Court Invalidates ESA Contract for not Including Benefits, Again:

In King v DST Systems ( 2018 ONSC 533} Dow J.was faced with an   ESA termination clause that referred to ” pay” but did not refer to benefits. Moreover the clause also said ” and you shall have no further or other entitlement in that regard”,
The Court said as follows:
“The failure to specify all types of remuneration available as part of severance due and owing is contrary to my understanding of Justice Laskin’s analysis in Wood v. Fred Deeley Imports Ltd., supra. I am reinforced in this understanding by the defendant’s acknowledgment they did not provide for all the types of remuneration it was providing to the plaintiff as part of the payment of the two weeks’ notice.”
His last sentence is somewhat concerning because it seems to imply that if the employer had in fact provided benefits over the ESA notice period that that would somehow remedy the situation. Wood v Fred Deeley however makes it clear however that we are only to look at the wording of the contract, not the actions or inactions of the Employer at the time of the discharge. This was intended to disallow the Employer from ” bootstrapping” an illegal agreement into a lawful termination agreement by filling in the deficiencies at the time of discharge.
I have not set out the actual contract language as the decision did not do so. It certainly would be better for the development of the law if judges set out the full clause under review so that the reader would know exactly what language was either invalidated or upheld.

    Release Does Not Oust the Jurisdiction of a CLC Unjust Dismissal Adjudicator:

    In Li v Bank of Montreal ( 2018 CarswellNat 1229 ) Adjudicator Webster had a situation where a dismissed employee signed a release after receiving legal advice, got the money ( and probably spent it) but afterwards initiated a Section 240 Unjust Dismissal complaint under the Canada labour Code.

    Citing various Federal Court decisions , the Adjudicator said that she had no jurisdiction to dismiss the complaint simply because the employee signed a release before she had filed her complaint.

    In her final paragraph she said :

    The Agreement and Release signed by the parties in April of 2017 is not a bar to the hearing of the Complaint of unjust dismissal, but may be an important consideration with respect to an appropriate remedy if the dismissal is found to be unjust.

    How to avoid this outcome?

    As there is very short 90 day window for a complaint to be filed, if the release was signed after the 90 days then the employee would be barred from even filing a complaint.

    I suppose the prudent federal employer will have to first wait 90 days, then make inquiries if a complaint has been filed and only then settle with the employee.

    Sounds stupid , no? That the law for ya.

    Court Orders Wide Financial Disclosure In Dismissal Case:

    In Gray v Promark Electronics ( 2018 ONSC 2298) Master Weibe had a situation where the dispute centred around the basis for how the employer could alter the Plaintiff’s commission plan.

    The Plaintiff said that it was based only on his sales. The Defendant said that it had an unfettered discretion to change the plan at any time and had done so in the past on 4 occasions based upon the company’s profitability and the diversification of the sales portfolio.

    The Defendant produced the relevant financial statements but little more. On discovery the President was asked for more detailed financial information and refused.

    At the motion to compel undertakings and produce the documents requested, the defendant did not deny the relevance of the documents being requested but said the request was not proportionate and a fishing expedition.

    Well, the Plaintiff gets to go fishing. The Master found that as there was a real dispute as to why and how the employer had changed the Plaintiff’s commission in the past, that he was entitled to receive broad disclosure .

    The lesson here is if you allege a valid business reason for exercising a discretion, be prepared to back it up with extensive disclosure. For Plaintiffs, requesting extensive financial disclosure on relevant items may be a useful tactic to encourage the Defendant to settle as they do not want to go through this extensive and expensive exercise and may dread that this information may go public one day.

    Judge Nullifies ESA Termination Clause But Offers Advice On How To Draft Better One:

    In Bergeron v Movati Athletic ( Group ) Inc. ( 2018 ONSC 885) Justice O’Bonswain found that the following termination clause was not enforceable :

    Movati Athletic Inc. may terminate your employment without cause at any time during the term of your employment upon providing you with notice or pay in lieu of notice, and severance, if applicable, pursuant to the Employment Standards Act, 2000 and subject to the continuation of your group benefits coverage, if applicable, for the minimum period required by the Employment Standards Act, 2000, as amended from time to time.

    The judge’s main criticism was the clause does not make clear that the common law right of reasonable notice was clearly excluded.

    Then for some reason , the Judge redrafted the clause and said if it had been like this, then it would have been upheld.

    Movati Athletic Inc. may terminate your employment without cause at any time during the term of your employment upon providing you with notice or pay in lieu of notice, and severance, if applicable, only pursuant to the Employment Standards Act, 2000 and subject to the continuation of your group benefits coverage, if applicable, only for the minimum period required by the Employment Standards Act, 2000, as amended from time to time.

    I do not believe that this was a good idea, for the following reasons:

    First of all I can spot at least these problems with the new clause drafted by the judge :

    1. The ESA standard for excluding termination pay and severance pay is is not just cause but rather the higher standard of wilful misconduct.
    2. The reference to ” only for the minimum period required by the Employment Standards Act” seems to only apply to the benefit extension period, not termination and severance pay. This is at least ambiguous.
    3. The extension of benefits” subject to the continuation of your group benefits coverage” would infer that if the insurance provider has a clause which precludes for coverage immediately upon the termination of employment ( which is common ) then this clause would deny coverage for the termination period, which is a violation of the ESA.

    Second, this Judge is saying to  employers that if you use this clause you will win. This may limit the degree by which other judges view future similar clauses as it looks as if this one has been sanctified by the Courts.

    Third, it is undoubtably the role of the Courts to rule on the legality of existing contract language and to give guidance for future drafters. However I think that the Courts go too far when they assume the role of drafters of contract clauses. We all know that employers draft employment contracts, especially ESA limiting agreements. Why should the role of the Courts be to actually draft contract clauses  that encourage employers to limit employee termination entitlements to the statutory minimums? Why not instead encourage employers to draft clauses that mimic the common law entitlement?

    Court are supposed to be the arbiters in employment law disputes, not advocates for one side.Employers in Ontario have access to excellent management counsel who know how to draft fair and binding employment agreements. Drafting is their job, not the Courts. If they get it right they win. If they get it wrong they lose.

     

    OCA Awards Cost of Benefits and Bonus over Notice period :

    Sometimes it takes the Court of Appeal to remind trial judges that some areas of wrongful dismissal law are set and not to be changed by them.

    In Singer v Nordstrong Equipment ( 2018 ONCA 364 Justice Feldman again explained two basic principles of employment law in Ontario:

    1) The correct way of valuing lost benefits during the notice period is the cost of replacing the benefits, or more exactly the cost to the employer in providing those benefits, The Plaintiff need not prove out of pocket costs.

    2) In assessing the entitlement to bonus over the notice period, the Court first determines if the bonus was an integral part of the Plaintiff’s compensation package . and if the answer is ” yes” then ” if ” there is nothing in the bonus plan that negates entitlement to a bonus during the a period of reasonable notice , damages for wrongful dismissal include compensation  for loss of the bonus ”  In determining the quantum of the bonus the Court took the two year average of past bonus payouts.

    9 Months Notice for a 57 year old General Manager with only 2.6 Years Service

    In Chambers v Global Traffic Technologies Canada Inc ( 20168 ONSC 2000)  Glustein J.  found that reasonable notice for a 57 year old General Manager making $208,000  who  had 2 years + 6 months service was 9 months.

    Some of the cases submitted by the employer consisted of finding of reasonable notice as an alternative finding, in that the judge found that there was cause or an enforceable contract. The judge rejected the argument of plaintiff’s counsel that these cases should be ignored or discounted.

    Regarding the bonus issue the Judge commented ” Bonuses which were earned during the period prior to termination or would have been earned in the reasonable notice period are payable upon termination, even if payment of the bonus would have been outside the notice period”

    Of note is that the judge distinguished, properly in my opinion, between earning a bonus and when a bonus is payable. The argument is that once a bonus is earned it becomes a wage under the ESA and thus can never be forfeited, no matter what the contractual language says. The analogy is that if you had a salary of $500/ week and were paid on the 1st and 15th of the month, but were terminated with just cause ( or quit) on the 14th, could an employer deny you your wages that you earned from the 1st to the 14th because your employment contract said that you had to be in the employment of the employer on the payday to be paid your wages?

    Of course the answer would be NO.

    Spoiler Alert: Counsel for the plaintiff was my eldest son , Matthew Fisher.

    18 Months Notice for 6.8 Years of Service :

    In Hale v Innova Ophthalmics ( 2018 ONSC 1551) Justice Carole Brown awarded 18 months notice to a 59 year old President making $300,000 / year who only had 6 years and 8 months total service. 

    Other than quoting the usual Bardal factors in determining  the appropriate notice period,  the Judge seemed to also consider these factors:

    1) The Plaintiff was unemployed for 30 months.

    2) The Plaintiff felt that the allegations of after acquired cause and the failure of the Defendant to provide references made his job search more difficult.

    This is an exceptionally high notice period for an employee with such moderate service.

    A search in my Wrongful Dismissal Database for Upper Managers with between 6 and 8 years service and between the ages of 54 and 64 shows an average of 12.5 months notice being awarded by Courts across Canada.

    The judgment does not reference any cases cited on the issue of reasonable notice. 

    Court Sets Out 4 Elements to Set Aside a Release:

    In Manak v Worksafe BC ( 2018 BCSC 182 ) Justice Branch had a case where a manger sought to set aside a Release that she had signed upon being terminated with allegations of just cause. Had cause not existed, 18 months would have been proper notice. The settlement was for 4 months.

    The Court said all four of these factors were necessary to overcome a Release:

    1. A grossly unfair and improvident transaction; and

    2. The victim’s lack of independent legal advice or other suitable advice; and

    3. An overwhelming imbalance in bargaining power caused by victim’s ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility, or similar disability; and

    4. The  other party’s knowingly taking advantage of this vulnerability.

    In this case the Court found that the Release was valid because:

    1. Although 4 months was very low, one had to factor in the significant chance that just cause would be upheld, therefore it was not grossly unfair that a compromise was agreed to. In this case the judge actually  held that just cause had been proven.
    2. Although in fact she did not have independent legal advice, she had sufficient time to do so but chose not to, she did her own internet legal research and she lied to her employer and told them that she had received legal advice before signing the Release.
    3. She was a manager, not a “low level ” employee. She was aware of the dismissal process, she had time and access to legal research, she spoke to other managers about her situation and she was not under undue economic pressure as either way she was going to get her ” healthy” pension.
    4. She had adequate time to consider her options. She made her decision in less time than the employer required. She carefully thought through the consequences. She negotiated some modest improvement in the settlement. There was no evidence of pressure from the employer other than the 24 hours that she was given by the employer to accept or reject the offer.

    Plaintiff Gets Bonus Over Notice Period Even Though Employer Cancelled Bonus Plan Months After Dismissal :

    In Manastersky v RBC ( 2018 ONSC 966 Monahan J. ) had a 58 year old  Managing Director with over 12 years service. One half of the Plaintiff’s  compensation was a Carried Interest Plan ( CIP). The plan contained a provision which allowed RBC to terminate the plan in June 2014, which they did. The CIP also contained a provision which allowed immediate vesting of all outstanding CIP amounts upon termination without cause.

    The Plaintiff was terminated without cause in February 2014 and paid out his CIP entitlement up to the date of termination.

    In awarding the Plaintiff 18 months notice, the Judge awarded the lost CIP for the entire notice period, even though that period was almost a year longer than the time in which the CIP had been cancelled. He based the quantum on a historical average of past payouts.

    The judge did so for 2 reasons:

    1) The provision that allowed RBC to terminate the CIP in June of 2014 was not clear language that detracted from his common law entitlement to reasonable notice.

    2) Had he not been terminated in February  and was still employed in June when the CIP was cancelled, if RBC not  replaced the lost CIP with an alternative plan, that would have been a constructive dismissal .

    I certainly agree with point #2 but point #1 is somewhat troubling. If the purpose of the doctrine of reasonable notice is to put the Plaintiff into the same economic position that he would have if  had been permitted to work out his notice period, then he , along with everybody else who received the CIP and had it cancelled, would have taken a economic hit. Why should he do better because he was let go?

    The flip side is what if halfway during the notice period the compensation went up because the Employer did very well. Should the Plaintiff’s damages not reflect this uptick or should he be limited to his historical earnings?

    In Chann v RBC ( 2004 ONSC 66310) the Court looked at what actually happened over the notice period in determining what his bonus would have been had the Plaintiff been allowed to work out the notice period. As overall bonuses were down 15% over the relevant period, the Judge used the same factor is calculating the  damages over the notice period.

    Sexual Harassment Not Covered by Release Covering Issues Arising From Employment :

    In Watson v Salvation Army ( 2018 CarswellOnt 2916) Justice Gordon had a situation where the Plaintiff was suing her former manager for sexual harrassment after having previously settled with her former employer and signed a Release which said as follows:

    “This release of claims shall include any claims against anyone or any organization in any way related to or connected with my employment or ending of my employment.”

    The Judge found that this did not protect the former manager  even though these events occurred at work because ” sexual harassment, intimidation and other improper conduct are not connected to employment . This are clearly separate items ” 

    How to avoid this outcome ?

    The Judge said ” specific language to such claims would need to be added to the Release to bar the present claim”.

    Does this mean that every employment release must mention sexual harassment, sexual assault etc ? What about racial discrimination, physical assault, or generalized harassment ? Are these also ” not  connected to employment “?

    Does this mean that she could go back and again sue the Salvation Army for vicarious liability for the sexual harassment that she endured from her former boss?

    I think the Judge got this wrong.

    Of course sexual harassment is ” connected with employment” insofar as it exists in most cases because of the employment relationship, especially like in this case where it is the boss harassing an subordinate.

    That is why making a sexual advance to a subordinate in the  workplace is qualitatively different than making a sexual overture to a stranger in a bar.

    Sexual harassment is all about the power that derives from the inherent power imbalance in the workplace.

    One gets the feeling that the Judge didn’t want the former manager to get the benefit of the very low settlement ( $10,000) negotiated between the Army and the Plaintiff. At the time of her settlement the manager was still in the Army’s employ. I am sure that the Army intended at that time that this settlement would cover all their employees, including the manager.

    If the Plaintiff wanted to settle with her employer but not her harasser, she could have negotiated  a carve out in the Release. In my experience that would have resulted in no settlement.

    Settlements and releases are essential to resolving employment disputes. The only thing that the employer is buying is peace. Allowing releases to be set aside for anything other than fraud or misreresentaion will have a negative effect on resolving future employment disputes.