned the trial judgement and, applying the “doctrine of notional severance”, altered the language of the covenant so as to give it effect. Given that the Supreme Court of Canada has not considered the issue of non-competition clauses in the employment context since 1978, the Court’s decision in this case will be of great interest to employers and employees across Canada.
STRICTER REGULATIONS FOR WORKPLACE SMOKING IN EFFECT
On March 31, 2008 the newest Tobacco Control Regulations came into effect. Part of those regulations establish a 3 meter ‘buffer zone’ around work place doors, open windows, and air intakes. Besides the fact that smoking is banned in all enclosed or substantially enclosed work spaces, employers are now responsible to ensure that no smoking occurs within these buffer zones. If employers provide sheltered smoking areas for their employees (employers are not required to do so), it will be important to review these regulations to ensure any shelter is not deemed a ‘substantially’ enclosed space. For more information on tobacco control in BC, visit the Tobacco Control Program’s website at www.health.gov.bc.ca/tobacco.
WORK PLACE POST VIA EMAIL
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Clark Wilson is pleased to announce the addition of 
With uncertainty and change prevalent in our economic, legislative, and even demographic environments, providing for flexibility in our workplaces is more important than ever. On June 24, Clark Wilson’s Labour & Employment Group will host a morning seminar on Planning for Change. Topics will include: building flexibility while avoiding constructive dismissal claims; planning and handling dismissals; managing recruitment, succession and retirement; protecting your interests when employees become competitors; handling the emerging issues of an ageing workforce; and other topical issues of interest to those in the labour & employment field.
Tel. 604.643.3166
E. gca@cwilson.com
Tel. 604.891.7732
E. alb@cwilson.com
Tel. 604.643.3173
E. nmb@cwilson.com
Tel. 604.891.7743
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