Another Court Determines that Termination During COVID Pandemic Extends the Notice Period :

In Miller v. Luminultra Technologies Ltd ( 2022 NBQB 060) Justice Morrison had this to say when awarding a 10 month notice period to a 55 year Marketing Manager with 6 years service who was terminated two months into the pandemic :

Plaintiff’s counsel suggests that consideration of the pandemic in determining reasonable notice constitutes a novel issue and that, in considering the same, this Court would be making “new law”. I do not necessarily agree with that characterization. In my view, the pandemic and its impact on the labor market is merely an extension of one of the factors the Court is directed by Bardal to consider: availability of alternative employment. While there is no evidence in the Record of the specific impact of the pandemic on Ms. Miller or the job sector in which she was seeking employment, there can be little doubt that the pandemic and the shutdowns associated with it would have had some impact on Ms. Miller’s ability to find new employment. I agree with the reasoning in Iriotakis that the pandemic is one of many factors to be considered when assessing reasonable notice. I also agree that termination at the point in the pandemic when the Plaintiff was terminated would tend to “tilt” the reasonable notice towards a longer range. Having regard to Ms. Miller’s age, her length of service (six years) and availability of alternative employment, I conclude that the reasonable period of notice is 10 months.

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Ontario Court of Appeal Explains Difference Between Common Law Just Cause and ESA Wilful Misconduct :

In Render v. ThyssenKrupp Elevator (Canada) Limited, 2022 ONCA 310 Justices Feldman, Pepall and Tulloch reviewed a trial decision in which a long service employee was found to have been terminated for just cause because he slapped a female co-worker on her buttocks.

The court upheld the trial judges’ termination that this single incident amounted to just cause under the common law but found that it did not constitute wilful misconduct under the ESA. The net result was that the Plaintiff was awarded only his ESA entitlements.

This is what the Court said on this issue :

[79]       The law on the interpretation of the prohibition sections has been consistently stated to require more than what is required for just cause for dismissal at common law. In Plester v. Polyone Canada Inc., 2011 ONSC 6068, 2012 C.L.L.C. 210-022, aff’d 2013 ONCA 47, 2013 C.L.L.C. 210-015 (the reasons on appeal found it unnecessary to address this point), Wein J. explained that in order to be disentitled from the ESA entitlements under the “wilful misconduct” standard in the Regulation, the employee must do something deliberately, knowing they are doing something wrong. In the case before Wein J., the conduct was not preplanned and not “wilful” in the sense required under the test, which she described as follows at paras. 55-57:

The test is higher than the test for “just cause”.

“In addition to providing that the misconduct is serious, the employer must demonstrate, and this is the aspect of the standard which distinguishes it from ‘just cause’, that the conduct complained of is ‘wilful’. Careless, thoughtless, heedless, or inadvertent conduct, no matter how serious, does not meet the standard. Rather, the employer must show that the misconduct was intentional or deliberate. The employer must show that the employee purposefully engaged in conduct that he or she knew to be serious misconduct. It is, to put it colloquially, being bad on purpose”.

Both counsel seemed to be slightly bemused by the recent authorities that distinguish between the definition of just cause and wilful misconduct. In my view, however, the distinction is quite obvious: Just cause involves a more objective test, albeit one that takes into account a contextual analysis and therefore has subjective elements. Wilful misconduct involves an assessment of subjective intent, almost akin to a special intent in criminal law. It will be found in a narrower cadre of cases: cases of wilful misconduct will almost inevitably meet the test for just cause but the reverse is not the case.

The conduct of Mr. Plester was serious, and his failure to report deliberate. However, it did not rise to the very high test set for disentitlement to the statutory notice benefit. It was not preplanned and not wilful in the sense required under this test. There was an element of spontaneity in the act itself and at most a “deer in the headlights” freezing of intellect in the delay in reporting. On these facts willful misconduct should not be found. [Emphasis added.]

[80]       The differing standards at common law and under the ESA are further discussed in a number of cases, as well as in the Ministry of Labour’s Employment Standards Act Policy and Interpretation Manual (2020). The Manual states: “this exemption is narrower than the just cause concept applied in the common law and in collective agreement disputes. In other words, an arbitrator or a judge may find that there was just cause to dismiss an employee, but this does not necessarily mean that the exemption in paragraph 3 of s. 2(1) applies.” This principle has also been followed in a number of other authorities: see, e.g., Lamontagne v. J.L. Richards & Associates Limited, 2021 ONSC 8049, 75 C.C.E.L. (4th) 86, at paras. 16, 19, leave to appeal to Ont. C.A. requested, M53078; Cummings v. Quantum Automotive Group Inc., 2017 ONSC 1785, at para. 73; Ojo v. Crystal Claire Cosmetics Inc.,2021 ONSC 1428, 60 C.C.P.B. (2nd) 200, at para. 14; and Khashaba v. Procom Consultants Group Ltd., 2018 ONSC 7617, 52 C.C.E.L. (4th) 89, at para. 53.

[81]       In my view, the appellant’s conduct does not rise to the level of wilful misconduct required under the Regulation. While the trial judge found that the touching was not accidental, he made no finding that the conduct was preplanned. Indeed, his findings with respect to the circumstances of the touching are consistent with the fact that the appellant’s conduct was done in the heat of the moment in reaction to a slight. Although his conduct warranted dismissal for cause, it was not the type of conduct in the circumstances in which it occurred that was intended by the legislature to deprive an employee of his statutory benefits.

My Comments :

First of all I should note that my son, Matthew Fisher was trial counsel for the Plaintiff. However Chris Foulon was counsel for the Plaintiff at the Court of Appeal.

Secondly, this case sets out with great precision how difficult it is to prove wilful misconduct now that the  employer must prove a subjective intent, almost akin to the criminal test of intent.

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First Ontario Case to Say that CERB is Deductible from Wrongful Dismissal Damages :

In Livshin v. The Clinic Network Canada Inc., 2021 ONSC 6796 (CanLII) Justice Black had this to say about the CERB deductibility debate.

[93]        I agree that the amount of $8,000 that Livshin received in Canada Emergency Response Benefits (CERB) should be deducted from the overall award.

That’s it. That was the complete analysis.

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Termination Clause is Illegal Even Though Parties Were Sophisticated

In Livshin v. The Clinic Network Canada Inc., 2021 ONSC 6796 (CanLII) Justice Black had a situation where the termination clause referred to ” just cause” and as such was illegal under the Waksdale case. The Defendant argued that this should not matter as the parties were highly sophisticated, were both represented by lawyers and that the employment agreement was part of a larger sale of business transaction .

The Court held that there was no ” commercial imperative ” that prevented the contract from complying with the ESA.

This is the part of the decision that I love.

The Defendant argued that because the Plaintiff had a lawyer in his negotiations, he should be held to the contract, even if it was technically illegal . The Court’s response was as follows:

“TCN’s argument that Livshin’s representation by counsel should result in him being taken to understand the potential pitfalls of the Employment Agreement at issue here might be turned back on TCN to suggest that an employer, represented by counsel, particularly in the period after the Court of Appeal’s decision in Fred Deeley, ought to know better than to draft a termination provision that fails to comply with the ESA.”

The result of this illegality was immense as the employment contract was a for three year fixed term and thus the breech meant that the Plaintiff was entitled to the balance of the contract, not just reasonable notice . Thus the Plaintiff received compensation for 20 months , with no duty to mitigate.

I have always said that the most important part of any employment contract is the termination clause.

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Court Distinguishes Between Independent and Dependent Contractor:

In 1159273 Ontario Inc. v. The Westport Telephone Company Limited (2022 ONSC 1375) Justice Kershman had to determine whether the relationship between the parties was that of an independent contractor vs a dependant contractor as the Defendant had terminated the Plaintiff. The Plaintiff was not claiming an employment relationship.

In finding that the relationship was that of an independent contractor, the Court was influenced by the following factors :

  1. The two principals of the corporate entities, ( Tom was the Plaintiff and Steve the Defendant) arranged their complex corporate structure with the help of professional tax advisors, thus the structure was not imposed on the Plaintiff.
  2. Tom was a traditional employee of the Defendant from 1977 to 1996. From 1996 until his termination in 2019 he carried out the same duties but through the corporate Plaintiff.
  3. Tom worked full time for the defendant ( 40 hours a week ) and had the title of Director of Technical Services, President and Vice President at various times.
  4. Tom was a shareholder, an officer and a director of the Defendant. Tom and/or the corporate Plaintiff owned one third of the shares in the Defendant until shortly before his dismissal.
  5. An analysis of Tom’s income tax returns indicated that for a a period of 4 years  only 50% of his income came from the Defendant where the other 50% came from other sources. Of the last two years of his relationship with the Defendant , 70% of his income came from the Defendant and the remaining 30% came from other sources.
  6. The primary source of the income from other than the Defendant was from Ancillary Companies, which were all related to the Defendant.
  7. Tom’s income ( not the corporate Plaintiff) derived between 52 % 71% of his income from the Defendant, according to the relevant tax returns. The Court  found that this did not amount to income exclusivity, the central component of a dependant contractor relationship.
  8. Steve and Tom are brothers.
  9. Tom was publicly identified as an owner of the Defendant .
  10. Although Tom had various  executive titles, the Plaintiff, which is a corporation, did not. Of course it is obvious that only a real person can be an officer or a director.
  11. For the time that the Plaintiff had some shares in the Defendant, Tom effectively had some control over the Defendant as he was also a director and an officer, thus the Defendant did not control the Plaintiff to the degree necessary for a dependant contractor relationship to exist.
  12. Notwithstanding that the Defendant provided Tom with an office and thus the tools necessary to do his job, the Judge found that was not a factor in favour of dependant contractor status.
  13. Although there was no expectation of profit or loss in the consulting agreement between the Plaintiff and the Defendant, when one looked at the big picture, Tom ( who was not a personal litigant ) made a profit or a loss dependant on the overall success of the Defendant as he  was a shareholder for most of the time but not at the end.
  14. Although Tom was an integral part of the Defendant, the corporate Plaintiff was not.

My Comments:

This case is very troubling .

At times the judge completely separates Tom from the corporate Plaintiff as when he said that although Tom was the President of the Defendant , the corporate Plaintiff was not. and when he said that although Tom was an integral part of the Defendant the corporate Plaintiff was not.

At other times he looks at the tax returns of Tom, not the corporate Plaintiff, to determine what portion of the income was derived from the Defendant. and what was derived from other entities.

The Judge said at one point that 71% does not show economic exclusivity but 88% does ? Where is the dividing line?  The Judge quoted a Court of Appeal case which states the test as follows:

Exclusivity is a categorical concept — it poses an either/or question, and “near-complete exclusivity” must be understood with this in mind. “Near complete exclusivity” cannot be reduced to a specific number that determines dependent contractor status; additional factors may be relevant in determining economic dependency. But “near-exclusivity” necessarily requires substantially more than 50% of billings. If it were otherwise, exclusivity — the “hallmark” of dependent contractor status— would be rendered meaningless.

I would think that 71% was  “substantially more than 50% of billings”.

In any event, as the Judge found that the Ancillary Companies were the source of the other 30% of his non passive income and that the Ancillary Companies were all related to the Defendant, in essence 100% of his non passive income came the Defendant and its related entities.

Moreover the Judge mentioned a few times that this complicated corporate structure was designed by professionals to minimize Tom’s ( not the corporate plaintiff’s) income tax liability. So what. How is that relevant?

Excuse me, this should have been seen as a simple case of a person who for years was considered to be an employee of the Defendant and then the parties decided to change the structure to save taxes but the Plaintiff continued in the same functional role as before. Whether Tom made other monies over and above his full time job with the Defendant should also be irrelevant. Full time employees often have second or even third jobs. One can wear different hats at the same time. You can be an employee, a director, an officer and even a shareholder. Each has their own set of rights and remedies which are independent of each other. The termination of one status has no effect on the other. This is even more important when the other income is from companies related to the Defendant, not real third parties.

In fact, as the Judge determined, at the time of his dismissal neither Tom nor the corporate Plaintiff owned any shares in the Defendant as Tom had sold his shares to an arms length third party against the wishes of his brother who wanted to buy out his brother but they could not agree on the price.  This is apparently what caused the Defendant to terminate the arrangement with the Plaintiff.

In non legal terms, Tom and his brother were partners and when Tom would not agree to the price his brother was offering, he sold his shares to a stranger, which upset the brother. The brother  returned the favour by firing Tom without paying him a dime.

I am not aware if this case is being appealed.

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