Court Rules That IDEL Leave is NOT a Constructive Dismissal:

In Taylor v Hanley Hospitality ( 2021 ONSC 3135 ) released June 7, 2021, Ferguson J. ruled that Countinho v Ocular Health Centre ( 20121 ONSC 3076 was wrongly decided and thus does not have to be followed. .The Plaintiff was put on IDEL leave on March 27, 2020, then recalled and returned to work on September 3, 2020.

In essence the Court found that the ESA provisions displace the common law which says that in most cases a temporary layoff is a termination . Furthermore to rule otherwise would make the ESA amendments irrelevant as it would not protect employers from lawsuits.

Here is part of the Judges’ analysis :

[21] I agree with the defendant’s submissions regarding this case:

(i) no matter which authority one wants to consider on the point – it offends the rules of statutory interpretation to give an interpretation that renders legislation meaningless. That issue was never addressed in Coutinho; 

(ii) Coutinho never addressed the consequential analysis – what does IDEL and the Regulation actually mean if not what Tim Hortons says it means?;

(iii) what we see from the cases is that s. 8(1) simply sets out that the ESA does not set out an exclusive forum for addressing matters set out in the Act. The employee can make a complaint under the Act or seek redress in the courts; 

(iv) the courts have never said that the Act does not or cannot displace the common law. In fact, they have said the opposite. The Court of Appeal addressed this in Elsegood4 (relied upon by the plaintiff in this case):

(v) if we paraphrase and apply that reasoning to this case, we get this: 

(a) the irony is that Elsegood was a constructive dismissal case; 

(b) the court put it succinctly: “Simply put, statutes enacted by the legislature displace the common law”; 

(c) in Elsegood, the court addressed the fact that s. 56 provides that a person was terminated “for the purposes of section 54″ of the ESA. The employer was arguing that the employee was not terminated at common law. The court disagreed. The court found that “A s. 56(1) termination is a termination for all purposes”. The court stated that it is a “faulty premise that the common law continues to operate independently of the ESA”.

v) if we paraphrase and apply that reasoning to this case, we get this: 

(a) The employee was on a leave of absence (IDEL) for all purposes; 

(b) The employee was deemed not to be laid off for all purposes; 

(c) The employee was not constructively dismissed for all purposes; 

(d) The employee cannot be on a leave of absence for ESA purposes and yet terminated by constructive dismissal for common law purposes. That is an absurd result. That is the same kind of “untenable” result that the employer was seeking in Elsegood.

(vi) in summary, s. 8(1) has never been interpreted to go as far as the court went in Coutinho and the courts have never before held that s. 8(1) prevents the ESA from displacing the common law. The Court of Appeal, which is binding on this court and the court in Coutinho, has said the opposite, in a constructive dismissal case;

(vii) S. 8(1) of the Act merely confirms that the ESA is not the exclusive forum to seek redress for issues involving the Act;

My Comments :

We now have two cases within two months which come to completely opposite conclusions. I am sure that this will be heading to the Court of Appeal soon. Hopefully they will give us a clear and concise answer.

Insofar as this Judge is concerned, an employee could be put on IDEL from March 2020 to July 3, 2021 ( 17 months) and have no remedy in law.

Presumably to this judge  the pre-COVID rules would also displace  the common law. This would mean that employers could temporarily layoff any employee for up to 35 weeks. Does the mean that an employee could be recalled from IDEL on July 3, 2021 and then immediately be put on a 35 week temporary layoff, again without any legal recourse? That would mean that employee could be without pay for up to 25 months without any legal recourse.

That would certainly be a very big change in the law.

Does this now mean that instead of terminating an employee, any employer could just  issue a temporary layoff notice of 35 weeks.? When they issued a recall notice 35 weeks later, many employees would either have started another job or simply did not wish to return to such unstable employment. Furthermore I am not sure that the ESA allows for the employee to claim that the layoff is a sham ( for instance because the employer immediately hires a replacement ) and therefore the temporary layoff is a disguised termination. This could easily lead to abusive employer behaviour.

In this particular case, the employer did in fact recall the employee after 5 months. What would be the result if instead of alleging constructive dismissal the Plaintiff claimed breach of contract for non-payment of wages? The law of contract allows the innocent party to either sue on the contract ( thus only claiming lost wages ) or to repudiate the contract ( by claiming constructive dismissal ). In this case, the employees’ loss would be limited to the actual loss which was 5 months, so suing for back wages vs claiming constructive dismissal damages would produce the same result. My quick reading of the IDEL rules would only seem to exclude the right to claim constructive dismissal, not wages owing from a breach of contract.

The one thing you can say about employment law in Ontario is that it certainly not getting easier or more predictable .

If you want a copy of this case email me at barryfisher@rogers.com

BCSC Holds that CERB Payments Reduce Wrongful Dismissal Damages:

In Hogan v 1187938 B.C. Ltd ( 2021 BCSC 1021 Justice Gerow held that the damages for wrongful dismissal damages should be reduced by the amount of CERB payments received by the Plaintiff for the time that these two periods overlapped.

This is what the Judge said on this issue:

[99]      The EI benefits should not be deducted. Section 45 of the Employment Insurance Act, S.C. 1996, c. 23, requires a claimant to repay any unemployment benefits if an employer becomes liable to pay their earnings. 

[100]    The plaintiff received $14,000 in CERB payments in 2020. The CERB payments raise a compensating advantage issue. If the CERB payments are not deducted the plaintiff would be in a better position than he would have been if there had been no breach of the employment contract. 

[101]    But for his dismissal, the plaintiff would not have received the benefit. The nature of the benefit is an indemnity for the wage loss caused by the employer’s breach of contract. There is no evidence that the plaintiff contributed to obtain the benefit by paying for it directly or indirectly. 

[102]    In my view, this case is distinguishable from Iriotakis where the CERB payments were not deducted. In Iriotakis, the plaintiff was terminated after 28 months. The court determined the reasonable notice period was three months, and determined that on the specific facts of the case, particularly the disparity between the payments and the employee’s loss of salary and significant loss of commission, it would not be equitable to reduce his entitlement to damages by the CERB payments. In Iriotakis, the employment contract provided the plaintiff was not entitled to commission income upon termination. The evidence in Iriotakis was that the plaintiff’s salary on which his past wage loss was based amounted to less than half of his actual income. 

[103]    In this case, the plaintiff’s damages per month are based on the income he would have earned if he had continued to work during the reasonable notice period. In other words, the plaintiff will be compensated for the income he would have lost. He did not suffer additional losses due a loss in commission income. As a result, there is not a large disparity between the plaintiff’s actual loss and the amount of damages he will receive. 

[104]    In Iriortakis the award for the lost wages was reduced by more than half as a result of the plaintiff’s employment contract, and retaining the CERB payments would not have put the plaintiff in a better economic position than he would have been but for the breach. In this case, if the CERB payments are not deducted the plaintiff will be in a better economic condition than he would otherwise be.

[105]    The CERB payments are not private insurance, and neither the employer nor the employee contributed to them. As a result, they are not delayed compensation or part of the plaintiff’s earnings. There is no evidence that the plaintiff will have to repay the CERB. 

[106]    The CERB payments were intended to be an indemnity for the type of loss resulting from the employer’s breach but the employee had not contributed in order to obtain the entitlement. In my view, this is similar to the situation in Sylvester and Ratych, where the benefits were deducted as the employee had not contributed in order to be entitled to the benefit. 

[107]    As a result, I see no basis to depart from the general rule that contract damages should place the plaintiff in the economic position he would have been in had the defendant performed the contract. 

[108]    Having considered the case law and the evidence, I have concluded the CERB benefits of $14,000 should be deducted from the award of damages. 

My Comments :

This case will undoubtably create a lot of controversy in the employment law field as the general practice up to this point is that the employer did not get to take into account CERB payments when calculating wrongful dismissal damages.

One of the main reasons that this judge ruled in this way was that EI is repayable and this avoids the overcompensation argument. However for EI benefit periods that started after September 27, 2020 and until September 25, 2021, this is no longer the case as a result of amendments to the EI regs, which are explained below :

Interim Order 8 under the EI Act reads as follows :

153.193 The following are to be excluded from the earnings referred to in section 35 of the Employment Insurance Regulations:

(a) any pay or earnings referred to in subsection36(8), (9) or (19) of those Regulations if

(i) the claimant’s benefit period begins on or after September 27, 2020, or

(ii) the pay or earnings are declared to the Commission on or after September 27, 2020 and would otherwise have been allocated under section 36 of those Regulations to a week beginning on or after September 27, 2020;

Here is the link to the Interim Order: https://lnkd.in/gfZCfni

What this would seem to mean is that if a person were terminated on or after September 27, 2020 then any termination pay, severance pay or wrongful dismissal damages they receive does not affect their EI entitlement.

Thus you can now get EI and termination pay etc for the same period.

AND

You presumably do not have to repay EI for wrongful dismissal damages received if the termination took place on or after September 27, 2020.

This provision expires on September 25, 2021.

Therefore for terminations that take place between September 27, 2020 and September 25, 2021 you need not even check with EI regarding any overpayment owing.

The question then becomes, since EI is not repayable now in certain cases, should the employer also get to claim that as a damage reduction? Personally I think not because the employee pays into EI and thus is dramatically different than CERB. In that case there is a tradeoff between two legal principles, the principle to avoid overcompensation vs the collateral benefit rule which says that the wrongdoer should not benefit from the innocent party purchasing insurance against a loss.

But who knows what will happen next in these weird times. Stay tuned.

” Subject to the ESA ” Does Not Validate an Illegal Termination Clause”

In Perretta v Rand A Technology ( 2021 ONSC 2111) Sanfilippo J. considered the following termination clause

Termination With Cause – We may terminate your employment for just cause at any time without notice, pay in lieu of notice, severance pay, or other liability, subject to the ESA. For the purposes of this Agreement, “just cause” means just cause as that term is understood under the common law and includes, but is not limited to: [list of Eleven Categories of Just Cause].

In light of Waksdale v. Swegon North America Inc., 2020 ONCA 391, the Court found that without the ” subject to the ESA ” language, this clause was clearly void.

The question then  becomes does the addition of these magic words save the day ?

This is what the Judge said :

[53] I accept Rand’s submission that, considering the entirety of the 2018 Employment Contract and the Termination With Cause Provision as a whole, there is a way that the Termination With Cause Provision can be read that is compatible with the ESA. The words “subject to the ESA” would have to be found to disqualify or neutralize the Offending Categories of Just Cause.

[54] Read generously, and by an employee well-versed in the ESA, the Termination With Cause Provision states in its first sentence that Ms. Perretta’s employment could be terminated at any time, without notice or pay in lieu of notice or severance pay, only if her conduct rose to the level of O. Reg. 288/01 of the ESA. However, the next sentence of the Termination With Cause Provision says the opposite. It says that Ms. Perretta’s employment can be terminated at any time, without notice or pay in lieu of notice or severance pay on the basis of the Offending Categories, which do not rise to the level of O. Reg. 288/01 of the ESA. Put differently, the second sentence of the Termination with Cause Provision would activate the Offending Categories as grounds for a ‘with cause’ termination, and the first sentence of the Termination with Cause Provision would deactivate the Offending Categories as grounds for a ‘with cause’ termination.

[55] The test of validity of a termination provision is not to struggle to find a way that the provision can be read consistent with the ESA, however convoluted. When the clause is ambiguous, as it is here, it must be read in a manner that provides the highest benefit to the employee. I adopt the statement by Sossin J. (as he then was) in Alarashi v. Big Brothers Big Sisters of Toronto, 2019 ONSC 4510, at para. 54-55: “While the clause can be read in a way that is compatible with the ESA, that is not the test for a valid termination clause, as affirmed in Andros. Because the clause could also be conveying to Alarashi that he may not be entitled both to termination pay and severance pay, the clause is at best ambiguous. In the face of ambiguous wording, the terminated employee is entitled to an interpretation that would lead to the highest level of benefit.”

[56] Although Rand says that its provision is “subject to the ESA”, the inclusion of the Offending Categories “flies in the face” of compliance with the ESA: as in Rossman, at para. 39. The ambiguity must be resolved in favour of Ms. Perretta by finding that the termination provision contravenes the ESA and is thereby invalid.

[57] The Defendant submitted that the ambiguity can be saved by the later provisions that state that when Rand’s employment contract results in a contravention of the ESA, Rand will comply with the ESA. These are ‘saving provisions’, and their proper use would be to safeguard against changes to the legislation made after the contract is concluded.

[58] An employer’s attempt to contract out of the ESA cannot be saved by a ‘saving provision’: Rossman, at para. 35: “It cannot be the case that the saving provision here – designed to make the Termination Clause compatible with future changes to the ESA – could reconcile a conclusory provision that is in direct conflict with the ESA from the outset”. Rand’s contract did not comply with the ESA “from the outset” and cannot now be saved by a savings provision.

My Comments:

In light of Waksdale, many employment contracts in Ontario need rewriting. This case should be of great benefit to those drafting new contracts who believe that all they have to do is include ESA savings  language .

Rather than write an illegal clause with ESA savings language, it is better to write the entire clause to be in compliance with the ESA from the beginning. These saving clauses are only relevant if the underlying statute or regulation change in the future. They do NOT cover changes in the common law or in how a Court may interpret a clause over time.

If you like a copy of this case, email me at barryfisher@rogers.com

 

 

 

 

 

Court Awards $5,660 in Notice But $60,000 in Aggravated & Punitive Damages :

In Fobert v MCRCI Medicinal Cannabis Resource Centre ( 2020 BCSC 2043) Fleming J. awarded 8 weeks notice to a 25 year old clerical employee with 1.5 years service.

However, the Judge was very concerned about the treatment the young employee received as she was being terminated. Here is what the Judge said:

[99] I note the employer’s dealings with the employee after the dismissal may be considered as part of the manner of dismissal: see Acumen Law Corporation v. Ojanen, 2019 BCSC 1352 at para. 126.

[100] I have no difficulty in concluding aspects of the defendants’ conduct during the dismissal process, after the termination meeting on May 24, 2019 significantly breached an employer’s obligation of good faith and fair dealing. That conduct included the ongoing withholding of Ms. Fobert’s unpaid wages and statutory severance, both modest amounts, well after the defendants were aware of their statutory obligations, and most significantly Mr. Liu’s conduct during the June 6 meeting.

[101] To be clear, I view Mr. Liu’s conduct during the June 6 meeting as appalling, harsh and reprehensible. He made false and serious allegations of financial impropriety, used aggressive and intimidating language and repeatedly engaged in a range of bullying tactics. Further, although he did not yell, his tone and manner of communicating were intimidating.

[102] To be specific, Mr. Liu alleged more than once that Ms. Fobert was part of a group of employees who had engaged in the misuse of enormous amounts of money although she never had any spending authority. In an obvious attempt to intimidate, he told her that the rest of the group had signed off without any severance. He made it clear the defendants were willing to sue and withstand being sued, emphasizing their financial advantage and his own. After indicating she would be offered nothing, he offered $500 severance, an amount well below her statutory entitlement. Mr. Liu then pressured Ms. Fobert into accepting the offer immediately, telling her it would be revoked after the meeting and refusing to put it in writing. He also commented that meeting over such a minor financial matter was not worth his time, which was disparaging if not contemptuous. The same is true of his response to a perfectly reasonable question about contact information, “I’m not you legal counsel. Go find the guy, 500 bucks an hour, to tell you “

That got her $25,000 in aggravated damages.

When it got to assessing punitive damages, the Court also focused on the Defendant’s litigation conduct.

[117] Ms. Fobert also relies on the defendants’ conduct in the litigation, namely making allegations of serious misconduct in the response to civil claim, despite admitting she was dismissed without cause. The pleaded allegations include Ms. Fobert breaching a non-competition term in the Employment Agreement by accepting employment with an MCRCI competitor “immediately subsequent to her termination”; and disparaging the defendants and their Directors to four MCRCI employees around the time of termination, which caused lost business and the resignation of employees. None of the allegations were even raised at the trial.

Having described the Defendant’s conduct as ” harsh and reprehensible ” as well as ” vindictive and malicious ” the Judge also awarded $35,000 in punitive damages.

If you would like a copy of this case email me at barryfisher@rogers.com

 

 

Judge Warns Against Employer Motions for Summary Judgement:

In Brown v Bank of Nova Scotia ( 2021 ONSC 2696 ) Myers J. dismissed a motion brought by the defendant for a motion for summary judgement alledging that there was a pre-litigation settlement.

On the issue of costs the Judge had the following to say

It is relevant to me as well that the motion was brought in a wrongful dismissal action by an employer against a former employee who seeks notice pay. The risk to the plaintiff of motion practice in wrongful dismissal actions is obvious and significant. This is especially the case where the employer does not allege that it had cause for dismissal. In the overwhelming majority of those cases, the employee is owed some amount of money by its former employer. There are few circumstances in civil litigation where the strategic risk of motion practice is higher. The thought of an unemployed employee, who is owed money by the employer, having to pay costs to its former employer is a massive strategic lever due to the vulnerable circumstances often occupied by wrongful dismissal plaintiffs and the gross imbalance of economic power. There is therefore additional reason to dissuade motion practice in wrongful dismissal actions generally and to ensure that deep-pocketed employers do not make strategic gains by bringing longshot motions that they can afford to lose. Costs on a substantial indemnity basis could well be available in such circumstances. 

 

Court Rules on Repudiation of Termination Clause and Awards Punitive Damages for Litigation Conduct :

In Humphrey v Mene Inc ( 2021 ONSC 2539) Justice Papageorgiou in a 68 page decision awarded 12 months notice to a 32 year old COO making $90,000/year with 2.7 years service.

There was a number of interesting issues decided by the Court :

  1. The Court found that the  termination provision was unenforceable because there was no fresh consideration when it was introduced mid term. The Court found that merely changing her status ( but not her pay ) from a consultant  to an employee did not suffice as she had in law been an employee throughout this period anyways .
  2. More interestingly, the Court also invalidated the without cause termination clause on the basis of repudiation. This is the concept that an employer cannot rely on an otherwise lawful  without cause termination provision in certain circumstances . This is how the Judge set it out

[135] I do not read any of the cases before me as laying down the proposition that in all cases where an employer asserts cause and fails it may nevertheless rely upon a without cause termination provision afterwards. The law of wrongful dismissal is based in contract. In all of the above cases, the courts had before them specific agreements with specific clauses which the courts construed. If the parties specifically agreed that the without cause termination provision required an election at the time of termination or that it expressly covered only certain acts of constructive dismissal, I see no reason why a court should not enforce that.

[136] In my view, the following principles emerge from the above cases:

a. Where an employer alleges cause and fails, or withdraws its cause allegation, or repudiates an employment agreement through acts which constitute constructive dismissal, the employer is not precluded from subsequently invoking a without cause termination provision for the purpose of calculating the employee’s damages: Roden, Moore, Simpson

b. However, in all cases, it is a question of construction of the without cause termination provision before the Court as to whether, properly construed, the without cause termination provision applies. Such clauses are subject to strict construction: Ebert, Matthews.

c. Even if the contract, properly construed, permits an employer to terminate without cause after a failed for cause termination, there are some breaches or acts of repudiation which are so significant, or of such an order of magnitude, that they render a without cause termination provision unenforceable: Dixon. Although Dixon has not specifically been considered and accepted by appellate courts I find the reasoning compelling. All employment agreements are negotiated and agreed to on the basis of certain implied minimum expectations as to how the employer will conduct itself, the duty of good faith being one. An employee’s agreement to accept terms which significantly impact on the employee’s common law rights must be taken to be made in the expectation that the employer will comply with these minimum implied expectations. Where the employer significantly departs from such expectations, in my view, the employee should not be held to extremely disadvantageous provisions which he, she or they agreed to. This is not rewriting the contract but giving effect to what the parties must reasonably have intended.

d. However, minor or technical mistakes made in good faith by the employer will not constitute a repudiation sufficient to prevent the employer from relying upon the without cause termination provision: Amberer, Oudin.

In other words, if the Employer acts in a manner inconsistent with the duty of good faith, this may invalidate the termination clause because good faith is part of all contractual provisions.

The Judge then goes on to set out why in this case the Employer’s conduct was such that it had repudiated its own agreement

[137] I am satisfied that in the circumstances of this case outlined above, Ms. Humphrey has established on a balance of probabilities that Men’s conduct, objectively viewed, demonstrates an intention to no longer be bound by the December 2018 Employment Agreement, thus repudiating it. The conduct which I have found includes setting her up to fail, subjecting her to a toxic workplace, embarrassing and humiliating her before co-workers and clients after her suspension, significantly exaggerating performance issues and the evidence it had in support of these at the time of termination, and alleging cause when it knew or should have known it did not have it. These are not mere technical breaches made in good faith. Men’s conduct in this case goes to the heart of the employment relationship.

My Comment on Repudiation:

This concept of repudiation has the potential of forever changing the way employment law is practiced. It is an unfortunate common employer practice to allege just cause in situations where it is clear that it will fail and is being alleged simply as an intimidation tactic in order to get a better deal for the employer.  In this same category is the defendants’ counterclaim which alleges huge damages because of the plaintiff’s actions.

In the past if this tactic did not succeed in getting a settlement, the employer could simply drop the defence with little worry of any serious consequences. Now it seems that deploying tis tactics could have a serious blowback by invalidating an otherwise valid termination clause.

It is important to know that in this case, the Defendant had originally alleged just cause but had dropped the allegation before trial.

3. The trial judge also awarded the Plaintiff $25,000 punitive damages  because of the Defendant’s litigation tactics. The Judge referred to these actions of the Defendant as grounds for awarding these damages :

a) They led extensive evidence as to the Plaintiff’s poor performance even though they no longer alleged just cause .

b) Some of these performance issues related to a time before the Plaintiff was promoted to her COO position.

c) The Defendants pleadings referred to irrelevant matters which rose to the level of malice.

d) The Defendants never formally amended their pleading withdrawing the just cause allegation so that the public record was not corrected .

e) The Defendant either lied about the existence of certain documents or destroyed them.

f) The defendant breached two Court orders regarding production.

g) Most upsetting, the Defendant in their material made reference to the Plaintiff’s dating patterns in that she used an on line dating service . As the Judge said “ I find that Mene’s. need to refer to Ms Humphrey’s personal life very troubling. Who and how Ms Humphrey dates is no business of Men’s or they Court’s. 

By the way, the Court also awarded $50,000 in aggravated damages because of the mental distress suffered by the Plaintiff given the manner of the dismissal

Lessons to be Learned:

Although it seems OK for Plaintiff’s to routinely make out sized claims for unfair treatment, harassment and discrimination, it now seems quite risky for Defendant’s to use the same scorched earth tactics.

In any event, it is becoming clearer that the Court will scrutinize employer’s actions both before and during litigation and severely punish employers who act in a fashion outside the Courts’ vision of acceptable  behaviour.

Employment litigation may not be a tea party, but neither is it supposed to be a fist fight.

 

 

 

 

Temporary Layoff Just Prior to COVID Pandemic Amounts to Dismissal :

In Ristanovic v Corma ( 2021 ONSC 3351) Justice Dunphy had a situation where two long service employees were given temporary lay off notices, one on January 31, 2020 and the other on February 18, 2020. The reasons given for the layoff notices did not reference COVID and they were promised to be recalled within 35 weeks . In fact they were not recalled within that period. Neither plaintiffs were ever subject to temporary layoffs before .

The Defendant advanced a defence that there is an implied term of employment that where an unprecedented event such as a global pandemic occurs, then the employer would be allowed to temporarily lay employees off without constituting it a dismissal.

The Judge said “NO’ to this theory for two reasons:

1) The layoff letters occurred “significantly before the facts that evolved to the point of a global pandemic impacting our entire Province or country.” Here is the extract :

[16] The defendant took no serious issue with the foregoing summary of the law. Instead, the defendant urged me to find that there is an implied term in the contract of employment of both plaintiffs authorizing the employer to lay off an employee as was done here when faced with the extraordinary circumstance of a global pandemic. I was urged to give consider the admonition of the Court of Appeal in Mifsud v. MacMillan Bathurst Inc., 1989 CanLII 260 (ON CA) concerning implied terms in a contract of employment. In Mifsud, McKinlay J.A. said that when “there is no written contract it is necessary first to determine what terms are implied in the specific contract involved, and those terms are not those which the court considers reasonable, but rather what the parties would have agreed to when forming the contract, had they turned their minds to the type of situation which later transpired” (at para. 18). Mr. Prentice forcefully urged me to find that the pandemic is a once in a lifetime occurrence. Had the parties turned their mind to it when the contract was first entered into, they would reasonably have agreed to permit a temporary lay-off to safeguard the ability of the employer to re-hire them when the situation improved. 

[17] It might be noted that only a few lines below the foregoing passage from Mifsud that I was urged to consider, McKinlay J.A. also cautioned that the exercise of implying terms into an unwritten employment agreement should not be undertaken to impose upon the parties the Court’s view of a “reasonable and just” contract. The exercise is one of determining the objective terms of the contract the parties entered actually entered into.

[18] In effect, the defendant is asking me to imply into a contract of employment a form of force majeure clause. I am mindful of the need to decide only those matters that require a decision in this or any other case. On the facts of this case, I don’t think that the question of an implied “global pandemic” exception to the well-settled law prohibiting non-consensual lay-offs properly arises. I reach this conclusion for two reasons. 

[19] First, the lay-offs in this case arose significantly before the facts had evolved to the point of a global pandemic impacting our entire Province or country. The lay-off letters sent did not, in fact, purport to justify the lay-offs of either plaintiff on the basis of an emergency that was global in scope impacting all sectors of the economy. The defendant itself told the plaintiffs in writing that they were being laid off because of “political instability” and a fall-off in orders. These circumstances were only beginning to produce impacts in Canada even if they were nevertheless having an out-sized impact on the defendant’s business. Over the coming weeks and months, the situation in China that side-swiped the defendant’s business in late 2019 and early 2020 morphed into a global phenomenon affecting businesses and employment the world over. There were no lock-down orders in effect in Ontario at the time the plaintiffs were laid off. The plaintiff was not prohibited from operating and the plaintiffs were not forbidden from coming to work.

[20] Without employing hindsight, there is little to distinguish the situation as regards Corma in late January/early February 2020 from any other adverse situation that might commonly affect a business, even to the extent of causing 40% of its revenues to dry up. A retailer may find business impacted by a big-box store opening a block away; a manufacturer may find the market flooded with imports as a result of a change in tariffs or a free-trade agreement. Insolvency, recessions or the evolution of the competitive marketplace have never justified unilateral lay-offs under our law. 

[21] Whether it may be reasonable to imply some kind of a force majeure clause in the case of a business prohibited from operating or placed under severe and unforeseen operational limitations by government action is something that I do not need to determine here on these facts. The circumstances existing when these plaintiffs were laid off do not reasonably lead to the conclusion that the parties would have mutually agreed to allow an indefinite lay-off with minimal compensation to be imposed upon employees had they but turned their mind to the prospect of their employer suffering headwinds – even material headwinds – in the operation of their business due to events abroad over which the employees have no control nor ability to provide for. 

2) Even if there was such an implied term, as the layoff extended beyond 35 weeks, the ESA deemed it to be a retroactive dismissal and thus this implied term would be in violation of the ESA.

My Comments:

This case is very fact specific.

At the time of both layoffs there was no Infectious Disease Emergency Leave in the ESA. However we now know that in light of the recent case of Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076 that the existence of that legislation does not prevent the plaintiff from claiming constructive dismissal 

This case starts to deal with the more interesting and troubling question of frustration of contract. If when  the employer is shut down by governmental mandate and therefore is prohibited from using the services of the employee does the the employment contract become  frustrated? This issue  remains to be determined in future cases.

ALERT: Winning plaintiff counsel was Jordan Reiner of Lecker and Associates in which my brilliant son, Matthew Fisher, is a partner.

If you want a copy of this case email me at barryfisher@rogers.com

Court Finds that IDEL Temporary Layoff is a Constructive Dismissal under Common Law:

In Coutinho v Ocular Health Centre ( 2021 ONSC 3076) Justice Broad was faced with an issue that has become of vital importance in Ontario, namely whether a temporary layoff under the ESA ( now called Infectious Disease Emergency Leave ) constituted a constructive dismissal under the common law.

In holding that such a layoff was a a constructive dismissal, the Court made the following points:

1) Citing section 8(1) of the ESA which says that no civil remedy is affected by the ESA, the Judge determined that since all the jurisdiction to enact a Regulation flows from the enabling statute, a regulation cannot override a statutory provision. This is what the judge said :

[41] Ms. Allen for Ocular argues that, given the unprecedented emergency brought on by the global COVID-19 pandemic and the severity of its impact on employers and employees in Ontario, section 7 of the IDEL Regulation, which deems a temporary layoff by an employer for reasons related to COVID-19 not to constitute a constructive dismissal, ought to be interpreted to apply to not only constructive dismissals for the purposes of the ESA, but also at common law. 

[42] In the case of Bristol-Myers Squibb v. Canada (Attorney-General, 2005 SCC 26 (S.C.C.) Binnie, J., writing for the majority, citing Dreidger, Construction of Statutes (2nd ed. 1983) observed at para. 38 that 

…in the case of regulations, attention must be paid to the terms of the enabling statute: 

It is not enough to ascertain the meaning of a regulation when read in light of its own object and the facts surrounding its making; it is also necessary to read the 10 words conferring the power in the whole context of the authorizing statute. The intent of the statute transcends and governs the intent of the regulation. (Elmer A. Dreidger, Construction of Statutes (2nd ed.1983), at p. 247) 

This point is significant. The scope of the regulation is constrained by its enabling legislation. Thus, one cannot simply interpret a regulation the same way one would a statutory provision. 

[43] In my view, the scope of s. 7 deeming a temporary lay-off for reasons related to COVID-19 to not constitute a constructive dismissal is constrained by s. 8(1) of the ESA. It is not possible to reconcile the interpretation of the IDEL Regulation urged by Ocular with the section of the statute which unequivocally provides that an employee’s civil remedy against her/his employee ( my note, this should be employer) shall not be affected by any provision of the Act”

2) The Judge also relied on a recent Ministry of Labour publication in which it stated ” These rules affect only what constitutes a constructive dismissal under the ESA. These rules do not address what constitutes a constructive dismissal at common law.’ This is what the Court said on this point:

[44] The fact that s. 7 of the IDEL Regulation may not be interpreted so as to take away an employee’s right of action at common law against her/his employer for constructive dismissal is reinforced by the online publication of the Ontario Ministry of Labour, Training and Skills Development (the “Ministry”), cited by Ocular in its Factum, entitled “Your Guide to the Employment Standards Act: temporary changes to ESA rules” https://www.ontario.ca/document/your-guide-employment-standards-act-0/covid-19-temporary-changes-esa-rules (the “Ministry Guide”). 

[45] In the section entitled “Overview” at page 1 the Ministry Guide states that on May 29, 2020 the government made a regulation under the ESA in response to COVID-19. During the COVID-19 period, a non-unionized employee is “deemed” on a job-protected infectious disease emergency leave if their employer has temporarily reduced or eliminated their hours of work because of COVID-19. 

[46] Under the heading “Constructive dismissal” on page 4 the Ministry Guide stated as follows: 

O. Reg. 228/20 establishes that there is no constructive dismissal under the ESA where a non-unionized employee’s wages or hours of work are temporarily reduced or temporarily eliminated by their employer for reasons related to COVID-19 from March 1, 2020 to July 3, 2021. This rule does not apply where the termination or severance resulted from a constructive dismissal that occurred before May 29, 2020. For a termination or severance resulting from a constructive dismissal to occur before May 29, 2020, it means the employee must have been constructively dismissed and quit their employment within a reasonable timeframe, all prior to May 29, 2020. 

For a discussion of each of the conditions that must be met in order for this rule to apply, please see Conditions for O. Reg. 228/20 temporary layoff and constructive dismissal rules to apply. 

These rules affect only what constitutes a constructive dismissal under the ESA. These rules do not address what constitutes a constructive dismissal at common law. 

[47] In my view, in reviewing the purpose of the IDEL Regulation the court can consider not only the wording of the regulation itself but also extrinsic evidence such as the Ministry Guide. 

[48] The entitlement of the court to consider such extrinsic evidence in interpreting subordinate legislation was made clear by the decision of the Alberta Court of Appeal in Heppner v. Alberta (Ministry of Environment) [1977] A.J. No. 523 (Alta C.A.). Lieberman, J.A., writing for the panel stated as follows at para. 34: 

One further aspect involved in reviewing the purpose of subordinate legislation must be examined and that is what evidence a court can consider in coming to its decision. Is a court restricted to the order in council itself, or can “extrinsic” evidence be examined? This question was considered by the Ontario Court of Appeal in LaRush v. Metropolitan Toronto & Region Conservation Authority, [1968] 1 O.R. 300, 66 D.L.R. (2d) 310. In that case the court was examining the purpose which caused the Authority to expropriate a certain parcel of land, and it was argued by counsel for the Authority that certain documents and the testimony of officers of the Authority could not be considered in 12 determining the purpose behind the expropriation. Aylesworth J.A., in delivering the unanimous judgment of the court, said at pp. 316-17: 

Appellant, as I understand it, contends that none of these documents with the single exception of the appellant’s resolution to submit the scheme to the Minister may be looked at and that the evidence of Mr. Higgs called as a witness at the trial by appellant cannot be looked at to ascertain the purpose of the acquisition of respondent’s lands. The learned trial Judge thought he could consider these matters and I emphatically agree. The documents themselves are the appellant’s own records of appellant’s proceedings and of the action taken by it. The contents of these documents and anything which necessarily follows from a consideration of their contents bears in the most direct way upon the question of appellant’s real purpose. Again that real purpose properly may be tested in the light of the evidence of Mr. Higgs as to the need or the lack of it to acquire respondent’s lands for any purpose of conservation of natural resources; Mr. Higgs was well qualified to speak on matters of conservation and more particularly on such matters as affecting respondent’s lands and the surrounding area; he was appellant’s own witness. The admissibility of the documents and of the evidence of Mr. Higgs seems so clear as not to require authority. 

The learned justice of appeal then goes on to cite numerous cases as authority for the proposition he has stated. 

[49] Although it is not binding on the court, the Ministry Guide is of assistance by offering insight into the Ministry’s intention in promulgating the provisions of the IDEL Regulation respecting constructive dismissal, including the stipulation that they do not affect an employee’s common law right to advance a civil claim of constructive dismissal, a position which is consistent with s. 8(1) of the ESA. 

I cannot express how important this case is as it is the very first case to deal with this issue. In my mediation practice, this issue has already come up many times and there are numerous cases already being litigated on this issue . More importantly , if this ruling stands , there will undoubtably be a virtual tsunami of cases coming forth now that this issue has been addressed by the Courts.

If you wish a copy of this case email me at barryfisher@rogers.com

EI Period that Starts After September 27, 2020 is Not Earnings:

Interim Order 8 under the EI Act reads as follows :

153.193 The following are to be excluded from the earnings referred to in section 35 of the Employment Insurance Regulations:
(a) any pay or earnings referred to in subsection36(8), (9) or (19) of those Regulations if
(i) the claimant’s benefit period begins on or after September 27, 2020, or
(ii) the pay or earnings are declared to the Commission on or after September 27, 2020 and would otherwise have been allocated under section 36 of those Regulations to a week beginning on or after September 27, 2020;

Here is the link to the Interim Order: https://lnkd.in/gfZCfni

What this would seem to mean is that if a person were terminated on or after September 27, 2020 then any termination pay, severance pay or wrongful dismissal damages they receive does not affect their EI entitlement.

Thus you can now get EI and termination pay etc for the same period.

AND

You presumably do not have to repay EI for wrongful dismissal damages received if the termination took place on or after September 27, 2020.

This provision expires on September 25, 2021.

Thanks to Lisa Feld for telling me about this.

Therefore for terminations that take place between September 27, 2020 and September 25, 2021 you need not even check with EI regarding any overpayment owing.

That will certainly make my mediations easier.

26 Month Notice Period Explains Special Circumstances:

In Currie v Nylene Canada ( 2021 ONSC 1922) Justice Smith had a situation where it was found that there were special circumstances which justified going over the general rule that 24 months notice was the maximum that a Plaintiff could recover.

This is what the Judge said about why this case had exceptional circumstances :

84      The Ontario Court of Appeal has recently held in Dawe that exceptional circumstances will be required in order to support a notice period that exceeds 24 months. I acknowledge that the cases relied upon Ms. Currie predate Dawe but there are worthy of consideration because they share some similarities to the case at bar. When combining and applying all of the factors to Ms. Currie’s unique situation, I am of the opinion that taken as a whole, it supports the conclusion that there are exceptional circumstances:
a. Ms. Currie left high school to start working at BASF as a temporary twisting operator, earning $4.50 per hour. She secured this job through her father who had worked there for over 30 years until his retirement in 1999. She was eventually promoted to a supervisory position and she has faithfully remained with one employer (Nylene and its successor employers) for 39 years. Her entire working life has been dedicated to working at the Arnprior plant. She has known nothing else.
b. At the time of termination, Ms. Currie was 58 years old. She was in her twilight working years, closing in on the end of her career.
c. She has worked and developed skills in a very specialized field (fiber production operation). Finding similar employment, as described later in this decision, has not been easy. Ms. Currie has made diligent efforts to mitigate and attempt to gain basic computer skills. That said, I am not convinced that she will succeed in securing alternative employment, by no fault of her own.
d. Since Ms. Currie entered the workforce in 1979, the work landscape has evolved and changed significantly. Ms. Currie’s experience has been limited to one employer (Nylene and its predecessors), in one type of environment (specialized manufacturing job), which makes it very difficult to transfer her skills to a new employer.
e. Given Ms. Currie’s age, limited education and skills set, the termination was equivalent to a forced retirement. She must compete with people that are much younger than her and that have a different set of skills that may be required such as advanced computer knowledge. She is not well equipped to effectively compete in today’s market or secure comparable employment.
85      Considering Ms. Currie’s unique situation and combining all of the factors set out in Bardal, I conclude that Ms. Currie has demonstrated the existence of exceptional circumstances.

 

My Comments :

The Court of Appeal in Dawe was well aware of the previous cases involving notice periods of over 24 months. By setting the ceiling at 24 months except for exceptional circumstances, they were implicitly overruling those same cases that the Plaintiff was relying upon in this case.

Moreover every one of the factors that this judge sees as exceptional is already taken into account in the Bardal Factors. How can a factor that goes into the Bardal analysis be seen also as an exceptional circumstance? Should not these exceptional circumstances be limited something else that affected the Plaintiff’s ability to obtain employment ? For instance, if an employer alleged just cause without reasonable grounds or where the employer took active steps to obstruct the Plaintiff’s re-employment.

I have been observing the issue of how to determine notice periods all my entire professional career. I had the naive hope that over time the issue of predicting notice periods would become more  certain to both employers and  employees and therefore avoid unnecessary lawsuits over notice. This case puts us back to the pre Dawe days where there was  even less certainty in a already uncertain world.

I feel that judges often do not have a sense on what goes on in the world outside their courtrooms. We all know that 99% of these cases are settled. Settlements are easier to achieve when there is more predictability in the outcome. Since Dawe, both employers and employees knew that 24 months was the realistic maximum and that it was quite easy to hit that  mark. These two factors has made long service cases easier to settle. Now we will be  back to Plaintiffs claiming 30 months  notice and Defendants responding with 16 months.

This is not a good thing.