This issue is relevant to the question of whether the employer must given a reason for termination and the subsequent impact of the answer to the principle of issue estoppel.
Employment Insurance & Reason for Termination
Every employer must issue a Record of Employment, given an interruption of employment for seven consecutive calendar days. The content of the R-o-E, which is not mandated by statute or regulation, apart from the requirement that it be in a form approved by the Commission, obliges the employer to state the reason for its creation. 1
These reasons, as contained in the form, include shortage of work, strike or lock-out, maternity leave, illness or injury, quit, retirement, work sharing, apprentice training, dismissal, leave of absence, parental leave and “other”. The code “dismissal” is to be used for an employer initiated termination, save for layoff or mandatory retirement. The intent of the document is to determine the eligibility of the employee to employment insurance benefits. The employee may be denied benefits for “misconduct”. The employer may be asked by the Commission to detail reasons for the termination. There is no mandatory requirement by statute to respond. It does state:
51 If, in considering a claim for benefits, the Commission finds an indication from the documents relating to the claim that the loss of employment resulted from the claimant’s misconduct or that the claimant voluntarily left employment, the Commission shall
(a) give the claimant and the employer an opportunity to provide information as to the reasons for the loss of employment; and
(b) if the information is provided, take it into account in determining the claim.
That being said, most employers will likely provide details, when requested. It is an offence under the Act to provide false or misleading information to the Commission. 2
The issue may arise as to whether a finding made in the E.I. process of “misconduct” or “no misconduct” may be binding on a civil court considering a claim such as wrongful dismissal or other issues related to the termination of employment, where the employer asserts “just cause” for termination. The reason given for termination may take on a more emphatic consequence, other than E.I. eligibility. It may determine the liability issue in the civil trial.
This then raises the question of issue estoppel and its impact on a later civil proceeding where the E.I. process has adjudicated on the reasons given for termination. For example, an employee’s success in winning a disputed claim for benefits based on alleged misconduct, could be determined as denying the employer the same just cause defence in the civil case.
Employment Standards & Issue Estoppel
The leading case on this subject is a Supreme Court of Canada decision in 2001. 3 This case did not involve an E.I. issue but dealt with a prior claim made under the Ontario Employment Standards Act.
The plaintiff in a civil action for wrongful dismissal and unpaid wages and commissions, allegedly owing at the time of termination in the sum of $300,000, had initially applied under the ESA for the sum of unpaid compensation. The ESA officer had not made the employee aware of the employer’s submissions to deny the statutory claim. The claim for the unpaid wages and commissions was denied. An order was issued for payment of two weeks’ notice. There was a right under the statute for a review of this decision which was not requested. Prior to the ESO decision, the plaintiff had commenced a civil claim for wrongful dismissal and the same unpaid commissions.
The employee continued with the civil claim of wrongful dismissal and unpaid compensation. Following the ESO decision to deny the commission claim, the employer moved successfully to strike the claim of unpaid wages and commissions, a decision which was affirmed by the Ontario Court of Appeal, based on the submission of issue estoppel.
A brief review of the test for this plea is in order. To succeed, the party submitting must show:
The same question has been decided in a prior proceeding;
The above judicial decision was final; and
The parties to that decision, or their “privies” are the same in each proceeding.
Even where these tests are met, the court must determine whether, as a matter of discretion, issue estoppel should apply.
Generally speaking, the Court viewed the application of this concept with favour:
The law rightly seeks a finality to litigation. To advance that objective, it requires litigants to put their best foot forward to establish the truth of their allegations when first called upon to do so. A litigant, to use the vernacular, is only entitled to one bite at the cherry. The appellant chose the ESA as her forum. She lost. An issue, once decided, should not generally be re-litigated to the benefit of the losing party and the harassment of the winner. A person should only be vexed once in the same cause. Duplicative litigation, potential inconsistent results, undue costs, and inconclusive proceedings are to be avoided.
On these facts, the Supreme Court found that the three criteria were met, notwithstanding the apparent unfairness in not providing the plaintiff the details of the employer’s rebuttal and the right to reply to it. This issue did not deny the application of the above steps, but this failure to allow for a fair process was a factor in influencing the Court’s exercise of its discretion to refuse the application of issue estoppel. 4
The Court set out factors which would provide guidelines for the exercise of its discretion to deny the application of the principle:
The words of the statute permitted a duplicate civil proceeding. 5 The civil proceeding was commenced in this instance prior to the ESO decision;
The purpose of the ESA was also considered, as it was seen as a quick and inexpensive way to deal with this issue as opposed to a complex civil proceeding;
No appeal was available under the statute. There was a potential of administrative review, a factor weighed against the plaintiff.
Were there adequate safeguards in place? Here, there was not as there was an evident breach of natural justice.
What was the degree of expertise of the decision maker? In the immediate case, the ESO was seen as a person without legal training, deciding a complex issue.
What was the context of the applicant in prior administrative proceeding? In this case, the plaintiff was in a personally vulnerable financial circumstance with a dismissal looming. The statute by the date of hearing had been amended to limit recovery to $10,000. This showed that the intent of the statute was one to deal with smaller claims and enacting a barrier to the making of such claims was a policy to be encouraged.
Overall, was there a potential injustice?
All of these factors taken cumulatively were seen as influential to deny the principle of issue estoppel based on the exercise of the Court’s discretion.
Employment Insurance Regime & Issue Estoppel
Prior to the above decision, in 1999, the Ontario Court of Appeal reviewed the question of whether the hearing process under the Employment Insurance Act could lead to a successful plea of issue estoppel. 6
Minott was employed in the defendant’s maintenance department. He had worked for 11 years and was considered a good worker. He had a dispute with his supervisor which prompted him to take an unauthorized leave of absence for two days. Upon his return to work, he was suspended for a further 2 days. He did not return from this suspension and was terminated.
His application for E.I. benefits was denied for a period of six weeks, at first level by the Insurance Officer, due to a finding of his misconduct. He appealed to the Board of Referees which agreed with the finding of misconduct, yet reduced the period of disqualification to three weeks. Minott had the right of appeal under the statute, one which he did not exercise.
The employer was aware of the hearing and chose not to attend. The Board did have in its file a written statement from the employer which stated that Minott had been given written warnings about his attendance and was offered other suitable employment accessible by public transit and did not seem interested.
He sued civilly. The employer’s argument of issue estopped failed at trial. It appealed this issue and others to the Court of Appeal in 1999. 7 The Court of Appeal looked to the three tests of issue estoppel as follows:
Same Issue
The Court noted that issue estoppel may apply to issues of fact, issues of law, or questions of mixed fact and law. The appellate court noted that neither the Insurance Officer nor the Board made any evidentiary findings. Had this been done, the parties, the Court stated, may have been precluded from litigating such evidentiary findings in the second proceeding.
The Board’s finding was one of mixed fact and law. The trial judge had found that “misconduct” under the statute was different from “just cause” at common law.
Molloy, J., the trial judge, concluded that just cause at common law may encompass misconduct in the E.I. regime but the contrary is not necessarily so. Misconduct may or may not be just cause in the civil context. The Court of Appeal took issue with the proposition that an employer may have just cause for dismissal even though there was no misconduct found in the E.I. process.
The Court of Appeal did agree with the concept that an employee’s conduct may be seen as misconduct under the E.I. regime, but would not be just cause at common law. The Court cited a prior Federal Court decision which spoke to this issue:
In the recent case of Fakhari v. Canada (Attorney General) (1996), 197 N.R. 300 at p. 302 (F.C.A.), Robertson J.A. noted that an employee's actions could be characterized as misconduct under the Act though an employer would not have just cause for dismissal:
An employer's subjective appreciation of the type of misconduct which warrants dismissal for just cause cannot be deemed binding on a Board of Referees. It is not difficult to envisage cases where an employee's actions could be properly characterized as misconduct, but the employer's decision to dismiss that employee will be rightly regarded as capricious, if not, unreasonable.
The converse is also true, the Court concluded. There may be just cause at common law but no misconduct in the E.I. process:
Conversely, an employee who is incompetent or persistently careless may be dismissed for cause though no misconduct is made out, because misconduct requires a wilful or reckless disregard of an employer's interest: see generally Canada (Attorney General) v. Tucker, 1986 CanLII 6794 (FCA), [1986], 2 F.C. 329, 66 N.R. 1 (C.A.) per MacGuigan J.A.; Rudner, The 1998 Annotated Employment Insurance Statutes (1997), at p. 607; and Canada (Attorney General) v. Jewell (1994), 175 N.R. 350, 94 C.L.L.C. 14,046 (F.C.A.).
The summary is that misconduct and just cause are not parallel concepts. It is not the case that one test is harder to achieve and success in demonstrating its existence would thus lead to meeting the lower threshold. It is simply that these tests are different.
For this reason, the Court of Appeal concluded that the same issue test was not met.
Was the Board decision final ?
The Board decision was required to be which was a judicial one and final. This issue was determined as met.
Were the parties the same?
The employer did not attend the hearing before the Board, although it was invited to do so. It had previously provided a written statement, as referenced above. The Court agreed with the following statement from In their article, "Ties that Bind at Common Law: Issue Estoppel, Employment Standards and Unemployment Insurance Adjudication" by Goodman & Murray: 8
The case law to date suggests that employers can avoid creating an estoppel either by not appealing a decision favourable to an employee or not attending an employee's appeal. The cases have held that by appealing or attending at an employee's appeal the employer becomes a party to that appeal.
The Court further offered policy reasons justified examining the degree of participation to assess whether an entity is a “party” to the proceeding:
In addition to the case law, I think that policy considerations justify focusing on the degree of participation to determine whether an employer in O'Shanter's position is a party for the purpose of issue estoppel. Holding that an employer who merely provides information to an insurance officer becomes a party and thus bound by the Commission's or the Board's findings could turn a right to participate into a practical obligation to do so. Ordinarily, employers do not appear on applications for unemployment insurance benefits or even on appeals because the stakes are small and they do not have a direct financial interest in the outcome, although they may be liable under s. 46(1) of the Act to repay any benefits received by an employee who subsequently succeeds in a wrongful dismissal action. Thus, to give employers in O'Shanter's position party status for the purpose of issue estoppel would provide a perverse incentive for employers to participate actively in hearings before the Board of Referees or before an umpire.
For this reason, this test was not met.
Further the court concluded that even had all three test been met, it would have exercised its residual discretion to deny the application of issue estoppel:
Applying issue estoppel to the findings of an administrative tribunal to foreclose a subsequent civil proceeding may also be unfair or work an injustice. Its application to findings made in proceedings under the Employment Insurance Act is a good example. Looking at legislative intent, nothing either in the scheme of the Act or in its individual provisions suggests, for example, that the finding of misconduct by a Board of Referees or by an umpire is binding in a civil action for wrongful dismissal. Issue estoppel is a common law rule and therefore the courts must consider the appropriateness of applying it to the findings of a tribunal under the Act to prevent those findings from being relitigated in a subsequent action for wrongful dismissal.
One would expect that this decision would be the definitive guidance on this issue. This would prove to be incorrect.
This issue of the application of the statutory hearing process dealing with E.I. benefits was again considered in a 2005 Ontario decision. 9
The plaintiff was a night shift supervisor whom was terminated due to allegations that he had allowed employees to steal property and leave their shifts early. His application for E.I. benefits was initially denied due to these allegations of misconduct. His appeal to the Board of Referees was successful. The employer appealed again which was heard by a retired justice of the Manitoba Court of Queen’s Bench. At this hearing, the employer unsuccessfully moved to allow the admission of new documentary evidence and new testimony, as it had been available at the time of the Board hearing. The meaningful factual distinction between this case and Minott was that the employer clearly was a party in the process.
The Ontario court found that all three tests were met. In consideration of the discretionary issue, the court noted that this was not a case in which the employer had no involvement and then found itself bound by the result. Here, the employer was aware of the employee’s allegations and chose to respond.
The employer’s appeal failed.
Is the decision in Global Wood good law?
There was no appeal taken from this result.
How this decision may possibly distinguish Minott remains a vivid mystery. There was no qualifier offered on the "same test" question which was rejected by the Court of Appeal. Similarly, there was no narrative offered to distinguish the Court of Appeal commentary on the policy reasons for its refusal to apply the concept for discretionary reasons, even had the three tests been made.
The court’s attention was not drawn to a section of the Employment Insurance Act, which allows the employee a statutory boost in cases by allowing them the “benefit of the doubt” in which the evidence is “equally balanced”. Section 49(2) effectively states that the tie goes to the runner, this being the employee. This is obviously a concept foreign to the common law. It is also reflective of the intent of the legislation to favour the applicant:
Benefit of the doubt
(2) The Commission shall give the benefit of the doubt to the claimant on the issue of whether any circumstances or conditions exist that have the effect of disqualifying the claimant under section 30 or disentitling the claimant under section 31, 32 or 33, if the evidence on each side of the issue is equally balanced.
Similarly, the E.I. process allows for a graded assessment of the degree of misconduct by its discretion to offer a period of ineligibility as opposed to a fundamental denial of entitlement. This is unlike the common law which requires a binary choice between cause or no cause. This submission has not been made to date.
The above decision was nonetheless applied to an unjust dismissal hearing under the Canada Labour Code. The employee's application for E.I. benefits was accepted at the first level. The employer had provided information setting out the reasons for dismissal. There was no appeal taken. The Insurance Officer found in favour of the employee's application. The adjudicator found that issue estoppel applied and denied the employer the right to assert just cause on this issue. 10
One point of note is that in considering the exercise of the residual discretion of the decision maker, once the three components of the test were met, the adjudicator noted that one factor was that the employer chose not to appeal. That is a unique factor not referenced in any prior cases.
More to the point, however, is that the adjudicator also noted that the termination letter did not reference any misconduct on the part of the employee to justify termination:
Considering all the facts, and noting that the termination letter does not mention any misconduct, that the notes of the Employment Insurance officer suggest the Employer had not looked into, and did not pursue, the issue of missing fuel which is the only point mentioned which might have been misconduct, and that the Employer has at no point pursued the Employment Insurance Commission decision, I am unable to find any basis for concluding that the application of issue estoppel would result in an injustice.
Oddly enough, the adjudicator denied the employer the right to assert misconduct, but did allow the company to assert a defence of incompetence. This issue had not been addressed in reasons given verbally to the Insurance Officer. This was allowed with the consent of the applicant.
It is also to be recalled that the Ontario Court of Appeal decision did agree that the parties may be bound by a factual finding made in the administrative process.
Canada Labour Code
The remedy of unjust dismissal is available to all persons holding a non-managerial position, with at least one year of employment. Such eligible persons may request from the employer the reasons for dismissal, which is mandated by the statute to be provided within 15 days. 11 This issue is reviewed in depth here.
New Brunswick Employment Standards Act
This statute requires the employer to provide reasons for termination, when the relationship is terminated for cause. 12
There a series of similar employment standards statutes which mandate that the reason for a group termination be provided to the relevant authority, but this are not germane to this review.