Internal Appeal to be Satisfied Prior to Second Case?

Certain cases have allowed the employee to bring a human rights complaint following the workers’ comp application based on the argument that the WC Board did not properly consider the merits of the human rights issue put before the WC Board. This issue is only of relevance should the second hearing before the Human Rights Tribunal determine that the “same question” test for issue estoppel or the statutory prohibition has been met.

Supreme Court of Canada

The law on this question was determined by the Supreme Court of Canada in the 2001 decision in Danyluk. ¹

Danyluk involved an employee who asserted a claim for unpaid commissions. She had applied unsuccessfully for the commissions of $300,000 through the Ontario Employment Standards Act. She also, after the filing but prior to the denial decision, sued concurrently in civil court for the same sum.

It had been found that the ESO had acted unfairly in that she had received information from the employer and had not shared this with the employee and had used these details to determine her decision denying the complaint.

The issue arose as to whether the employee was obliged to implement the internal appeal process. She was not entitled to appeal as of right, but rather the internal review process was discretionary.

The general principle that the defence of issue estoppel, as stated by the Supreme Court of Canada, is to preclude the losing party from relitigating the claim in another forum.

The civil claim for unpaid commissions was dismissed on a preliminary motion, a result which was upheld in the Court of Appeal, which brought this issue to the SCC.

The Supreme Court noted the fundamental principles of issue estoppel generally would consider the initial decision to be final, unless reversed on appeal. That said, the principle is one of public policy which will qualify its application:

However, estoppel is a doctrine of public policy that is designed to advance the interests of justice.  Where as here, its application bars the courthouse door against the appellant’s $300,000 claim because of an administrative decision taken in a manner which was manifestly improper and unfair (as found by the Court of Appeal itself), a re-examination of some basic principles is warranted.

The SCC noted certain unfairness within the statutory process of review. Further, at the time of the application, unlike the modern cap of $10,000, the ESO, generally a person without legal training, could have allowed the full claim of $300,000. The SCC also observed that the person, to whom review authority is given, also lacks legal training.

The unfairness of the statutory process allowed the employer a right of review, but a request for a review by the employee was discretionary.

The conflicting submissions were that the employee was allowed to walk away from such a fundamentally flawed process, whereas the employer argued that the procedural flaws ought to have been the subject of an internal review application.

In applying the test of issue estoppel, the SCC confirmed that even where the three steps of the test are met, there remains residual discretion in the judge to deny its application.

Flawed Process May Yet Lead to Issue Estoppel Defence

A fundamental statement on the flawed process was met by the SCC as to whether such an obvious unfairness in the initial administrative process could yet lead to meeting this test on the estoppel defence. The answer was yes:

The main controversy in this case is directed to this third aspect, i.e., is a decision taken without regard to requirements of notice and an opportunity to be heard capable of supporting an issue estoppel?  In my opinion, the answer to this question is yes.

To be clear, as this is an important issue of a broad perspective, the SCC repeated this point:

In my view, with respect, the theory that a denial of natural justice deprives the ESA decision of its character as a “judicial” decision rests on a misconception.  Flawed the decision may be, but “judicial” (as distinguished from administrative or legislative) it remains.  Once it is determined that the decision maker was capable of receiving and exercising adjudicative authority and that the particular decision was one that was required to be made in a judicial manner, the decision does not cease to have that character (“judicial”) because the decision maker erred in carrying out his or her functions.

This will be an important point in debating the application of this decision to the workers’ compensation/human rights context.

Application of Residual Discretion

The significance of the defects of the process, in this case, procedural fairness, will not upset the three prong test of issue estoppel, but will allow for consideration by the court as to whether it should exercise its residual discretion to deny the application of what otherwise would have been a successful defence. Such was the case in this instance.

As a prelude to the review of the exercise of this residual discretion, the SCC noted that this becomes more expansive where the initial decision came from an administrative tribunal:

In my view the discretion is necessarily broader in relation to the prior decisions of administrative tribunals because of the enormous range and diversity of the structures, man dates and procedures of administrative decision makers.

The SCC reviewed these factors in this case to be considered in the exercise of this issue of residual discretion in this instance: ²

1. The wording of the Employment Standards Act states that its terms will not impact a civil remedy;
2. The civil proceeding was initiated before the decision of the ESO;
3. The purpose of the ESA is to allow for a quick and easy process. The application of issue estoppel would defeat this intent;
4. The ESA does not provide a right of appeal but a possible administrative review. This factor was to be weighed against the employee’s submission;
5. The apparent deficiencies in the administrative process, in this instance, would be influential in support of the use of residual discretion;
6. The decision maker lacked legal expertise in the context of a complex issue of contract law;
7. The employee used the administrative process prior to her termination. It was unlikely the legislation intended a summary procedure for typically small amounts would be a barrier to such a claim. However, the fact that the employee initiated this process would be a factor against her argument.
8. There was a potential injustice in that the claim for $300,000 worth of commissions had never been properly considered on the merits.

1. Danyluk v Ainsworth Technologies
2. This was noted to be not an exclusive list, but rather the factors to be weighed are an open category