Tuesday, September 27, 2016

Fall Edition - International Employment Committee Newsletter

Dear all

Welcome to the Fall edition of the newsletter. Many thanks as always to our contributors, who have helped to ensure another edition of articles from around the world.

Please let me know if you are interested in submitting an article for future editions.

Helen Colquhoun
Hong Kong

Canada - Where the Rubber Hits the Road, Reflections on Supreme Court Decision in Wilson v Atomic Energy of Canada Ltd

By Theodore Goloff, Robinson Sheppard Shapiro, Montreal


Time was when it was thought that, as slavery had been abolished throughout the British Empire before 1850, therefore, no one could be made to work for another in perpetuity. The corollary was that no employer could be forced to keep another in its employ in perpetuity. Hence, there was a reluctance to enforce mandatory injunctions respecting employment contracts and to order reinstatement, in the event of termination, for to do so would seem to violate these norms.

Within the British Parliamentary tradition followed in Canada, Parliament, being supreme, so long as it respected constitutional norms, could validly adopt legislation that departed from these principles and empower administrative bodies, when they found terminations of certain classes of employees to be unlawful or without just cause to be reinstated. That’s how Division XIV of Part III of the Canada Labour Code, empowering arbitrators duly seized of so-called “Section 240” complaints to determine whether a given contested termination was or was not just, and if the latter was the case, order reinstatement.

It is trite law to posit that provisions set out in labour standards legislation are matters of public order from which no one may contract out. All labour jurisdictions in Canada reject the American doctrine of “employment at will”, and oblige employers who terminate employees without disciplinary or administrative “cause” to provide them with both statutory and common law notice or pay in lieu thereof. In their respective labour standards legislation, three jurisdictions in Canada — the federal jurisdiction, Quebec and Nova Scotia — provide employees satisfying certain threshold seniority levels the ability to contest their termination as being “unjust” and seek, from the appropriate administrative agency, an order of reinstatement and back pay if the employer is unsuccessful in proving “cause” that is “sufficient” to justify termination. What to do if one part of such legislation provides and allows an employer to terminate an employee without “cause”, on condition that it favour the employee with a specified notice or pay in lieu thereof, while another provides the possibility of contestation of the “justness” of the termination? Does the fact that “cause” is not alleged make such termination per se unjust?

At the same time, non-statutory employment law, whether resulting from the common law of nine provinces and three territories of Canada or the civil law of the Province of Quebec, recognizes that an employer could, on providing “reasonable notice” or pay in lieu thereof to an employee, terminate any employment contract that was not for a definite term, at any time, the whole in line with the principles noted above. Indeed, the very provisions of Civil Code of Québec that recognize such reciprocal rights and obligations declare that the right thereto cannot be renounced to by the employee, in advance of its crystallization (Arts. 2091-2092 C.C.Q.).

Because labour and employment law is a combination of both statute law and the general law that results from either the common law or the Civil Code, the question of how to conjugate both in a manner which does not offend one or the other becomes supremely relevant. Put succinctly, if the authority of an administrative body to reinstate an employee lies in its finding that a particular termination challenged before it was without “just and sufficient cause”, is a termination without “cause” but with “reasonable notice”, defined in its widest sense, hence “legal”, per se unjust and therefore amenable to any such compulsory reinstatement order?

The Issue Succinctly Stated

Such was the issue that came before an arbitrator hearing the complaint of one Joseph Wilson, whose employment of four and a half years without discipline of any kind was terminated in November 2009 with what the employer termed “a generous dismissal package that well exceeded the statutory requirements”. Mr. Wilson claimed that his dismissal was unjust via a Section 240 complaint. A labour arbitrator was appointed to hear the complaint. Atomic Energy sought a preliminary ruling on whether a dismissal without cause but with a sizeable severance package was nonetheless “unjust”, or whether given the substantial package, the arbitrator’s jurisdiction or “vires” to rule on the justness or sufficiency of the grounding of the termination was therefore absent or removed. If a termination with a generous package was a) legal and b) not per se unjust, what was there left to litigate? The arbitrator held against Atomic Energy that however generous the severance payments he had jurisdiction to determine whether the dismissal was unjust. As no “cause”, either disciplinary or administrative had been alleged or proven, Mr. Wilson’s complaint was allowed.

Applicable Principles of Judicial Review

Decisions of such administrative tribunal are immune from challenge otherwise than by way of judicial review. Therefore a review of the rules of this branch of administrative law is in order to understand the significance of the case.
Back in the day, the prerogative writs of English common law provided a powerful tool to ensure that the “rule of law” and a full and fair application of the rules of “natural justice” were guaranteed before administrative tribunals. With the proliferation of statute law whose application and interpretation was largely given over to such administrative boards and tribunals, deemed to have “specialized knowledge” of the subject matter, coupled with the adoption of privative, preclusive and/or finality clauses in such enabling legislation, the scope of intervention of the common law superior courts were successively and effectively diminished. There developed a conscious and ever prevalent “deference” to the inferior tribunal’s decision provided it was “reasonable” i.e. one which the facts and law could rationally countenance and support. While the Supreme Court in Dunsmuir v. New Brunswick, 2008 SCC 9, had said that the “function of judicial review is […] to ensure the legality, the reasonableness and the fairness of the administrative process and its outcomes” [par 28], it also noted that judicial review “seeks to address an underlying tension between the rule of law and the foundational democratic principle, which finds an expression in the initiatives of Parliament and legislatures to create various administrative bodies” [par 27].

On the other hand, while recognizing that deference should be accorded and a reasonableness test should be applied (1) where the enabling statue contains a privative or preclusive clause, indicating therefore a statutory direction from the legislative authority indicating an inclination against intervention and (2) where a discrete and special administrative regime in which the decision maker has “special expertise” was set up — e.g. for instance in labour union certification where a labour relations board has particular, recognized and discreet expertise, the Court recognized exceptionally that where the issue concerns a question of law that is of central importance to the legal system and lies outside the specialized area of expertise of the administrative decision maker, such an issue would attract a “correctness” standard of review. A substantive error of law, or mixed fact and law, would therefore vitiate the decision. “Correctness” is a go/no go binary standard. A decision is either correct or incorrect, and cannot be halfway valid.

Ostensibly, the “reasonableness” test is concerned with the intelligibility and transparency of the grounds upon which a judgement relies, and its consonance with the myriad of solutions that the facts and the laws might allow. By definition, even conflicting and contradictory positions might qualify as “reasonable”.

Atomic Energy of Canada sought judicial review of the arbitral decision before the Federal Court — Trial Division and the Federal Court of Appeal. It won in both instances, the Trial Division holding that the standard of review was the “reasonableness” of the decision but that the arbitrator’s outcome was itself unreasonable. The Court of Appeal agreed on the merits of the case but, applying the standard of “correctness”, found that the decision of the arbitrator was flawed and inconsistent with a proper interpretation of the law. The Court quashed the decision and ruled that, provided the required level of notice or severance is paid to the employee, such a termination was not in and of itself unjust. Hence, Mr. Wilson’s referral of the case to the Supreme Court of Canada.

The Supreme Court’s Judgment and the Issues it Raises

Applying the “reasonableness” standard means that once a court finds that a decision passes muster, anything else it finds is entirely obiter. From this author’s point of view, if the reviewing court ventures beyond, it begins to deal with the correctness of the decision which is not one strictu sensu before it.

As the Supreme Court minority in Wilson pointed out, Atomic Energy of Canada was in the unenviable position of having come before two arbitrators with the identical issues raised i.e. whether a termination without “cause” but with a package was or was not per se unjust. These cases resulted in two contradictory decisions on the same issue from two different arbitrators involving the same employer.

Apparently, in one case, because the arbitrator ruled that a termination without cause but with a generous package was not “unjust” and was legal, the Section 240 complaint was dismissed. In the other case, precisely the opposite resulted. If both positions are reasonably consonant with the statute what is a conscientious employer to do? Is predictability in the law one facet of the rule of law? If judicial review has as its object the preservation of the rule of law, does this affect the choice of standard of intervention i.e. “reasonableness” or “correctness”? While the Supreme Court opined in Domtar Inc. v. Québec (Commission d’appel en matière de lésions professionnelles), [1993] 2 SCR 756, without deciding the point definitively - that jurisprudential conflict did not constitute an “independent” basis for review - the question could it seemed, be revisited and was indeed by three of the judges.

The Federal Court of Appeal and the minority in the Supreme Court found that because administrative decision makers are not bound by the principle of stare decisis and lack an institutional umbrella under which these issues can be debated openly for a consensus position to emerge where there are conflicting interpretations that go to the heart of the employment law regime i.e. is an employer ever permitted to dismiss a non-unionized employee without cause, finding that some arbitrators say yes and some say no, the minority ruled that:

“The rule of law and the promise of orderly governance suffer as a result. When reasonableness review insulates conflicting interpretations from judicial resolution, the identity of the decision-maker determines the outcome of individual complaints, not the law itself. And when this is the case, we allow the caprice of the administrative state to take precedence over the “general principal normative order”. [par 84]”

In the minority’s view (Justices Côté, Brown and Moldaver), among the foundational principles of the rule of law are that (a) there is one law for all, whether prince or pauper and (b) what the law requires must be intelligible at the outset, not only after the game has been played. Indeed, the minority held that “the cardinal values of certainty and predictability — which are themselves core principles of the rule of law […] — are also compromised” [par 86]. Unless the Supreme Court determines the issue on the basis of correctness, federally regulated employers unpredictably determine when and how they can dismiss their employees so long as conflicting adjudicative jurisprudence could only be challenged on the basis of reasonableness. Indeed, the minority opinion held such a situation “creates the risk that the very same federally regulated employer might be subjected to conflicting legal interpretations, such that it may be told in one case that it can dismiss an employee without cause, while being told in another case that it cannot” [par 87]. Those judges pointed out that this was not mere conjecture — it had already happened to Atomic Energy of Canada. Finally, the minority reasoned that it makes little sense to defer to the interpretation of one decision maker when it is clear that other similarly situated decision makers whose decisions are equally entitled to deference have reached different results. Put differently “as long as there is one conflicting but reasonable decision, its very existence undermines the rule of law” [par 89].

On the merits, the minority found that a dismissal without cause but with adequate notice and/or severance was not per se unjust. Other circumstances would have to be examined to sustain a Section 240 claim.

The Majority Opinion

But what of the majority composed of the six remaining judges? Justice Abella, in obiter, first suggested a revision of the standard of review jurisprudence, something none of her colleagues would buy into. Justices Cromwell, Karakatsanis, Wagner, Gascon and Chief Justice McLachlin asserted that since the standard of reasonableness was appropriate and the arbitrator’s decision met that standard, Mr. Wilson’s appeal should be allowed with costs.
While three separate majority opinions might have settled the litigation particular to the two litigants before the Court, in this author’s most respectful view, the more general question is not quite so settled: does termination with a package but without disciplinary or administrative cause, attract a Section 240 challenge ? Which school of thought should be preferred?

To be sure, Madam Justice Abella put forward the position to the effect that “the foundational premise of the common law scheme — that there is a right to dismiss on reasonable notice without cause or reasons — has been completely replaced under the [Canada Labour] Code by a regime requiring reasons for dismissal“ [par 63] and the Chief Justice and Justices Karakatsanis, Wagner and Gascon together agreed “with her disposition of the appeal on the merits and with her analysis of the two conflicting interpretations of the Unjust Dismissal provisions of the Canada Labour Code […] proposed to the Court” [par 70]. Mr. Justice Cromwell, on the other hand, made no such endorsement of what is, at least in this author’s point of view, entirely obiter.

A Critique Thereof

Parenthetically, when a court comes to the conclusion that a decision of an inferior tribunal is reasonable, and therefore immune from judicial review, does its analysis of competing and conflicting points of view amount to doing indirectly what a correctness standard would require? It is not without a good deal of circumspection that I am of the view that this is what in essence happened.

With the greatest of respect for my betters, I ask the simple question as to whether having decided that (a) the standard of review was reasonableness and (b) that the arbitrator’s decision has passed muster, the analysis of the “two conflicting interpretations of the Unjust Dismissal provisions of the Canada Labour Code” [par 70] is tantamount to an end run, an attempt in effect to adjudge which of the two conflicting points of view is more reasonable. Mindful always of the great respect that the aforementioned judges are due, both personally and as respects their high office, their statements made with respect to Justice Abella’s efforts to stimulate a discussion on “how to clarify or simplify our standard of review jurisprudence to better promote certainty and predictability” [par 70] with respect to the “reasonableness standard” and to the effect that “it is unnecessary to do so in order to resolve this case” [Ibid] is equally apt and equally applicable to the analysis made by her of the two conflicting interpretations above mentioned.

Having determined that the arbitrator’s decision in the case at Bar was reasonable, discussion should have ended at that point! It has always been understood that no court should decide more than required to dispose of the matter before it. Reasonableness, like a rose by any other name, smells as sweet. Declaring that an arbitrator’s decision is reasonable is not tantamount to deciding that another point of view is any less reasonable. Indeed, for a court, any court, eminent judges of the Supreme Court included, to so decide is to, most respectfully, cross the line into the standard of “correctness”.

If there are two standards that determine judicial review — “reasonableness” on the one hand and “correctness” on the other — preferring one competing, contradictory but reasonable analysis over another competing, contradictory but no less reasonable analysis is to violate the rule that one cannot be just a wee bit pregnant.

Either the standard is the “reasonableness” of the decision or it is the “correctness” of the decision. While recognizing that those judges may have sought to indirectly settle matters, I fear they may have provided grist for a new debate about the legitimacy of so doing, at least in the eyes of the legal “purist” that I might be accused of being.
For this author then, the question of which point of view will ultimately triumph is yet to be decided. While a challenger of Madam Justice Abella’s analysis may have a tough row to hoe, in strict law it is still open to he or she who is brave and stout enough, at heart, to do so. A bit like pushing water uphill, perhaps, but doable – even necessary! Difficult maybe, but certainly not a Don Quijote situation!

And if my views above differ with those of my betters then, most respectfully, I differ with deference.

Canada - Electronic Travel Authorization ('eTA') Ushers New Passenger Screening Era

By Sergio R. Karas, B.A., J.D.

A new era of airline passenger prescreening has begun in Canada following on the footsteps of the United States. Canada now requires that airline passengers provide personal and background information prior to travel, in an effort to minimize the number of visitors who may be inadmissible when appearing at a Port of Entry.

Although authorities made electron travel authorizations (eTAs) available as of March 15, 2016, and visa-exempt foreign nationals who fly to or transit through Canada were expected to obtain them, the requirement was only made mandatory as of September 29, 2016, after a leniency period expired. Individuals who are not otherwise exempt from obtaining an eTA will face considerable difficulty when attempting to board a flight to Canada.

Pursuant to Section 11 (1.01) of the Immigration and Refugee Protection Act (IRPA) the Federal government has created the requirement for visa-exempt foreign nationals to apply for an eTA. The section establishes the means by which that application must be made (i.e., through the electronic system).

Section 7.1(1) of the Immigration and Refugee Protection Regulations (IRPR) creates the requirement for visa-exempt foreign nationals to obtain an eTA before entering Canada, unless they are otherwise exempt by the regulations.

The eTA is a new entry requirement for visa-exempt, non-U.S. foreign nationals travelling to Canada by air. Travelers entering Canada by land, sea, and rail are not required to obtain an eTA. The purpose of the eTA program is to pre-screen travelers to ensure that they are admissible to Canada. The list of countries whose citizens require an eTA is found in Section 190 of the Immigration and Refugee Protection Regulations . Citizens of the United States and certain other small groups are exempt from obtaining an eTA. Specifically, Subsections 7.1(2) and 7.1(3) of the Immigration and Refugee Protection Regulations describe the individuals that are exempt from the eTA requirement.

Individuals who are required to obtain a Temporary Resident Visa (TRV) by reason of their country of citizenship do not need to obtain an eTA, as they are prescreened at a visa post outside of Canada.

To apply for an eTA, foreign nationals must submit an application online using the eTA form at www.Canada.ca/eTA.
Applicants will need to provide the following information on their application form:

• Passport details
• Personal details
• Occupation and previous travel
• Responses to background questions (to assess for health, criminality and immigration-related concerns)
• Contact information
• A filing fee of CDN $7.00

There is also a text area at the end of the application form which allows the applicant to briefly indicate if there are additional details that must be considered. The applicant may express an urgent need to travel to Canada, or to provide other relevant information in that area.

No documents can be uploaded or added to the eTA application. If any additional documents are required, the applicant will be notified by email. That can delay the application process significantly.

Once the applicant has successfully submitted the eTA application, he or she will receive an automated email confirming receipt by Immigration, Refugees, and Citizenship Canada (IRCC). This email will contain the application number, as well as a link to allow the applicant to check the status of their eTA application at any time.

Section 12.05 of the Immigration and Refugee Protection Regulations stipulates that an eTA is valid for five years or until the applicant’s passport expires, whichever occurs sooner.

An eTA can be cancelled by a designated officer pursuant to Section 12.06 of the Regulations.

After the application is received by the system, it will create a “prospective” application and will then perform an identity search to determine if the applicant already exists in the databases, and will associate the application to any existing UCI (unique client identifier) where possible. If no adverse information is found, the system will automatically notify the applicant by email that the eTA has been approved.

Occasionally, applications cannot be automatically approved. In that case, they are referred by the system for manual review in IRCC Operations Support Centre (OSC), where officers can request additional documents or a security screening, or both. If documents are required from the applicant, he or she will be directed to create a MyCIC account, to which they will link their eTA application. MyCIC offers a secure environment in which the applicant may communicate with IRCC and vice versa.

When a decision cannot be made due to the need for an interview or other factors, the application will be referred to a visa office. Other circumstances will require assessment in an overseas mission, including applications that result in the need for a Permanent Resident Determination, a Temporary Resident Permit, etc.

Cases referred to overseas missions will be processed in the same way that Temporary Resident Visa applications are currently processed. Officers may request an interview with the applicant if required.

Applicants whose eTAs are refused will be notified by email of the reasons for the decision.

eTAs are enforced using Canada Border Services Agency (CBSA) Interactive Advance Passenger Information (IAPI) system. Unlike a Temporary Resident Visa, no counterfoil will be provided to an applicant upon approval of an eTA. Therefore, there is no official physical proof of the presence or validity of an eTA. Air carriers will use the CBSA’s IAPI system to confirm that an IRCC authorization to travel (either a visa or eTA) is linked to the traveler’s passport subject to the exceptions noted above. IAPI is an enhancement of the previous Advanced Passenger Information (API) program. It automates a previously manual process and requires air carriers to submit traveler API earlier (at check-in instead of takeoff). Air carriers will conduct their usual check-in procedures, which will now initiate an automated query in IAPI using the traveler’s passport number and country of issuance. Before a boarding pass can be printed, IAPI must provide an “ok to board” message to the air carrier.

Travelers must be careful to determine whether they require an eTA and, if they do, apply for it well in advance of their anticipated travel date to avoid any difficulties.

The advent of eTAs raise several concerns. It is unclear whether there is sufficient legislative authority to make a determination that a traveler who is visa-exempt is inadmissible to Canada prior to appearing at a post of entry for a full examination, or if such determination runs afoul of basic principles of fairness. Yet, a traveler who requires an eTA and does not obtain it will be prevented from boarding a flight bound for Canada. Further, the eTA system implicitly deputizes airline personnel to enforce immigration legislation by denying boarding to a traveler who has been unable to obtain an eTA. These questions will no doubt be litigated in the future.

France - Recent Legal Developments

By Roselyn S. Sands, EY Société d’Avocats, Paris, France

Final adoption of the draft law (the “El Khomri” law) relating to “labor, improvement of social dialogue and safeguard of professional careers”

The law on “labor, improvement of social dialogue and safeguard of professional careers” was passed by the French Parliament on July 21, 2016. The law is applicable since August 10, 2016, except for provisions requiring that specific decrees of application be published by the government. This law is the result of a tumultuous parliamentary process, which began in May 2016 and was marked by country wide strikes and demonstrations that continue today even after its passage into law.

The law contains provisions that are aimed at clarifying the general principles of French employment law, strengthening collective bargaining in France, increasing flexibility by modifying rules on working time and leave and clarifying rules on economic redundancies.

I. Rewriting the French Labor Code and its general principles

The new law profoundly reworks the general principles of the French Labor Code and modifies its general architecture. Indeed, under the new law company-level collective bargaining may result in greater flexibility for employers regarding working time, unless specified otherwise by law. This is a considerable philosophical change in French labor and employment law, where the historical hierarchy of norms principle ensured that company-level CBAs could further enhance employee rights but could not provide less protection.

The general structure of the French Labor Code is henceforth as follows:

i). Rules that must be enforced as they stand, now divided into three segments with no flexibility through company-level bargaining agreement
ii). Rules that may be modified by a company-level bargaining agreement if agreed to by at least 50% of the representative unions, or 30% of the representative unions and 50% of the employees
iii). Limits to which the rules in ii) can be modified

Overtime is a good example of how the new architecture of the French Labor Code is designed. The new Labor Code provides that:

i). Additional overtime pay must necessarily be paid to employees. This rule must be enforced as it stands
ii). Today, overtime is paid at 25% extra for the first 8 hours, however, by a company-level bargaining agreement overtime can be paid less or more than the 25% provided by law
iii). Yet, a company-level bargaining agreement cannot provide that overtime be paid at less than 10% more

Whereas the detailed application of this architecture will take a couple of years to fine tune, by exception, this architecture is immediately applicable for issues relating to working time and employee leave.

II. Flexibility through collective bargaining

The law strengthens the legally binding effect of company-level CBAs, and enables companies to achieve flexibility through collective bargaining.

Under the new law, the validity of company-level CBAs will depend on a “two-tier” system, starting September 1, 2019. Company-level CBAs will be valid if the majority unions, who have gathered more than 50% of the employee votes during the most recent election, sign or if the signatories have gathered more than 30% of the employee votes during the most recent election and the agreement has been approved by the employees through referendum.

In addition, the law provides for the following rules with respect to the company-level CBAs:

- The limitation of their duration to 5 years, unless stated otherwise in the agreement (e.g. indefinite term)
- Change of the rules pertaining to the review, modification and the termination of the agreements
- Publication on a national online database of all company-level CBAs with provisions of anonymization
- Possibility for companies with less than 50 employees to apply a special agreement provided by the national CBA.

III. Working time

The new law includes a series of measures impacting working time in order to increase employer flexibility and freedom in organizing the company, while safeguarding employee rights, in particular with regard to work life balance and health and safety at work.

As mentioned above, the new structure of the French Labor Code is currently applicable to working time related issues. Indeed, working time related issues such as the number of hours to be worked to trigger night work compensation, the maximum weekly time duration or the weekly and daily minimum rest period can now be set through collective bargaining, based on the above mentioned structure.

In addition, the law provides for a right “to disconnect, in particular from electronic devices, after working hours. This measure aims to ensure a proper balance between workload and private life with the regulation of the use of digital tools. The specific implementation of this right will be decided on a company by company basis with the union representatives during the annual negotiation on “work life balance”.

IV. Greater flexibility in the justification for collective redundancies

The law provides for new rules regarding collective redundancies, clarifying some of the reasons that can be used to justify a collective redundancy caused by economic difficulties. Indeed, the law provides that in addition to the already existing reasons (i.e. the company’s closure, or the safeguard of the company’s competitiveness, or considerable technological changes) two new reasons could be used, including a drop in the company’s turnover for a period of time depending on the size of the company (e.g. 4 consecutive quarters for companies with more than 300 employees).

Together with the procedural changes from 2013, the combination of these modifications facilitates the collective redundancy process in France.

V. Conclusion

French labor and employment law continues its path to creating a more employer friendly environment in order to fuel investment into France.

Kingdom of Saudia Arabia - Vision 2030's Impact on Employment

By Sara Khoja, Clyde & Co, Dubai

In late April 2015, Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman, announced an ambitious and ground breaking programme to develop the Kingdom’s economy and society over the next fifteen years. How the programme will be implemented together with the immediate five year plan set out in the National Transformation Plan 2020 will be of key interest to businesses operating in the Kingdom. In this article, we examine the main likely employment implications of Vision 2030 and the introduction of ‘weighted Nitiqat.’


With the Ministry of Labour estimating that each year 250,000 new graduates enter the job market in KSA, the creation of employment opportunities is a social and economic imperative. Vision 2030 seeks to reduce the overall unemployment rate from 11.6 % to 7%, overhaul the education system and increase the female participation rate from 22% of the workforce to 30%. Remittances by foreign workers is also high with a plan to increase in country spending by the resident population from 2.9% to 6%. The National Transformation Plan aims to create 450,000 new jobs by 2020.

Developing the local workforce will be a task spread across a number of Government authorities, including the National Labour Gateway (TAQAT) which will seek to establish sector councils to examine each socio-economic sector’s skills and knowledge requirements to promote vocational training and entrepreneurship. Apprenticeships will be promoted through the establishment of a centralised student database from which large private sector companies.
Other stated goals are the increase of foreign direct investment from 3.8% to 5.7% and the proportion of GDP from the private sector from 40% to 65%.

Defence and Security

KSA is currently the third largest global spender on military equipment. Under Vision 2030, the goal is to localise military spending and establish a local manufacturing capability (including the production of complex equipment such as military aircraft). There are currently seven local defence companies and two research centres in the Kingdom. Increasing capacity will require the development of a specialist and skilled Saudi Arabian workforce.


In 2015, the number of religious tourists to the Kingdom reached a high of eight million. By 2030, the goal is to have increased this to 30 million. The nurturing of a domestic tourist industry is also a stated aim with several historical and cultural sites (including the Red Sea coast) earmarked for development with a desire to double the Kingdom’s UNESCO registered sites which now include Jeddah’s old city; Al Balad. This expansion will create jobs but also challenges in training staff to a proper level to perform effectively in a service industry.


Vision 2030 envisages an annual growth rate of 10% in retail, the workforce for which amounts to 1.5 million works, only 0.3 of which are KSA nationals. By 2020, the aim is to have 1 million more Saudi nationals working in retail by 2020.
Civil Service and collaboration between the public and private sectors.

By 2020, the Government aims to have trained 500,000 government employees and to create HR centres of excellent to promote best practices and provide training within every government agency. The King Salman Program for Human Capital Development will also be launched with a comprehensive programme to examine efficiency within the civil service and the development of strategic partnerships.


As well as the headline announcement of a plan to publicly list 5% of Saudi Aramco, over the next five years, the Government plans to privatise eleven airports, and over the next fifteen years to privatise almost three hundred hospitals and over 2,200 health centres.

USA - Department of Labor Accepts First Labor Petition Under US-Colombia Trade Promotion Agreement

By Tequila J. Brooks

On July 15, 2016, the U.S. Department of Labor accepted the first petition to be filed under Chapter 17 (Labor) of the U.S.-Colombia Trade Promotion Agreement (TPA). The petition was filed by the AFL-CIO and five major Colombian labor federations including the Central Unitaria de Trabajadores (Central United Workers – CUT), the Confederación de Trabajadores de Colombia (Workers Confederation of Colombia – CTC), the Corporación Colombiana para la Justicia y el Trabajo (Colombian Corporation for Justice and Work – COLJUSTICIA), the Sindicato Nacional de Trabajadores de la Industria Agropecuaria (National Union of Workers in Agroindustry – SINTRAINAGRO) and Unión Sindical Obrera (Workers Sindicated Union – USO).

The petition, filed on May 16, 2016, alleged that the Government of Colombia violated a number of its labor-related commitments under U.S.-Colombia TPA Chapter 17 in a manner directly affecting trade and investment. These labor-related commitments include: (1) failure to effectively enforce labor laws; (2) waiver or derogation of existing labor statutes and regulations to incentivize trade; (3) failure to adopt or maintain statutes and regulations consistent with the 1998 ILO Declaration on Fundamental Principles and Rights at Work; (4) failure to ensure that dispute resolution proceedings in labor, administrative and judicial tribunals are transparent and without unwarranted delays; and (5) failure to ensure that final decisions in labor-related adjudications are made available without unnecessary delay. Among the allegations made by the AFL-CIO and its Colombian counterparts was that the Government of Colombia had failed to meet its commitments under the Colombian Action Plan Related to Labor Rights (LAP) of April 7, 2011.

The U.S.-Colombia TPA went into force on May 15, 2012 only after U.S. authorities felt that the Government of Colombia had made significant progress in meeting the requirements outlined in the April 2011 LAP. These requirements included reforms to both the labor and criminal justice systems as well as substantive changes to various Colombian labor laws. The LAP required Colombia’s Labor Ministry to hire and train 100 new labor inspectors in 2011 and total of 480 over a 4-year period – and for the Finance Ministry to approve a budget allocation to pay for the new labor inspectors. The Colombian Labor Ministry was also required to improve complaint and dispute resolution mechanisms and to conduct outreach to the public, employers and workers.

To address concerns expressed by the U.S. Congress, trade unions and human rights advocates, the 2011 LAP negotiated between the U.S. and Colombia required specific reforms to Colombia’s Criminal Code to address two main issues: (1) employers’ use of intermediaries to avoid labor law compliance and (2) the need for investigation and punishment of threats and violence against trade unionists. Colombia has been described as the most dangerous country in the world for trade unionists. Over 2,500 trade unionists have been murdered in Colombia since the 1980s. Under the LAP, the President of Colombia committed to issuing a directive to the National Police assigning 95 full-time judicial police and prosecutors to investigate criminal cases involving union members and labor activists. The LAP also required Colombia’s Ministry of Interior and Justice to issue a Ministerial Resolution expanding the scope of persons entitled to special protection to include labor activists, persons engaged in active efforts to form a union and former trade unionists. The LAP specifically requires that a budget be allocated for special protection of trade unionists and labor activists from threats and violence.

The substantive changes required by the LAP to Colombia’s labor laws centered on employers’ use of cooperatives, temporary agencies and collective pacts to avoid compliance with fundamental labor rights. The essence of these legal reforms was that employers may not utilize third parties as intermediaries with employees performing “permanent core functions” of their operation. Export sectors of particular concern in Colombia include the palm oil, sugar, mines, ports and flower sectors.

In their May 15.2016 labor petition under Chapter 17 of the U.S.-Colombia TPA, Colombian and U.S. trade unions point out that Colombia’s conformity with its 2011 LAP commitments has been superficial and incomplete – and that the U.S. government did not require effective implementation of LAP commitments before the TPA entered into force. Petitioners observe that while the Government of Colombia agreed to establish and fund a 95-person police force dedicated to investigating and punish threats against trade unionists, cases are still not meaningfully investigated and prosecuted. Over 1,466 threats and acts of violence against trade unionists have taken place since the TPA went into force, including 99 assassinations, 6 kidnappings and 955 death threats – with an 87% rate of impunity for murder of trade unionists. The National Protection Unit has been accused of diverting funds intended for protection of at risk individuals. Although Colombian trade unions have filed 1,146 criminal complaints since 2012, no employer has been convicted under the new labor and criminal regimes. In addition, while additional labor inspectors were indeed hired by Colombia’s Ministry of Labor, they were hired on a temporary basis.

On the topic of new legislation banning employer use of work cooperatives as an intermediary to avoid unionization of workers and compliance with other labor and social security requirements, petitioners observe that while the use of “work cooperatives” has declined, use of a new form of labor intermediation called contratos sindicales (syndical contracts or employer-friendly unions) has arisen. These contratos sindicales do not reflect collective bargaining. Their number has increased form 50 in 2010 to 1,925 in 2014. Petitioners cite research studies from 2015 and 2016 (including a January 2016 OECD report) for the proposition that 73% of the workforce in Colombia is informally employed with no access to social security.

Petitioners outline specific cases in the oil and sugar sectors to show how the Government of Colombia has failed to meet its commitments under the 2011 LAP and Chapter 17 of the U.S.-Colombia TPA. In one of these cases, 1,100 oil workers began to unionize with the support of Unión Sindical Obrera (USO) at the Canadian-owned Pacific Rubiales Energy Montajes site in February 2011. Their grievances included excessive use of labor intermediaries, excessive hours, health and safety problems and failure to provide adequate equipment and food. A member of the Colombian National Police was part of the employer’s negotiating team. On July 18, 2011, 4,000 workers held an assembly at the Montajes site. 150 police entered labor camps using rubber bullets and percussion bombs and spraying tear gas into tents. Petitioners observed coordination between the Colombian Army and Police to inhibit communication between trade unionists and physical attacks against workers.

In September 2011, 1,000 of 3,493 workers who joined the union were fired and replaced by other workers. After the Colombian Labor Ministry pressed the employer to engage in collective bargaining with USO, the employer signed a Labor Normalization Agreement with an organization called the National Union of Energy Workers (UTEN) which had no relationship with the workers. Five years later, UTEN has still not negotiated a collective bargaining agreement on behalf of the workers. A database was established to exclude USO members from the work site and a check point was put in place at the work site to make sure they did not enter.

In February 2012, USO filed an administrative complaint with Colombia’s Ministry of Labor about the employer’s actions (including mass firings and blacklists) at the Montajes site. In April 2013 - over a year and 3 months later - the complaint was dismissed, as were subsequent motions to reconsider and appeals. The reason given for dismissal was the lack of a direct employment relationship with the employer since workers were employed by a number of intermediaries. The Government of Colombia did not initiate criminal action against the employer for failing to comply with new labor and criminal provisions. In fact, arrest orders were issued against two USO trade union members who testified against the company.

Petitioners’ arguments challenge both the substance and application of Colombian labor laws and the new criminal regime established to protect trade unions. They point out that the ILO’s Committee on Freedom of Association (CFA) issued a report observing failure on the part of the Government of Colombia to protect freedom of association and the right to collective bargaining. One of the arguments made by petitioners is that the Government of Colombia failed to effectively enforce Article 63 of its labor intermediation law which makes it unlawful to utilize intermediaries to contract workers performing core permanent functions of a company. Petitioners note that excessive focus by Colombian labor authorities on the particular legal form “work cooperative” has allowed the similar forms of the same phenomenon to arise with different names and legal forms.

The primary innovation in the May 2016 petition is the argument made by U.S. and Colombian unions that the Government of Colombia has not complied with Chapter 17 of the U.S.-Colombia TPA because it failed to effectively enforce certain provisions of its Criminal Code. In particular, petitioners argue that Articles 200 and 347 of Colombia’s Criminal Code – which impose both fines and jail time as penalties for violations for labor laws and threatening or intimidating trade unionists – are labor laws within the meaning of Chapter 17 of the U.S.-Colombia TPA. Article 200 is directly related to the internationally recognized right of freedom of association and Article 347 was specifically adopted to bring Colombia into compliance with the 1998 ILO Declaration.

While U.S. DOL has declined in the past to consider criminal matters (including threats against and murder of trade unionists and worker rights advocates) to be within the scope of the NAFTA labor side agreement (NAALC) in Mexico and Chapter 16 (Labor) of the CAFTA-DR in Guatemala, petitioners’ argument under the U.S.-Colombia TPA is likely to be accepted in this case since a good portion of the 2011 U.S.-Colombia LAP requires specific changes to Colombia’s Criminal Code and practice to better protect trade unionists from threats and violence. A similar basis was arguably not present under the NAALC or CAFTA-DR Chapter 16. A successful outcome under the U.S.-Colombia TPA may set a precedent for stronger protection of trade unions and worker rights advocates from violence by U.S. authorities in future cases, however.

Under regulations governing petitions under FTA labor provisions, U.S. DOL is required to issue a report in response to the May 15, 2016 petition by January 15, 2017 unless it determines that more time is required.

Petitioners have laid the groundwork for this case to go to international arbitration under Chapter 21 (Dispute Resolution) of the U.S.-Colombia TPA by arguing that failure by the Government of Colombia to effectively enforce labor laws in the oil and sugar sectors directly affects trade between the two countries. Thus far, the only case to go to the international arbitration phase under U.S. FTA labor provisions is the 2008 Guatemala case under the CAFTA-DR. After several delays, the arbitration decision in that case is scheduled to be released in early September 2016.

Saturday, June 11, 2016

International Employment Committee Newsletter - Summer 2016

Dear all

Welcome to the Summer edition of the newsletter. Many thanks as always to those who contributed an article for inclusion in this edition. We have our first article on Malaysia, together with articles on Saudia Arabia, the Netherlands, Ireland and Canada - so the newsletter is becoming increasingly international!

Helen Colquhoun

Canada - Balancing Uncertainty and Good Faith when Terminating Employment Contracts

By Theodore Goloff, Robinson Sheppard Shapiro LLP

Introduction – “Ripleys’ Believe it or Not”

Canadians really are different from our American neighbours – not only because of our peculiar way of spelling “labour”!

“At-will employment”, as known in many states of the U.S.A., simply doesn’t exist north of the 48th parallel that defines the international frontier between Quebec, New Brunswick and the border states. All Canadian jurisdictions of which there are at least 11, at the least, require that when terminating employment of indeterminate term otherwise than for “just cause”, employers provide the employee with both “statutory notice”, as provided by governing employment standards legislation and common law notice, or corresponding pay in lieu thereof. Some jurisdictions require the payment of “statutory severance”, in addition. Thus, while in most Canadian jurisdictions an employer is free to terminate such employment at any time even without alleging cause, doing so may give rise to substantial costs. Termination for redundancy is nowhere considered “cause”, and ever since Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701, spurious allegations of “cause”, advanced and/or unreasonably pursued will give rise to additional damages, either in the form of substantially increased “notice”, (appropriately termed “Wallace Damages”), as in Canada’s common law provinces, or “moral” damages in Quebec. When the manner in which termination is effected is particularly egregious, that may also attract punitive damages.

Decidedly, the purpose of common law notice, or its equivalent in Quebec, “reasonable notice” pursuant to articles 2091-2092 of the Civil Code of Quebec, is to provide employees with a cushion of expected income while seeking to transition to alternative employment. It allows the perceived weaker party to acclimatize to changed circumstances while safeguarding the right of the employer to determine the size and composition of his work place. Ostensibly, it is to balance and temper competing rights.

Unless contractually otherwise defined, the measure of notice that is due must be individually assessed at the time of termination depending on varying factors whose relative importance may vary from case to case according to context.
While “working notice” is generally an option, employers terminating employees in Canada and deciding to give immediate effect to the termination and “monetize” notice, must ensure that the employee receives the full value of what he/she would have received had “working notice” been provided.

When an employer chooses to provide pay in lieu of working notice, the question then arises what must be taken account of in making the employee whole?

The rule requiring that payment in lieu of notice must include all rights and benefits which the employee would have received had he/she worked the notice period, easy in concept, is difficult in application. When the employment contract or its ancillary agreements provide that a specific benefit, e.g. incentive bonus, share options or warrants, etc. as yet unvested, requires active employment as a condition of vesting, can a termination that is otherwise lawful in some way be viewed as “frustrating” the contract making it open to challenge or allowing recovery of damages? When the specific language of the contract or its ancillary documents restrictively defines the full and final parameters of the notice payment — excluding such benefits — what happens when there is a discrepancy between the two amounts? Can the condition depriving the employee of the benefit, at least for what would have accrued during the notice period be struck or annulled, and, if so, on what basis? Can provisions that cancel unvested rights as at the date of termination be attacked as being in the nature of “adhesion provisions” that are inherently “abusive”, or in breach of good faith/fair dealing and therefore unenforceable? In circumstances where termination without cause involves forfeiture of contingent unvested rights, can such termination be viewed as arbitrary, unreasonable and therefore suspect and/or actionable? Is there a difference between contingent rights which vest during or after the notice period? In one way or another, these questions involve the tension between certainty of contractual outcomes and different perceptions of good faith/fair dealing.

As the reader will see below, the primacy of provincial rather than federal competence in matters of employment and labour relations complicates a “one size fits all” response to these questions.

Good Faith from the Civil Law/Common Law Perspective

The Civil Law of Quebec

Canada enjoys both a bilingual and bijural legal tradition — the common law in nine of its provinces and three territories, and the civil law tradition in Quebec. Contradictory results sometimes obtain regarding similar contractual issues and may result from (i) where the litigation originates, or (ii) is adjudicated, and (iii) under what legal regime. With its judges representing both legal traditions, the Canada Supreme Court adroitly seeks providing harmony between systems by reducing inconsistencies between systems, where possible without jeopardizing each tradition’s individuality.

Adherents of the civil law tradition in Quebec sometimes boast that its methodology of identifying the appropriate “codal” principles and applying them contextually provides decisions made “by authority of reason” and not, as in common law, “by reason of authority”. Codification such as the Civil Code of Quebec, the jus commune in that province “purports to be comprehensive…not in details but in the principles (calling) for a liberal interpretation in order that it may serves the basis of decision for new situations”.

Of interest, regarding the questions raised above are inter alia articles 6, 7, 1375, 1379 and 1437 of the Civil Code of Quebec which provide:

6. Every person is bound to exercise his civil rights in good faith.

7. No right may be exercised with the intent of injuring another or in an excessive and unreasonable manner, and therefore contrary to the requirements of good faith.

1375. The parties shall conduct themselves in good faith both at the time the obligation arises and at the time it is performed or extinguished.

1379. A contract of adhesion is a contract in which the essential stipulations were imposed or drawn up by one of the parties, on his behalf or upon his instructions, and were not negotiable. […]

1437. An abusive clause in a consumer contract or contract of adhesion is null, or the obligation arising from it may be reduced.

An abusive clause is a clause which is excessively and unreasonably detrimental to the consumer or the adhering party and is therefore not in good faith; in particular, a clause which so departs from the fundamental obligations arising from the rules normally governing the contract that it changes the nature of the contract is an abusive clause.

The Quebec Court of Appeal has canvassed these provisions to reach what seem well anchored positions with respect some of the questions raised above providing needed direction to the employment bar on these issues.

In IBM Canada Ltée c. D.C., 2014 QCCA 1320, the terminated executive benefited from IBM’s Long-Term Incentive Award Program. The Restricted Stock Units [RSUs] pursuant to the program granted to him contained provisos to the effect that in the event of his ceasing to be an employee (other than because of death or disability) all as yet unvested RSUs would self-cancel and that options that were not exercisable as at the date of termination were forfeit. Had the executive worked the notice period, a number, but not all of those RSUs would have become vested. Plaintiff argued that the clause(s) whereby be forfeited unvested RSUs and/or options were “adhesion clauses”, inherently abusive, unreasonable and offensive to the principle that he was required to be made whole in respect of all benefits he would have enjoyed during the “notice period” had he worked. As he would have then become vested with at least some of those RSUs and options, he was short-changed and claimed judgment in his favour on the basis of “quod erat demonstrandum".

Plaintiff succeeded in Trial Court but saw the judgment reversed in appeal. In particular, Mme Justice St-Pierre, with whom her colleagues on this point agreed, specified:

[102] I am ready to agree that these clauses represent a contract of adhesion. It is however with respect to the claimed abusive character of the provisions that restrict the rights of Mr. C to require or monetize the advantages set out in these agreements where my opinion differs.

[103] IBM and Mr. C concluded an employment contract of indeterminate duration having multiple facets. Many provisions that benefit Mr. C were agreed to firmly and their exigibility was not dependent on anything other than the execution by the latter of the obligations which were his counterpart.

[104] That is not the case with respect to the programs dealing with incentive measures which relate to unilateral decisions of IBM and with respect to which it has reserved discretionary powers. The purpose served is clear. IBM wished to advantage in a very special way certain key employees in order to encourage them to remain with the enterprise. As mentioned earlier, its seems to me a legitimate purpose in context.

[105] Taking into consideration the totality of Mr. C’s working conditions, I cannot see how the reserve by IBM of the discretionary faculty of granting him, from time to time, additional advantages beyond those firmly consented to could be considered abusive. I therefore believe ill-founded Mr. C’s argument drawn from the text of Article 1437 C.C.Q.

[108] I accept the proposition according to which agreements regarding incentive measures form part of Mr. C’s working conditions. Nevertheless, to the extent that they are not abusive, and that is the conclusion to which I have already arrived, they must be applied according to their tenure.

[109] Here, the grant of incentive advantages depends upon the unilateral wish of IBM to encourage or not its employee to remain in its service. In May 2007, even assuming that IBM would have given Mr. C a notice period of two years, it is evident that IBM would have ceased to offer him these types of advantages that are destined to keep him in his position.

While parts of the very substantial judgment that Plaintiff was awarded at trial were upheld, his submissions on the issue of the “abusive” nature of the implicit “forfeiture” provisions were decisively dismissed.

Plaintiff also benefited from IBM’s Supplemental Executive Retention Plan [SERP]. As the Court noted:

[74] … IBM ended the Plan on December 12, 2008, without cancelling the acquired rights of those who had jointed the Plan and who were still in its employ.” (Translation our own)

Plaintiff had ceased to be an employee of IBM in June 2007. Plaintiff’s claims pursuant to the SERP were dismissed by the appellate court, Mme Justice St-Pierre writing:

[75] I note that the Plan was not based upon written accounting documents. During the period of membership in the Plan, neither IBM nor the employee were required to disburse, so that the regime in question was purely virtual (“notional”).

[82] IBM was entitled to end the employment relationship without cause, under reserve, certainly, of its obligation to provide reasonable notice. The argument that the clause was abusive is without merit to the extent that the Plan pursued a legitimate purpose, known and accepted by everyone, that is, to retain executives by incentivizing them to pursue their career with IBM up to the age of 55. I will have occasion to come back to the particular chapter of contractual relations between Mr. C and IBM.

[83] This said, Mr. C might have legitimately been entitled to be indemnified if he had established that his dismissal sought notably to deprive him of the sums virtually accumulated in the SERP. That was not the case. [Translations our own]

The Court in effect noted that actori incumbit probatio — he who alleges must prove — and that the rule entails the inference that the absence of fact duly established is not evidence.

In both instances, the Court recognized that the litigants were adults and vaccinated when they contracted together, understood that some “benefits” were inherently “precarious” and opted for respect of certainty and purpose in the absence of proof of bad faith.

In Premier Tech ltée c. Dollo, 2015 QCCA 1159, the ex-employee was both an executive and a shareholder. The Share Option Purchase Plan contained provisions (Section 8.01.2) similar to those in the IBM case providing the loss/forfeiture of unvested and/or unexercised warrants or options in the event of cessation of employment, but with an exception: “… unless the Board of directors, in its sole discretion decides otherwise”.

As the Court of Appeal noted, Plaintiff had foregone an opportunity to exercise the options that he had accumulated during an earlier period of corporate reorganization, on the express representations of Defendants’ Board that he would be able to exercise them notwithstanding Section 8.01.2 in the event of a future termination of employment. While the Court recognized the “adhesion” character of that provision, it refused to view the clause as being inherently abusive or unreasonable. On the contrary, it was only because of the promises made to Plaintiff to the effect that his forbearance would not be prejudicial to him in the future that the refusal of the Board of Directors to exercise its reserved discretion became unconscionable. From this author’s perspective, it is the evidence of the Board’s bad faith through its failure to honour previously given specific assurances that marks this case as one based on a form of promissory estoppel — or as its partial complement is known in Quebec — “fin de non-recevoir”.

In this case, certainty of outcome and good faith favoured the executive because no one, as the Court noted, should be allowed to profit from their own misrepresentation. On the other hand, pursuant to the Civil Code, good faith is always presumed in the absence of evidence to the contrary. In the Premier Tech case, the objective evidence of misrepresentation was made crystal clear for the Court and did not require adverse inference.

It is of some note that leave to appeal to the Supreme Court of Canada was recently denied, making this judgment final.

Good Faith And Fair Dealing – An Organizing Principle in the Common Law of Canada

As I wrote elsewhere, (See 49 ABA/SJL YIR (N.S.) 463 (2015) pp. 471-474) in Bhasin v. Hrynew [2014] 3 S.C.R. 494) :
The Supreme Court recognized a duty of good faith, as “a general organizing principle of the common law” requiring that parties perform their contractual duties honestly and reasonably and not capriciously or arbitrarily, bringing Canada’s common law in line with commercial expectations elsewhere in North America, while producing a subtle shift towards a “civilian” approach to legal analysis.

The court left undisturbed the trial judge’s finding that in the period preceding termination of Mr. Bhasin’s “commercial dealership agreement”, the respondents were neither candid nor forthright, indeed misleading him on critical details, all of which led, at the expiry of the contract term, to his losing “the value in his business in his assembled workforce.”

The case turned on whether Canadian common law required the respondents to perform their contractual obligations “honestly” and with due regard for Mr. Bhasin’s legitimate interests. The court wrote that
Finding that there is a duty to perform contracts honestly will make the law more certain, more just and more in tune with reasonable commercial expectations. It will also bring a measure of justice to the appellant, Mr. Bhasin, who was misled and lost the value of his business as a result.

“Determining Canadian common law to be: (i) uncertain, (ii) incoherent, and (iii) “out of step with the reasonable expectations of commercial parties, particularly those of at least two major trading partners of common law in Canada – Quebec and the United States”, the Court felt obliged to develop the common law in step with societal/commercial expectations, but in an incremental fashion. Good faith as an “organising principle” would not reverse pre-existing rules, but created an over-arching standard of conduct that “states in general terms a requirement of justice from which more specific legal doctrines may be derived [that] may be given different weight in different situations. Applying it to particular situations would allow a coherent way forward “where the development may occur incrementally in a way that is consistent with the structure of the common law of contract [with] due weight [given] to the importance of private ordering and certainty in commercial affairs.”

In Bhasin, the record relied upon disclosed to the Court’s satisfaction absence of candor, a dollop of double-dealing and a healthy serving of material misrepresentation. The originality of the case from our perspective is dual: It borrowed from civilian methodology in putting forward honesty, candor and the obligation to recognize and take account of the effects that one’s behaviour can have on the “other’s” well founded expectations, both in performing and ending contractual relations as an “organizing principle” of the common law as a principle, to be modulated in situ from case to case based on the evidence that the record disclosed.

Respectfully, however elastic these principles, they ought not be divorced from the factual underpinnings that gave rise thereto. Certainly, in Bhasin, there was an expectation based on real and objective misrepresentations by Defendant that led Plaintiff to believe that he would not be prejudiced. Indeed, it was because of such deceptive practices, as the Court saw them, that Plaintiff lost the value of his business. It was such deception and unfair dealing that the organizing principle was affirmed.

Enter Stage Right, Styles v. Alberta Investment Management Corporation, 2015 ABQB 621

As a Trial Court judgment that is presently in appeal, this judgment might have passed under this writer’s radar, save for the fact that it seems to have expanded on the Bhasin principles in a manner that is far more typical of the civil law tradition than that of the common law. Whether it overshot the mark, I leave for higher Courts to decide.

The Supreme Court in Bhasin drew upon Quebec’s civil law tradition to prescribe an “organizing principle” of the common law, which would allow it to find application organically, and be interpreted and/or modulated by new situations as they arose. From this writer’s perspective, the Styles case seems to apply the Bhasin principles questionably to a factual situation where proof of actual misrepresentations and/or bad faith is absent in the record. It nevertheless is important to consider this case carefully when an employer terminates employment on a without cause basis, but subject to the payment of a specified and contractually agreed amount that excludes unvested and as yet unmatured entitlements to incentive payments. Does this judgment also directly or indirectly properly oblige an employer who terminates the employment of a hitherto exemplary employee on a without cause basis to explain the rationale of the termination so as to negate any possible of inference of unreasonable or arbitrary conduct? Does the right to terminate “without cause” equate with “even for no reason at all” or does such right, at its limit, mean the right to terminate for only some intelligible and palpable reason, that is always reviewable or challengeable on the basis of its alleged arbitrariness or capriciousness? To protect against possible adverse inference, must a prudent employer advance some credible explanation of why the termination, so as to negative an inference that what was done was simply to elude payment of what would otherwise become due, all other things being equal, in the fullness of time? Does that mean that any termination must have some internal and credible logic to it that must in the event of litigation be alleged and proven? In forcing the employer for its self-preservation to “go public” on the rationale, does that always serve the interests of justice, and those of the employee in particular?

Is certainty of outcome of contractually foreseen events a value that has somehow been lost in an eagerness to protect a perceived disadvantaged and weaker party? In Quebec, the employer’s interest in advantaging or incentivizing those whom it decided “in its discretion” to keep in its employ was comparable to the inherently reasonable rationale justifying the forfeiture of such “precarious” unvested” and as yet “unmatured” rights. Is that a position that should be followed elsewhere?

Important questions all they are that are raised here for consideration by the reader, rather than for response.

The Facts and The Judgment in The Styles Case

Plaintiff was hired in 2010 into a senior executive position pursuant to an employment contract which essentially provided:

i. the possibility of termination without cause upon three months’ notice or payment in lieu thereof, such payment being contractually limited to a calculation that takes account only base salary. All contingent unmatured and unvested rights were therefore not to be taken account of;

ii. the possibility, subject to acceptance and signature of Participation Agreements, of being granted Long Term Incentive Plans (LTIPs) which would mature, vest and payout four years after grant, according to a formula whereby they could appreciate up to a maximum of three times the grant or depreciate to zero-based on a number of factors, only some of which the employee himself could influence, if at all;

iii. as active employment as of the date of maturity was a condition of payout, all unvested grants were subject to forfeiture without additional compensation as of the last day of employment;

iv. at its discretion, the Employer could modify, amend or terminate the Plan provided that in the event of “termination of the Plan” a Participant would, subject to the terms of the Plan, continue to be entitled to grants previously awarded.

Plaintiff had been awarded grants on January 1, 2011, again in 2012 and in 2013 with “maturity” or “vesting” dates of December 31, 2014, December 31, 2016 and December 31, 2017, i.e. 48 months following the grant. Plaintiff’s employment was terminated with payment of three months of base salary pursuant to the termination clause of the Employment Contract in June 2013 on a without cause basis. The reader should note that the Plan in question was not terminated. Only Plaintiff’s employment was.

Notwithstanding the provisions regarding the exclusion of anything but base salary, and notwithstanding the forfeiture clause of unvested LTIP grants, the Trial Judge determined that: (i) Plaintiff had exceeded every performance targeted imposed by the employer; (ii) there was no indication that he was not committed to carrying out his employment in the most diligent and professional manner; and as the case came up for decision on summary judgment, (iii) notwithstanding an affidavit from one of the employer’s executives, Defendant provided no evidence to explain how the termination came about or the reasons therefor.

From this writer’s perspective however, how can the absence of evidence imply bad faith? Does it necessarily lead to a conclusion that the basis of the termination was or is somehow suspect? If good faith is presumed or to be presumed in the absence of proof to the contrary, can the absence of evidence explaining the termination allow an adverse inference as to its reasonability or legitimacy? Isn’t the whole idea of termination based on the absence of any necessity to provide justification?

In Styles, the Alberta Court of Queen’s Bench wrote:

[65] In affirming this common law duty of reasonable exercise of discretionary contractual powers, I have recognized the fact that “[t] the duty of good faith performance of contractual obligations recently affirmed by the Supreme Court of Canada in Bhasin [is not a license] to invent obligations out of whole cloth divorced from the actual terms of the contract between the parties” : […]

[66] This duty of reasonable exercise of discretionary contractual power is not a limitation on “the right of an employer to determine the composition of its workforce”; Bhasin at paras 53-54. It is designed to deal with both the unfair manner of termination and the consequence that flow from unduly insensitive conduct of an employer when dismissing an employee. In some situations, where the termination deprives an employee of the right to receive earned performance bonuses, grants, or awards, then the exercise of the discretion to terminate without cause becomes arbitrary or capricious when the employer creates circumstances under which the employee would be unable to receive the bonuses or other benefits and provides no reasonable or meaningful explanation for such deprivation.

Given the exemplary conduct and singular contributions that Plaintiff Styles apparently made, coupled with the absence of any explanation as to why termination arose, the Court noted:

“[121] In my opinion, the right to terminate without cause, whether in general or pursuant to a term in a contract, is a clear indicator of the power imbalance between employer and employee. As such, I believe that the historical recognition by the Supreme Court of Canada of the unique nature of employer/employee relationship and its recognition of an implied term of good faith governing the manner of termination, informs the application of the Bhasin principles to the employment contract generally.

[122] In this context, I note that the LTIP document states, inter alia:

Unless otherwise stipulated, participants must be actively employed by AIMCo, without regard to whether the Participant is receiving, or will receive, any compensatory payments or salary in lieu of notice or termination on the date of payout, in order to be eligible to receive any payment.

[123] When an employment contract includes a condition for the receipt by an employee of a benefit under the contract and the employer has the discretion, pursuant to the terms of the contract, to frustrate the satisfaction of that condition, it becomes even more important for that discretion to be exercised fairly, reasonably and not arbitrarily. When one focuses on the unique nature of the relationship here, and the reality that there has accrued to the Plaintiff some earned entitlements from the subject LTIP, then the unfair or arbitrary exercise of discretion in a manner that takes away those earned entitlements is more serious.

The Court ended by stating

[133] Given my conclusion that there is a common law duty that discretionary contractual powers granted under a contract must not be exercised in a manner that is unreasonable, unfair, “capricious” or “arbitrary” – conceived as a general doctrine of contract law imposing, as a contractual duty, a minimum standard of reasonable exercise of discretionary contractual power – I conclude that the entire agreement clause in Clause 4 (o) of AIMCo’s Long Term Incentive Plan Participation Agreement does not assist the Defendant AIMCo in the circumstances of this matter: see, Bhasin at para 74.

[134] I find that the Defendant AIMCo breached the employment contract and the incorporated LTIP Agreement when it failed to exercise its contractual discretionary powers reasonably in dismissing the Plaintiff while at the same time refusing to pay the Plaintiff any of his earned, awarded and approved LTIP grants. I also find that the Plaintiff suffered damages as a result of that breach.

It is one thing to find that particular conduct or representations preclude an employer from relying upon the express provisions of the contract. On the other hand, when both parties to a contract are sophisticated business folks who, one would imagine, would have read and re-read their contractual rights and responsibilities many times, it is a stretch, however, to apply the Bhasin principles where no active and objective misrepresentation can be attributed to Defendant.

Indeed, the Court recognized that in writing as it did:

[135] It may be possible to debate whether the unreasonable exercise of discretionary contractual powers would constitute a breach of the duty of honest performance in the context of the Supreme Court’s prescription in Bhasin. However, it is not necessary for me to debate this issue because the exercise of contractual discretionary powers in this case clearly constitutes a breach of a common law duty that requires discretionary powers granted under a contract to be exercised fairly and reasonably and not in a manner that is “capricious” or “arbitrary”.

Lessons to be Learned

It remains to be seen whether the Trial Court judgment will be maintained, varied or quashed in appeal. Indeed, given that it runs to the heart of what are the parameters of an employer’s right to terminate “with notice but without cause”, it may be viewed, possibly, as material for eventual review by the Supreme Court of Canada. Whatever the case, an employer, at least in the common law provinces of Canada should always consider whether there is some value to providing a rationale for the termination, not for the purpose of establishing performance based or disciplinary cause, but so as to negative any inference of bad faith, and thereby secure some degree of certainty of contractual outcome. The flip side to that, of course, is that such allegations become just one more item that may become litigious. Great for lawyers – perhaps not so great for clients! Where the balance lies between the two, I leave to others to determine.

France - Update on the Bill for 'New Freedoms and Safeguards for Companies and Workers'

By Roselyn Sands and Nicolas Etcheparre, EY Société d’Avocats, Paris, France

In early March the French government reviewed a draft billed entitled “New Freedoms and Safeguards for Companies and Workers”, that impacts numerous aspects of labor and employment law in France.

This draft bill (the “El Khomri” bill based on the name of the Minister for Labor who submitted it) contained provisions which aimed at clarifying the general principles of French employment law, strengthening collective bargaining in France, increasing flexibility by modifying rules on working time, and rendering damages for wrongful termination more predictable.

The philosophical changes

The new bill has created quite a bit of uproar in France. The underlying reason for this is a philosophical change in the construction of employment laws, most notably, under the new proposed law, company-wide collective bargaining can result in less protection for employees than the Labor Code or industry-wide collective bargaining agreements, on matters such as working time. This is a considerable shift in French labor and employment law, where the principle has been that company-wide collective agreements can only be more favorable to employees than existing law or industry wide agreements.
Indeed, article 2 of the bill provides that under certain conditions established by law, company-wide collective agreements passed with unions can provide for rules which are less favorable to employees within limits set by law.

Indeed, this article sets forth a new structure of French law and distinguishes employee rights on three levels:

i) The rules that must be enforced as they stand, regardless of the contents of the applicable company-wide bargaining agreement

ii) The rules that may be modified by a company-wide bargaining agreement if agreed to by at least 50% of the representative unions, or 30% of the representative unions and 50% of the employees

iii) The limit to which the rules in ii) can be modified

For example, as to overtime:

i) Overtime work must necessarily be paid at a higher rate to employees, in principle 25% more for the first 8 hours of overtime work

ii) A company-wide bargaining agreement can provide that overtime be paid less or more than 25%

iii) But a company-wide bargaining agreement cannot provide that overtime be paid less than 10% more

The other key changes

The bill provides for new rules regarding collective redundancies, clarifying some of the reasons that can be used to justify a collective redundancies caused by economic difficulties. Indeed, the bill provides that in addition to the already existing reasons (i.e. the company’s closure, or the safeguard of the company’s competitiveness, or considerable technological changes) two new reasons could be used: a drop in the company’s turnover for a period of time depending on the size of the company (e.g. 4 consecutive quarters for companies with more than 300 employees).

The bill also contain measures aimed at reducing unemployment among young employees who have little if no professional experience or training by providing for State paid training, as well as measures allowing companies to modify employees’ remuneration or working-time when faced with job-threatening difficulties through collective bargaining.

The parliamentary process

The draft bill was submitted before the Assemblée Nationale for discussion on March 24, 2016. More than 5,000 amendments were submitted by both the right-wing opposition and the pro-governmental left-wing parliament members. The opposition felt that the concessions made were too important and had considerably altered the law’s efficiency, whereas the pro-governmental parliament members felt that the bill threatened employee rights.

Faced with this considerable amount of amendments and divergence of opinions, Prime Minister Manuel Valls made use of article 49-3 of the French Constitution, which allows him to bypass the Assemblée Nationale and submit the vote directly to the Senate unless a no-confidence motion is passed by the parliamentary members. The no-confidence motion failed on May 12, 2016 and the Senate is currently examining the bill. The Assemblée Nationale will proceed with a final review of the bill from June 13 to June 24.

Strikes and demonstrations: the heart of the issue

The unions that had not agreed to the earlier compromise challenged the use of article 49-3 of the French Constitution, and called its members, in particular those working in strategic sectors such as oil refinery, public transports and trains, to go on strike and to demonstrate.

Even if part of the unions demand that the government drop the bill, most of the unions request that article 2 be removed from the bill. The government has however explicitly stated that it will not back down and that the bill will be passed with its article 2 in its current state.

Even if most strikes in oil refineries have ended, strikes in the public transports sectors are still ongoing. The situation is however very complex, as the heart of the issue is that strikes and demonstrations are also often tied to claims specific to sectors. For instance, train conductors are currently renegotiating their working time agreement with their governmental employer and are taking advantage of the situation to increase their bargaining power on that specific issue.


The bill itself provides for new interesting tools that aim to render French labor and employment laws more flexible. However, the country’s political situation makes it difficult to know whether or not the bill will pass. The government seems bound to pass the bill as dropping it would too dangerous politically, and the unions seem bound to pursue their strikes as giving up without obtain anything in exchange would threaten their legitimacy as partners in the future and disappoint their members.

Even if the bill has been significantly modified since it was first introduced in February of 2016, it still contains interesting and groundbreaking provisions that should increase flexibility for employers working in France, and increase the attractive position in France for foreign investment.

Ireland - the Distinction Between Information Gathering and Fact Finding

By Deirdre Lynch, Byrnewallace Solicitors, Dublin

In the context of investigations of potential disciplinary issues, it is ever important for employers to bear in mind the distinction between pure information gathering, on the one hand, and fact finding, on the other. In the former case, there is no right to fair procedures; in the latter, there is. The following recent case illustrates the potentially serious consequences for an employer of not affording an employee her right to fair procedures where findings of fact were made in respect of that employee’s behaviour.

In Mary Joyce v Board of Management of Coláiste Iognáid, the plaintiff was the principal of the defendant school. The Board of Management requested the Chairperson to prepare a report regarding certain “major” issues at the school. This report contained a number of negative references to the plaintiff and was presented to the Board of Management. The plaintiff was requested not to attend the Board meeting at which the report was presented. The minutes of the Board meeting indicated that the report was discussed in detail. The Board resolved to request the Chairperson to prepare a further report outlining the issues of concern in relation to the plaintiff. The school's disciplinary procedure was then distributed to attendees and the Chairperson indicated that he would be "inviting the Board in time to consider if a report might be presented to the principal in the context of the [disciplinary] procedure".

A further report was prepared by the Chairperson. This was presented at a meeting of the Board of Management on 14 May 2015. The Chairperson reminded the Board that the report set out a series of matters of concern relating to the plaintiff which, it was indicated, could not be discussed in detail as they needed to be put to the plaintiff. No decision was made by the Board regarding how to proceed. A further meeting was held in June during which the allegations were discussed. No attempts were made by the Chairperson to interview the plaintiff. The Chairperson finalised his report in July 2015 and sent it to the plaintiff. The Board concluded that disciplinary proceedings, regarding mismanagement issues highlighted in the report, should be initiated.

The plaintiff sought an injunction to restrain further disciplinary proceedings pending a full trial of the action. The plaintiff submitted that the report was more than a mere evidence gathering exercise and, that it made findings and drew conclusions which were deeply prejudicial to her. In view of these findings, the plaintiff asserted that she should have been afforded an opportunity, in accordance with the principles of natural justice and fair procedures, to make representations. This did not happen.

The defendant submitted should that the report was merely a pre-investigation and therefore that the principles of natural justice should not apply. It alleged that no findings had been made against the plaintiff.

However, the High Court found in favour of the plaintiff on the following bases;

1. That the Chairperson and the Board did not distribute copies of their initial report to the plaintiff and the Board proceeded to discuss the matter at two further meetings prior to involving the plaintiff, to her likely detriment. This contravened the procedures set out in a relevant circular.

2. That the report which issued in July contained not just statements of facts but also findings and conclusions which had been made without giving the plaintiff an opportunity to respond, thereby depriving her of natural justice and fair procedures.

Given the adverse conclusions drawn in the report, the High Court considered that there was a strong likelihood of the plaintiff succeeding at trial and therefore granted an injunction restraining any disciplinary action against her until a plenary trial.

What lessons may be learned from this case?

(a) It is essential to be cognisant of the important distinction between fact finding and pure information gathering.
(b) An employee is entitled to fair procedures where findings of fact are made/conclusions drawn. A failure to afford such rights can have costly consequences for employers in Ireland.

Malaysia - Navigating the Complex Laws Governing Employee Termination in Malaysia

By Yap Yeong Hui, Skrine

It is common to see a clause in employment contracts in Malaysia stating that “either party may give to the other two months’ written notice to terminate the employment contract”. The clause has led many employers in Malaysia to assume that by giving due notice pursuant to such a clause, it is safe from any form of action by the dismissed employee. However, this is not the case in Malaysia.

An employment agreement is not the final word on the parties’ respective rights and liabilities. The rights and liabilities of the employer and the employee are subject to and governed by the prevailing employment laws, in addition to and despite the contents of the written contract.

The Industrial Relations Act 1967

The Malaysian Industrial Relations Act 1967 creates a procedure which effectively protects an employee from being dismissed save with just cause or excuse. An employee who believes that he was dismissed without just cause or excuse may submit a representation to the Director General of Industrial Relations. An Industrial Relations Officer would then make attempts to reconcile the parties through mediation. If the matter is not settled, the Director General of Industrial Relations will notify the Minister of Human Resources who will then make a decision whether to refer the representation to the Industrial Court for adjudication. It has been held that the Minister should refer all representations to the Industrial Court unless it is frivolous or vexatious.

Termination by due notice but without just cause or excuse is a dismissal in respect of which the Industrial Court can make an order of:

(a) reinstatement and up to 24 months back wages from the date of dismissal to date of reinstatement; or
(b) up to 24 months last drawn salary as back wages and one month’s salary for each year of service in lieu of reinstatement (less payments already made to the employee, if any).

Employee Enjoys Security of Tenure

An employee in Malaysia therefore enjoys security of tenure. The employer may not terminate the contract of service as it pleases. The rationale for this protection can be found in the judgment of the Malaysian Federal Court in the case of Dr A Dutt V Assunta Hospital [1981] 1 MLJ 304. The Court in that case held referred to the following paragraph in the judgment of the Indian court in Gajendragadkar J. in RB Diwan Badri Dass & Ors v Industrial Tribunal Punjab Patiala & Ors AIR 1963 SC 630:

“The doctrine of the absolute freedom of contract has thus to yield to the higher claims for social justice. … Industrial adjudication does not recognise the employer's right to employ labour on terms below the terms of minimum basic wage. This, no doubt, is an interference with the employer's right to hire labour; but social justice requires that the right should be controlled. Similarly the right to dismiss an employee is also controlled subject to well-recognised limits in order to guarantee security of tenure to (industrial) employees. …”

Therefore despite clear words in an employment contract expressly providing that the employer may terminate the contract with notice, such termination by an employer with notice may still amount to be unjust dismissal, if the employer does not prove that it had just cause or excuse to dismiss the employee.

This by no means mean that employees enjoy absolute security of tenure and employers can never in any circumstance exercise their contractual right to terminate an employment contract. In certain instances, the law recognises the right of the employer to terminate the contract of employment in accordance with its terms, such as upon expiry of a genuine fixed term contract and upon retirement.

As for what amounts to just cause or excuse validating the dismissal of an employee, it depends on the grounds for the dismissal. There are two common reasons for dismissing an employee: due to poor performance or misconduct.

Poor Performance

A poor performing employee generally refers to an employee who is performing below the standard of performance expected of him by his employer. The Malaysian courts recognises the employer’s right to take disciplinary action for poor performance including and up to dismissal. This does not mean however that the employer has a carte blanche to terminate any time and any how whenever he becomes dissatisfied with the performance of his employee. Industrial jurisprudence as developed by the Courts points unequivocally to the requirement of a fair process which an employer ought generally to follow before it can come to a considered decision that due to an employee's poor or unsatisfactory performance the latter's services can no longer be retained.

Generally speaking, an employer should warn the employee before action is taken for the employee’s poor performance. In the case of I.E. Project Sdn. Bhd. v. Tan Lee Seng [1987] 1 ILR 165, the Court held that “[a]n employer should be very slow to dismiss upon the ground that the employee is found to be unsatisfactory in his performance or incapable of performing the work which he is employed to do without first just telling the employee of the respects in which he is failing to do his job adequately, warning him of the possibility or likelihood of dismissal on this ground and giving an opportunity of improving his performance. It is for the employer to find out from the employee why he is performing unsatisfactorily to warn him that if he persists in doing so he may have to go.”

The requirement is not so stringent in the case of an employee who occupies a senior management position on the basis that senior personnel should by reason of his seniority be aware of what is expected of him in discharging his functions and whether he is meeting the expectations of management.

Additionally, the employee must be given sufficient opportunity to improve. In this regard, the employer is expected to set standards or criteria of improvement for the employee.

The standards or criteria of improvement in the employee’s performance set by the employer must be fair and attainable. This is especially relevant in cases where the employees are required to meet a certain target or quota. In assessing whether the target is reasonable, the Industrial Court is entitled to consider targets met by other personnel who occupy the same or similar position at the same time, before or even after the employee’s tenure of employment. Similarly, if the employee alleges that the targets were not reasonable, he must be shown to have requested the employer to lower the target or make some changes to the target or sales system.


The term “misconduct” is not defined in any statute in Malaysia but attempts have been made to define this term by the Courts. Misconduct is defined by the Malaysian High Court in Syarikat Kenderaan Melayu Kelantan Sdn. Bhd. v Transport Workers Union [1990] 1 MLJ 5, as “… conduct so seriously in breach of the accepted practice that, by standards of fairness and justice, the employer should not be bound to continue the employment”.

Some accepted examples of types of misconduct are insubordination, wilfully disobeying lawful and reasonable orders or procedures, unprofessional conduct and breach of company policy, absence without leave, habitual lateness, breach of duty of trust and confidence, theft and using violence or abusive language at the workplace.

Burden and Standard of Proof – Employer Bears the Burden

In the Industrial Court, in a dismissal case, the burden of proof lies on the employer. It must prove the employee was guilty of a misconduct or performed poorly, and it is not the employee who must prove himself not guilty or that his work performance was satisfactory.

For this reason, unlike in a usual court action where it is the claimant who must start the case, the employer has to start the case, calling its witnesses and adducing evidence, whether oral or documentary, to prove the facts and circumstances which it contends constituted just cause or excuse for dismissing an employee.

The employer is under an obligation to produce convincing evidence to prove on a balance of probabilities that the employee committed the misconduct complained of or performed poorly.

Disciplinary Process – Should You Hold a Domestic Inquiry

When an employee is suspected of having committed misconduct, an employer must conduct an investigation. This will involve collecting and studying all relevant documents and taking statements from relevant persons. Once the investigation is complete, the employer must determine if misconduct has in fact been committed, if there sufficient evidence that the employee has in fact committed the misconduct and whether the misconduct justifies further action being taken.

The normal disciplinary process after completion of investigation will entail the employer issuing a letter to the employee setting out the allegations against the employee and asking the employee for an explanation or to produce evidence in his defence. If the employer is not satisfied with the explanation or the evidence provided, employers can commence a domestic inquiry.

A domestic inquiry is an inquiry held by the employer against an employee against whom certain acts of misconduct are alleged. The requirements for a domestic inquiry in light of decisions of the Malaysian Courts are more stringent than in other countries. The proceedings are conducted as if the inquiry is a criminal court action where:

(a) A panel consisting of at least 3 other independent employees of the employer will preside over the proceedings.
(b) The charges against the employee will be read to the employee and he will be asked whether he pleads guilty or not guilty.
(c) If he pleads not guilty, the ‘prosecutor’ will present the employer’s case and the produce witnesses who will tender the evidence relied on by the employer. The employee will be given the opportunity to cross examine the witnesses. Thereafter the employee will be invited to present his case in a similar manner. Verbatim notes will be taken of the proceedings.
(d) Both parties will then be given an opportunity to summarise their cases and the employee can raise mitigating factors in the event the panel finds him guilty of the charges.
(e) The panel will then deliberate and record its findings and recommendations in writing. The findings and recommendations will be forwarded to the relevant decision maker.

Thereafter the employer’s decision maker will study the evidence, notes and findings and recommendations and will make a decision on whether the employee is guilty of any misconduct and what punishment, if any, the employer will mete out to the employee.

The proceedings, which is akin to a criminal court hearing, is rather complex so employers need to decide if they wish to hold a domestic inquiry. The Malaysian Courts have held that the failure to hold one is cured by proceedings before the Industrial Court. So the failure to hold a domestic inquiry is not fatal. Nevertheless there are advantages to holding such inquiries which is summarised in the case MAS vs Mohd. Salem Abd. Majid [1997] 3 ILR 783 as follows:

“A due inquiry properly conducted and well-documented serves to ensure that a disciplinary authority has acted only after giving fair consideration to the matter. It also provides a reliable record for the employer to turn to when, due to the effluxion of time witnesses have become unavailable or memories have faded, the employer is faced with difficulties in having to prove his case before an industrial tribunal. Confronted with such forensic difficulties, an employer might well have to make extensive references to the records of the domestic inquiry”

Finally, in relation to what punishments are appropriate, not all misconduct will or should result in dismissal. Some misconduct on the part of an employee although acknowledged to be misconduct inconsistent with the terms of the employee’s employment may not be serious or grave enough to justify dismissal. The punishment that is meted out for misconduct must be commensurate with the misconduct.


Three key takeaways from this article which show that dismissal of employees in Malaysia can be tricky are as follows. The first is that despite clear wording in the contract allowing for termination of an employment contract by one party serving on the other termination notice, the dismissal of an employee by the employer must still be for just cause or excuse. Secondly, if an employee is dissatisfied with his dismissal and the Minister refers his claim to the Industrial Court, it is the employer who starts the proceedings and has the burden of showing that the dismissal is for just cause or excuse. Thirdly, before dismissing an employee for misconduct, where possible the employer may wish to conduct a domestic inquiry. There are numerous requirements to be complied with if an employer conducts such an inquiry in order for the Courts to accept that the inquiry was conducted in accordance with the principles of natural justice.

It is hoped that this article demonstrates why employers, especially those new to the country, should seek advice from local advisors when it contemplates taking any disciplinary action, especially dismissing an employee. This may go a long way to ensuring that the employer can satisfy its burden of showing that a dismissal of an employee is with just cause and excuse.