Society is intolerant of this conduct. It appears the Ontario Government has listened. On March 8, 2016 Bill 132 (titled: “Sexual Violence and Harassment Action Plan Act (Supporting Survivors and Challenging Sexual Violence and Harassment), 2015”, received Royal Assent. The Bill will officially come into effect on September 8, 2016. Of importance to dentist employers, Bill 132 amends Bill 168 (Workplace Violence and Harassment) of the Occupational Health and Safety Act (“OHSA”), which previously came into effect in 2010, and creates significant new obligations for employers in Ontario.

Upon coming into effect in 2010, Bill 168 created obligations on employers regarding workplace violence and harassment, including developing and implementing appropriate policies and programs. However, Bill 168 did not contain an explicit provision dealing with sexual harassment. Further, a major deficiency in Bill 168 was that, although it created obligations for employers concerning harassment and violence, there was no real mechanism to enforce those provisions. As lawyers say, “it lacked teeth”. Well, no more. Bill 132 creates new obligations for employers surrounding the prevention, training, investigation and resolution of workplace harassment, particularly workplace sexual harassment. Bill 132 also provides the Ministry of Labour with significant powers to deal with matters of harassment, sexual harassment, and violence.

Sexual Harassment

Harassment under Bill 168 was defined as: engaging in a course of vexatious comment or conduct against a worker in a workplace that is known or ought reasonably to be known to be unwelcome. Bill 132 expands the definition of harassment under the OHSA, which now reads as follows:

“workplace harassment” means:

1. engaging in a course of vexatious comment or conduct against a worker in a workplace that is known or ought reasonably to be known to be unwelcome, or
2. workplace sexual harassment

As you will see, “workplace sexual harassment” is now specifically prohibited by the OHSA.  Workplace sexual harassment is defined under the OHSA as follows:

1. engaging in a course of vexatious comment or conduct against a worker in a workplace because of sex, sexual orientation, gender identity or gender expression, where the course of comment or conduct is known or ought reasonably to be known to be unwelcome, or
2. making a sexual solicitation or advance where the person making the solicitation or advance is in a position to confer, grant or deny a benefit or advancement to the worker and the person knows or ought reasonably to know that the solicitation or advance is unwelcome.

The Ontario Human Rights Code and Bill 132

Sexual harassment has always been conduct prohibited by the Ontario Human Rights Code. Under the Code, sexual harassment constitutes discrimination on the basis of sex. An employee who experiences sexual harassment in the workplace can commence an application at the Human Rights Tribunal, seeking, amongst other things, damages related to the sexual harassment.

Further, cases from the Human Rights Tribunal of Ontario have stated that employers have a “duty to investigate” legitimate complaints of harassment in the workplace, when those complaints are linked to any enumerated ground (such as sex, race, religion, etc.). Failing to properly investigate legitimate complaints of harassment can result in liability for the employer.

With the advent of Bill 132, there are now two avenues available for an employee who has experienced sexual harassment in the workplace. While Bill 132 does not provide the Ministry of Labour with the authority to award monetary amounts to harassed employees (in contrast to the Human Rights Tribunal), it does provide the Ministry of Labour with the authority to order an employer to conduct an investigation into any complaints of harassment. The cost of this investigation is to be borne by the employer, and such investigations are not cheap. If an investigation is ordered, and sexual harassment is deemed to have occurred, the employee could rely upon this investigation in seeking damages from the Human Rights Tribunal.

Written Workplace Management Program

Bill 132 requires all employers to implement specific written programs in the workplace. These programs must:

1. include measures and procedures for workers to report incidents of workplace harassment to a person other than the employer or supervisor, if the employer or supervisor is the alleged harasser;
2. set out how incidents or complaints of workplace harassment will be investigated and dealt with;
3. set out how information obtained about an incident or complaint of workplace harassment, including identifying information about any individuals involved, will not be disclosed unless the disclosure is necessary for the purposes of investigating or taking corrective action with respect to the incident or complaint, or is otherwise required by law;
4. set out how a worker who has allegedly experienced workplace harassment and the alleged harasser, if he or she is a worker of the employer, will be informed of the results of the investigation and of any corrective action that has been taken or that will be taken as a result of the investigation; and
5. include any prescribed elements.

As noted above, Bill 168 required employers to have proper violence and harassment policies in place. However, simply having a written program on workplace harassment will no longer suffice, as Bill 132 confirms that such programs must also be implemented appropriately.  An employer must now ensure:

1. an investigation is conducted into incidents and complaints of workplace harassment that is appropriate in the circumstances;
2. the worker who has allegedly experienced workplace harassment and the alleged harasser, if he or she is a worker of the employer, are informed in writing of the results of the investigation and of any corrective action that has been taken or that will be taken as a result of the investigation; and
3. the program developed is reviewed as often as necessary, but at least annually, to ensure that it adequately implements the policy with respect to workplace harassment.

Dentist employers in Ontario should take steps to ensure they are in compliance with Bill 132 prior to September 8, 2016. Steps that should be taken include:

• Reviewing and updating existing Workplace Violence and Harassment Policies;
• Ensuring that Employers are aware of their responsibility to investigate allegations of sexual harassment, including training on how to investigate such complaints; and
• Training employees and staff on the new laws, to ensure that all staff are aware of their obligations with respect to sexual harassment in the workplace.

Issues of sexual harassment in the workplace are serious, and Bill 132 reflects society’s intolerance for such behavior. Employers must take steps to proactively deal with issues of sexual harassment, or face serious consequences if they fail to do so.

Are you ready to comply? We can help.

If you wish to have proper policies drafted, or have existing policies reviewed, please contact Matthew Wilton at matthew@wiltonlaw.com, or Paul Martin at paul@wiltonlaw.com, or by phone at 416.860.9889.

*The foregoing is not intended to be legal advice and is provided for educational purposes only.  You should retain a lawyer to seek advice prior to taking any legal steps.

Who is an independent contractor?

Both the dentist and the hygienist can benefit from being in an independent contractor relationship. However, as the old adage goes, if something sounds too good to be true, then it probably is. The reason for this is that regardless of how the dentist and the hygienist frame the relationship, the CRA and the Courts will look behind the title utilized by the parties, and will employ a comprehensive test to determine the true nature of the relationship. Both institutions have created guidelines to follow in determining whether or not a worker is an employee or independent contractor. Some of these factors include:

• How much control the dentist has over the hygienist;
• Whether or not the hygienist provides his or her own tools and equipment;
• Whether the hygienist can subcontract his or her work or hire assistants;
• The degree of financial risk taken by the hygienist;
• The degree of responsibility for investment and management held by the hygienist;
• The hygienist’s opportunity for profit; and
• Any other relevant factors, such as written contracts (more on this later).

Ultimately, all of these factors are synthesized to answer one, overarching question: Who is the hygienist in business for, herself, or the dentist? If it is determined that for the most part, the hygienist is in business for herself, then the Courts and Government will likely classify her as an independent contractor. If it is determined that the hygienist is in business to serve the dentist, then she will be classified as an employee.

Mischaracterizing the nature of the relationship can have serious tax and employment law consequences for a dentist.

Tax Issues

One of the primary reasons both dentists and hygienists prefer to classify the relationship as one of “independent contractor” is that both parties can reduce their obligations to the CRA.

For instance, in a typical employment relationship, the hygienist is paid an hourly wage (ie. $30.00 per hour), and the employer deducts and remits income tax, Canada Pension Plan (“CPP”) contributions, and Employment Insurance (“EI”) contributions, which are collectively known as “source deductions.” The employer then also makes matching contributions for CPP and EI. However, when a hygienist is paid as an independent contractor, the hygienist is paid a gross sum (ie. $30.00 per hour), without source deductions made by the dentist. The hygienist is then responsible for remitting her own income tax, CPP, and, if she chooses, EI. The dentist is also relieved of the obligation to make matching contributions for CPP and EI. This arrangement can obviously be mutually beneficial. On the one hand, the dentist is not responsible for his or her portion of CPP and EI, which results in a cost savings. On the other hand, the independent contractor is entitled to file taxes as an independent, and can take advantage of a number of tax deductions that reduce overall income, and therefore tax payments. The independent contractor can also defer tax payments, as well.

Of course, the government does not appreciate being duped, and will not hesitate to ensure that taxes, CPP, and EI are properly remitted. It is for this reason that the CRA frequently conducts audits of dental offices concerning the characterization of hygienists as independent contractors.

When the CRA audits a dental office, and determines that a hygienist who is being paid as an independent contractor is actually an employee, the dentist who has failed to properly remit taxes may be liable to pay the taxes that should have been remitted, as well as a penalty on the outstanding amount. Further, if the hygienist failed to remit their taxes (or claimed significant deductions, which are deemed improper for an employee), then the penalty could be increased if the dentist “knowingly” did not remit the taxes, or exhibited “gross negligence” in failing to do so. This could put the dentist in a position where the hygienist’s effective salary is actually higher than what was paid to her, as the hygienist will keep the taxes she was supposed to remit, and the employer will then make the additional tax contributions on her behalf.

Further, if the CRA determines that the hygienist is actually an employee, the CRA will seek payment of the proper amounts for CPP and EI. The dentist who has failed to remit the matching contributions for CPP and EI will be required to remit the past payments. Further, if the hygienist has not remitted her CPP and EI contributions, the CRA can also recover those unpaid contributions for CPP and EI from the dentist, along with penalties and interest.

There are also HST implications. When a hygienist is paid as an independent contractor, the dentist may be responsible for paying HST (13% in Ontario) for those services. The dentist then claims for an input tax credit and receives a credit equivalent to the HST paid. However, if the CRA determines that the hygienist is in fact an employee, and HST was not actually payable on the services provided by the hygienist, the dentist will not be entitled to claim the input tax credit for the HST paid. Essentially, the dentist ends up paying an additional 13% to the hygienist, which cannot be recovered. It would then be up to the dentist to try and reclaim that 13% from the hygienist.  If the hygienist refused to repay the money, then the only recourse would be to sue the hygienist. This would obviously not be good for employer-employee relations.

A properly drafted independent contractor agreement will help to minimize the above-noted tax risks, as the contract should include a clause whereby the hygienist agrees to indemnify the dentist against any claims made by the CRA as a result of mischaracterizing the relationship. In this way, if the CRA looks to the business owner for payments that should have been remitted, and levies penalties, the dentist can seek payment for those amounts from the hygienist.

Wrongful Dismissal

When an employee is dismissed from their employment, the employer must provide reasonable notice of the termination, or pay-in-lieu of notice (this obligation should always be minimized by a proper employment law contract). Historically, independent contractors were not protected by the common law principles applicable to employment law relationships. So, while an independent contractor may have been entitled notice (or pay-in-lieu of notice) upon termination of the independent contractor relationship, this notice was usually not as substantial as in situations where an employee with a similar length of service was dismissed. Avoiding the obligation to provide reasonable notice of termination would obviously represent a significant benefit for the dentist, but a major corresponding detriment to the hygienist.

It never ceases to amaze us when an independent contractor, whom has chosen to be classified as such for tax purposes, is dismissed, and then turns around and claims she was an employee the entire time, in an attempt to extract a larger payment out of the dentist. In other words, the hygienist will want to have their cake, and eat it too!

As we have posted in the past, wrongful dismissal lawsuits can have disastrous consequences on dental practices. In the absence of a properly drafted employment contract, an employer will have to provide an employee with common law reasonable notice of termination. For illustrative purposes only, this notice will be in the vicinity of one month of notice per year of service. Hence, if the employee has worked for 12 years, she will be entitled to approximately 12 months of notice upon dismissal.

Take then the hygienist who has worked for 12 years as an independent contractor, when in reality that title applied in name only. Frequently, when the dentist decides to terminate the independent contractor relationship, and proceeds to do so upon the assumption that minimum notice is required, the dentist will be sued for wrongful dismissal, as the hygienist will claim she was an employee the entire time. If the dentist has indeed mischaracterized the relationship, the dentist will then have to provide the hygienist with reasonable notice of the termination. Given that the hygienist will be deemed an “employee” with 12 years of service, the dentist could be liable for wrongful dismissal damages in the vicinity of 12 months. This would be quite a rude awakening for the unsuspecting dentist.

Dependent Contractors

Further muddying the waters on this issue, in 2009, the Ontario Court of Appeal seemingly created a new category of worker, the “dependent contractor”. A dependent contractor is a sub-category of the independent contractor. The Court of Appeal stated that if an independent contractor has a “relationship of exclusively” with a business, then they are clearly dependent, and are therefore entitled to reasonable notice, even though they are not employees. In our experience, the majority of hygienist independent contractors in dental offices fall under this dependent contractor category. While they may not actually be employees, as they meet a number of the independent contractor criteria listed above, they also have a relationship of exclusivity with the dentist that results in dependency.

Initially, as the case law developed, dismissed dependent contractors were deemed to be entitled to less reasonable notice than dismissed employees, but of course more notice than true independent contractors. This presumption seems to be evaporating, as recent cases have provided dependent contractors with significant reasonable notice periods, in line with the amount of notice an employee in similar circumstances would receive.

Hence, in our opinion, whether a hygienist is an employee or dependent contractor is an academic argument only, as both are entitled to reasonable notice of termination, which is likely equal.

Put Proper Contracts in Place

Just like with employees, it is imperative that dentists ensure that proper contracts are in place with independent contractors. A proper agreement will include a termination clause, which outlines the maximum amount of notice the dentist must provide the independent contractor upon termination of the contract. The termination clause, if properly drafted, should cover termination in the event that the hygienist is ultimately deemed an employee or independent contractor, thereby negating the risks associated with improperly characterizing the relationship. This will insulate the dentist from a potential wrongful dismissal claim by a hygienist who suddenly claims to be an employee or dependent contractor.

Further, as outlined above, a proper agreement with an independent contractor will include provisions to protect the dentist in the event the CRA conducts an audit of the relationship, and re-classifies the relationship.

If you have concerns about hygienists who are working as independent contractors in your office, please contact Matthew Wilton at matthew@wiltonlaw.com, or Paul Martin at paul@wiltonlaw.com, or by phone at 416.860.9989.

*The foregoing is not intended to be legal advice and is provided for educational purposes only.  You should retain a lawyer to seek advice prior to taking any legal steps.

• Whether there is a proprietary interest worthy of protection;
• Whether the spatial (geographical) and temporal (time) aspects of the clause are reasonable; and
• Whether, in contrast, a non-solicitation clause would adequately protect the principal’s interests. As was noted, in most cases, this is the factor that defeats the enforceability of an otherwise reasonably drafted non-competition clause.

What is a non-solicitation clause?

Like a non-competition clause, a non-solicitation clause is a restraint on trade. Put simply, the non-solicitation clause prevents a departing associate from soliciting the patients of their former principal. In almost all circumstances, Courts hold this restraint on trade to be “reasonable”, and to be preferable to the more onerous non-competition clause. The conventional thinking is that in permitting the use of non-solicitation clauses, Courts will strike a balance between the principal’s interest in protecting their business interests, and the associate’s right to practice dentistry.

The non-solicitation clause must still be reasonable. A non-solicitation clause that is overly broad, or too far sweeping, will meet the same fate as a non-competition clause that overreaches, being that it will be deemed unenforceable. Non-solicitation clauses must be succinct, and must be properly temporally restrained. It is worth mentioning that Courts do not require geographical constraints on non-solicitation clauses, but only a temporal aspect.

So long as the clause does not attempt to prohibit solicitation for an undue period of time, then it will likely stand up to scrutiny by the Courts. For instance, a non-solicitation clause that attempted to prohibit solicitation for an unspecified term, would almost certainly be struck for being too broad. Similarly, a non-solicitation clause that prohibited solicitation for a period of 10 years would also likely be struck, for reaching too far. A properly drafted non-solicitation clause should define the exact activities of solicitation prohibited, and also the time frame of prohibition. An example would be:

(a) The associate agrees that she shall not, at any time during the term of this agreement, or within 36 months following the termination of this agreement, solicit, invite or encourage in any manner whatsoever, any patients of the practice to seek dental services elsewhere

(b) The associate agrees that she shall not, at any time during the term of this agreement or within 36 months following the termination of this agreement solicit, invite or encourage in any manner whatsoever, any employees, Associates or staff of the practice to work, be employed or retained as independent contractors elsewhere.

The reader will note that this clause prohibits the solicitation of patients, and also the solicitation of employees, staff, and associates. The rationale for prohibiting the solicitation of staff, associates, and employees is that absent such a clause, a departing associate could steal the identity of the practice. Most dentists will know that their support staff are typically the face of the business. Given that competition is allowed (remember, competition by an associate typically cannot be restrained through a non-competition clause), if a departing associate set-up a practice next door, and hired the staff members to come work for him or her, it would create confusion for patients. Hence, the Courts will enforce a clause that attempts to prevent this mischief.

Active Solicitation

Solicitation, by its very nature, requires an active component. The departing associate must take positive steps towards soliciting the patients in order to run afoul of a non-solicitation clause. For instance, stealing the patient list and sending out direct mailings to the patients on that list would likely constitute solicitation. The dawn of social media has provided new opportunities to covertly solicit. In a recent case we dealt with, the departing associate established a private FaceBook page for the new practice she was starting, and invited a number of the patients of the former principal to be friends. To the associate’s credit, this was one of the more creative solicitation campaigns we have seen.

Patients have the right to choose their treating dentist. If a long-standing associate, who has built solid relationships with patients, leaves and sets up shop across the street, it is highly likely that a number of patients will follow her across the street. This will occur without the departing associate ever taking any active steps to solicit.   This is an unfortunate risk, but one that likely cannot be prevented.

This results in a situation where, theoretically, an associate can open a new practice across the street, and wait for patients she has treated to filter in, so long as the patients are doing so of their own volition. Of course, the less time and less involved the associate was in the former principal’s practice, the less chance that patients will follow him or her. Where the associate has been with the practice long enough that patients are willing to leave with him or her, the greater the likelihood that the situation might show “exceptional circumstances”, and a non-competition clause might very well be enforced. Lying somewhere in between is the associate who has been with the practice for a reasonable amount of time, and who a relatively small percentage of patients have an allegiance to. In this situation, the Court will likely rely upon the public policy rationale for allowing competition in the marketplace.

Dilution of Non-solicitation clauses

Previously, it was difficult for a patient to find a departing associate, in the absence of a direct solicitation.  Patients would have to call the RCDSO, or look through the Yellow Pages and hope the associate was listed. In today’s marketplace, it is very easy to find out where a dentist is working through a simple Google search. Patients will not automatically know that an associate dentist has departed. Given that competition is generally allowed,  it is not possible to prohibit the former associate from launching their own website. If a patient considers an associate to be their dentist, then the next time they want to book an appointment, all they have to do is type the former associates name into their smart phone, and the new website and office address will appear. Without any active solicitation, the patient has now learned that the associate has a new practice, which is conveniently located right across the street.

Ultimately, if a patient wishes to follow a departing associate dentist, they will find them. This results in a possible dilution of the effectiveness of the non-solicitation clause, as it is much more difficult to protect the existing patient base.

Further, as noted above, with the advent of social media, it is also difficult to police solicitation. Associates who engage in solicitation campaigns have more opportunities to do so covertly.

It is conceivable that the pendulum will start to swing the other way, and we will see more and more cases where Courts are willing to respect the terms of a non-competition clause entered into by the parties. This may prove to be the only way to adequately protect the patient base of a principal. However, there is no indication as of now that the law is headed in that direction, and dentists must be sure to include a properly drafted non-solicitation clause in agreements with associates.

If you wish to have an associate agreement drafted, or have an associate agreement you wish to have reviewed, please contact Matthew Wilton at matthew@wiltonlaw.com, or Paul Martin at paul@wiltonlaw.com, or by phone at 416.860.9889.

*The foregoing is not intended to be legal advice and is provided for educational purposes only.  You should retain a lawyer to seek advice prior to taking any legal steps.

The prototype of a justifiable restraint on trade is the situation of the sale of a business, including its goodwill (patient base), where in order for the vendor to attract purchasers, the vendor may need to agree not to compete against his or her former business. This reasoning has been used to validate non-competition clauses used in the sale of businesses, such as dental practices. The rationale for upholding such a clause in an agreement of purchase is that the purchaser, in purchasing the goodwill of the dental practice, has a legitimate proprietary (“ownership”) interest in that goodwill, that can truly only be protected through a non-competition clause.

For instance, if a dentist bought a practice from another dentist, who owned the practice for 20 years, and the vendor-dentist was then allowed to set up a new practice across the street, the reality is that the majority of patients would start going across the street to seek treatment from the same dentist they have been seeing for years. Patients would simply think that the vendor-dentist had moved, and not that the practice was sold. Further, it is unlikely that they would care whether the business was sold, as patients are free to see the dentist of choice, and are not bound to any one practice.

The vendor-dentist would not need to actively solicit patients for this to happen, and a non-solicitation clause would therefore be inadequate. If the non-competition clause was not enforced, the purchasing dentist would not receive the goodwill they bargained for, but would rather be stuck in a situation where the practice they bought for a substantial sum is rendered nothing more than a start-up.

However, when a vendor-dentist is precluded from competing within a defined geographic zone, for a specified period, then it is much more likely that patients will continue to attend at the purchased practice, as they will not want to be inconvenienced by attending for treatment further away. This will allow the purchaser-dentist an opportunity to establish a relationship with his or her new patients.

Simply put, where a properly-worded  non-competition clause is used in an agreement of purchase, the vendor-dentist will be bound by the clause.

It is not uncommon for vendor dentists to remain as associates within the practice post-sale. In these circumstances, a non-competition clause contained in the vendor dentists’ associate agreement will almost always be upheld, as it is really a non-competition following the sale of a business.

The case law has routinely held that non-competition clauses will be upheld where “the nature of the relationship will likely cause customers (patients) to perceive an individual employee (associate) as the personification of the company or employer.” Without such a clause being enforceable, then theoretically, the vendor-associate could associate with the purchaser-principal for a short period of time, and then leave and open a competing practice across the street. This would deprive the purchaser of the very thing they purchased, being the goodwill (patients) of the practice.

 Our advice is to ensure that both the agreement of purchase, and the new associate agreement, contain mirror non-competition clauses.

 It should be noted that while the Courts will allow non-competition clauses in purchase agreements, those clauses must still be drafted properly. The spatial (geographical) and temporal (time) aspects of the clause must be properly restrained. If the purchaser insists on a non-competition clause that is too broad, then the purchaser runs the risk of the clause not being enforceable. This would have disastrous consequences for the dentist who has spent a significant sum of money to purchase the patient base of the vendor dentist.

If you wish to have non-competition agreement reviewed, please contact Matthew Wilton at matthew@wiltonlaw.com, or Paul Martin at paul@wiltonlaw.com, or by phone at 416.860.9889.

*The foregoing is not intended to be legal advice and is provided for educational purposes only.  You should retain a lawyer to seek advice prior to taking any legal steps.

We are also frequently contacted by Principal dentists with concerns that a former associate is in breach of the non-competition clause contained in their associate agreement. The Principal, wanting to protect their business at all costs, is often disappointed in the advice we give them concerning the enforceability of the non-competition clause.

The title of this post alludes to the difference that exists between perception and practice when it comes to the enforceability of non-competition clauses. On the one hand, Principals often believe that in having non-competition clauses in place, they are absolutely protected from possible attempts to compete by former associates (in other words, the associates are bound by iron shackles). On the other hand, in practice, courts routinely disregard the intentions of contracting parties, and will find ways to defeat restrictive covenants contained in otherwise binding agreements (rendering the clause a paper tiger – a clause that has teeth, but only on paper).

Non-Competition clauses

Non-competition clauses represent a drastic, and comprehensive, approach in attempting to protect business interests. Unfortunately, it is this very expansiveness that often leads to the courts deeming non-competition clauses invalid.

A typical example of a non-competition clause is as follows:

The associate shall not, either individually, or in partnership, or in conjunction with any other person or persons, corporation, partnership, syndicate, firm, association or any other entity, as an employee, Principal, agent, shareholder, officer, director or any other capacity whatsoever, directly or indirectly carry on or be engaged in or concerned with or interested in or advance, lend money to, guarantee the debts or obligations of, or permit his name to be used or employed by any person or persons, corporation, partnership, syndicate, firm, association or any other entity engaged in or concerned with or interested in the practice of dentistry:

1. within a 3 KM radius of the practice during the term of this agreement; and
2. within a 3 KM radius of the practice for a period of 36 months following the termination of this agreement.

Part (i) of the non-competition clause prohibits the associate from working within a 3 KM radius during the term of the agreement. Of note, clauses prohibiting competition during the course of the relationship are almost always deemed valid. The enforceability of non-competition clauses during the term of the relationship are viewed through a different set of lenses than non-competition clauses pertaining to post-contractual obligations.

We are noticing that there is a tightening in the market for full-time associates. This leads to a situation where many associates are working at two separate offices. Principals want to ensure that an associate does not work 3 days a week at their practice, and 2 days a week across the street. The potential harm this creates is that if patients begin to build a rapport with an associate at one practice, but are only available to see the associate on days they are scheduled at the other practice, then it will be of no concern to the patient if they go to one side of the street or the other. The law is clear that during the term of the agreement, associates owe duties of good faith and fidelity to their Principals. It is therefore deemed reasonable to impose a non-competition clause on an associate during the term of the agreement.

However, it is part (ii) of the clause that represents a challenge to Principals, and is often the source of much confusion and debate. The second part of the clause prohibits the employee or associate from working within a 3 km radius (known as the “spatial” or “geographical” aspect of the clause) for a period of 36 months (known as the “temporal” or “timing” aspect of the clause) after the termination of the agreement.

As a general proposition, and the default position typically taken by the Courts, clauses prohibiting competition after the termination of an agreement are enforceable only in “exceptional circumstances”, as they represent an unreasonable restraint on trade, which typically cannot be justified. The rationale being that competition is healthy for the marketplace, and individuals who have chosen a given career path should be able to pursue that career in the geographical area of their choosing.

The authoritative case dealing with the enforceability of non-competition clauses in the dentistry context is Lyons v. Multari, an Ontario Court of Appeal case. In Lyons v. Multari, the Court of Appeal enunciated the test to be applied when determining whether or not a non-competition clause should be upheld. Lyons was a case involving two oral surgeons in Windsor: Lyons, the Principal; and his Associate, Multari. Lyons had practiced in Windsor for 25 years. As with most oral surgeons, the source of Lyons’ patient base was referrals from GP Dentists. When he hired Multari, he implemented a rudimentary non-competition clause, which stated: “Protective Covenant. 3 yrs. –5 mi”. It is safe to say that Lyons did not have the assistance of legal counsel when he drafted the clause. Nevertheless, it was not the rudimentary nature of the clause that was its ultimate undoing.

Multari left the practice after only 17 months, and, 6 months later, set up his own practice 3.6 miles away. On its face, this action was a clear violation of the non-competition clause. Lyons sued for breach of contract. At trial, Lyons was successful and awarded damages in the amount of $70,000.00. The court held that Lyons had a proprietary interest in his referral base, which he had built up over time, and which was deserving of protection through a non-competition clause. Multari appealed the decision of the trial court.

The Court of Appeal summarized the relevant law and confirmed the following three-step analysis to be used in determining the validity of a non-competition clause:

1. Whether there is a proprietary (ownership) interest worthy of protection. The courts will not enforce non-competition clauses where the intention is simply to prevent a former associate from competing in the dental industry generally. The necessary proprietary interest in the dental context relates to the relationship between the Principal and his or her patients (the goodwill of the practice). In dentistry, there will almost always be a proprietary interest worthy of protection, whether it is an existing patient base, or a referral source. Hence, this first aspect of the analysis will almost always be satisfied in the dentistry context.
2. Whether the spatial (geographical) and temporal (time) aspects of the clause are reasonable. For instance, a dentist practicing in London, ON could not preclude a departing associate from practicing in “all of Ontario”, as this would be unreasonable. When looking at the reasonableness of the spatial scope, the size of the municipality, and the number of practices contained within the proposed zone, will be relevant. What is reasonable in a small town with 5 dentists, will not be reasonable in downtown Toronto. Generally, the larger the city, the smaller the geographical aspect of the clause should be. Similarly, the temporal aspect cannot be too long. A clause prohibiting competition for 10 years would almost definitely fail. Typically, these clauses should be kept to a maximum of 3 years. The shorter, the more reasonable.
3. Whether, instead of the non-competition clause, a non-solicitation clause would adequately protect the employer’s interests. Assuming that there is a proprietary interest worthy of protection, and the clause has been drafted reasonably in terms of the spatial and temporal aspects, the Court will then examine whether a non-solicitation clause is sufficient to protect the legitimate proprietary interest. In most cases, this is the factor that defeats the use of otherwise reasonably drafted non-competition clauses.

A non-solicitation covenant permits competition to a degree, but narrowly precludes a former associate from competing by soliciting business from or through the patients of the other Principal. Simply put, the non-solicitation clause allows competition, but controls the manner of the competition.

In Lyons, the Court of Appeal agreed with the Trial Judge that the referral base of Dr. Lyon’s was a proprietary interest worth protecting. The Court of Appeal also held that in terms of the spatial (5 miles) and temporal (3 years) aspects, the clause was reasonable. As with most cases, it was on the third element of the test that the clause failed. The Court of Appeal confirmed that only in “exceptional circumstances” will the nature of the employment justify a covenant prohibiting the employee not only from soliciting the Principal’s patients, but also from establishing a competing business.

In such circumstances, a Court will examine the exact nature of the interest that requires protection, and determine whether it can adequately be protected by a non-solicitation clause. In this case, the Court held that Dr. Lyon’s existing referral base could be protected by prohibiting Dr. Multari from soliciting from the existing referral dentists. Of interest, the Court noted that Dr. Lyons did not have a proprietary interest in all possible referring dentists within 5 miles of his office, and that Dr. Multari could not be stopped from competing for business from potential referral sources within the 5 mile zone, as this would constitute an unreasonable restraint on trade.

I expect in the course of reading this post, the reader has at some point asked: “Wait, if these clauses are generally unenforceable, then why do I always them in associate agreements?”

Notwithstanding the general prohibition on non-competition clauses, our advice is typically to add these clauses to associate agreements. The rationale for doing so has nothing to do with the law, and everything to do with human nature. A significant percentage of the population is moral and law-abiding. Most people do not wish to breach contracts, especially with colleagues, in a relatively close-knit industry. Nobody wants to burn bridges. Even fewer wish to be on the defending side of a lawsuit. If a non-competition clause is inserted in an associate agreement, then a large percentage of departing dentists will look at it, and abide by it. In this way, notwithstanding the likelihood that the clause is unenforceable, it nevertheless accomplishes the intended goal. Further, the facts of a particular case may support the upholding of the non-compete, as it may be the only true way to protect a proprietary interest. If the clause was left out of the agreement because it is generally unenforceable, then the former Principal will not be able to try and enforce it at all. It is better to have the clause in the agreement, and allow the associate to argue unenforceability, then to not be able to have the argument at all.

If you wish to have an associate agreement drafted, or have an associate agreement you wish to have reviewed, please contact Matthew Wilton at matthew@wiltonlaw.com, or Paul Martin at paul@wiltonlaw.com, or by phone at 416.860.9889.

*The foregoing is not intended to be legal advice and is provided for educational purposes only.  You should retain a lawyer to seek advice prior to taking any legal steps.

Employers cannot terminate employees on the basis of the employee taking time off due to illness. This is because under the Ontario Human Rights Code, the employer has a duty to accommodate the employee in respect of any disability.

The duty to accommodate is a troublesome issue that regularly arises for employers in dental practices. Whenever there are issues of attendance and efficiency, the question that often arises is, “can I dismiss this person?” The answer is invariably “it depends”. Whenever an employee is not performing to the standards required, or is missing shifts, an employer should never take steps to dismiss this employee without exploring the underlying reasons for the employee’s substandard performance or absences.

In our experience, the most frequent scenarios where this issue arises are when employees are sick and disabled, or when they are pregnant. Employers should be aware that the definition of “disability” under the Code is broad. Essentially any physical or mental impairment may constitute a disability. Pregnancy raises accommodation requirements on the basis of sex, as women are uniquely able to bear children.

Where an employee is experiencing difficulties performing or attending at work due to a medical condition, or pregnancy, the employer has the primary responsibility to offer and provide suitable accommodation to the employee. This duty is extensive.

Examples of typical accommodations are:

• Allowing an employee to work with modified duties;
• Allowing an employee to work with modified hours;
• Allowing an employee time to attend medical appointments;
• Allowing an employee breaks to sit and rest; and
• Allowing an employee a leave of absence.

The question for most employers then becomes, “how far do I have to go?”

Undue Hardship

The duty to accommodate is discharged once the employer has reached the point of undue hardship. This is a subjective term. The Code prescribes three considerations in determining undue hardship:

1. Cost;
2. Outside sources of funding, if any; and
3. Health and safety requirements.

The relevant case law has added further considerations, but those considerations are typically subsumed within the three guiding principles outlined above. In terms of dental offices, the two most common considerations in dealing with accommodation issues are the cost and health and safety requirements.

Cost

The most common complaint we receive from employers when advising on the duty to accommodate is that it will result in a disruption to the employer’s business. The Guidelines published by the Ontario Human Rights Commission specifically state that business inconvenience, employee morale, and third-party preferences should not be considered as justifications to abdicate the duty to accommodate.

The case law holds that “…cost would amount to undue hardship only if it would alter the essential nature or substantially affect the viability of the enterprise responsible for the accommodation.”

Of specific importance to dental offices, which are typically small businesses, the Guidelines do indicate that employer size is a consideration that is encompassed under the “cost” consideration. Under this consideration, the employer is entitled to consider the ability of his workplace to adapt and implement the accommodation request.

A further reality with respect to the duty to accommodate is that employers must keep an employee’s job open until they return from their sick leave. This is also incredibly frustrating for dentist employers. Even if an employee is off for six months or a year as a result of a serious illness or injury, the employer cannot fire that employee. When that employee is ready to return to work, the employer must give them back their old job. The loss of employment while on a leave of absence can result in a human rights complaint. If this were to occur, the employee may be in a position to seek to be reinstated by the Ontario Human Rights Tribunal.

Overall, the cost must be quantifiable and cause hardship in relation to the size of the employer’s business. There is no objective standard employed to determine whether the cost of a proposed accommodation is prohibitive.

Health and Safety Risks

Further, health and safety risks to workers, clients or the public may be considered in determining undue hardship. This is particularly applicable in a dental office, where patient safety is paramount. A health and safety risk will amount to undue hardship if the degree or risk that remains after the accommodation has been made outweighs the benefits of enhancing equality for persons with disabilities. For instance, if a hygienist has developed a condition that affects her motor skills, the employer may not have to accommodate the hygienist by allowing her to continue to treat patients, if there is a real risk that patients will be harmed.

The relevant case law holds that while employers must try to accommodate employees, this does not mean the work place must be fundamentally changed. The employer is not required to maintain a disabled employee in a position that is not useful or productive in the context of its operations.

Discharging the Duty

Once it has been determined that a duty to accommodate does exist, employers must take steps to discharge the duty. Generally, the employer has the following obligations:

• Accept the request for accommodation in good faith;
• Obtain expert opinion or advice where needed;
• Take an active role in ensuring that alternative approaches and possible accommodation solutions are investigated, and canvass various forms of possible accommodation;
• Maintain confidentiality;
• Limit requests for information to those reasonably related to the nature of the limitation or restriction so as to be able to respond to the accommodation request;
• Grant accommodation requests in a timely matter; and
• Bear the costs of obtaining any required medical information.

Employers bear the primary responsibility in the process. However, employees also have a reciprocal duty in the accommodation process, in that the employees should work with the employer to find the appropriate accommodation. The duties of the employee can be summarized as follows:

• Advise the employer of the disability;
• Make her needs known to the best of her ability, so that the employer can accommodate the worker;
• Answer questions or provide information regarding relevant restrictions or limitations, including information from health care professionals, where appropriate;
• Participate in discussions regarding possible accommodation solutions;
• Cooperate with any experts whose assistance is necessary;
• Meet agreed-upon performance and job standards once accommodation is provided; and
• Work with the employer on an on-going basis.

All dentists will have received an employee sick note from a MD indicating the employee requires time off “until further notice for medical reasons.” The reality is that GP physicians will not act as the gatekeeper in order to ensure that employees do not take unwarranted sick days. Unfortunately, unless you have a written contract with the employee that allows you to obtain a medical note from the employee’s physician setting out the diagnosis and prognosis in respect of any medical absence, you have no right to insist that the employee advise you as to the nature of the medical issue. This legal reality is what leads to employee abuse of the right to take sick days.

However, the employer is entitled to request additional information from the employee when there is a concern over the adequacy of the documentation being provided in support of the accommodation request. The employee should cooperate with these requests. The duty to accommodate does not give employees permission to refuse to provide their employers with information about their ability to work with or without restrictions where there is a legitimate question about those issues. Nor does the duty to accommodate require an employer to tolerate an employee’s ongoing unsubstantiated absence from work.

The typical advice we provide to our dentist and employer clients is that they are not entitled to obtain more specific information about an employee’s absence; however, this doesn’t preclude a dentist from asking the employee why they are off sick. If the employee does not answer, then the dentist should not force the issue, as it will be considered the employee’s right to keep his or her medical status confidential.

The case law has held that it is unfair to expect an employer to impute and deduce a worker’s needs based on remote and scant knowledge. Employees are expected to waive some privacy considerations in order to open the accommodation dialogue. The duty to accommodate is not triggered simply because an employee makes a demand, and then breached because the employer failed to accede to the employee’s demand. The accommodation process is a two-way street. The employee must cooperate in the process and provide as much information as possible to facilitate the search for accommodation.

The employer is also entitled and obligated to address concerns of fitness for work. Further, after an employee returns, if there are concerns about her fitness for work, the employer is entitled to request further information to satisfy concerns that the employee is fit to work.

Employers are warned to be cautious with employees who are suffering from a disability. Steps should never be taken to discipline in any manner an employee who is suffering from health issues without first consulting a lawyer.

If you would like to discuss the duty to accommodate in dental offices, please contact Matthew Wilton at matthew@wiltonlaw.com, or Paul Martin at paul@wiltonlaw.com, or by phone at 416.860.889.

*The foregoing is not intended to be legal advice and is provided for educational purposes only.  You should retain a lawyer to seek advice prior to taking any legal steps.

In 2014, Credit Valley Oral Surgery was the first dental office to become unionized in Ontario. We are receiving an increasing number of enquiries concerning unionization, and it is believed that a specific union is targeting dental offices for unionization. If this is to occur, it will represent a seismic shift in the employment law landscape for dentists.

Unionization

The Ontario Labour Relations Act sets out the process for a workplace to become unionized.  There is a specific application and voting process the workers and the union must go through.  In Ontario, the union certification process is as follows:

• The union will commence organizing initiatives with employees in the workplace. The employer often has no idea that these initiatives have commenced.
• If the union can demonstrate that it has the support of at least 40% of the employees in the workplace, then it can file an application with the Ontario Labour Relations Board (hereinafter “OLRB”) seeking certification to represent the employees in the workplace.
• The union then serves the application for unionization on the employer.
• The employer is required to immediately post notice of the application in the workplace,  so that it is brought to the attention of the employees.
• The employer then has two business days to complete, serve, and file a response. It should be noted that the response is not a response in the sense that the employer has an opportunity to make submissions as to whether or not the workplace should be unionized. The response is limited to the employer declaring its position on which workers constitute the bargaining unit, which workers should be excluded, and whether the Union actually has obtained 40% or more support in order to proceed with the vote.
• Five days after the original application is filed, the vote takes place. An officer from the OLRB supervises the vote.
• If 50% +1 of the employees vote in favour of the union, then the workplace becomes unionized, subject to any disputes about the vote that may be decided later. It is important to note that in the voting process, the percentage necessary to certify the union is based only on the number of employees who actually vote, not the number of employees employed in the workplace. If a dentist has 10 employees, but only 4 of them vote, then this group of employees will dictate whether or not the remaining employees become unionized. For instance, if 4 out of 10 employees vote, and 3 out of 4 vote in favour of unionization, then the entire workplace will become unionized.
• If the union drive is successful, the employer and the union will enter into negotiations for a collective bargaining agreement.

As you can see, the timelines are short, and the OLRB is typically unforgiving of employers who cannot meet the deadlines. This process can leave the employer scrambling to counteract the union campaign, in circumstances where the union has a significant head start.

Risks to dentist employers           

There are significant business risks when a dental office becomes unionized. Firstly, the most obvious risk is that the employer will lose a large measure of control over workplace issues.   Collective bargaining agreements often provide for grievance processes for employees. These processes can involve contested arbitration hearings. This will significantly drive up the time commitment and legal costs for dentist employers. Secondly, the establishment of a union in the workplace will undoubtedly drive up labour costs for the employer dentist. Having to pay more to employees in wages and benefits will decrease the profitability of dental practices. It is our opinion that a dental practice with a union in place will be more difficult to sell than a non-unionized work place. The sale of dental practice to a new owner will not remove the union from the workplace. Potential purchasers may be scared away by the presence of a union in the workplace. The presence of a union will result in more administrative headaches, and potential expenses.

Employer’s right to free-speech

If you think all of this sounds unfair and frightening, then you are probably correct. However, the employer is not completely without rights in the process. There is a common misconception that employers are not allowed to discuss the unionization process with employees. This is simply not correct. The Ontario Labour Relations Act does not prohibit discussions with employees, but rather moderates the contents of those discussions.

Under s. 70 of the Labour Relations Act, the employer is free to express his or her views regarding unionization, so long as the employer does not use coercion, intimidation, threats, promises or undue influence. So, while the employer may communicate with employees concerning unionization, they must be very careful in how they do so. The line between discussing unionization and engaging in prohibited conduct under s. 70 is a fine one, and employers must be cognizant of what they can and cannot say.

What employers can say or do

The entrenchment of the right of freedom of speech under the Labour Relations Act allows employers to express opposition to the union, and to express their opinion on the merits of unionization. Again, the employer must be careful not to utilize tactics of coercion, intimidation, threats, promises or undue influence. Below is a list of activities employers are entitled to engage in:

• The employer can inform employees that the employer wishes for the workplace to remain union-free, and that it does not wish to have a union intervene in the employment relationship. Employers can indicate that it would be best if the employment relationship remained direct, as opposed to having to negotiate through a third-party.
• The employer can inform employees that a union cannot guarantee its promises. Unions may often make promises to employees about what they will receive through unionization. However, a union does not unilaterally impose the terms and conditions of employment on the employer after certification. Instead, after the union is certified, the parties will still have to negotiate a collective bargaining agreement.
• The employer is allowed to indicate that if a collective bargaining agreement is not reached, then this will most likely result in a strike or a lockout.
• The employer may communicate facts about the union’s finances, such as the amount of strike pay unionized employees receive while off on strike. The employer can also discuss with employees the amount of union dues that will be payable, what union dues pay for, and the salaries of union personnel, so long as this information is accurate.
• The employer can stress the importance of voting in the process. Remember, if the voter turnout is low, then a minority of employees could end up binding the entire workforce.
• The employer can combat incorrect information or statements made about the workplace by the union.

Ultimately, employers are entitled to discuss their opposition to unionization, and can provide employees with facts about the union.

It would be best if communications with employees are conducted either in writing, or in what is known as a captive audience meeting, where the employer meets with employees to discuss the unionization process. Depending on the volatility of the situation, and the employer’s familiarity with what they can and cannot say, this may be a constructive exercise, or one that blows up in the employer’s face. Employers should work with a lawyer to ensure they are fully aware of what to say at a captive audience meeting, as running afoul of the legislation may have negative consequences, as more fully discussed below.

What employers cannot say or do

As stated above, employers cannot coerce, intimidate, threaten, make promises or exert undue influence over employees in relation to the unionization process. Specific examples of prohibited conduct are:

• The employer cannot make implicit or explicit references to job security. For instance, employers cannot advise employees that they will be fired if they attempt to unionize. Employers cannot indicate that if the workplace becomes unionized, it may be shut down entirely.
• The employer cannot engage in more subtle forms of discipline, such as a reduction in hours of employees who support unionization.
• The employer cannot promise bonuses, or pay increases, or additional benefits to employees in exchange for voting against a union, or agreeing not to participate in the process.
• The employer cannot side with employees who are voicing anti-union opinions that would be a violation of the Act if communicated by the employer personally. The Employer cannot reward those employees who are anti-union.
• The employer cannot advise employees that the business will becomes less competitive if the workplace is unionized.
• The employer cannot ask employees how they intend to vote.
• The employer cannot conduct surveillance of employees to determine whether or not they are participating in union activities. Employers also cannot have another employee report to them concerning union campaign initiatives.

Risks associated with going too far

It is very important for employers faced with a union drive to not overstep the stipulated legal limits in communicating with employees. Employers can expect that unions will be aggressive in combating inappropriate employer communications. An employer who goes too far runs the risk that the union, or an employee, will make a complaint to the OLRB against the employer for engaging in “unfair labour practices”. The consequences for an employer who breaches s. 70 of the Labour Relations Act can be draconian. The Board has the remedial power to certify a union without a formal vote in response to an employer who engages in unfair labour practices. For instance, if an employer threatens to fire an employee (or employees) in response to unionization efforts, then the OLRB has the power to certify the union without the need to go through the application and voting process.

Discussing unionization is a potential minefield for employers in the dental industry.  The unionization process elicits a visceral reaction in many employers. There is a strong sense of the small business owner being “in charge” of their office, and unionization represents a loss of that control. This can be a difficult pill to swallow for a business owner who has invested their entire career in building a successful practice.

However understandable the negative reaction to a unionization of the workplace may be, an ill-planned response will likely not serve the employer well. If the employer is emotional or angry, then these feelings are bound to taint the discussions with employees, and may cause the employer to go too far in their communications

How do you stop a union from gaining a foothold in your office?

We are strong advocates of taking preventative measures in the workplace. When it comes to the unionization process, our advice is no different. As trite as it may sound, if employees are happy, they will rarely seek to unionize. While employee happiness is a somewhat esoteric concept, employers would be remiss to ignore the changing reality of the dental workplace. These changes have happened, and it appears likely that more unionization will occur. An employer who proactively pays attention to their employees, and treats them fairly, will face less of a chance that the workers will band together to unionize.

As mentioned above, employers are often caught flat-footed when faced with a unionization drive. In this increasingly tumultuous time for dental offices, it would be prudent to have in place strategies to combat unionization initiatives, including information on how to conduct meetings with employees, and to draft acceptable communications to employees in response to union pressure. While the choice to unionize will ultimately belong to the employees, the employer who is knowledgeable about the process and their rights stands a better chance of combating unionization than an employer who turns their mind to it after receiving the application for unionization.

If you would like to discuss unionization in dental offices, please contact Matthew Wilton  at matthew@wiltonlaw.com, or Paul Martin at paul@wiltonlaw.com, or by phone at 416.860.9889.

*The foregoing is not intended to be legal advice and is provided for educational purposes only.  You should retain a lawyer to seek advice prior to taking any legal steps.

After reading part 1 and part 2 of our last posts, you are familiar with why dental employment contracts are vital, and you will also know that the easiest way to implement a contract is to have the employee sign it before they start. Based on this, what could possibly be wrong with uttering the words at the top of this post?

We consistently run into employers who have taken the time to prepare a new written employment agreement and have a new employee sign it, before the start of their first shift. Unfortunately, it is quite often the case that these employment agreements were actually signed after the employee truly commenced employment. The employer, after taking the time to get the contract in place before the employee starts their shift, could still run the risk of having the dental employment contract deemed unenforceable. This is a most unfortunate occurrence, but sadder still, one that is commonplace.

Once an employer communicates to an employee that they “have the job”, then, quite simply, they are hired, and they already have the job. This means that their employment contract has commenced, albeit one on verbal terms. This creates an issue, as once you have an agreement with your new employee, verbal or written, you cannot unilaterally impose a new agreement on them, even if that imposition occurs only hours after you communicate that the employee has been hired. Unfortunately, Courts do not distinguish between employees who have been employed for 3 hours, 3 weeks, or 3 years. Once an employee commences employment, the employer cannot unilaterally enforce a new agreement on the employee, unless the employer provides something of value (consideration, in legal jargon) in exchange for signing the new agreement. As mentioned in Posts 1 and 2, the essential elements of any contract are (1) Offer; (2) acceptance; and (3) consideration.

Another common (but dangerous!) practice is to present a new employee with a contract the morning of their first shift. The employee holds onto the agreement, starts working, and returns it signed at lunch. Surely a court will not penalize an employer simply because the agreement was signed a few hours after they started, right? Courts have indeed held that agreements signed hours after an employee commences employment are void, as again, once the employee starts, there exists a verbal contract governed by a common law bundle of rights. Any new written employment agreement imposed on the employee will be void, unless the employee receives consideration in return for signing the “new” agreement.

Alternatively, as also outlined in the previous post, you could also provide the employee with reasonable notice that their employment on their current terms is at an end, and that at the end of the notice period, they will be provided with a new agreement. If you have an employee who has only been working for a few days, the reasonable notice period would be quite short. Nevertheless, this is a complication, and one that can be easily avoided if employers take proper steps to implement the new contract, before the employee commences employment.

Best practice when contemplating hiring a new employee is to advise the prospective candidate as follows: “I would like to make you an offer of employment, which will be put to you in writing. You must accept in writing by signing the offer letter”. Then, you should provide the employee with a proper written dental employment contract, and advise them that this contract is the offer. So long as the employee signs, and communicates their acceptance, prior to commencing their first shift, then all necessary elements of a binding contract will be established, as the employee is receiving consideration in the form of a new job, and the employer is receiving consideration in the form of a new employee hired on the terms the employer desires. Make sure you receive back the signed, dated contract before the employee’s first day of employment.

The implications of these nuanced laws have particular interest in the dental employment world. A common, but improper, practice in dental offices is to hire an employee, and place them on a three-month probationary period. Once the employee passes the three-month probationary period, the employer then offers them a new contract to sign. Employers often mistakenly believe that passing the probationary period will serve to act as the “fresh” consideration to sign the new agreement. These employers are wrong. The law is unforgiving of employers who attempt to use the passing of a trial period as a chance to implement a new agreement. The rationale is, that in essence, the employee is not getting anything they already didn’t have once they pass the probationary period. The job is the same for all intents and purpose, save for the fact the employee cannot now be terminated without notice. However, this is a protection they are entitled to under the ESA anyways, and not a new benefit that will serve as consideration to sign the agreement.

If the agreement is not implemented properly, prior to the employee commencing employment, then it is likely that the agreement is void, and the relationship will revert to being governed by the common law. The risk being that if the employee stays on for a longer period of time, such as 5 years, all while the employer is mistakenly under the impression that they are protected by a contract limiting notice entitlements to the ESA, the employer could be in for a rude awakening in the event of termination.

It is always best to contact a lawyer, prior to offering employment to a new employee, to ensure that you are following the proper procedure. The drafting of new dental employment contracts should not be a costly process, and the employer is left with the peace of mind that they have the protection of a proper agreement.

If you would like to discuss the benefits of dental employment contracts for your business, please contact Matthew Wilton  at matthew@wiltonlaw.com, or Paul Martin at paul@wiltonlaw.com, or by phone at 416.860.9889.

*The foregoing is not intended to be legal advice and is provided for educational purposes only.  You should retain a lawyer to seek advice prior to taking any legal steps.

Implementing the Agreements

If possible, we recommend that employers put employment contracts in place prior to the employee commencing employment, by having prospective employees sign written offers of employment before commencing employment. This ensures that the terms of employment are clear from the beginning of the relationship. However, the reality is that many dental offices have employees working without written agreements in place. In cases where a dentist has employees working without written dental employment contracts, steps should be taken to ensure they are implemented sooner rather than later.

Imposing new contracts on existing employees requires a very precise approach. In these circumstances, a question we often receive once an employer has decided to implement new agreements is: “Can’t I just provide my existing employees with the new contracts? If I offer and they accept, then that’s all that matters, right?”

The simple answer is “no”. The law is clear that an employer cannot unilaterally impose new contractual terms during the course of employment. The reason for this is that for a contract to be binding, three elements must exist: 1) offer; 2) acceptance; and 3) consideration.  The term consideration refers to something of value that must be exchanged between the parties to a valid contract. In the employment context, the consideration flowing from the employer is the job and payment for services, and the consideration flowing from the employee to the employer is those same services.

So, while you may offer the new contract to an existing employee, and the employee may accept, if there is no form of consideration flowing from you to the employee, then the contract will not be binding. The issue is that by imposing a new dental employment contract on an existing employee, there will be no consideration. The employee already has the job (and associated payment for that job), and the employer already has the benefit of the employee’s services.  When a new agreement is imposed, only the employer is obtaining something new of value. The consideration only flows one way.

This can cause issues if the employment contract is ever challenged by the employee. A Court will find it to be unenforceable. So, after taking the time to put the proper terms into place, and believing that you have the security of a proper agreement, the contract may be held unenforceable, leaving you exposed to a claim for notice in accordance with common law principles.

How can you impose new agreements on your existing employees?

As mentioned above, you will need to provide the existing employees with some form of consideration in exchange for their signature on a new dental employment contract.  We typically recommend that an employer offer an employee a bonus or raise that they would not otherwise be entitled to in exchange for their signature on the new contract. The bonus or raise acts as the consideration. We usually recommend a payment of at least $500.00. In this way, the three elements of a binding contract are in place.  So long as the employee accepts the $500.00 payment in exchange for signing the new agreement, there should be no question that the agreement is valid.

What if the employee refuses the offer of a raise or bonus?

There is another method by which an employer can impose an enforceable dental employment contract upon an employee, during employment. If the employee refuses to accept the signing bonus or raise, and refuses to sign the new employment contract, then the employer can provide written notice to the employee that at a date in the future, their employment will be at an end. As mentioned above, as a rough rule of thumb, Courts provide that an employee should receive one month’s notice for each year of employment. For instance, with an employee who has been working for 6 years, you would need to provide them with notice that in 6 months their employment will terminate. Once the employer has provided the employee with proper notice and the notice period expires, the employment will be at an end. The employer can then offer the employee re-employment on the amended contractual terms. In this way, the employer is not imposing a new employment contract during employment, but rather a new employment relationship is being created.

Just like every aspect of running your practice, proper attention to employee relations is integral. As we often tell employers, “an ounce of prevention is worth a pound of cure”. Spending the time to implement proper dental employment contracts can end up saving you valuable time and money in the future. Our dental employment contracts are designed to crystallize the employment relationship. There are certain terms that are implemented to significantly limit the employers’ liability. There are a number of other benefits that our agreements provide in addition to those outlined above.

We would be happy to discuss these benefits with you and help organize your workplace in an attempt to minimize your exposure to potential future loss. If you would like to discuss the benefits of dental employment contracts for your business, please contact Matthew Wilton at matthew@wiltonlaw.com, or Paul Martin at paul@wiltonlaw.com, or by phone at 416.860.9889.

*The foregoing is not intended to be legal advice and is provided for educational purposes only.  You should retain a lawyer to seek advice prior to taking any legal steps.

Over the course of two posts, we will provide you with an outline of the benefits of implementing dental employment contracts in your office, as well as information on how the implementation process must be handled.

So, what are the benefits?

The best place to begin discussing the benefits of written dental employment contracts is actually at the end of the employment relationship – the threat of a lawsuit. In the dental employment context, there are numerous employment law issues that arise repeatedly. The most common of these is a claim for wrongful dismissal. When an employer terminates the employment relationship without cause, the law dictates that the employee must be provided with notice of the termination, or payment in lieu of notice. The Employment Standards Act (the “ESA”), which governs most dental employment relationships in Ontario, stipulates the minimum required notice that an employer must provide an employee when the employment relationship is being terminated without cause. These notice requirements are based on length of service, and are as follows:

Employers who employ more than 50 employees, and have payroll in excess of $2.5 million have additional obligations, but that is beyond the scope of this article.

However, the ESA only outlines the minimum notice requirement. Common law principles expand on these notice requirements. The common law is judge made law. There is no defined rule as to the amount of notice an employee may be entitled to at common law. However, as a very rough rule of thumb, Courts will typically award wrongfully dismissed employees approximately one month’s pay per year of employment. There is any number of factors that courts will consider when determining the appropriate notice period, such as length of service, age, and employment responsibilities. The amount of notice will fluctuate based on the applicability of these factors.

A properly drafted dental employment contract can limit the amount of notice to which an employee is entitled, to the ESA minimums. The potential savings to an employer can be substantial!

Take the case of an employee that has been working in your practice for 24 years and earns $800.00 per week. Under the common law, if you were to let this employee go without cause, you could be liable for up to 24 months of severance, or more. This could cost you $83,200.00. However, if the notice requirement is properly limited to the ESA minimums in a written dental employment contract, the maximum severance you would have to pay in the case of a 24 year employee would be 8 weeks. This would only cost you $6,400.00. This results in a potential saving to the employer of $76,800.00. While you are always entitled to provide the employee with more pay, having the notice obligations limited to the ESA minimum puts the ball in your court.

What other benefits do written contracts provide?

Sale of a practice

We are often consulted on the sale of an existing practice, as to how the vendor should handle existing employees.

The general rule is that employment contracts are not assignable, meaning that the rights and obligations under the contract are exclusive between the current employer and employee, so that the contract cannot be transferred to a third-party, such as a purchaser. However, there is an important distinction between a share sale and an asset sale.

In a share sale, the vendor sells the shares of her Dentistry Professional Corporation to the purchaser. If the practice is to be sold by way of a share purchase, then the purchaser will essentially step into the shoes of the former employer. The identity of the employer corporation does not change. From an employment law perspective, the share transaction does not automatically terminate the employment relationship. In this situation, the employees of the former employer are given credit for the years of service they spent with the former employer, and will be deemed continuous employees for the purposes of measuring their length of employment. So, in the scenario of the 24 year employee, a potential share purchaser of a practice would be saddled with the vendor’s previous termination obligations. This could seriously affect the value and marketability of a practice, as potential purchasers will be leery of assuming such a large potential liability.

However, through a properly drafted dental employment contract, the purchaser can obtain the benefit of previously implemented employment contracts, so long as the employment contracts contain a clause that stipulates the agreements may be assigned to a purchaser. Therefore, the share purchaser will obtain the benefit of the clause in the employment contract that stipulates how much notice an employee will be provided on termination. The potential savings could be significant. Properly drafted dental employment contracts will make your practice more marketable, as potential purchasers will not be deterred by the prospect of inheriting common law notice termination obligations usually attached to long-standing employees.

However, in the case of an asset purchase and sale, the situation is different, and generally more complicated from an employment law perspective. When a company is sold by way of an asset sale, there is a resulting change in the identity of the employer and, in principle, all employees are terminated at the moment of sale. The ESA provides statutory protection for employees, and mandates that employees who are re-hired by the purchaser will receive credit for past years of service when a business is sold. Therefore, even in an asset sale, so long as the purchaser re-hires even one employee, they will inherit that employee’s entire length of service with the vendor. Unfortunately, in an asset purchase, the employment contracts are not assignable to the new purchaser. This creates a problem whereby purchasers will be encumbered with the employees’ previous years of experience, but will not have the benefit of an employment contract that caps the notice entitlements. A purchaser in an asset sale will have to implement new dental employment contracts with existing employees in order for the purchaser to obtain proper protection from potential employee termination obligations. There is a strict process involved in implementing new dental employment contracts with existing employees, which will be covered in the next posting.

While employment contracts are generally not assignable in an asset sale, there is still a significant advantage to the vendor in having properly drafted dental employment contracts in place at the time of an asset sale. Situations will arise where the purchaser in an asset sale does not wish to offer employment to the vendor’s long-standing employees, as they are not obligated to do so. This will leave the vendor liable for the cost of terminating the employees in advance of the sale. If the vendor has a properly dental employment contract in place that limits the notice entitlements upon termination, she will not be exposed to significant notice obligations in the event certain employees are not assumed by the purchaser.  As outlined previously, the maximum exposure will be 8 weeks’ notice at the time of dismissal. A prudent vendor could simply give the employee notice 8 weeks’ in advance of the sale, that their employment will terminate on this date, and will not be out of pocket for any notice obligations.

This arrangement can also benefit the purchaser. If the purchaser has reservations about assuming long-standing employees, these fears can be minimized. The vendor could dismiss any of the long-standing employees by providing eight weeks’ notice in advance of the sale, and the purchaser would then be free to offer those employees re-employment. The new dental employment contract offered by the purchaser can also contain a clause limiting the employee’s notice entitlements to the ESA. If the employee refuses to sign the employment contract, then that will be the end of their relationship with both the vendor and purchaser, and neither will be responsible for any additional notice pay. The vendor minimizes their severance obligations, and the purchaser is provided with the opportunity to implement similar dental employment contracts with the employees she wishes to retain after the sale.

Retirement

When dealing with employees, retirement has the same legal effect as selling your business. The closure of the business will result in a termination of the employment relationship, triggering an obligation for the employer to provide notice pay to employees. While many practitioners have a well thought out retirement plan, with a fixed date for retirement well down the road, sometimes life does not cooperate. Many practitioners make the decision to retire within a relatively short amount of time. Others have life changing events that necessitate retirement before the date they originally planned.

When it comes to retirement, it is always advisable to have properly drafted dental employment contracts in place for all employees restricting the amount of notice each employee is entitled to. In the event that you are forced to retire earlier than you had planned, then the amount of notice you must provide to an employee that the business will be closing can be capped at the ESA minimums. This will provide more flexibility in your retirement plans. In the case of the 24 year employee, instead of having to provide 24 months of notice, the prudent dentist will only have to provide a maximum of 8 weeks notice of their intention to retire.

Many practitioners lease premises for a fixed amount of time, with the view to retiring at the end of the term of the lease. Before the lease ends, you will need to give your employees proper notice of termination of their employment. If this is not done properly, and you only realize 3 months before the end of the lease that you have not provided adequate notice to your employees, you could be left with significant liability for the employee severances. This could ultimately decimate your retirement funds (and plans!).

Having properly implemented dental employment contracts means that the amount of notice you will be required to provide will be limited to the ESA minimums. This will make the transition easier and more manageable, in terms of ending your lease.

Death

For unincorporated dentists, in the unfortunate situation where the dentist passes away, employees will have a claim against the estate for wrongful dismissal. Death is not just cause to terminate an employment relationship. While these issues can be minimized through proper estate planning, part of that planning should include ensuring that any claims for wrongful dismissal are minimized as much as possible. By having proper dental employment contracts in place with your employees limiting the amount of notice to which employees are entitled to the ESA, you can ensure that in the event of your passing, your estate heirs will not have to pay large severances for dismissal.

Non-solicitation clauses for hygienists

Another common situation that we repeatedly deal with is non-solicitation and non-competition clauses. Since the Dental Hygienist Act was amended in 2008 to allow hygienists to self-initiate, there is an ever-growing concern that hygienists will take patients away from their principal dentist’s practice. All of our hygienist employment agreements include a clause that prohibits the hygienist from soliciting patients both during and after the employment relationship. This is commonly referred to as a non-solicitation clause. This is to be contrasted with a non-competition clause. A non-competition clause bars a former hygienist from competing against a former employer for a specified amount of time and within a defined geographical area. A non-solicitation clause is a less onerous covenant than the non-competition clause, and is aimed at preventing a hygienist from soliciting a former employer’s hygiene patients.

Ontario courts are reluctant to enforce non-competition clauses, whereas a non-solicitation clause that is reasonably restrained in timing (ie. 2 years) is usually enforceable, as it is considered to represent a more reasonable balance of the competing interests between the employer and employee. The courts will ask what interest the employer is attempting to protect through the restrictive covenant. Dentists do not have a proprietary interest in potential patients of the practice, but only the existing patient base. Therefore, a non-solicitation clause will typically serve to protect this interest. A non-competition clause, prohibiting a departing hygienist from practicing at all within a defined geographical area for a specified period of time, is usually seen as an unreasonable restraint on trade.

Only in exceptional cases will a non-competition clause be upheld in an employment context.

An appropriately drafted non-solicitation clause offers protection for an employer without unduly compromising a former hygienist’s ability to work in his chosen field. Unlike the non-competition clause, the hygienist is able to immediately commence employment in their chosen industry, and within the same geographic area. This interest is balanced with the employer’s proprietary interest in their existing client base.

It is important to have a properly drafted non-solicitation clause in a dental employment contract, as a clause that is overly broad may be deemed unreasonable by the courts, and therefore struck from the agreement all together. This would deprive the employer of the very protection they sought in the first place.

As you can see, properly drafted dental employment contracts provide a number of significant benefits to employers. In the next post, we will discuss the process involved in implementing the new dental employment contracts, to ensure that the contracts are enforceable.

If you would like to discuss the benefits of dental employment contracts for your business, please contact Matthew Wilton  at matthew@wiltonlaw.com, or Paul Martin at paul@wiltonlaw.com, or by phone at 416.860.9889.

*The foregoing is not intended to be legal advice and is provided for educational purposes only.  You should retain a lawyer to seek advice prior to taking any legal steps.