November 16, 2008 by Israel Foulon LLP
Issue Estoppel and Abuse of Process in the Employment Context
Employers need to understand that there are a number of legal rules that deal with the ability to re-litigate issues that have already been determined in prior proceedings. As a general rule, employers should conduct themselves on the understanding that if they attend at a judicial or quasi-judicial proceeding and an issue is finally determined within that proceeding then that finding will be binding for other purposes as well. This doctrine is known as issue estoppel. These rules also apply to employees. In the employment context, employees tend to be most effected by a similar doctrine – abuse of process – in relation to being bound by findings in a criminal context.
Issue Estoppel
On a fairly regular basis we receive telephone calls from our employer clients advising that they have received a notification in the mail inviting them to attend a Board of Referees Hearing in respect of a former employee’s claim for Employment Insurance benefits. The letter advises the employer that “it is in your interest to attend” and asks the employer to provide information regarding the circumstances surrounding the termination of the employee’s employment. Usually, in these circumstances, the employee has been terminated on the basis of just cause and no notice or pay in lieu of notice has been provided to the employee. Employer clients call asking for our advice as to whether or not they should attend the hearing? Should an employer attend? In a word – NO.
By attending the hearing and participating in the hearing the employer will be unnecessarily subjecting itself to an adjudication with the employee on whether or not the employee lost his position as a result of the employee’s own misconduct. What very few employers realize is that a finding by the Board of Referees that the employee did not lose his position as a result of his own misconduct may well foreclose the employer from asserting that it had just cause to dismiss the employee in a civil action or ESA complaint commenced by the employee by virtue of the doctrine of Issue Estoppel.
The essence of the doctrine of issue estoppel is the theory that parties to litigation should not be permitted to re-litigate an issue that has already been finally decided between them in a prior judicial or quasi-judicial proceeding. There is an element of judicial economy to the doctrine as it would be a waste of resources and unfair to the originally successful party to incur the time and expense to re-litigate the issue. It is also argued that to allow the issue to be re-litigated can amount to a collateral attack on the original decision. Finally, there is a danger of inconsistency of outcomes which could tend to lead to a questioning of the soundness of the judicial system.
The legal test for the application of the doctrine of issue estoppel is a two-tiered test and is well established in the case law. The first tier requires that the following three questions be affirmatively answered:
(i) Were the issues the same?
(ii) Were the parties the same?
(iii) Was the decision a final judicial decision?
If all these questions are affirmatively answered, the Court must move to the second tier and ask whether there is “something in the circumstances of this case such that the usual operation of the doctrine of issue estoppel would work an injustice” (Schweneke v. Ontario (2000), 47 O.R. (3d) 97 (Ont. C.A.), as cited by Binnie J. in Danyluk v. Ainsworth Technologies Inc., [2001] 2 S.C.R. 460 (S.C.C.) at para 63).
If the Court determines that what is being litigated is the same issue between the same parties in a prior judicial or quasi judicial decision and the application of the issue estoppel doctrine would not work an injustice in the particular circumstances then a Court will apply issue estoppel and prohibit the parties from re-litigating the issue that was decided previously. The parties will be bound by the findings of the previous quasi-judicial decision in respect of that issue.
Application of the Doctrine of Issue Estoppel
In Korenberg v. Global Wood Concepts Ltd. (2005), 2005 CarswellOnt 7152 (S.C.J.), the plaintiff Mr. Korenberg claimed damages for wrongful dismissal. The defendant Global Wood took the position that it had just cause for the dismissal. In its statement of defence, Global alleged that the plaintiff had assisted fellow employees in taking materials from the defendant without proper authorization, contrary to a clear policy of the defendant which the plaintiff had acknowledged. The statement of defence also alleged that the plaintiff had breached company policy by allowing employees to cease working before the termination of their shifts.
Korenberg had applied for Employment Insurance benefits. After an initial denial of Employment Insurance benefits by an officer on the basis that his loss of employment was due to his own misconduct, Mr. Korenberg appealed to the Board of Referees. The employer unwisely attended the Board of Referees hearing at which the employer played a videotape of some surveillance and made oral submissions. The Board of Referees concluded that Korenberg had not lost his employment due to his own misconduct specifically finding that Korenberg thought he had permission for fellow employees to remove the materials in question and that the evidence of employees being allowed to leave early was insufficient.
The employer appealed the Board’s decision to the Umpire who upheld the Board’s decision. The Umpire declined to permit the employer to adduce new evidence on the basis that it had been in the hands of the employer at all times and also declined to allow new testimony in the form of oral testimony of a manager for the defendant on the grounds that the matter in issue was one of which the employer was fully aware in advance of the hearing.
Korenberg moved for summary judgment on the basis that the doctrine of issue estoppel applied to the only defence pleaded by the defendant. Essentially, Korenberg took the position that Global was prohibited from re-litigating the allegation that it had just cause to terminate Mr. Korenberg, as pleaded in its statement of defence as these factual issues had already been litigated in Korenberg’s favour in the EI process.
The Court concluded that issue estoppel applied as the two proceedings involved the precisely the same issues, the same parties, and the EI decision was a final decision. The Court also concluded that the application of issue estoppel would not work an injustice to the employer as it had chosen to participate and call evidence at the Board of Referees hearing and then chose to appeal that decision. As a result, the employer no longer had the opportunity to allege just cause in the civil action.
Employer participation in Employment Insurance hearings (the do’s and don’ts)
As a result of the doctrine of issue estoppel it is our advice to employer’s to not attend employment insurance proceedings. If the employer does not attend it is difficult to see how it can be said to be a party to the proceeding. To the extent that the employer wishes to provide the Board of Referees written materials or other written comment we generally advocate that the employer should make it clear that it is not taking a position in the Board of Referees hearing as to whether or not the employee should be entitled to EI benefits. It is also best practice to simply rely on existing business records and not present new arguments or written advocacy. It is arguable that taking such steps could amount to participation in the proceeding.
A sample letter to send to EI could read as follows:
Board of Referees Centre
Re: EMPLOYEE NAME, file #: 888-888
We have received notice of the Board of Referees hearing to be held DATE. Please be advised that the employer will not be attending this hearing.
Please find attached a copy of the letter of termination for your records along with other business records that the employer considers relevant to this matter. As you will see in the attached termination letter the employer has taken the position that the employee’s employment was terminated for just cause. The employer maintains that position but specifically takes no position on the employee’s entitlement to Employment Insurance benefits.
Sincerely, Human Resources Manager
It is important to note that an employer does not have anything at stake in attending an EI proceeding. An employer should not be concerned from a financial perspective if an employee receives EI benefits. It has no financial impact on the employer. In our experience, given this reality where an employer attends these hearings they tend to show up unprepared, without the required evidence, documentation or witnesses. Employees on the other hand have much at stake and therefore generally will be better prepared. It is also argued by many that the Board of Referees exercise a bias in favor of granting of benefits and will only deny benefits in very clear cases of loss of employment on account of employee misconduct. The benefit of the doubt will go to the employee. For all of these reasons, employers ought to be extremely weary of participating in EI proceedings.
Abuse of Process – Attempts at re-litigation of Criminal Convictions
A similar doctrine known as abuse of process also affects employment related disputes from time-to-time. This doctrine arises most importantly form an employer’s perspective when dealing with criminal convictions involving employees.
Abuse of process is similar to issue estoppel in that it is designed to stop a party from re-litigating an issue that has been finally determined in a prior proceeding. The application of the doctrine of abuse of process is somewhat wider than issue estoppel however as it can apply to situations where the one of the parties in the civil proceeding was not a party to the prior dispute.
The doctrine of abuse of process engages the inherent power of the court to prevent the misuse of its procedure, in a way that would bring the administration of justice into disrepute. It has been applied to preclude re-litigation in circumstances where the strict requirements of issue estoppel are not met, but where allowing litigation to proceed would nonetheless violate such principles as judicial economy, consistency, finality and the integrity of the administration of justice.
Application of the Doctrine of Abuse of Process re: Criminal Convictions
In Toronto (City) v. C.U.P.E., Local 79, [2003] 3 S.C.R. 77, Glenn Oliver worked as a recreation instructor for the respondent City of Toronto. He was charged with sexually assaulting a boy under his supervision. He pleaded not guilty. At trial he testified and was cross-examined. He called several defence witnesses, including character witnesses. The trial judge found that the complainant was credible and that Oliver was not. He entered a conviction, which was later affirmed on appeal. He sentenced Oliver to 15 months in jail, followed by one year of probation.
The City of Toronto fired Oliver a few days after his conviction, and Oliver grieved his dismissal. At the grievance hearing, the City of Toronto submitted the boy’s testimony from the criminal trial and the notes of Oliver’s supervisor, who had spoken to the boy at the time. The City did not call the boy to testify. Oliver again testified on his own behalf and claimed that he had never sexually assaulted the boy.
The arbitrator ruled that the criminal conviction was admissible as prima facie but not conclusive evidence that Oliver had sexually assaulted the boy. No evidence of fraud nor any fresh evidence unavailable at trial was introduced in the arbitration. The arbitrator held that the presumption raised by the criminal conviction had been rebutted, and that Oliver had been dismissed without just cause.
Not surprisingly, the City appealed this decision and was successful at the Divisional Court. The Union appealed unsuccessfully to the Ontario Court of Appeal and then to the Supreme Court of Canada.
The Supreme Court of Canada ultimately concluded that the appellant union was not entitled, either at common law or under statute, to re-litigate the issue decided against the grievor in the criminal proceedings. Re-litigation of this sort resulted in a blatant abuse of process. Oliver had been convicted in a criminal court on an evidentiary standard that required proof beyond a reasonable doubt. Oliver had exhausted all his avenues of appeal. The Court concluded that his conviction must stand, with all its consequent legal effects. There was nothing in the case that militated against the application of the doctrine of abuse of process to bar the re-litigation of the criminal conviction and the arbitrator was required as a matter of law to give full effect to the conviction. As a result of that error of law, the arbitrator reached a patently unreasonable conclusion. The Court concluded that the evidence before the arbitrator could only lead him to conclude that the respondent City had established just cause for Oliver’s dismissal.
Employers are therefore entitled to rely on the criminal conviction of an employee as conclusive proof that the employee engaged in the misconduct alleged. Interestingly, an employee is not in a position to make the same assertion in respect of an acquittal. An acquittal is not a finding that the employee did not engage in the underlying facts but only that there is some reasonable doubt that the employee may have done so. Similarly, an employer may be in a position to lead evidence that was barred in a criminal proceeding due to procedural or Charter based issues. Finally, the burden of proof in a civil proceeding (balance of probabilities) is of course much lower than in a criminal context (beyond a reasonable doubt) and therefore an employer may well be able to establish an employee’s committal of an offence in a civil proceeding or at a grievance arbitration to the satisfaction of a finder of fact even where this could not be established by the Crown in a criminal proceeding with the higher standard of proof.
Statutory attempts to limit Multiplicity of Proceedings (ESA and OHRC)
The frequency within which these issues arise in the employment context has been considerably narrowed given the relatively recent changes to first the Employment Standards Act (“ESA”) and then the Ontario Human Rights Code (“OHRC”) which changes have been designed to limit multiplicity of proceedings.
Section 97 and 98 of the ESA prohibit employees from pursuing both a civil action and an ESA complaint concerning the same subject matter. This change has resulted in much fewer circumstances where issue estoppel will arise in the employment context.
When civil proceeding not permitted
97. (1) An employee who files a complaint under this Act with respect to an alleged failure to pay wages or comply with Part XIII (Benefit Plans) may not commence a civil proceeding with respect to the same matter. 2000, c. 41, s. 97 (1).
Same, wrongful dismissal
(2) An employee who files a complaint under this Act alleging an entitlement to termination pay or severance pay may not commence a civil proceeding for wrongful dismissal if the complaint and the proceeding would relate to the same termination or severance of employment. 2000, c. 41, s. 97 (2).
Amount in excess of order
(3) Subsections (1) and (2) apply even if,
(a) the amount alleged to be owing to the employee is greater than the amount for which an order can be issued under this Act; or
(b) in the civil proceeding, the employee is claiming only that part of the amount alleged to be owing that is in excess of the amount for which an order can be issued under this Act. 2000, c. 41, s. 97 (3).
Withdrawal of complaint
(4) Despite subsections (1) and (2), an employee who has filed a complaint may commence a civil proceeding with respect to a matter described in those subsections if he or she withdraws the complaint within two weeks after it is filed. 2000, c. 41, s. 97 (4).
When complaint not permitted
98. (1) An employee who commences a civil proceeding with respect to an alleged failure to pay wages or to comply with Part XIII (Benefit Plans) may not file a complaint with respect to the same matter or have such a complaint investigated. 2000, c. 41, s. 98 (1).
Same, wrongful dismissal
(2) An employee who commences a civil proceeding for wrongful dismissal may not file a complaint alleging an entitlement to termination pay or severance pay or have such a complaint investigated if the proceeding and the complaint relate to the same termination or severance of employment. 2000, c. 41, s. 98 (2).
A more recent change is found in new sections 34(11) and 46.1 of the Ontario Human Rights Code.
Where application barred
34 (11) A person who believes that one of his or her rights under Part I has been infringed may not make an application under subsection (1) with respect to that right if,
(a) a civil proceeding has been commenced in a court in which the person is seeking an order under section 46.1 with respect to the alleged infringement and the proceeding has not been finally determined or withdrawn; or
(b) a court has finally determined the issue of whether the right has been infringed or the matter has been settled. 2006, c. 30, s. 5.
Civil remedy
46.1 (1) If, in a civil proceeding in a court, the court finds that a party to the proceeding has infringed a right under Part I of another party to the proceeding, the court may make either of the following orders, or both:
1. An order directing the party who infringed the right to pay monetary compensation to the party whose right was infringed for loss arising out of the infringement, including compensation for injury to dignity, feelings and self-respect.
2. An order directing the party who infringed the right to make restitution to the party whose right was infringed, other than through monetary compensation, for loss arising out of the infringement, including restitution for injury to dignity, feelings and self-respect. 2006, c. 30, s. 8.
Same
(2) Subsection (1) does not permit a person to commence an action based solely on an infringement of a right under Part I. 2006, c. 30, s. 8.
This provision of the Code does not absolutely prohibit the institution of both a civil action and a human rights complaint but it does prohibit an employee from pursuing a human rights complaint if the employee has chosen to pursue human rights damages in the context of a wrongful dismissal suit brought in the civil courts. This change should result in a lessening of multiplicity of proceedings and a further decrease in situations where issue estoppel would apply. However, in cases where a human rights complaint proceeds to the tribunal concurrently with a civil action there is no reason to think that issue estoppel would not apply in favor of the factual findings made in the first proceeding that makes it to hearing.
Finally, in circumstances where the civil action were to proceed first, new section 45.1 of the OHRC allows the Tribunal to dismiss an application in whole or in part if the Tribunal is of the opinion that another proceeding has appropriately dealt with the substance of the application.
Chris Foulon is a Partner of Israel Foulon LLP, a leading employment and labour law firm in Toronto. Chris can be reached at 416.640.1550 or cf@qtw38575.mywhc.ca.