How a U.S. Company Inadvertently Advanced Ontario Labour Laws | Authors: Bram Lecker & Simon Pelsmakher
Ontario labour laws evolve by nature. Decisions rendered by courts set precedents and add to jurisprudence that primarily remains pro-employee. Over time, the net result compounds like interest on long term savings, strengthening the judicial system.
In the last decade, one U.S. organization, Kohler Co., single-handedly and quite obtusely, gave this agenda a boost. Best known for their kitchen and bath products, in 2005 they purchased Canac Kitchens, a Canadian cabinet manufacturer. Three years later, they abruptly closed Canac’s manufacturing facility in North Toronto to forge efficiencies between their Canadian and U.S. plants. They undertook a “shock-and-awe” style downsizing campaign that was as un-Canadian as it could get. All the while, they completely forgot that a border separates us and that they were operating in a legal jurisdiction that could not be more different from what they were accustomed to, down south.
Wrongful Dismissal Lawsuits
Canac employed 300 workers, some of whom were over 50 years old and with decades of seniority. Supervisors and managers, entitled to extensive notice and termination pay, per Ontario labour laws, barely received minimums set out in the Employment Standards Act. This set off a torrent of wrongful dismissal lawsuits against Kohler and our firm lead the charge on some.
Looking back a decade later, we remain astonished. Kohler Co., whose owners are bastion supporters of conservative politics in the U.S., advanced employee rights within Ontario like no other. In some instances, their nescience culminated in legislative changes to Ontario labour laws which now protect the most vulnerable workers in our society. Here are the stories of some Canac workers who made this happen.
Non- Supervisor Level Notice & Compensation
In June of 2008, Kohler management advised Juan Gutierrez that his services were no longer required. They offered him the minimum severance required by law, equivalent to 5 months’ pay because his position was not supervisory in nature. Mr. Gutierrez was 50 years old with 13 years of service at Canac. When he came to see us, we advised him to litigate.
At trial, the judge took all factors into account, including his age, years of service, position, as well as job market conditions. He deemed it would take Mr. Gutierrez much longer than 5 months to find equivalent employment. He awarded our client 12 months of notice pay, more than double the original offer. And the awards did not stop there. Mr. Gutierrez was also compensated for the loss of medical benefits, which were part of his compensation package, along with funds to hire a career coach to assist him with his upcoming job search.
All of this was in line with Ontario labour laws which requires employers to compensate employees with more than the minimum when circumstances call for it.
“Young” Employees with Long Service
Stephen Yiu, a team lead, was also let go with insufficient termination pay after working for Canac for 11 years. Unlike Mr. Gutierrez, he was only 37 years old. Kohler considered him young and someone who could mitigate the job loss to find comparable employment quickly. Once again, they offered the minimum, a severance package amounting to 5.5 months pay.
Kohler overlooked one salient fact in this situation. Mr. Yiu had spent much of his career in the kitchen cabinet manufacturing industry which was now in decline. The judge recognized he would have difficulty finding similar work in the industry and accepted our position that he required retraining. He awarded him 9 months’ pay, along with compensation for lost benefits and a training allowance.
Compensation for Career Counselling
Eugene Moldovanyi was 40 years old when he lost his job at Canac. He had worked in progressive roles at the company for over 19 years. Kohler offered him approximately 8 months of pay in lieu of termination notice. Like all the others, we advised this client to sue.
By this time, our judges were becoming quite familiar with the litany of cases against Kohler and their inadequate interpretation of Ontario labour laws. The judge presiding over Mr. Moldovanyi’s trial relied upon the body of past Canac judgements as the best guide to determine what was fair for his circumstances. He awarded an extra 6 months of pay, topping his notice period to 14 months in total. Mr. Moldovanyi also received compensation for loss of benefits and for the first time, the judge held an employer responsible for out of pocket expenses employees incur for career counselling to explore their options.
Failure to Mitigate
Ontario labour laws expect employers to compensate employees adequately for dismissal without cause. We place equal responsibility on employees to mitigate job loss by actively looking for equivalent employment.
This matter came into play in Rasheed Zaman’s case against Kohler. He was a 39-year-old account payable clerk with 16 years of service at Canac. Kohler let him go in June 2008 with an offer of 7.25 months of pay, which we felt was vastly understated for his length of service.
By the time his case got to trial in February 2009, Mr. Zaman remained unemployed and was attending classes to upgrade his skills. The judge’s ruling increased his notice period to 13 months in total, along with costs for loss of benefits and a career assessment. However, this time, Kohler attempted to reduce their liability by arguing mitigation failure on Mr. Zaman’s part.
The judge was having none of it. He scolded Kohler for criticizing Mr. Zaman’s efforts when they had caused the loss in the first place. He dismissed their argument because Mr. Zaman’s unemployed status was no indication of mitigation failure and Kohler had presented no evidence to prove otherwise.
Kohler’s Lesson on Ontario Labour Laws
Case after case coming before the courts schooled Kohler on Ontario labour laws. Most important was the fact that the minimums stipulated in the Employment Standards Act were just that – the least employers should do. Kohler learned that unlike in the U.S., here in Ontario, they had an obligation to make Canac workers “financially whole” until they landed equivalent jobs elsewhere. We enforce it in two ways. When the minimums prove insufficient for any individual’s circumstance, a second legislative framework, called Common Laws, comes through to protect workers’ rights. Decades of precedents have added to the efficacy and strength of these Common Laws; judges utilize them regularly for wrongful dismissal cases.
Through all the cases noted above, and many more that other lawyers brought against Kohler, our judges held strong. They applied Common Law principles to each case and continued to refer to previous Canac rulings to ensure every worker received fair, consistent and equitable severance packages to reduce their financial hardship and to allow them to move on from the fiasco Kohler had created in their lives. This was an exemplary representation of our judicial system at work.
In the most important and consequential case, Kohler inadvertently succeeded in advancing the rights of one of the most vulnerable groups of Canadian workers. These were the so-called “independent contractors” who worked like employees but received none of the benefits.
It all began in 2009 when Marilyn and Lawrence Keenan came to see us about their situation with Canac. They were 61 and 63 years of age respectively, and had jointly worked for Canac, first as employees and then as contractors at the request of management. However, other than the title, no material change occurred in the work itself. When Kohler closed Canac’s manufacturing facility, the Keenan’s had worked for them for three decades. Kohler let them go with no severance at all because they considered them suppliers to the business.
At the time, this was a disturbing employment trend we were witnessing in Ontario. Employers were taking full advantage of unclear legislation, hiring and firing staff on-demand. All the while, workers, like the Keenans lost ground with diminished benefits and severance protections. This was a gray area in employment law screaming for clarification.
The Keenan case allowed us to clean up the house. It took several years to move through our court system, culminating in 2016 with groundbreaking results. The judge recognized the Keenans as a new class of workers in Ontario, the dependent contractor with the same rights as employees. He went on to severely penalize Kohler by awarding our clients an unprecedented 26 months of notice pay. At the time, this was the highest ever compensation for contractors dismissed without severance.
Kohler’s Legacy in Ontario Labour Law
The Keenan case received extensive media coverage and Law Times Magazine quoted it as one of the most influential cases in Ontario. Legislators closely studied the semantics of the case before enshrining them into law in 2017, with Bill 148. Thanks to Kohler, the law in this matter is finally crystal clear. We now recognize dependent contractors, who have the same rights as employees, as distinct from independent contractors, who operate as small businesses.
Kohler arrogantly arrived at our shores believing they could simply change the flag on their U.S. termination contracts and shove them down the throats of Canadian workers. And they departed for the U.S., with their cabinet manufacturing operations in tow, nursing a bloody nose in the process. Without a doubt, the quantum of Kohler cases, culminating with the Keenan case, advanced Ontario labour laws. They firmly remain part of our judicial history for judges to rely upon as reference in upcoming cases. We are certain this was not the legacy they meant to leave behind.
Vet Contract Before Signing
As we become a globalized society, disputes will continue to rise between employers, who live under different legislative regimes, and their employees who receive the stellar protection of Ontario labour laws. We fully expect to litigate new cases against employers who are either unaware of our laws or blatantly choose to ignore them.
Lecker & Associates have practiced employment law for over 35 years. We have successfully represented employees in disputes against their employers. The most important advice we can offer is not to sign any contract until a lawyer has vetted it. It does not matter whether it is an employment or termination contract. A 1-hour consultation will give you peace of mind because, in our experience, your employer may not understand Ontario labour laws as well as we do.
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