Audit, Compliance and Risk Blog

One of the enduring benefits of the corporate form is the treatment of corporations as separate “people,” distinct from their owners when questions of legal rights, responsibilities and liabilities arise. This separation extends not just to individual investors and shareholders, but in most circumstances to the corporate directors and officers who decide what their corporation does. Common law courts and federal and provincial corporation statutes define the exceptions – usually based on what are called “piercing the corporate veil” between the company and its controlling minds, or by deciding that those controllers run the corporation as an “alter ego” rather than as a distinct legal person. In recent months, two cases in Ontario have given courts the opportunities to review and reaffirm these traditional approaches.

On September 12, 2019, the Québec Court of Appeal rendered its ruling in the case of Singh c. Montreal Gateway Terminals Partnerships¹, upholding the decision rendered in first instance by the Honourable Justice André Prévost of the Superior Court. This case opposed the right to freedom of religion and the requirements of health and safety in locations like marine terminals, where safety is a major issue.

The most basic principle of corporate directorships is that the directors have a fiduciary duty to act in the best interests of their corporation. It has followed closely that directors should serve the best interests of the shareholders – in most circumstances this means all the shareholders, not the majority or some faction to which a director might owe allegiance. Although it’s not so clear how expansively directors should interpret those corporate interests, the trend is toward consideration of more groups of “stakeholders.” The past year has seen important reinforcements for that trend.

Although an ever-expanding range of laws prohibit workplace harassment, the Court of Appeal for Ontario has now ruled that harassment is not a free-standing common law tort in that province. This ruling reverses a trial court ruling by the by the provincial Superior Court of Justice that shocked employment law in 2017. This ruling returns workplace harassment to the realm of statutory and regulatory requirements and prohibitions, which certainly isn’t unambiguous, but at least offers more structured frames of reference. The case is Merrifield v. Canada (Attorney General), and it litigates a complaint between a member of the Royal Canadian Mounted Police (RCMP) and his employers.

In the last few years, and particularly with the advent of the #MeToo movement, some employers may have seen a rise in the number of harassment complaints in the workplace, including sexual harassment complaints. Employers under federal jurisdiction have been affected as well.

However, the current legal framework surrounding harassment and violence in federally regulated workplaces is fragmented. The results of many public consultations have shown that this framework is not currently designed to adequately address occurrences of sexual harassment and sexual violence.

In that context, in the past 18 months, significant changes have been proposed to the current legislation to address workplace harassment situations.

Sexual harassment in Canadian workplaces can trigger a variety of laws and regulations:

The Canada Labour Code and provincial employment standards acts generally specify a minimum notice period before such terminations (the “statutory notice period”), and generally allow the employer to pay compensation to the employee instead of giving the employee notice. (e.g., CLC ss. 54-67) This compensation is usually called “severance pay”; it replaces advance notice of termination. In general, the severance pay must equal the salary and benefits that the employee would have earned if permitted to work until the end of the notice period. Courts interpret and defend these prohibitions against “contracting out” termination benefits.

On April 26, 2018, the Ontario government passed the Pay Transparency Act, 2018 (the Act), which created a number of requirements for employers with respect to compensation reporting and disclosure to employees and potential employees, as well as compliance compensation reporting to the government, which the government will then make public.

In the recent British Columbia Supreme Court decision of Kenny v. Weatherhaven Global Resources Ltd., the plaintiff successfully claimed unpaid bonuses and bonus amounts owed over the contractual notice period of approximately $170,000.

In a recent decision, Canadian Union of Postal Workers v. Canada Post Corporation, the Federal Court of Appeal reversed an earlier Federal Court endorsement of an appeals officer’s decision to limit the definition of “workplace” for the purposes of inspection under Part II of the Canada Labour Code to workplaces where the employer exercises control.