Dirk de Lint, a partner at MBC Legal, discusses the importance of employment law and the duty of good faith for current and future dental practice owners. He shares advice for when to introduce employment contracts and suggests other tools available for managing terminations effectively, reducing costs, and mitigating risks.
Read the audio transcript below:
Dr. Jordan Soll (JS): Hi, everyone. Welcome to Brush Up on Business, presented by Oral Health Group, a special brush up podcast series focused on the business of dentistry. I’m Dr. Jordan Soll, chairman of Oral Health’s editorial board. And today, I’m joined by Dirk de Lint. Mr. de Lint is a partner at MBC Legal. MBC Legal provides employment law advice primarily to dental practices and other employers in the health care sector. MBC Legal is affiliated with MBC Brokerage, which specializes in the valuation and sale of dental practices and practices in other health care sectors. Mr. de Lint has been practicing employment law for thirteen years. Prior to joining MBC, he was senior legal counsel at the Ontario Securities Commission for twelve years. Welcome, Dirk.
Alright. So, let’s jump right into it. I’d like to ask you, what is the top piece of employment law advice that you would suggest for dental practice owners?
Dirk de Lint (DD): Well, think there’s one that is sort of a clear number one, and that is that employment contracts are extremely important. But there’s another one that I kind of want to sneak in, which is a bit less well known but is also critical to the employment relationship, and that is that employers have a duty of good faith and fair dealing when dealing with their employees. So, this comes from the Supreme Court of Canada case in the late 1980s, in which the court recognized that the employment relationship is really integral to a person’s sense of identity and self worth. And so what I think your viewers should understand is that, yes, it’s a contractual relationship, but it’s really a special contractual relationship. And that specialness about it informs how the courts will interpret an employment law dispute between the parties.
When somebody goes to a cocktail party, the first question that they will ask or be asked is, what do you do for work? What do you do for a living? That’s how integral employment is to a person’s sense of self worth and identity. And so, what flows from that is this duty of good faith that employers have. And this has been particularly scrutinized when it comes to dismissal, an employee being dismissed, but courts have started to say that it can apply to all aspects of the employment relationship. And why I wanted this to be sort of message number two: yes, contracts are important, but also remember your duty of good faith because this is where a lot of employers get into trouble, particularly dental practice owners. They’re small business people, they’ve got a million things to worry about, now they’ve got an employee who’s kind of upsetting them.
Employee is knowingly falling below the reasonable standards of performance. She’s looking at her cell phone, she’s coming to the morning huddles late, she’s asking for her vacation time at the last minute. It’s causing all kinds of problems. Well, as an employer, as just a person, a human, you’re irritated by that and you think, she should know better. And so that causes people to respond to that behavior in a way that the employment law doesn’t really want you to respond. You may feel like you want to retaliate, you may feel like you want to not say good morning to her and make it clear to everybody that you’re upset with her. That’s not really in keeping with the duty of good faith. So, what the law says is, as an employer, when you have somebody like that who is clearly performing below your reasonable standards as an employer, you are entitled to deal with it, but you’ve got to deal with it using the tools that are available to you as an employer. You don’t get to just be ticked off with them and embarrass them in meetings and make snide comments. You’ve got tools available to you.
JS: So, before I jump in to ask you specifics about tools, as an employer, do we have any protection that the employee should also act in good faith?
DD: Yes. You have the power of termination. Okay? That’s the ultimate…
JS: At great expense many times.
DD: Well, so long as it’s done properly. So of course, and this is where we can get into employment contracts, but if you have properly drafted, valid employment contract, the cost of terminating an employee can be substantially reduced. So, the Employment Standards Act, it’s a piece of legislation that says an employer has to give an employee at least these minimums: minimum vacation pay, minimum vacation time, and minimum termination pay. And so, you can have a contract in place that says, if I terminate your employment, that’s all you’re going to get. And the difference between that and not having a contract can be very substantial.
So, under the Employment Standards Act, there’s a clear formula in the act, and in most circumstances what the employee will be owed is a week of notice or pay in lieu of notice for every year of service to a maximum of eight weeks pay or working notice. So, somebody who’s been there for six years, that’s six weeks notice or six weeks pay. Somebody who’s been there for fifteen years, it caps at eight weeks, so eight weeks’ notice or eight weeks’ pay. That’s assuming that you’ve used your power as an employer to say, I want employment contracts with everybody. This is how they’re going to be drafted. That’s the way it’s going to be. Then you are able to terminate with only providing those employment standards at minimums. If you don’t have that, then the employee is owed what’s called reasonable notice.
And there’s a lot of case law about what is reasonable notice in a particular circumstance, but you can generally go by the rough rule of thumb, which is a month per year of service, up to usually tapers off at twenty-four months of pay for anybody who’s been there twenty-four years or more. So that fifteen-year employee that I mentioned earlier, instead of looking at eight weeks’ pay, you you’ve got this troublesome employee, how do I get rid of this person, what’s it going to cost me? Well, if you’ve got a properly drafted contract in place, you’re looking at eight weeks of working notice or eight weeks’ pay versus maybe fifteen months.
So that’s the employers. You are able to say, I have reasonable expectations with respect to your performance in the workplace. And this is an excellent question because how do you set those out? Like, we’re big proponents of having employee policies in place, so policies that talk about cell phone use, that talk about code of conduct. But you as an employee, as set out in our code of conduct policy, are expected to be professional when dealing with everybody in the workplace. And that means being courteous, it means being respectful, it means no gossiping, it means you’re not supposed to ostracize people. And there are policies dealing with all sorts of situations.
JS: So other than the employee contract, is there any other tools that the employer would have at their disposal?
DD: Yeah. So, as I mentioned, we would say very helpful tool to have in place are employee policies. But then you also have, you can put somebody on a performance improvement plan, for example. You can say, listen, your performance isn’t up to par. Here are the areas where you’re falling short of our standards. These are what our standards are, and here’s a timeline in place that we want to see improvement. And if you haven’t improved, you may be terminated without further notice. So that’s a tool, a performance improvement plan. You can also reprimand, and that can sometimes be very effective. An oral reprimand, then maybe a written reprimand, and it may get to the point where you have a final warning.
So those are tools that are there. Employers certainly can set out standards of conduct that are perfectly reasonable and enforceable. Say this is the way I want it in this workplace and that’s given the economy, the work environment, dentistry as an industry.
JS: Is it time that all dentists should be turning to having employment contracts?
DD: I mean we would certainly say so because of the big difference between dealing with a problem that you have with an employee if you have a contract or if you don’t have a contract. So, we would certainly say yes. If you’re selling your practice, you’ve got even three or four employees. So maybe you’ve got a small practice, but you’ve got three or four employees who have been there between six and twenty years. If you don’t have proper contracts in place, the purchaser is going to offer a lot less. If they take on those employees, they’re going to be accepting a lot of risk because they may say I don’t get along with these people, maybe I’ve got to terminate them, so that’s going to affect your purchase price. I mean at the end of the day it’s sort of a personal decision, it’s a business decision, but there are clear legal advantages to having contracts and employee policies in place.
JS: Is there an ideal time for a dentist to think about introducing contracts into their to all their team members or is the ideal time yesterday?
DD: Well yeah, I mean it’s like investing, you know, it’s better to do it yesterday if not today but as soon as possible. So, we would again say the sooner the better. But you have to look at the client’s particular situation. If they’ve just purchased a practice, if it’s a young person, they’ve just purchased a practice, that’s often a very good time when they’ve just taken over the practice. This is part of getting things to work as they would like. Then you can explain to the staff, I do want these rules that are regarding your conduct, that’s why I have this policy manual, and I do want proper employment agreements in place. So usually at the outset of the relationship is the ideal time, that’s when it’s easiest, but it can also be done at any point in the employment relationship. So, we do have clients who come to us, and they talk to our brokerage division. One thing that our brokers will always ask when evaluating the value of the practice, they’ll say, show me your lease, do you have employment contracts in place? And then they’ll send them over. If they have employment contracts, they’ll do a quick review. So we do have a lot of clients who will come to us who need to get it done sort of later on in the life cycle of the practice, and it can be done then as well.
Another excellent time to do it is when you’re giving raises. So, we always suggest there have been a lot of changes in the case law, particularly since 2020. So, language in contracts that has been acceptable for decades, courts are now saying for one reason or another, we’re not going to let this language pass, and your termination provisions that you thought were enforceable are now not enforceable. So, you thought you had to pay the Employment Standards Act amount, and now you’re going to have to pay a month per year of service. So, we had a lot of that case law recently. So we suggest to touch base with your employment law advisor periodically.
And another great time to think about updating contracts is when you’re going to give a raise to somebody. So, prior to announcing to your staff that you’re going to give raises, you see whether you need your employment contracts done, because that can be a very efficient time to do it. I would like to give you this raise, but as a condition, I am updating my employment documentation, policies, contracts, and in order for you to get this raise it’s conditional upon you signing this contract.
JS: So, being the junior lawyer, I would ask or I would think is that not duress?
DD: No. Duress is pressuring the employee. Duress might be here’s your contract, sign it before the end of the day or I don’t want you talking to a lawyer about it, rushing the process. But there’s nothing unfair. The law doesn’t consider it unfair to give something to somebody, a raise, in exchange for receiving something in return, a signed contract. So that’s not considered duress, no. But strangely, that is a very common question that we get from clients and practice owners, that there seems something improper about if I don’t sign, I don’t get the raise.
You don’t get the raise, so you don’t have to sign. So that’s where the question comes in, sure you can do it like that, offer them a raise in exchange for signing, but if they don’t sign it and they don’t get the raise, some people might make that decision. It’s extraordinarily rare. But the consequence of that is that now they haven’t signed your contract. If you want to say they have no choice to sign the contract, the method there is when presenting the contract, you say I’m bringing your current contract to an end. Under your current contract we have determined that you are owed so much working notice, maybe six weeks, maybe eight weeks, maybe twenty-four months. So we are now giving you that working notice. And if you haven’t signed this new contract by the end of your working notice period, your time with us is done and we don’t owe you anything more. But if you do sign it, you know, your raise is there.
JS: You know, I want to point out and for our viewers to know, I I’ve been working with MBC now for over thirteen years. I had phenomenal experiences and actually in one specific case saved me a ton of money. But I’ve noticed that when I first introduced contracts, it was a little hair raising thirteen years ago. But now when we’re interviewing new employees, right off the bat, we tell them contract. Yeah. It’s like they’ve heard this. But it seems to be a lot more of a commonality in our industry now.
DD: Absolutely. The industry’s totally evolved. And actually, I would credit, my legal partner, Mariana Bracic, with that because she really was one of the first lawyers to come into the dental world and say she took her Bay Street experience, and her Bay Street experience was doing a lot of litigation, employment law litigation. And they had some very big clients there who didn’t have contracts in place. And she would say to the partner, shouldn’t these guys be on employment contracts because that would save you a lot of money on the back end? Like, let’s get this stuff in place. And of course, there’s kind of a disincentive from the litigating employer’s perspective to do that. I don’t want to accuse that of having influenced this decision. But she brought that experience and, through her knowledge of the industry, discovered this is an industry in which contracts aren’t there. So she started educating dentists and saying, you can have unwritten contracts, but here’s the consequence, and here is the alternative. And I think you were a very early discoverer of that. And so, it’s from that that the whole industry has kind of evolved.
JS: Okay. So in in this whole contract thing, also to put dentists at ease that if they are letting an employee go, talk to us about mitigation and what the employees…because we all know it’s so hard to find, you know, quality dental staff today. So talk to us about mitigation and how that can benefit the dentist.
DD: Well, mitigation, do you mean by assisting the employee finding other…
JS: Or the dentist or the employee, I’m understanding, has an obligation to try to find employment.
DD: Yeah, absolutely. A terminated employee has a legal duty to mitigate her losses. This is a general principle in contract law. If somebody’s breached a contract with you, you have to act reasonably to minimize your losses. And what that means in the employment context is that that terminated employee should be sending out resumes and looking for similar employment, pursuing similar employment, and accepting it when it comes to mitigate her damages. Now, unfortunately, the law, as you might expect, would say tends to favor the employee in that context. So, what we would do in dental context is to make it clear to the other lawyer this employee has a duty to mitigate. We’ve gone on Workopolis, we’ve gone on Indeed, I think is another one, these work sites, here are all the positions in her area that pay an equivalent amount and really put pressure on with respect to that duty to mitigate. But if the employee acts in good faith and returns your obligation in good faith, you owe her a good faith duty during the employment relationship. If she treats you in fair dealing, in good faith, she will look for another job and she’ll probably find it. Unfortunately, a lot of employees won’t do that, and courts will cut employees a lot of slack. So, they will say, for example, during the first month or two after termination the employee gets kind of a grace period where they’ve got to kind of recover from that, adjust to that. Yeah.
And then you can also get into sticky situations where the employee says, my contract was terminated in a particularly stressful way, so I’ve had to take some disability leave, and that can affect the mitigation process. So, deciding to do the termination is something that you should also be thinking about and planning for, because we do get a lot more clients coming to us now saying, I’m thinking of terminating somebody, and we can look at the circumstances and evaluate: is this a low-risk termination? No problem, here’s your termination letter, it’s going be Employment Standards Act minimum, I don’t see any risk here. Or there may be significant risk, and then you follow a different course of action so that you avoid litigation. There are strategies, maybe you arrive at a mutual agreement to end the employment relationship. So there are different tactics that you can use in that situation. It’s all about limiting your cost and your risk, right? Exposure, yeah.
JS: Okay, so I also want to ask you, I read an awful lot in the report on business, financial posts. And so I’m constantly reading, and it makes the hair on the back of my neck stand up, that I’m seeing, I don’t care how much armor you have and how up to date your contract is, it seems like every month contracts are getting thrown out. What’s a guy to do?
DD: You probably read an article about a case April 2020, around then, in which a very prominent employment lawyer in Ontario who regularly writes these articles and in these papers essentially said that. And the contract, the termination provision that was at issue there said essentially, I, the employer, at any time and at my sole discretion, can terminate your employment so long as I give you your Employment Standards Act minimums. That type of language was considered acceptable for years. And in fact, there was a case a number of years ago in which the employee’s lawyer tried to attack that language, and the court said, go away. That’s unimpeachable language. The court in this case said, well, the employee’s lawyer has a point here. You can’t terminate at your sole discretion at any time. So, to take an extreme example, an employee comes to you and says, Jordan, I’m pregnant. And you say, well, not only are you pregnant, you’re terminated. I’ve just decided to terminate you. And you may be thinking, well, it says here, I can terminate you at any time in my sole discretion so long as I pay you your Employment Standards Act minimums. So, a court a few years ago said don’t be ridiculous, we’re not going to toss out all this determination provisions in the contract because of that language. But a court in April of 2024 decided differently. Now that may go to the Court of Appeal, but there is language that we feel…I mean, we have employees terminated all the time under our contracts. We had a case yesterday where the court dismissed it because the plaintiff’s lawyer just decided not to show up. They just didn’t pursue it. So they threatened, they sent a demand letter, they filed documents with the courts, they wanted to settle. But when it came to going to court, I guess they understood they’ve got no case here, they didn’t show up, and the court just dismissed it. So, there is protection.
JS: Were you awarded costs in that situation?
DD: We will be seeking, yeah, we’ll be seeking costs, yeah.
JS: So, in the end, the best advice is to have the most current language contracts and that’s sort of the best the best bulletproof vest you can have but still no guarantees if push comes to shove.
DD: Yeah. You want people who are reviewing this stuff constantly and you want to check-in with them. Hey, I’m hiring somebody new. Do I have to update my new hire contract template?
JS: So that’s what I was going to ask you. If you take this seriously, how often should someone, should an employer who has what they think is very current contracts, how often should they be reviewing this?
DD: Years ago, we would have said, you know, every few years kind of thing. Now I would say to somebody, if you are considering hiring somebody, give your lawyer a call. And they may say, and we do this all the time, no, your contracts are fine, go ahead. If you are thinking of giving raises, use that as an opportunity. Should I bother updating my contracts now? So, I would do it periodically and given the recent case law I would say more frequently now than in the past.
JS: Great, great advice. I’ve just picked up some great pearls as well. Dirk, I thank you so much for coming by and speaking with us and, you know, informing our audience of the need for employment contracts and how it can be a little prickly minefield if they don’t have it and how they can, again, best bulletproof themselves to have a successful practice. So, thank you so much for coming.
DD: Well, thank you, Jordan. My pleasure.
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