Canadian Employment Law Today

Canadian HR Reporter, 2021 Good faith The Supreme Court confirmed that an em- ployer has a "duty of honest performance" in discharging contractual obligations, meaning it cannot "lie to" or "knowingly mislead" employees. Further, employers must act in good faith in the manner of dis - missal, which is not limited to the moment of dismissal and can include conduct over an extended period of time leading up to a constructive dismissal. Matthews argued that he was entitled to the LTIP bonus because it was a foreseeable loss, which flowed from Ocean's dishonest conduct, in breach of its duty of honesty, over the course of four years. Ultimately, though, the court opted to ground the bo - nus entitlement in reasonable notice prin- ciples, not good faith. The trial judge did not have the benefit of the Supreme Court's decision in Bhasin v. Hrynew establishing the duty of honest performance. Further, the evidentiary record concerning the ef - fects of Ocean's conduct on Matthews was deficient. By declining to apply principles of good faith to the facts, the court stopped short of declaring that employers are subject to a generalized duty of good faith performance that animates the entire employment re - lationship. Nevertheless, it acknowledged that reasonable notice damages do not ad- equately address the "non-monetary ben- efit" that employees derive from the em- ployment relationship and which can be "wrongly taken from employees if, at dis- missal, they are lied to or misled as to the reasons for termination." With that recognition, the top court's de- cision nudges the common law toward ex- panded employer obligations of good faith, stating: "It might be that…a duty of faith will one day bind the employer based on a mutual obligation of loyalty in a non-fi- duciary sense during the life of the employ- ment contract, owed reciprocally by both the employer and employee," but leaves the debate open to consider on another set of facts. Takeaways for employers The Matthews decision provides two key les- sons for employers. First, employment agreements must use clear and unequivocal language to restrict entitlement to incentive payments during a reasonable notice period. A requirement of active employment at the time of bo- nus entitlement will not suffice. This is because the law deems employment ter- minated at the end of the reasonable no- tice period. Second, obligations of good faith dur- ing the course of an employment relation- ship are evolving. Courts will continue to address, with potentially more expansive remedies, employer conduct that is dishon- est, insensitive, misleading or unduly harsh leading up to termination. For more information, see: • Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26 (S.C.C.). • Bhasin v. Hrynew, 2014 SCC 71 (S.C.C.). • Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10 (S.C.C.). March 24, 2021 | Canadian Employment Law Today CREDIT: OLIVIER LE MOAL iSTOCK CREDIT: PETERSPIRO iSTOCK ABOUT THE AUTHOR Rishi Bandhu Rishi Bandhu is an employment lawyer in Oakville, Ont., advising employers and employees on all aspects of employment and labour law. He can be reached at (905) 849-0025 or rishi@blpc.ca.

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