In the matter of Commission des normes du travail v. Compagnie d’assurances Standard Life du Canada1, the Court of Québec had to decide whether an employer could file a counterclaim against an employee in proceedings in which Quebec’s Labour Standards Commission2 (the “Commission”) was suing the employer on behalf of the employee. It should be noted that the majority of the Court’ of Québec’s previous decisions were to the effect that it could not, despite the fact that the Court of Appeal had previously suggested that an employer could do so.

The facts are as follows. Following the termination of her employment, the employee filed a complaint before the Commission because the employer refused to pay her $2,301 for unpaid vacation days. The employer maintained that it owed her nothing, as the employee had received salary advances of more than $5,000 and had signed an undertaking to repay that amount, which she had not fulfilled. The employer accordingly set off the amount due by the employee from the amount it owed her, resulting in a balance in its favour of $2,589.93, for which it filed a counterclaimed against the employee.

The Commission filed a motion to dismiss the counterclaim filed by the employer on the grounds that (i) the Labour Standards Act, (ii) the majority of the case law from the Court of Québec did not permit employer’s to file counterclaims against their former employees in cases like the present one and (iii) the employee’s undertaking to repay the salary advances did not allow the employer to exercise its right of set off. In addition to the foregoing, the Commission maintained that it was not possible for the employer to claim the excess amount it was owed by the employee in a counterclaim, as the principal action was instituted by the Commission, a separate party, and not by the employee. As the employee was not party to the proceedings it argued that a counterclaim was not possible.

The Court of Québec rejected the Commission’s arguments and allowed the employer to make its defence and counterclaim against the employee in a single proceeding. It held that the defence of set off is a principle recognized by the courts, and because the employer was entitled to invoke against the Commission any ground of defence it had against the employee, it could file a counterclaim for the excess amount it was owed by the employee for salary advances that had not been repaid by same.

The Court of Québec also pointed out that it was bound to respect the principle of proportionality set forth in the Code of Civil Procedure. Given the small amount at stake, the Court felt that it would be inappropriate to oblige the employer to institute a separate proceeding against the employee in order to claim the excess amount it was owed and that it would be preferable to have all the litigious issues between the parties dealt with in a single proceeding.

It is thus distinctly possible that, pursuant to the action instituted by the Commission against the employer, it will ultimately be the employee who is ordered to pay damages and interest to the employer.