FAIRNESS AND GOOD FAITH OBLIGATIONS FOR CHARITIES AND NOT-FOR FOR-PROFITS

Transcription

1 FAIRNESS AND GOOD FAITH OBLIGATIONS FOR CHARITIES AND NOT-FOR FOR-PROFITS BC NON-PROFIT HOUSING ASSOCIATION CONFERENCE NOVEMBER 5 7, 2003 WESTIN BAYSHORE RESORT & MARINA VANCOUVER, BC T. CHARLES DE JAGER DEJAGER VOLKENANT & COMPANY

2 THE LEGAL RELATIONSHIP BETWEEN THE ORGANIZATION AND ITS EMPLOYEES The contract of employment has many characteristics that set it apart from the ordinary commercial contract... the terms of the employment contract rarely result from an exercise of free bargaining power in the way w that the paradigm commercial exchange between two traders does. Individual employees on the whole lack both the bargaining power and the information necessary to achieve more favourable contract provisions than those offered by the employer, particularly with regard to tenure. This power imbalance is not limited to the employment contract itself. Rather, it informs virtually all facets of the employment relationship.. The relation between an employer and an isolated employee or worker is typically a relation between a bearer of power and one who is not a bearer of power. In its inception it is an act of submission, in its operation it is a condition of subordination rdination. This unequal balance of power led the majority of the Court in Slaight Communications, supra,, to describe employees as a vulnerable group in society: see p The vulnerability of employees is underscored by the level of importance which our society attaches to employment. Wallace v. United Grain Growers Limited, 1997, Supreme Court of Canada.

3 NATURAL JUSTICE It is now settled law that all administrative tribunals must provide procedural fairness.. However, H administrative tribunals are the masters of their own procedures and, unlike courts, need not be shackled by all the requirements of natural justice; rather, they are entitled to devise flexible procedures adapted to their own needs in order to achieve a certain balance between the need for fairness, efficiency iency and predictability of outcome.. Thus, the duty of fairness is flexible and variable and will depend upon an appreciation of the context of the statute involved and the rights affected.. L HeureuxL Heureux-Dube J. set out a non-exhaustive list of factors that are relevant to the determination of the level of procedural fairness s required in particular cases. They include: (1) the nature of the decision and its underlying procedures, that is, the degree of similarity of the administrative process to the e judicial process; (2) the role of the particular decision in relation to the nature of the statutory scheme; (3) the importance of the decision to the individuals affected by it; (4) ) the legitimate expectations of the person challenging the decision where expectations were created as to the procedure to be followed; and (5) the choice of procedure made by the tribunal, as well as its expertise and its institutional constraints. B.C. Securities Commission v. Pacific International Securities Inc., 2002, BC Court of Appeal

4 NATURAL JUSTICE The content of the principles of natural justice is flexible and depends on the circumstances in which the question arises. However, the most basic requirements are that of notice, opportunity to make representations, and an unbiased tribunal.[emphasis added] Lakeside Colony of Hutterian Brethren v. Hofer, 1992, Supreme Court C of Canada

5 NATURAL JUSTICE What then is fair?? To a large extent the dictates of fairness have come to be expressed in the concept of natural justice and fairness of which there are two major principles: the right to be heard (audi alteram partem) ) and the right to be heard by someone who is listening, that is to say the right to be heard by an unbiased decision maker.. Natural justice s s guaranty of a right to be heard dictates that agencies must ensure that their hearings provide parties with ample opportunity (a) to know the case made against them; ; (b) to dispute, correct or contradict anything which is prejudicial to their positions; and (c) to present arguments and evidence supporting their own case. Robert W. MacCaulay, Q.C., Hearings Before Administrative Tribunals. Carswell

6 NATURAL JUSTICE In determining bias on the part of a decision maker it is not necessary to prove that the decision-maker is actually biased. The appearance of bias is sufficient. As stated by Lord Goff in R. v. Gough, Justice must not only be done...it must manifestly be seen to done.. The legal test for bias is whether or not an ordinary person fully informed of the facts of the case at hand would find a reasonable apprehension of bias. Bias may exist where the decision-maker has a direct interest in the outcome of the case or where he or she has prejudged the issues or has had prior involvement in the subject matter of the case.

7 COURT REVIEW OF DECISIONS OF PRIVATE TRIBUNALS.. the courts have been gradually moving from a policy of non-interference to a reluctant willingness to exercise a limited supervisory jurisdiction. The review by the court of orders made by an unincorporated association is limited. The power in no way includes the right in the court to substitute e its decision for that of the domestic tribunal. The court is not a court of appeal. Rather, its power is narrow and it may only interfere if the order was made without jurisdiction (or against the rules) or if it was made in bad faith or contrary to the rules of natural justice. In addition, the courts will be reluctant to interfere with the decisions of a domestic tribunal where it is shown that internal remedies have not been exhausted. And there is even greater reluctance to interfere if the decision is based upon opinion regarding the standards of propriety and conduct appropriate for members of a particular association. Peerless et al. v. BC School Sports, 1998, B.C. Court of Appeal

8 COURT REVIEW OF DECISIONS OF PRIVATE TRIBUNALS I I think we ought to take great care that this Court does not by successive decisions usurp an authority in these cases for which there is no colour in point of law. In my opinion there is some danger that the Courts will undertake to act a as Courts of Appeal against the decisions of members of clubs, whereas the Court has no right or authority whatever to sit in appeal upon them at all. The only question which w a Court can properly consider is whether the members of the club, under such circumstances, have acted ultra vires or not, and it seems to me the only questions which a Court can properly entertain for that purpose are, whether anything has been en done which is contrary to natural justice, although it is within the rules of a club in other words, whether the rules of the club are contrary to natural justice; secondly, s whether a person who has not condoned the departure from them has been acted against contrary to the rules of the club; and thirdly, whether the decision of the club has been come to bona fide or not. Unless one of those charges can be made out by those who come before the Court, the Court has no power to interfere with what has been n done.. The Court has no right, in my opinion, to consider whether what was done was w right or not, or, even as a substantive question, whether what was decided was reasonable or not. North Shore Independent School Society v. B.C. School Sports Society, 1999, B.C. Supreme Court

9 EMPLOYEES CONTRACTUAL AND STATUTORY PROCEDURAL FAIRNESS The organization and employee may agree that the contract of employment will contain terms that provide for procedural fairness protection. For example, the contract might provide that the employee will receive written notice of performance related concerns and be given an opportunity to respond to same before any action or decision is taken by the organization. Generally speaking, there is limited statutory procedural fairness protection for employees in Canada. There is some protection afforded employees in this regard under the various provincial Employment Standards legislation. For example, in New Brunswick, the Act requires employers to give reasons in writing when dismissing employees for cause.

10 A DUTY OF PROCEDURAL FAIRNESS IN THE DECISION TO DISMISS The common law has traditionally not required the employer to give the employee reasons for his or her dismissal. Traditionally the common law has not required the employer to provide the employee a fair hearing when it intends to terminate his or her livelihood unless one was a public office holder. The courts have been concerned that false cause allegations could d affect the well-being and reputation of employees. Because of this factor, many jurists have indicated that employers should not make a decision to dismiss an employee for alleged misconduct without treating the employee fairly and giving the employee an opportunity to be heard. It has been held that a long-term employee is entitled to a fair hearing before irremediable action is taken. Failure to give an employee an opportunity to respond to the employer s s concerns will militate in favour of the court finding that the employer acted precipitously. As Sutherland J. stated, not to accord a hearing is a perilous course for the employer.. It may have the effect of encouraging the court to award punitive damages or damages for mental m distress against the employer. It is submitted that it may additionally constitute strong evidence of bad faith on the part of the employer. However, a principle is developing that all employers may have a common law obligation to give employees an opportunity to respond d when allegations amount to cause for dismissal. In two cases involving particularly ruthless terminations by the same employer, it was further held that there was an onus on an employer conducting an investigation to conduct a fair and full one. S.R. Ball, Canadian Employment Law, Canada Law Book Inc.

11 OTHERS - CONTRACTUAL AND STATUTORY PROCEDURAL FAIRNESS The Residential Tenancy Act (the Act )) and other legislation (eg. The Human Rights Code) provide for significant procedural and substantive fairness for tenants. The Act mandates the essential terms of the tenancy agreement and provides for the termination of tenancies and the resolution of disputes in relation to same. Subject to the Act and other applicable legislation, a housing society may incorporate into their tenancy agreements further terms that provide for procedural and substantive fairness.

12 CONTRACTUAL AND STATUTORY SUBSTANTIVE FAIRNESS FOR EMPLOYEES The organization and employee may agree that the contract of employment will obtain terms providing for substantive fairness. For example, the contract may provide that the parties will deal with each other in good faith.. Such terms are uncommon. There is significant substantive fairness available today to employees by way of statute. The various provincial employment standards legislation provide a wide range of protection around wages, holidays, terminations etc. In addition the various provincial human rights acts provide employees with very significant protection in matters of discrimination.

13 THE IMPLIED OBLIGATION OF GOOD FAITH AND FAIR DEALING ON TERMINATION Work is one of the most fundamental aspects in a person s s life, providing the individual with a means of financial support and, as importantly,, a contributory role in society. A person s s employment is an essential component of his or her sense of identity, self-worth and emotional well-being. being. Thus, for most people, work is one of the defining features of their lives.. Accordingly, any change in a person s s employment status is bound to have far-reaching reaching repercussions... when this change is involuntary, the extent of our personal dislocation is even greater. The point at which the employment relationship ruptures is the time when the employee is most vulnerable and hence, most in need of protection. In recognition of this need, n the law ought to encourage conduct that minimizes the damage and dislocation (both h economic and personal) that result from dismissal.. By way of expanding upon this statement, I note that the loss of one s s job is always a traumatic event.. However, when termination is accompanied by acts of bad faith in the manner of discharge, the results can be especially devastating. In my opinion, to ensure that employees receive adequate protection, employers ought to be held to an obligation of good faith and fair dealing in the manner of dismissal, the breach of which will be compensated for by adding to the length of the notice period. Wallace v. United Grain Growers Limited, 1997, Supreme Court of Canada

14 THE IMPLIED OBLIGATION OF GOOD FAITH AND FAIR DEALING ON TERMINATION The obligation of good faith and fair dealing is incapable of precise definition. However, at a minimum, I believe that in the course of dismissal employers ought to be candid, reasonable, honest and forthright with their employees and should refrain from engaging in conduct that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly y insensitive. In Trask, supra,, an employer maintained a wrongful accusation of involvement in a theft and communicated this accusation to other potential employers e of the dismissed employee. Jivrag, supra, involved similar unfounded accusations of theft combined with a refusal to provide a letter of reference e after the termination.. In Corbin, supra,, the New Brunswick Court of Appeal expressed its displeasure over the conduct of an employer who made the decision to fire the employee when he was on disability leave, suffering s from a major depression. Wallace v. United Grain Growers Limited, 1997, Supreme Court of Canada

15 NOTICE In subsequent cases in BC the courts have awarded increased notice on the basis of Wallace. The general range for these increased notice awards is 2 to 6 months. In these cases the employee was required to show that the manner of the dismissal caused mental distress or an adverse affect on future employment prospects. It has been suggested that such increased notice does not adequately compensate the employee for the harm done and that the courts should compensate employees on the basis of tort law (eg. employment torts such as intentional infliction of nervous shock and bad faith discharge ).

16 THE CONTEXTUALIZED APPROACH TO JUST CAUSE DISMISSAL In light of the foregoing analysis, I am of the view that whether an employer is justified in dismissing an employee on the grounds of dishonesty is a question that requires an assessment of the context of the alleged misconduct. More specifically, the test is whether the employee s s dishonesty gave rise to a breakdown in the employment relationship. This test can be expressed in different ways. One could say, for example, that just cause for dismissal exists where the dishonesty violates an essential condition of the employment contract, breaches the faith inherent to the work relationship, or is fundamentally or directly inconsistent with the employee s s obligations to his or her employer. McKinley v. BC Tel et. al., 2001, Supreme Court of Canada

17 THE PROPORTIONALITY PRINCIPLE This is not to say that there cannot be lesser sanctions for less serious types of misconduct.underlying the approach I propose is the principle of proportionality. An effective balance must be struck between the severity of an employee s s misconduct and the sanction imposed. The importance of this balance is better understood by considering the sense of identity and self-worth individuals frequently derive from their employment, McKinley v. BC Tel et al., 2001, Supreme Court of Canada

18 THE NEXT STEP EMPLOYMENT TORTS Thus, although the loss of a job is very often the cause of injured feelings and emotional upset, the law does not recognize these as compensable losses. However, where an employee can establish that an employer engaged in bad faith conduct or unfair dealing in the course of dismissal, injuries such as humiliation, embarrassment and damage to one s s sense of self-worth and self-esteem esteem might all be worthy of compensation depending upon the circumstances of the case. In these situations, compensation does not flow from the fact of dismissal itself, but rather from the manner in which the dismissal was effected by the employer. Often the intangible injuries caused by bad faith conduct or unfair dealing g on dismissal will lead to difficulties in finding alternative employment,, a tangible loss which the Court of Appeal rightly recognized as warranting an addition to the notice period. I recognize that bad faith conduct which affects employment prospects pects may be worthy of considerable more compensation than that which does not,, but in both cases damage had resulted that should be compensable. The availability of compensation for these types of injuries has been recognized in other areas of the law. Compensatory damages, in a case in which they are at large, may include several different kinds of compensation to the injured plaintiff. They may include not only actual pecuniary loss and anticipated pecuniary loss or any social disadvantages which result, or may be thought likely to result, from the wrong which has been done. They may also include the natural injury to this feelings - the natural grief and distress which he may have felt at having been spoken of in defamatory terms, and if there has been any kind of high-handed, handed, oppressive, insulting or contumelious behavior by the defendant which increases the mental pain and suffering caused by the defamation and may constitute injury i to the plaintiff s s pride and self- confidence, those are proper elements to be taken into account in a case where the damages are at large. In my view, there is no valid reason why the scope of compensable injuries i in defamation situations should not be equally recognized in the context of wrongful dismissal from employment. The law should be mindful of the acute vulnerability of terminated employees and ensure their protection by encouraging proper conduct and preventing all injurious losses which might flow from acts of bad d faith or unfair dealing on dismissal, both tangible and intangible. I note that there may be those who would say that this approach imposes an onerous obligation on employers. I would respond simply by saying that I fail to see how it can be onerous to treat people fairly, reasonably, and decently at a time of trauma and despair. In my view, the reasonable person would expect such treatment. So should the law. Wallace v. United Grain Growers Limited, 1997, Supreme Court of Canada

19 THE NEXT STEP EMPLOYMENT TORTS DUTY OF CARE There is a growing body of jurisprudence that employers now have a duty of care when acting on conclusions that could have a devastating effect on an employee ee s s career.. In the decision of Conrad v. Household Financial Corp., the Nova Scotia Court of Appeal dealt with a fact pattern where a dismissed employee was made a scapegoat for poor performance of one of the employer s offices. Although there was no direct accusation, the employee was dismissed in a manner that people would think the dismissal was for theft. The Nova Scotia Court of Appeal found a duty of care outside and independent of the contract of employment... Wilson J. in Kamloops (City) v. v Nielsen stated the Anns test for a duty of care as follows: (1) is there a sufficiently close relationship between the parties... so that, in the reasonable contemplation c of the [defendant], carelessness on its part might cause damage to that person? If so (2) are there any considerations which ought to negative or limit (a) the scope of the duty and (b)( the class of person to whom it is owed or (c) the damages to which a breach of it may give rise? Given G the policy goals of modern employment law, as enunciated by the Supreme Court of Canada, the e Ontario Court (General Division) and the Nova Scotia Court of Appeal came to the right conclusion in finding that employers had duties of care outside the traditional contract of employment towards employees when dismissing them.. There is no reason in principle or policy why these duties cannot sound in tort. S.R. Ball, Canadian Employment Law, Canada Law Book Inc.

20 THE NEXT STEP EMPLOYMENT TORTS BAD FAITH DISCHARGE It is submitted that common law jurisdictions ought to recognize a tort action for bad faith discharge. If the courts are unwilling to recognize a new nominate tort, they should recognize a new contractual action based on an implied term of good faith and fair dealing, a term to be implied d by law....ordinary employees owe their employers an obligation to serve faithfully and have a common law duty of good faith. Equity imposes on some employees even more onerous fiduciary obligations. If one of the e purposes of the law is as Blackstone says, to protect the weak from the insults of the stronger,, one would think that a reciprocal obligation would flow from employers to employees. Although there is considerable evidence that the law is now moving in this direction in Canada, some 200 years after Blackstone s Commentaries on the Laws of England,, there is still no generally recognized principle that employers have an implied obligation of good faith and fair dealing. The common law should recognize an obligation of good faith and fair dealing owed by employers in all employment relationships. ionships. S.R. Ball, Canadian Employment Law, Canada Law Book Inc.

21 A DUTY OF GOOD FAITH AND FAIR DEALING FOR TENANTS The Act provides that the common law respecting landlord and tenant applies to residential tenancies except as modified or varied by the Act. The common law of landlord and tenant in BC does not currently provide for a general duty of good faith and fair dealing at law between landlord and tenant. BC courts may however find a duty of good faith from the express terms of a contract or by implication from the reasonable expectations of the parties

22 A DUTY OF GOOD FAITH AND FAIR DEALING FOR TENANTS There is however case authority in Canada to support such a general duty at law in the context of commercial tenancies. In the Gateway Realty case in Nova Scotia the court recognized such as duty as follows: The law requires that parties to a contract exercise their rights under that agreement honestly, fairly and in good faith. This standard is breached when a party acts in a bad faith manner in the performance of its rights and obligations under the contract.the insistence on a good faith requirement in discretionary conduct in contractual formation, performance, and enforcement is only the fulfillment of the obligation of the courts to do justice in the resolution of disputes between contending parties.. Although the Gateway case is not the law in BC, it is yet another example of the courts in Canada moving towards imposing duties of good faith and fair dealing on contracting parties where appropriate.

23 VIOLENCE THE CONFLICT RESOLUTION CONTINUUM LEGISLATION LITIGATION ARBITRATION CONCILIATION MEDIATION CONSENT

24 MEDIATION MODEL Internal Solution Interest-Based Process Oriented Relationally Sensitive Pros fast and inexpensive open information limitless solutions open to interests positive on relationships Cons needs willing parties Requires goodwill

25 ARBITRATION MODEL FEATURES Imposed Solution Positional End-result Oriented Rights Oriented Pros has force of law predictability Cons hard to access - $/time selective information narrow range of solutions ignores interests ignores relationships

26 DISCUSSION AND QUESTIONS