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.


Refusing to Accept Offer From Purchaser Not Failure to Mitigate :

In Dussault v Imperial Oil ( 2018 ONSC 1168) two long term plaintiffs were told that Imperial was selling   the division that they worked for to Mac’s and that Mac’s would make them a comporable  job offer. The Plaintiffs rejected the Mac’s offers.

The legal issue was whether this was a failure to mitigate, thereby reducing the Imperial severance obligations.

Justice Faveau said NO for the following reasons:

1) The Mac’s offers came before the actual termination from Imperial and were not restated after the actual termination.

2) Because Imperial demanded that before paying out severance the Plaintiffs had to sign a release, it was reasonable not to accept Mac’s offer as this would deny the Plaintiffs any ability to later sue Mac’s for any shortfall.

3) As Mac’s was not prepared to recognize their years of service with Imperial, it was reasonable for the Plaintiffs to reject the offer.

4) The Plaintiffs had to agree with Mac that they would not disclose their pay rate to other Mac employees as their pay rate was higher.  This would make the future work relationship ” potentially difficult’.

5) The higher salary was only guaranteed for 18 months, less than the 26 month notice period awarded by the Court.

Off Duty Drunk Driving Employer Truck Not Just Cause :

In Klonteig v District of Kelowna ( 2018 BCSC 124) Justice MacNaughton had a situation where an Assistant Fire Chief ( Administration) was terminated after being given  a 90 day driving suspension ( but no criminal charge ) outside of working hours but while driving an unmarked District owned vehicle.

The Court found that this off duty conduct did not justify dismissal because of the following factors:

1) He was permitted to drive the District vehicle  for personal use and the truck had no markings showing it was owned by the District.

2) The public was not aware of the suspension of his licence.

3) His was not the face of the employer. His duties were largely administrative.

4) No criminal charges were laid.

5) There was no evidence that the plaintiff had lost the support or respect of the other employees. In fact almost every firefighter sent a letter of support in favour of the plaintiff.

6) The conduct of drunk driving was not as morally reprehensible as possession of child porno, consorting with a prostitute on company property or engaging in a dishonest tax scheme.

I understand all the points except the last one. Nobody ever died from consorting with a prostitute or  tax fraud.

Can’t say the same about drunk driving. According to MADD:

Crashes involving alcohol and/or drugs are a leading criminal cause of death in Canada. On average, approximately 4 people are killed each day in crashes involving alcohol and/or drugs. In 2013, there were a total of 2,430 crash deaths on public roads, involving at least one highway vehicle (e.g. passenger cars, vans, trucks, or motorcycles). Based on testing of fatally-injured drivers, it may be estimated that 1,451 (59.7%) of these deaths involved drivers who had some alcohol and/or drugs in their system.

Manitoba CA Fixes Multiple Notice Period Mistakes:

In Grant v Electra Signs, the Court of Appeal was dealing with a decision of the Queens Bench which awarded a 63 year old GM with 13.5 years service the following:

a) 12 months reasonable notice.

b) Plus 2 extra months for the manner of dismissal (  Keays v Honda ).

c) Less 4 months notice for poor mitigation.

Thus the plaintiff was awarded 10 months .

The CA ruled that :

a) 12 months was reasonable and that there is no rigid rule in Manitoba  that one year of service = 2/3 of a month notice.

b) To award Honda damages based on an increased notice period is wrong in law and although medical evidence is not required there must be some evidence that the plaintiff suffered some damages in excess of the normal feelings upon losing one’s job.

c) Even though the plaintiff  did nothing to look for a job, the failure of the Defendant to show that had he looked for a job within the notice period that he could have lessened his damages was fatal to their argument and thus no reduction of the notice period was appropriate.

In the end the Plaintiff got 12 months notice.