Canadian Employment Law Today

Cases and Trends 6 | December 10, 2014 Canadian HR Reporter, a Thomson Reuters business 2014 Parties must not undermine other's interests cessful at trial, the decision was overturned by the Alberta Court of Appeal, which found no such duty existed. Bhasin appealed to the Supreme Court of Canada. e supreme Court's analysis e court reviewed the current state of Canadian law and noted the piecemeal ap- proach that existed in relation to the duty of good faith performance of contracts across different areas of law. In order to fix this in- consistency, Justice Cromwell, writing for a unanimous Supreme Court, wrote: "In my view, it is time to take two incre- mental steps in order to make the common law less unsettled and piecemeal, more co- herent and more just. e first step is to ac- knowledge that good faith contractual per- formance is a general organizing principle of the common law of contract which under- pins and informs the various rules in which the common law, in various situations and types of relationships, recognizes obliga- tions of good faith contractual performance. e second is to recognize, as a further mani- festation of this organizing principle of good faith, that there is a common law duty which applies to all contracts to act honestly in the performance of contractual obligations." In defining the contours of the new gen- eral principle of good faith contractual per- formance, the court explained that in carry- ing out her own performance of a contract, a contracting party should have appropriate regard to the legitimate contractual interests of its contracting partner. e duty of good faith contractual performance is not a fidu- ciary duty and does not require that a party put another party's interests first. It simply requires that a party not undermine another party's interests in bad faith. Duty of good faith in employment relationship e concept of an implied contractual duty of good faith is not new in the employment context. In 2008, the Supreme Court rec- ognized an implied term of good faith gov- erning the manner of dismissal and that, in particular, an employer should not engage in conduct that is "unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive." However, this con- cept did not previously extend beyond the manner of dismissal. As an extension to the general principle of good faith contractual performance, the court also recognized a duty of honesty in contractual performance. As the court explained, "is simply means that par- ties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. is does not impose a duty of loyalty or of disclosure or require a party to forego advantages flowing from the contract; it is a simple requirement not to lie or mislead the other party about one's own contractual performance." e purpose of this duty is to ensure that each party can rely on a minimum standard of honesty from their contracting partner and to allow each party a fair opportunity to protect their interests if the contract does not work out. In this case, the court held that Can-Am's conduct, in repeatedly misleading Bhasin, violated the duty of honesty and, as a result, the company was ordered to pay damages. Takeaways for employers Expect to see a lot of this decision in pleadings. While the common law already recognized a duty of good faith in relation to the manner of dismissal, this decision ap- pears to open up the duty of good faith to all aspects of the employment relationship, in- cluding discipline, salary/bonus payments, promotions, and investigations. is may lead to an increase in damage claims alleg- ing that an employer has acted dishonestly in some aspect of the employment relation- ship, especially where there is a valid termi- nation clause that would otherwise limit an employee's entitlement to damages. implications beyond the employment relationship. is decision applies to all contractual relationships and provides pro- tection to non-employees, such as indepen- dent contractors. Employees beware. e principle of good faith contractual performance and duty of honesty applies to all parties to a con- tract, including employees. is decision potentially opens the door for more claims by employers against former employees. honesty is the best policy. It has yet to be determined how this decision will be ap- plied by lower courts. In the meantime, all parties to a contract should act honestly and in good faith at all times to best protect themselves from litigation. For more information see: • Bhasin v. Hrynew, 2014 CarswellAlta 2046 (S.C.C.). « from FirEFightEr on page 3 Employer was already aware of firefighting pay « from nEw Duty on page 1 his cheques from the fire department every six months without a breakdown of which calls were while he was on the job and which weren't. is didn't support Mainroad's charge of fraud and intentional time theft, said the arbitrator. e arbitrator also found Buckley's lack of answers in the investigative meeting were related to a lack of sufficient information to respond. Most of his responses related to past practice and indicated he didn't deliber- ately collect wages from Mainroad for work he didn't perform. "While normally the conduct of (Buckley) would be considered very serious, the con- text of this workplace and the fact the em- ployer knew of this situation in 2009 changes the complexion of the actions at issue from deliberate dishonesty and malfeasance," said the arbitrator. "Ultimately the evidence in my view establishes an employee operating under an understanding he thought to be in place over a significant period of time." Mainroad was ordered to reinstate Buck- ley and made whole for loss of pay since his dismissal. For more information see: • Mainroad Group and BCGEU, Local 10- 01 (Buckley), Re, 2014 CarswellBC 3327 (B.C. Arb.). ABouT THE AuTHoR Justin tetreauLt Justin Tetreault is an associate with Grosman, Grosman & Gale LLP in Toronto. He represents both employers and employees in all aspects of labour, employment and human resources law with a particular focus on wrongful dismissal litigation. He can be reached at jtetreault@grosman.com.

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