May 22, 2014

Two major decisions were released today by both the Supreme Court of Canada addressing the issue of mandatory retirement, as well as the Ontario Court of Appeal addressing the issue of punitive damages.

In the Fasken v. McCormick decision, the Supreme Court of Canada made clear that Mr. McCormick, a 65-year-old partner at that time, of Fasken, Martineau DuMoulin LLP, was not discriminated against, despite the fact that he was asked to leave the partnership under the mandatory retirement clause in his partnership agreement.

The court reasoned that the key to determining who is in an “employment relationship” for purposes under the Human Rights Code  is the degree of control and the extent to which the worker is subject and subordinate to someone else’s decision-making over working conditions and remuneration.  McCormick’s status as an equity partner, and his ownership, sharing of profits and losses, as well as the right to participate in management made him part of the group that controlled the partnership, not a person vulnerable to its control.  The court further found that that in his thirty years, he had not been in a subordinate relationship with the other equity partners.   The ability to vote  for and stand for election to the firm’s Board, the right not to be subject to discipline or dismissal, and the duty that other partners owed to him to render accounts made clear that he had the ability to influence decisions that critically affected his working life.   Given these facts, and that he exercised control, he could not be considered an employee for purposes of the British Columbia Human Rights Code.

However, the Supreme Court left the door open for other situations involving a partner in a firm who is subject to control of the firm, like a non-equity partner.  Specifically, the court stated that if such a finding were to be made, it would only be justified in a situation quite different from this case, where the powers, rights and protections normally associated with a partnership were greatly diminished.   In that regard, a partner lacking that control, and rather depending on the firm for direction may be more in line with an employee in an employment relationship, than a partner who has the ability to vote and be a part owner in the firm/company.   The court also commented on the duty of good faith, which partners owe to each other, as another way to advance a discrimination claim.  It found that if there were to be a breach of this duty in a partnership, it may well capture some forms of discrimination among partners.

In the 2nd decision, of Boucher and Wal-Mart, the Ontario Court of Appeal significantly reduced the damage award made by the jury of one million dollars for the reprehensible behaviour displayed by Walmart, after it failed to properly investigate the serious harassment complaints Boucher had brought forward to senior management about her superior. Purporting to investigate her complaints, Wal-Mart asserted that Boucher’s complaints were unsubstantiated, and that she would be held accountable for making them, therefore acting in reprisal against her. They allowed the behavior of the superior to continue unchecked and Boucher asserted constructive dismissal of her employment and sued for damages.

In the Court’s view, the significant reduction in damages was due to the fact that Wal-Mart had already been found liable for significant compensatory damages. Given that Wal-Mart’s misconduct lasted less than 6 months, it did not profit from its wrong-doing, and did not force her resignation, the court reasoned that on a comparative scale with other punitive damage cases of this nature, that it was acceptable to reduce the award.

However, in my opinion, what the Court of Appeal failed to consider, is the fact that the employer abdicated its duty to properly investigate allegations of harassment brought forward by Boucher, and to assist her with the harassment in any way.  Further, it sought to punish her for bringing the complaint forward, which in essence, is an act of reprisal toward her for asserting her rights.

While it is important that the Ontario Court of Appeal maintained a basis for the punitive damage award, reducing it by $900,000 demonstrates that the court did not consider the fact that Wal-Mart failed to properly investigate a workplace harassment complaint and then acted in reprisal against the employee all that bad, placing the emphasis on the length of time of the behavior, rather than behavior itself.   With employers understanding that they have an absolute duty to investigate workplace harassment properly, what kind of message does that send?