Employment Law Update – Skana v. Lazauskas

On May 2, 2014, the British Columbia Supreme Court ruled that an employee being sued by a former employer was able to take the unusual step of using the British Columbia Employment Standards Act (the “ESA”) as a shield against the employer’s claim.

Normally the ESA is used by employees as a means of enforcing their statutory right to certain compensation, such as overtime and vacation pay. Generally, employees cannot enforce these rights in court, and must instead use the dispute processes available through the BC Employment Standards Branch. One notable exception is where an employee wishes to argue in court that a severance limiting clause in her contract should be void because it violates the minimum standards of the ESA.

However, in Skana Forest Products Ltd. v. Lazauskas, the court allowed an employee to use the ESA to defend against his employer’s claim for repayment of certain monies following the employee’s resignation. The employer argued that by virtue of a clause in his employment contract, the employee was required to pay for and take with him outstanding lumber inventory he had ordered before he quit.

In reaching its decision, the court considered section 21 of the ESA which prohibits employers from requiring employees to pay an employer’s cost of doing business [see our recent blog post on this topic], and found that the unsold inventory was a business cost. Accordingly, the contractual term the employer sought to enforce was “inoperative and unenforceable.”

Implications for Employees and Employers

This decision will be of interest to employees as an example of how to use the ESA to defend against a claim rather than to enforce a statutory entitlement to unpaid wages. It is also a rare case of the ESA being applied outside of the processes of the Employment Standards Branch.

For employers, this case should serve as a reminder to consider whether any claims they may make against an employee are in fact offside employment standards legislation.

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