Supreme Court interprets whistleblower provision of Saskatchewan employment standards statute

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Employers are familiar with anti-reprisal provisions in employment-related statutes. These provisions typically protect employees who seek to enforce or exercise a right under the statute granting the protection. In some instances, however, such provisions have been expanded to provide broad-ranging whistleblower protection for employees who report unlawful acts.

In a decision issued on November 24, 2005, the Supreme Court of Canada has given a broad interpretation of one province’s whistleblower protection legislation. At issue in Merk v. International Association of Bridge, Structural, Ornamental and Reinforcing Iron Workers, Local 771 was the meaning of the term “lawful authority” in section 74 of Saskatchewan’s Labour Standards Act which, at the time, provided:

“74(1) No employer shall discharge or threaten to discharge or in any manner discriminate against an employee because the employee:

(a) has reported or proposed to report to a lawful authority any activity that is or is likely to result in an offence pursuant to an Act or an Act of the Parliament of Canada; …”

The case involved, in the Court’s words, “the somewhat unusual situation of a trade union seeking a dilution rather than an expansion of employee rights” due to the fact that the employee in question had worked for a trade union and had attempted to prosecute her former employer under subsection 74(1). Linda Merk was the office manager of the union Local who was fired after writing a letter to the union’s International President advising that the president of the Local and its business manager were misappropriating funds.

The trial judge found that the alleged misappropriation had occurred and that Merk had been terminated because she had complained about the misappropriation to the International union. However, because the trial judge interpreted “lawful authority” to mean “a person or institution authorized by law to investigate offences”, she did not convict the employer. The acquittal was eventually upheld by a majority of the Saskatchewan Court of Appeal, also on the basis that the union hierarchy to whom Merk had reported the wrongdoing was not a “lawful authority”. Merk appealed to the Supreme Court of Canada.

SUPREME COURT: “LAWFUL AUTHORITY” NOT NECESSARILY A PUBLIC AUTHORITY

By a six to one majority, the Supreme Court of Canada allowed Merk’s appeal and convicted the employer. The majority rejected the Court of Appeal’s interpretation of “lawful authority”, holding that that interpretation had the paradoxical effect of denying protection to the “loyal” employee who attempted to resolve the situation by reporting the allegation internally before going to any public authorities:

“Section 74 … seeks to reconcile an employee’s duty of loyalty to his or her employer with the public interest in the suppression of unlawful activity. A long line of decisions in the labour relations field affirms that this balance is best achieved if “loyal” employees are encouraged to resolve the problems internally rather than marching forthwith to the police, i.e. work with internal remedies before going public. Yet the interpretation given s. 74 by the Saskatchewan Court of Appeal denies the “loyal” employee protection: the employee only obtains protection when the complaint is taken outside the employer organization to the police or other public authority. This is the antithesis of good labour relations policy… .”

Because it discouraged the internal resolution of alleged misconduct by withholding whistleblower protection until an employee goes “outside” to public authorities, the Court held that the Court of Appeal’s interpretation of “lawful authority” was too narrow. Protection under section 74 should be extended to employees who first blow the whistle to persons inside the employer organization who have the “lawful authority” to deal with the problem. If the problem is not resolved internally, then employees can go “outside” to a public law enforcement agency but, the Court stressed, it is not necessary that they do so to obtain the whistleblower protection.

Accordingly, the Court concluded that a “lawful authority” did not have to be a public law enforcement authority:

“I conclude that the expression “lawful authority” in s. 74 includes not only the police or other agents of the state having authority to deal with the activity complained of “as an offence” but also individuals within the employer organization who exercise lawful authority over the employee(s) complained about, or over the activity that is or is likely to result in the offence.”

Having concluded that “lawful authority” included the union official to whom Merk had reported her allegations, the Court held that the trial judge should have entered a conviction. In the result, the appeal was allowed and the conviction entered.

In Our View

Most employers would subscribe to the view that the internal resolution of allegations of misconduct should be encouraged and that the law should support this approach rather than penalizing those employees who follow it. It should be noted that, about a year after the Saskatchewan Court of Appeal rendered its decision, the legislation was amended to add the following definition:

“74(3) In this section, “lawful authority” means:

(a) any police or law enforcement agency with respect to an offence within its power to investigate;

(b) any person whose duties include the enforcement of federal or provincial law with respect to an offence within his or her power to investigate; or

(c) any person directly or indirectly responsible for supervising the employee.”

Therefore, the Court’s interpretation had already been expressly adopted by the legislature. (For information on federal initiatives concerning whistleblower protection see “Federal whistleblower legislation receives Royal Assent” on our What’s New page.)

In early February 2006, it was reported that Merk received a settlement of $240,000 and is to be reinstated to her position.

For further information, please contact Steven Williams at (613) 940-2737.