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Key topics in employment law

Jul 12, 2017

Employers must deal with a myriad of employment and labour law issues, most of which are pressing and require swift and effective action. That is why maintaining compliance with the constantly evolving statutory labour and employment obligations is of paramount importance. Effectively navigating the associated regulatory landscape can help you avoid incurring extra expenses and unnecessary headaches.

In addition, there are industry-specific issues that are threatening to expose businesses to even more potential liabilities. For example, franchisors need to be cognizant of how the proposed joint employer status could expose them to employees’ claims under employment and labour laws, collective agreements, wrongful dismissal suits, wage and overtime class actions, and human rights claims.

Another key employment issue is random drug and alcohol testing in the workplace. While there is no legislative regime in Canada that specifically governs this testing — it is based on case law and arbitral jurisprudence — counsel must understand the balance between an employer’s legitimate interest and its obligation to provide a safe work environment, and an employee’s privacy and human rights.

As part of Osler’s Brief the Board series, these resources developed by Jennifer Dolman, a partner in Osler’s Litigation Practice Group, and Brian Thiessen, a partner in Osler’s Employment & Labour Practice Group, examine key employment and labour law issues and offer best practices and useful suggestions for briefing a board on a number of matters, including

  • joint employer status as it applies to franchise law
  • how to avoid joint employer status
  • unionization and franchise law
  • the implications of Bill 148, the Fair Workplaces, Better Jobs Act, 2017
  • random drug and alcohol testing in the workplace

Every employer will be confronted with various employment and labour law issues that could expose them to liabilities. These resources will help counsel provide employment law advice and develop the necessary framework for successfully managing these situations:


The essentials

  • Franchisors remain at risk of being found to be joint employers which can have a significant impact on their costs and liabilities
  • Proposed changes to Labour Relations Act may increase number of union drives and applications for certification
  • It is critical for employers to have clear drug and alcohol policies and protocols in place

Access the PDF of TakeawaysReview the slide deck



Video transcript

ERIC MORGAN: Hello, and welcome to Osler's webinar series, Brief the board. I'm Eric Morgan. I'm an associate in Osler's litigation department in Toronto.

This is a series of webinars that Osler is presenting on how counsel can brief their board members and senior management about a variety of litigation topics.

In today's webinar, we'll be discussing briefing boards and senior management about hot topics in employment law, in particular, employment issues for franchises in random drug and alcohol testing.

If you have any questions during the webinar, please email us or type them into the area provided on your screen and we'll respond to them as time permits.

I'm joined today by Jennifer Dolman and Brian Thiessen.

Jennifer is a litigation partner here at ostler in Toronto. She has a broad commercial litigation practice with an emphasis on assisting Canadian and international franchisors with their business critical disputes. And with that, I'm going to turn it over to Jennifer.

JENNIFER DOLMAN: Thanks, Eric. I'm going to talk about labor and employment issues in franchising A good place to start is to review what is a franchise. A franchise relationship importantly is distinct from an employment relationship.

A franchise is broadly defined under franchise legislation like Ontario's Arthur Wishart Act Franchise Disclosure, 2000. I'll call that the AWA. There are actually five other provinces in Canada with franchise legislation like the AWA, but for today's purposes, I'm just focusing on the AWA.

Under the AWA, there are three key elements of a franchise.

The first is payment to the franchisor in the course of operating a business, or as a condition of acquiring the franchisor commencing operations.

The second is the franchisee being granted the right to sell, offer for sale, or the right to distribute goods or services substantially associated with the franchisors or franchise associates trademark, service mark, trade name, and the likes.

And thirdly, the franchisor must exercise significant control over or offer significant assistance in the franchisees' method of operation.

The AWA expressly states that it does not apply to employment relationships.

In 2015, the changing workplaces review was initiated in Ontario by the Ministry of Labor to consider issues affecting the workplace. Two special advisors were tasked with making recommendations to the government to address the changing nature of the workforce, the workplace, and the economy. They were focused on two Ontario statutes, The Labor Relations act and The Employment Standards Act. Public consultations were held in 12 cities across Ontario in 2015.

In July 2016, an interim report and guide were issued. Approximately 50 issues were addressed and over 225 options raised for further consultation. One recommendation was that franchisors be deemed joint employers with their franchisees of their franchisees' employees.

Prior to this particular proposed amendment, the question of whether a franchisor was a joint employer with its franchisee at its franchisees' employees was decided on a case-by-case basis with varied results, and depended on that franchisors control of its franchisees' day-to-day operations. The idea that franchisors could be deemed to be joint employers by legislation was considered a significant threat to both the franchise model, but also to Ontario's thriving franchise industry. Joint employer status, if across the board, could expose franchise owners to employees claims under employment and labor laws, collective agreements, wrongful dismissal suits, wage and overtime class actions, and human rights claims.

So again, even though prior to this proposed amendment, there had been findings of joint employment status. That was on a case-by-case basis. It wasn't just deemed by legislation as being necessarily so.

What are the direct and indirect impacts of joint employer on a franchise or its business? Well, those could include increased liability in respect of the franchisees' commitments to their employees, including liability for wages, salaries, overtime, vacation pay and benefits, termination notice and pay in lieu of notice, severance pay and employment related premiums, payroll taxes, really any situation in which monies are owed to employees. If a franchisor was deemed to be a joint employer, then they would be responsible together with the franchisee for any outstanding monies owed to employees.

And as a result, because of this potential liability, there would be increased costs on the part of a franchisor to ensure that the business was compliant with statutory labor and employment obligations. And because the typical franchise model has the franchisor passing certain costs through to the franchisee, there would need to be changes to the economics and incentives in a franchisor's business model as it tried to flow these increased costs and operational burdens through to its franchisees. And then franchisees who typically have an autonomous existence from their franchisors, they operate independent businesses but under the license from their franchisors, they would experience a loss of autonomy over the operation of their businesses if the franchisors were going to increasingly become more involved because of the increased exposure to liability. And then, there was an increased risk as well that franchisees employees could become more unionized.

The final report was released by the special advisors on May 23, 2017. And the great result for not just franchisors but franchisees as well, because they would be impacted by franchisors being deemed to be joint employers with them, the final report specifically rejected this adoption of a proposed new deem joint employee status for franchisor. So this was a very exciting and welcome news for the entire franchise industry. But notwithstanding that there will not be legislation deeming franchise owners to be joint employers with their franchisees in Ontario, franchise owners do continue to remain at risk of being found to be a joint employer.

And because there was so much publicity around this issue, both the Canadian Franchise Association and the Ontario Bar Association franchise law section were advocating against this particular proposal. A lot of franchisors themselves were meeting with the special advisors to advocate against these changes. And there was a lot of newspaper write-ups and the likes. So it was very much a hot topic such that, I think franchise owners should still be expecting this issue to be on everybody's radar. And if there's a particular dispute between an employee and a franchisee, the employees council may then well decide to name the franchisor in any complaint or suit particularly because franchisors typically have deeper pockets than their franchisees.

As such, it is very important still for franchisors to take steps to try to avoid a finding of joint employer status. And franchisors therefore need to think carefully about the extent to which they control the day-to-day operations of their franchisees. Franchisors must afford franchisees a significant level of independence and discretion when it comes to employee hiring and firing, scheduling wages, personnel files. And yet franchisors, at the same time, because they're the ones who own the trademarks, and they're the ones who have created the system that they've franchised, and they're the ones with the know-how and the skillset and the brand and reputation, they do have to, of course, take steps to make sure that their brand is efficiently controlled.

So there needs to be a careful balance between taking steps to ensure that the franchisors' own trademark is preserved and its reputation and that system standards are complied with. But at the same time, not get too deep in the weeds in terms of the franchisees' relationship with its employees. So franchisors owners need to step back and let their franchisees deal with hiring and firing, scheduling, and everything that is more closely connected to the actual employment relationship between its franchisees and its franchisees' employees.

And so, franchisors should focus on practices that impact the consumer's experience with the brand, but steer away again from steps that they would take that are too closely involved with what the franchisee needs to mandate of its employees. One thing franchisors should consider doing is taking a close look at their franchise agreement and their operations manual to see what provisions are in there that may be too close to employment practices. And they should eliminate provisions that go too far, or they at least should take steps by consulting with franchise council as to what is necessary to protect their brand but not to get too close to the franchisees' relationship with its employees.

Franchisors should make sure that it's the franchisees' name and not the franchisor's that appears on store level receipts, stationery, employment applications, pay stubs, accounts, websites et cetera. The employees, but also consumers, should understand that the franchisee is an independently-owned and operated business under a franchise agreement with a franchisor, but that the franchisee is not the same as the franchisor. The franchisee is a separate company from the franchisor, and operates independently from the franchise owner although with the license of the franchisor to use the franchise laws system marks et cetera.

Although the final report did not recommend, as I've discussed, that franchisors be deemed joint employers, it did recommend a process that could create a more direct route to unionization and allow employees of multiple franchisees operating the same brand at multiple locations the opportunity to bargain collectively.

So again, great news was not having the deemed joint employer status in the report as one of its recommendations, but still a recommendation that could lead to a more direct route to unionization.

The final report was accompanied by a statement from the Ontario minister of labor that the government would announce its response to that report within a week. So a very quick result from that. And indeed on June 1st 2017, the Ontario government released Bill 148, The Fair Workplaces, Better Jobs Act, 2017. The second reading was dispensed with, and the bill has been referred to a standing committee to consider over the summer. And Bill 148 is intended to implement certain recommendations from the final report.

Fortunately for franchisors, Bill 148 doesn't propose that multiple franchisees of the same brand operating in the same geographic area be required to bargain together with local employees towards one collective bargaining unit. That had been one of the recommendations in the final report.

Another recommendation that did not find its way into Bill 148, not withstanding the final report recommendation, was that an employer bargaining agency made up of representatives of the franchisees' employers represent the franchisees at the bargaining table with the union.

There are proposed changes to the Labor Relations Act however that may increase the number of union drives and successful applications for certification. Again, these are just proposals. The legislation has not been passed and is not in effect yet. But the amendments would allow Ontario Labor Relations Board, the OLRB, to change the structure of bargaining units within a single employer. And this would make it easier for employees of a single employer operating multiple businesses to be certified as one business unit.

And this could impact, not just franchisors that have multiple corporate stores, but it could impact multi-unit franchisees who have more than one location in close geographic proximity to each other. And this would be open to trade units in building services, homecare and community services, and temporary help agency industries to apply for certification without a representation vote.

And importantly, building services industry is broadly defined and that includes a whole bunch of services, segments of the economy that are commonly serviced by franchise brands such as cleaning services, food services, and security services. The OLRB would have the discretion to certify the union if satisfied that more than 55% of employees in the bargaining unit are members of a trade union. And the OLRB would also have discretion to dismiss applications for certification without a representation vote where it finds, upon application of what is being referred to as an interested person, that there's evidence that the application does not likely reflect the true wishes of the employees.

Where no trade union has been certified as a bargaining unit and no collective agreement in place, a trade union may apply to the OLRB for an order for an employer to provide a list of its employees. And if that were to happen, a trade union if successful, could use the list in its campaign to establish bargaining rights.

So that's on the unionization side which can be quite technical but all the provisions are available online looking at the proposed bill.

Significantly, there are other proposed changes to Ontario's labor employment law regime that will impact, not just franchisors and franchisees, but all small businesses. And I can't get into all of these but these are topical right now. And franchisors are considering the impact of this on the industry but so are franchisees, because they're the ones who are impacted directly in terms of requirements around employment. So it affects franchisors because if this is passed, it impacts the burden on the franchisees and that in turn may concern people entering into franchise agreements and impact the industry broadly.

So the types of proposed changes that have been included in the bill are new shifts scheduling rules with a target effective date of January 1, 2019. And so there's a lot in that particular topic in terms of employees' rights to be able to get paid in the event of not getting very much notice about shift changes and the like. Equal pay for equal part-time work provisions, giving rights to casual part-time temporary and seasonal employees, and then the one for which there's been a particular amount of press is the proposed increased minimum wage that would find Ontario's minimum wage increase to $14 an hour by January 1, 2018 and then $15 an hour by January 1, 2019.

So if this is passed, obviously, franchisees have to comply with this law and will have to pay these increased amounts. But that doesn't just impact those employees of franchisees who were getting minimum wage, it impacts all employees because there's certain class of employees who although being paid more than minimum wage would be entitled to just perhaps a bit more than minimum wage. And so, when the minimum wage goes up, then the wages of all the other employees would be expected to go up as well. And so again, that is going to increase the overall costs.

So in summary, the great news is no deem joint employer status in Ontario although franchisors need to be mindful. But we have to wait and see what gets passed in this legislation around unionization, and particular changes that will impact the businesses that franchisees operate in terms of what the employee's rights are and their entitlement to wages.

ERIC MORGAN: Thanks very much, Jennifer. We're now joined by Brian Thiessen.

Brian is an employment law partner at Osler's Calgary, and his practice focuses on the managerial side of employment and labor issues. I'll turn it over to Brian.

BRIAN THIESSEN: First of all, as an agenda, we're going to cover an overview of drug and alcohol testing in Canada focusing on the Irving decision out of the Supreme Court of Canada. And then we're going to talk about Post Irving case law and arbitral decisions that are of labor an arbitration board. And thirdly, we'll talk about some practical suggestions as employers engage in drug and alcohol testing.

So as an overview, we'll start with an overview of drug and alcohol testing.

First of all, employers have a statutory obligation to provide a safe workplace and accordingly, have a legitimate interest in doing so. This arises out of the occupational health and safety legislation in each jurisdiction which provides a statutory duty to maintain a safe workplace. There's no legislative regime in Canada that specifically governs drug and alcohol testing in the workplace. So all of the case law is out of common law decisions and particularly, labor arbitrage jurisprudence.

The balance that struck in drug and alcohol testing is always between an employer's legitimate interest and obligation to provide a safe work environment on one hand, and on the other hand, the employee's privacy and human rights. So it's really a weighing balancing of those interests.

So the key decision of any review of drug and alcohol testing in the workplace is the communications, energy, and Paperworkers Union of Canada local 30 v Irving pulp and paper, which is really just the Irving decision of the Supreme Court of Canada.

Irving involved a case with random alcohol testing with an employee who was working in a pulp mill in Eastern Canada, and was subject to random alcohol testing in the workplace. And the Supreme Court of Canada says, that an employer must establish that its workplace is number one, dangerous, and number, two an employer must provide evidence of enhanced safety risks such as evidence of a general problem of substance abuse in the workplace.

So looking at those requirements, drug or alcohol random testing in the workplace, the starting point is always, is it at a dangerous workplace? Is it in a safety sensitive work environment? If you don't have that part of the test, if you're an office worker, management that doesn't work in the field, you are not permitted. So first of all, safety sensitive. So that only gets you past the first part of the test.

The second piece, you need to demonstrate that enhanced safety risk, such as evidence of a general form of substance abuse. Irving provides little guidance with respect to the degree of seriousness of drug and alcohol problem in the workplace that is required to justify random testing. In the Irving decision, there were only eight undocumented incidents of alcohol consumption or impairment in the workplace over a period of 15 years. We know the Supreme Court of Canada felt held that to be insufficient, but we'll look at other case laws that talked to you a little bit about what might be sufficient to demonstrate evidence of enhanced safety risk. The deterrent value of random testing was not really given real consideration Irving, although it has been raised in subsequent decision.

So we turn to an overview chart on slide 6 of the presentation, looking at the testing method and permissibility.

If we just run through the types of drug and alcohol testing, you can see that the first type of testing is called pre-employment testing. That type of testing is possibly permissible. If we look at pre-employment testing such as in the Chason decision out of the open court of appeal, pre-employment drug testing in that context the courts have said, if you demonstrate an issue with addiction, the employer must be given a chance to reapply, be enrolled in a treatment program, and reapply then possibly pre-employment testing is permissible.

Universal random testing. That term is coined in the Irving decision and the summary of the case law here is you can possibly engage in universal random testing in a dangerous workplace with enhanced safety risk, such as demonstrated problems with drug and alcohol abuse.

The Supreme Court of Canada in Irving went so far to say that safety risks would have to outweigh the unassailable conclusion of the significant inroads that random testing would have on employee privacy. We see that the tests that were up again.

Reasonable cause/post-incident. So reasonable post-testing were of reasonable suspicion that an employee is subject to the influence of substances, or whether there's a serious post-incidents in the workplace of motor vehicle accidents for example. Case law was clear that you can engage in testing in that circumstance.

Post-reinstatement testing is permissible. It has been permissible for some time if it's a necessary part of a broader assessment process for a stipulated term only, most commonly 2 years. So that's often an employee who suffers from an alcohol or drug addiction issue who engages in a treatment protocol, and then has post-reinstatement testing on a regular basis. Even random testing.

Mandatory disclosure of a current problem and you as an employer is entitled to require.

And mandatory disclosure of a past problem for five to six periods after a successful remission for alcohol, six-year period for drugs is what Irving stipulates.

So after Irving, the decision of the Supreme Court of Canada, we take a look at some of the arbitral decisions that the labor boards have taken a look at for the urban centers of random drug and alcohol testing.

So, in Suncor Energy v. Unifor which involve random drug testing, the arbitrator in that case permitted a grievance by the union, and found that Suncor failed to establish evidence of a problem with alcohol and drugs in its workplace amongst it unionized employees. The testing policy was found to be too broad, did not use the least intrusive or most accurate testing measure, and did not contain provisions for communicating with employees regarding false positive results.

In Teck Coal, there was a grievance that sought to strike down Teck's random drug and alcohol testing. The employer established significant risks of industrial accidents in the workplace. Although no history of accidents caused by impairment, the grievance that struck as safety outweighed the employees' privacy concerns.

In Teck Coal and UMWA before the Alberta Labor Relations Board, the Alberta Labor Relations Board went the other way. In a similar grievance, the arbitrator found there was no enhanced safety risk, consistent positive tests, or link between workplace incidents and drug or alcohol use.

And then finally, recently in the TTC decision, the judge dismissed an application for an injunction against the TTC's random drug alcohol testing policy citing the deterrent effect of the policy and its ability to increase public safety as reasons for the judge's decision. Keep in mind, like some of the previous decisions we discussed, these are initial applications for injunctions to bar applications of drug and alcohol testing policy.

11,000 random tests carried out between October 2010 and December 2016 found 291 documented cases of questionable behavior. And there were 45 instances of employees buying or selling drugs or alcohol on the job. So the court in those circumstances said that the case can of course proceed to arbitration. The court declined to impose an injunction prohibiting drug and alcohol testing in the circumstance, and pointed out that if there was serious violations of privacy for example, that tortious claims provide adequate compensation, then there was no need for an injunction to stop the testing in the meantime.

So practical suggestions arising out of Irving as well as the arbitration decisions.

Have a drug and alcohol policy and protocols and procedures in place. Really, at this day and age, you cannot proceed with drug and alcohol testing of any form without proper protocol procedures in place.

Have a strong occupational health and safety policy and protocols in place. If you're going to justify drug and alcohol testing on the basis of safety in terms of the work environment and particularly, a safety sensitive jobs position, you cannot do so without having a proper occupational health and safety consulting protocol.

Train front-line managers and supervisors on policies and protocols every one to two years. I think particularly with the amount of the case law involving the arbitration decisions evolving every day, provide up-to-date training for those managers, supervisors, and so.

Keep records of workplace safety incidents. As you can see from the backgrounds of physicians, labor and arbitration decisions, one of the key factors is establishing a significant risk of industrial accidents in the workplace. It's almost impossible to do if you do not keep an accurate proper record of all workplace safety incidents. And that includes for workplaces even on post-reinstatement testing, which is not controversial, but having an idea of what that post-reinstatement after a time off for drug addiction et cetera. What type of numbers an employer experiences in that environment can be very important for trying to for example universal [INAUDIBLE] testing and substance [INAUDIBLE].

Now keeping records of drug and alcohol incidents, employees, whether it's safety or operationally related or not. Really any kind of records of drug and alcohol incidents and finding drug paraphernalia on the worksite. If an employer utilizes sniffer dogs and they detect a positive walking by lockers, every incident, whether or not it's part of the operation, is to be recorded.

Compliment drug and alcohol testing regime with management observation. This is just as important as testing I think so. What managers and supervisors can look for is slurred speech, unsteadiness, red eyes et cetera. That's a big part of reasonable cause testing for example. It forms a basis for whether an employer has reasonable cost to drug and alcohol testing employees in such circumstances.

Decision makers will be more likely to uphold drug and alcohol testing policies that are tailored to address the legitimate workplace safety hazards which can be demonstrated with concrete evidence of workplace drug and alcohol problems. So really all of the previous points are, if you believe at some point, you are going to get to a decision point on implementing universal random testing for example, that is a multi-year project where you gather evidence over years. You have a good idea of your workplace. Picture the amount of safety tests that you have before you even make the decision to engage in universal testing. And then if you do so, you want to have that evidence in place before you start testing.

An employer that wants to implement random drug and alcohol testing will need to leave evidence, general workplace problem with drugs or alcohol, as well as evidence of the inherent dangers in it's workplace if such a problem is not addressed.

So looking at the TCC decision for example, which was and injuction decision, you can see the type of information that the court is looking for. 291 documented cases of questionable behavior, 45 instances of employees buying or selling drugs or alcohol on the job. So that was a six year period of measurement with multiple incidents details on exactly what's going on with drugs, alcohol abuse or that are sold in the workplace and how many times. That's the type of evidence you're going to be looking for in order to establish a bona fide drug and alcohol testing or a universal random testing program in the future.

So those are the practical suggestions. Thank you very much. My name is Brian Thiessen. I'm a partner in the employment and labor and privacy, and data management groups at Osler. Thank you for your time, and I appreciate your listening in today.

ERIC MORGAN: On behalf of Jennifer and Brian, thank you very much for joining us for this webinar. We hope this has given you some useful insights into these emerging areas of employment law. You can find more information and commentary on risk management on Osler's risk management blog at risk and crisis management, all one word, . com or at under the Resources tab. Thank you again for attending this webinar and have a good day.