An edited version of this article first appeared in the February, 1993 issue of Canadian Lawyer. If you wish to reproduce this article, click here for copyright info.
Spells, Sophistry and Sacred Cows
The legal profession has an image problem. Many people perceive us to be slippery, fast-talking con artists, able to twist and manipulate words and situations to give them an interpretation exactly the opposite of what was intended. The recent Supreme Court of Canada decision in Machtinger v. HOJ Industries Ltd. won't help.
The plaintiff Machtinger was employed by the defendant HOJ, a car dealership. Their written employment contract gave HOJ the right to terminate employment upon giving "0 weeks notice or salary." After seven years, Machtinger was fired. Notwithstanding the contract, HOJ paid him four weeks' salary--the minimum required under Ontario's Employment Standards Act.
Machtinger, apparently having heard something about the alchemy which the legal system can perform on leaden contracts, sued for wrongful dismissal. The trial judge invoked some precedent incantations about invalidity and unconscionability, and--presto!--the gold materialized: Machtinger was entitled to seven months' notice of termination, worth about $48,000. Those unbelievers at the Ontario Court of Appeal undid the spell, but the Supreme Court restored the trial judge's Midas touch.
Mr. Justice Iacobucci, after finding the zero notice clause null and void under the Employment Standards Act, turned to a consideration of how that clause affected Machtinger's common law rights. Would the clause rebut the usual presumption that the employment contract could not be terminated except after reasonable notice?
Incredibly, he answered no; once the clause was rendered null and void by statute, it was null and void for all purposes. There was "simply no evidence" about what the parties intended.
This is surely one of the most distressing examples of judicial sophistry in Canadian legal history. The fact that there are British precedents is no excuse. This kind of reasoning is one of the antics that bring lawyers and judges into well-deserved disrepute with the general public.
If the court had to grab at some legal fiction to resolve this case, why didn't they choose one that would have been more in keeping with common sense? They could, for example, have borrowed the cy-pres doctrine from trust law, and chosen to enforce the void clause as closely as possible to its self-evident intent. Machtinger would then have been entitled to only the minimum statutory notice.
We can glean some clues about the court's motivation from the section of the judgment entitled Policy considerations. The court clearly wanted to get tough with employers because they have greater "bargaining power" than employees. This troublesome phrase deserves examination.
If jobs are scarce and there are a lot of eager applicants waiting to take over the job of any employee who gets fired, then some might describe this situation as one in which employers have a lot of bargaining power. Even so, it doesn't necessarily follow that justice, or morality, will be served if our courts enhance employees' bargaining power.
What Mr. Justice Iacobucci overlooks is that the employer and employee are not the only people affected by the relative strengths of their bargaining positions. The next job applicant on the employer's waiting list is also affected by the ease with which the employer can dismiss an unsatisfactory employee. Increasing the incumbent's job security is tantamount to reducing the opportunities of his closest rival. Why are job-holders more worthy of protection than job-seekers?
Consumers are affected too. If equalizing bargaining power results in greater expense to employers, the price of their products will rise. Why are employees more worthy of consideration than customers?
In any event, the whole notion that employers ipso facto have greater bargaining power than employees should be treated with suspicion. Intuitively, it may seem correct. Employers are fewer in number than employees. Employers are frequently richer than employees. These attributes would appear on superficial examination to give employers an edge.
But if scarcity and wealth denote bargaining power, which in turn determines the wages and working conditions employers can impose on their employees, what would we expect to see in the real world?
We'd expect that employees would get better deals for themselves when negotiating with employers who had relatively little of those bargaining power characteristics--employers who were relatively numerous and relatively poor, like the employees themselves.
Thus we'd expect clerks in Mom-and-Pop convenience stores to have better wages and employment terms than clerks in, say, Eaton's, because there would be greater equality of bargaining power. We'd expect waitresses in local greasy spoons to have better wages and employment terms than waitresses in swanky revolving skyscraper restaurants, because there would be greater equality of bargaining power. We'd expect secretaries employed by newly graduated lawyers in small firms to have better wages and employment terms than the secretaries of the top senior partners at the largest law firms, because there would be greater equality of bargaining power.
In the real world, we don't see these things. That's because it's not bargaining power that determines wage levels and employment terms. It's supply and demand in the labour market. It's something called the "marginal revenue productivity" of labour. Even middle-of-the-road economists recognize this in standard introductory textbooks. What a pity the Supreme Court of Canada doesn't.
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