Prevailing Duty of Care
On a first review of this issue, one would expect that the liability of the employer in negligence for failing to provide a safe employment environment should not be an earth shattering conclusion. 1
The Ontario Court of Appeal clearly defined, albeit in the context of the defence of a wrongful dismissal claim, the duty of the employer in this circumstance. The manager has a duty to protect the employer from the possibility of civil suits arising out of sexual harassment, and a duty as the agent of the employer to protect the employees from sexual harassment. 2
Further, the Occupational Health and Safety Act in Ontario 3 makes it mandatory for the employer to maintain and implement a policy to ensure its workforce remains free from threats of workplace violence and harassment. The Act makes the investigation of such complaints compulsory. In addition, the policy developed by the company must state how the complaint is to be reported and in what manner the complaint is to be investigated.
The policy must include steps and procedures to permit employees to report workplace harassment. It must also explain the process in place by which the employer will investigate and deal with complaints.
Harassment is defined broadly and will include sexual harassment. The actual words used define workplace harassment as “engaging in a course of vexatious comment or conduct against a worker in a workplace that is known or ought reasonably to be known to be unwelcome”.
In addition the employer must ensure that an appropriate investigation is conducted of all incidents and complaints of workplace harassment, that the worker be advised in writing of the results of the investigation and of any corrective action.
Clearly there is a statutory duty and indeed a common law obligation upon the employer to maintain a safe work environment. One would expect that the law would allow a remedy in negligence for the failure to do so. This issue is also reviewed here.
This is not, however, as facile a proposition, as the above reference would suggest. The analysis of the application of the duty of care to an employer for damages for a workplace wrongdoing will require a review of the test as set out by the Supreme Court, as two Ontario Court of Appeal decisions have rejected such a claim. 4
General View of Claim for Pure Economic Loss
The traditional common law view has been that a claim for pure economic loss, absent damage claims for personal or property, is one which is not allowed. 5 Claims made, however, in the following classes, have been allowed to be considered. These categories are not closed.
- Independent liability of statutory public authorities;
- Negligent misrepresentation;
- Negligent performance of a service;
- Negligent supply of defective goods or structures;
- Rational economic loss
In the review which follows, claims against an employer have been allowed in negligence for negligent misrepresentation and the negligent performance of a service, without direct reference to the above.
To establish a possible extension of these categories, the court will apply the two step test as set out in Anns v. Merton London Borough Council 6 to determine the application of such a duty, as had been done with the first four of these exceptions.
Generally speaking, tort law leaves pure economic loss to be determined by contract or statutory protections. 7
Should a claim be allowed in tort, a further issue will be whether the plaintiff may sue in tort and/or contract. One limitation may be a contractual term which denies or qualifies the right to sue in tort. Should the tort duty not be contradicted by the contract, it is actionable. 8 The example in the Heller case, as cited, denied the tort claim being allowed as a concurrent claim.
Test for New Tort
The first issue is whether the common law has recognized such a duty of care for such a category of cases. If this is not established, the issue then will become whether there has been established a “novel” duty of care. To date, there has been no establishment of such a duty of care as a given presumption. 9 The accepted test for the latter “novel” duty is that: 10
- There is a proper proximity between the parties that it “would not be unjust or unfair to impose such a duty of care”;
- The damages asserted are reasonably foreseeable as a consequence of the breach of this duty;
- There is no policy reason to deny or qualify such a duty.
The existence of such a duty of care was considered by the Ontario Court of Appeal in a case alleging physical and other abuse in the workplace. 11
Policy Considerations
The court found the first two steps of the “novel” approach were met, but the case failed on the third step of policy considerations, due to the finding that such a tort notion of “good faith and fair dealing” in dismissing an employee would be a radical departure from the common law. 12
The Court of Appeal hence rejected such a tort duty on the basis that the suggested duty to “shield an employee during the entire course of his or her employment from acts in the workplace that might cause mental suffering strikes me as far more expansive than a duty to act fairly and in good faith during just the termination process”.
Such a proposed duty, as the court noted, “would require employers to shield employees from the acts of the other employees that might cause mental suffering”. 13
Each of these decisions were decided prior to the Bhasin decision of November 2014.
There are clear inroads, however, developing to counter this view. This principle was followed in one Ontario case which held there is no such tort as the negligent infliction of mental distress, as the trial judge found that the law was limited to good faith issues arising at the time of termination. 14
The Court of Appeal offered no right or wrong review of the trial decision on this issue, which it issued in May of 2009. It regrettably chose to avoid the issue. It is odd that neither decision referenced Sulz which was initially decided in January of 2006, although it was before the court as it was cited on the issue of intentional infliction of emotional suffering. 15
One subsequent case did allow the pleading of such a claim to stand when challenged on a dismissal motion a decision which was reversed on appeal when the court held that “there was no such tort”. 16 It may well have been a pleading issue, rather than the substantive question, as the Divisional Court stated that:
There is a tort of negligent infliction of psychiatric damage 17 : But the plaintiff has not pleaded mental distress to herself that amounts to a recognized psychiatric illness.
The distinction appeared to rest in the need to plead a diagnosed illness as opposed to a general assertion of mental distress. The tort of intentional inflectional of mental distress at one time did require a “provable illness” which was likely the reason for this distinction, as the court determined that the same is mandated for a comparable claim in negligence. 18
There is no longer a need to show such a "provable illness", at least by medical evidence. In July of 2023, the Ontario Court of Appeal considered this very issue and concluded that medical evidence was not mandatory to the success of the tort. 19
The basis, however, of a tort action in negligence against the employer was clearly denied in the two appellate decisions referenced above. In each case there was no reference to the successful claim made in the British Columbia Supreme Court based on the negligent infliction of mental suffering. In this case the manager was sued for this claim and the employer held vicariously responsible. The action was based on verbally abusive conduct. 20
Policy Considerations Reviewed Again
Duty to Manage Group Benefits
It is incorrect, with respect, to state that policy reasons should thwart a claim in negligence. Ironically in many cases there have been successful claims against the employer in negligence. These cases deal with the employers responsibility to administer the group benefits plan. The employer clearly has a responsibility to ensure the proper administration of its disability insurance plan and has faced claims in negligence for its failure to do so.
Such a finding was made by the Ontario court in July of 1989 21 in which the employer failed to advise the employee that he had insurance coverage, let alone the right of conversion. The plaintiff was successful in the claim.
A second Ontario case in 1989 22 came to the similar conclusion that the employer had an obligation to assist an employee suffering from emotional issues to complete the long term disability application. Its failure to do so led to its liability:
It should have been in the contemplation of the officers or employees of Allied, upon receiving the letters of November, 1979, that carelessness on their part may be likely to cause damage to their ex-employee. It was not up to them to decide whether or not there was a valid claim but rather to "assist in completing the required forms". Mr. Tarailo may well have been so mentally ill that he did not appreciate that he might have a claim. I conclude that a duty was owed to him. There do not appear to be any considerations which ought to negative, or to reduce or limit the scope of the duty or the damages to which a breach of it may give rise. Allied did nothing to assist Mr. Tarailo.
A similar issue arose a decision of the Queen’s Bench of Alberta in February of 2006. 23 The estate of the employee sued the employer, alleging that the details of the deadline dates had not been properly explained. The court found in negligence against the employer and found against the deceased employee to apportion liability equally because of the failure to mitigate or in negligence language, was contributorily negligent. The court found a duty of care upon the employer to show reasonable care with respect to the administration of the plan which included the duty to provide information to the employee of applicable dates for applying and the consequences of not doing so. The same analysis was used to determine the alternative claim in contract on the same basis. This claim was based on life insurance conversion. The theory of liability will not be limited to this particular benefit.
The B.C. Supreme Court came to the same end, 24 holding the employer responsible in negligence for its manner of administering the benefits plan. The company had a group employee disability benefit plan, by which the plaintiff was designated a beneficiary under the life insurance component. For reasons unknown to the plaintiff, the employer advised the insurance carrier that as of May 8, 1995, that the employee was no longer employed with it as of February 3 1995. This was later found to be actionable negligence which allowed the plaintiff’s claim for the insurance proceeds in the sum of $42,000. The mistake was apparently due to an administrative error, as the plaintiff had received a Record of Employment due to illness. The court found the employer was negligent.
A comparable fact situation arose before the Ontario Superior Court of Justice in June of 2000. 25
The employer was aware of the plaintiff’s personal issues which led to her resignation letter referencing her inability to cope, which duplicated earlier conduct which had led to a period of sick leave. There was no contact between the employer and the plaintiff following its receipt of the letter of October 2 and its reply to her two days later. The employer representative was aware of the plaintiff’s past personal issues when he had met with her for an exit interview on October 19. He observed she was tearful and under stress.
There was no reference made by him to the disability plan, even though he had taken the initiative to suggest this to her on a prior occasion when she displayed similar symptoms. The termination checklist noted the supervisor’s responsibility to advise the employee of group life and staff insurance. There was no note that this had been done. The Court found that the plaintiff was medically disabled when she wrote the letter of October 2.
The trial judge referenced the passage from Wallace setting out the vulnerability of employees at the time of termination and held the company to a duty of good faith. The court also quoted from the Tarailo decision to show that the employer had a duty to provide benefits at the time of termination.
In the case at bar, the employer was self-insured. The court concluded that the employer-insurer had an obligation to help the plaintiff to make a claim for disability benefits. An award was made for lost disability benefits from October 19 1990 to the date of trial in June of 2000.
The Ontario Court of Appeal considered the claim made by the estate of the employee against his past employer based on an allegation that the employer owed a duty to its employees to advise them with respect to the group insurance coverages and also to administer the plan in a competent manner in its 2005 decision. 26
The group life insurance plan provided for two types of benefits, one being basic life insurance and the second an enhanced benefit plan allowing for benefits equal to double the annual earnings of the insured. Three months after her employment commenced, as she then became eligible for coverage, the employee signed an enrollment card electing only the basic life insurance coverage. The estate alleged against the employer that it was negligent in administering the group policy with the result that the estate was entitled to only the basic coverage.
At trial, Pierce J. held that the employer did owe such a duty to advise its employees with respect to the group insurance coverage options and to administer the plan in a competent manner. The trial judge accepted that the deceased employee would have elected the enhanced benefits, had she been so advised of her option to do so. No appeal was made by the employer as to its liability in tort. Judgment was given to the estate in the sum of $206,840.
The Supreme Court of Nova Scotia 27 considered a claim made by the plaintiff resulting from the employer’s failure to enroll the plaintiff in the LTD plan. In obiter, it was found that the employer had an obligation to ensure the plaintiff was properly enrolled in the LTD plan. 28
The question of a policy decision denying an employee a claim in negligence has never been raised in this context as had been successfully argued in the Ontario and Nova Scotia Court of Appeal cases 29
Sexual Assault
A claim in negligence was successfully by a manager due to a sexual assault made by a resident in a care facility against a youth worker. The employer was found to be vicariously responsible. 30
A recent decision of the Ontario Superior Court also reviewed the same “novel” analysis 31 based on a claim made by female employees of a subordinate company in Guatemala who allegedly suffered sexual abuse.
After noting that the first two steps of the analysis were met by the pleadings, as is the test, the court then considered the policy issue, to which issue the court concluded that there were “competing” policy issues which were sufficient to allow the case to proceed to trial.
It is to be noted that the policy arguments may be unique to the facts of the case, namely, a Canadian mining company sued by persons alleging serious harm by security personnel at its foreign location, apparent steps being taken by the Canadian federal government to encourage a high standard of “corporate social responsibility” and the need to marshal the international activities of western companies in Third World countries.
One would expect a possible claim could be made in contract or negligence where the employer was in default of its obligation to have in place a harassment policy to prevent and investigate workplace sexual harassment where such a policy is required by statute. These statutory duties may well allow for the policy considerations to be found in favour of the tort duty, particularly when read in conjunction with the Bhasin duty.
Bhasin
The Supreme Court of Canada in its November 2014 decision in Bhasin v Hrynew spoke to the issue of “honest performance” throughout the entirety of the relationship and that this duty of good faith is no longer limited to the “moment of termination”, as it arguably once was so confined. 32 It is reviewed in depth here.
The Nova Scotia Court of Appeal in the November 2015 decision of Industrial Alliance v Brine also provided an interesting application of Bhasin principles in a case involving the interpretation of the good faith requirement of a disability insurer.
One of the issues in dispute between the parties was the conduct of the insurer in providing rehabilitation services and then reversing its decision. The policy did not mandate the provision of such services, but the company did provide such in view of the young age of the insured and the possibility that he may never work again. Thirty months after the services had been provided, the insurer elected to terminate them, following receipt of its IME.
The trial judge was critical of the manner of this decision being made, which was contrary to the view of its IME.
The issue presented on appeal was hence how could the insurer be determined to have acted in bad faith upon terminating a benefit which it was not contractually obliged to provide? The Court of Appeal referenced the Supreme Court of Canada decision in Bhasin to determine that it was not necessary to find a specific contractual term which had been violated, but rather the court could look to the “independent implied contractual obligations”:
Bhasin’s broad organizing principle and its outgrowth duties do not just tack an extra sanction onto the breach of an explicit contractual term. Neither are the duties of honest dealing in Bhasin, or good faith in the insurance context, just executive summaries of the contract’s written terms. They are independent implied contractual obligations that derive from the existence of the contract. Whether National Life breached its duty of good faith is not predicated on the condition precedent that National Life breached an explicit provision of the Policy.
This is clearly a liberal reading of the Bhasin theme. The reluctance of the Court to rely specifically on the contractual term and instead consider the relationship in its broadest concept is reflective of a generous interpretation of the obligations of the contracting parties to one another. 33 The same liberal view may well apply to the determination of the issue of this developing tort and indeed the application of the Bhasin theme to the entirety of the employment relationship.
The duty of honest performance may readily allow a civil action for unfair conduct throughout the employment relationship.
Further, it seems inconsistent that the employer may be sued for negligent misstatements made in the hiring process by a then potential employee, but not for acts of negligence during the working relationship. 34 This line of cases in addition to the Bhasin theme point to the moment to review the Ontario Court of Appeal decisions on this issue.
Impact of Statutory Duty
One would expect a possible claim could be made in contract or negligence where the employer was in default of its obligation to have in place a harassment policy to prevent and investigate workplace sexual harassment where such a policy is required by statute. 35 These statutory duties may well allow for the policy considerations to be found in favour of the tort duty, particularly when read in conjunction with the Bhasin duty.
The Ontario Court of Appeal, on the employer's appeal from Divisional Court on a certification motion, agreed that the claim asserted in negligence for the alleged failure to monitor overtime hours was allowed to stand. 36 The argument was advanced that the Canada Labour Code set the standards of overtime compensation, which had been incorporated into the employment relationship. This decision was based on the plain and obvious test and does not suggest that this is a firm principle of law.