Time Theft and False Log Entries = Just Cause :

In Barrett v Bragg Communications ( CLC Adjudication , no cite available ) Adjudicator Starkman upheld the discharge of mobile tech who did the following misdeeds:

1. Used the company vehicle for personal use, contrary to policy.
2. Over a 4 week period used the company cellphone on company time for over 60 hours, many of which were personal calls.
3. Took may extra long lunch breaks.
4. Created false entries in his time log tp cover up his extended lunch breaks outside of his service area.

But for the false logs, it appears that the adjudicator might have found that the penalty of discharge was too severe and would have substituted a lesser penalty, which unlike a judge, he had the power to do. But the false logs put his behaviour over the top and the discharge was upheld.

Of note the worker had a previous discipline record of a one day suspension which contained a final warning. He was a 7 year employee.

Poor Economic Conditions Lengthen Notice Period Says Alberta Court:

In Hunsley v Canadian Energy Services ( 2020 ABQB 724 ) Poelman J. dealt with an supervisor in the old and gas industry, which the Court noted that the parties agreed that at the time of termination the industry was facing ” challenging financial circumstances”.

This is what the Court said :

[26] Adverse economic conditions tend to increase the notice period because they usually contribute directly to the estimated time required to find replacement employment.

A depressed economy or sector tends to lengthen the notice. But is only one factor and should not be given disproportionate effect: ibid,

[28] The amount of reasonable notice must be determined based on circumstances at the time of dismissal, not subsequent events or length of actual unemployment.

The court went to award a supervisor / lower manager with 7 years and 7 months service and 34 years of age an eight month notice period .

Court Considers COVID Effect on Notice :

 

In Yee v Hudson’s Bay ( 2021 ONSC 387) Justice Dow was considering the proper notice period for a 62 year old Director of Product Development with 11.65 years service.

The plaintiff was laid off in August of 2019 ( pre COVID). When asked by the Plaintiff to award a longer period of notice because of the difficulty of getting a job in retail in the midst of a pandemic, the Court distinguished those cases where the employee was let go before COVID but his notice period was during COVID and those who were terminated during COVID. This is because ” Notice is to be determined by the circumstances existing at the time of termination and not by the amount of time that it takes the employee to find employment”

The Court awarded the Plaintiff 16 months notice.

At first blush this distinction seems illogical because. whether you were fired a day before the pandemic or the day after would have no effect on how long it may take you to get another job. However this decision is consistent with previous decisions where Courts have ignored post termination events in assessing the proper notice period. The policy reason behind this is the theory that the parties should be able to both assess the issue of notice at the time of termination. This is intended to promote certainty because if post termination events affected the notice period , then presumably you could never ascertain the correct notice period until it was over.

However there are certain exceptions to this rule because the notice period can be less than the reasonable  notice period in at least three cases:

  1. The employee fails to properly mitigate his or her damages.
  2. The employee succeeds in finding a new job before the end of the notice period.
  3. The employee dies within the notice period.

Q: Do you notice any themes to these exceptions ?

A: They all benefit the employer.

Great Ruling on Enforceability of a Rule 49 Settlement:

In Wilson v John Howard Society ( 2020 ONSC 5531) Bondy J. ruled that the defendants’ Rule 49 offer which was accepted by the plaintiff was enforceable even though there were some minor issues not covered in the offer as follows:
1)The plaintiff wanted the $2,221.50 characterized as retiring allowance whereas the defendant wanted to treat it as wages. This made a tax withholding difference of about $363.
2) The plaintiff wanted the entire amount allocated to legal fees. The defendant refused because that is not what the Rule 49 offer said.
3) The offer was not clear as to would pay for the dismissal order.

The Judge rejected al these arguments.

1) The characterization was agreed to in the Rule 49.
2) The amounts were properly characterized in the Rule 49 offer and thus could not be changed unilaterally.
3) The implication from the Rule 49 offer was that the defendant would take out and pay for the dismissal order.

The Plaintiff got a judgement for $4,037. The Defendant was awarded costs to be determined.

Question : At the end who won?

What this case was really about was a plaintiff who wanted to back out of a deal that she had originally agreed to. This case reinforces the idea that ” settlements are sacred” and any attempt to weasel out of a deal made when both parties are represented by lawyers is basically a fools’ game.

This case reminds us of the importance of making sure that settlements should be fully documented and signed on the spot. In my mediations, I strongly encourage   the parties execute full settlement agreements, including releases, at the end of the mediation. To do otherwise allows either  one reluctant party to try to back out or the realization that the parties had not really agreed on important issues like allocation, confidentiality, non disparagement clauses and the like.

Experienced counsel come to a mediation with draft settlement documents that can serve as a basis for the finalized documents.

 

 

CFO Awarded $35K for Mental Distress for Unfounded Allegations of Misconduct:

In Hrynkiw v. Central City Brewers & Distillers Ltd. ( 2020 BCSC 1640) Horsman J. had a situation where a CFO was accused of intentionally paying himself excess vacation and shares without the consent of the owner. The Court found that this accusation was unfounded and found that there was no just cause. The Plaintiff was awarded 12 months notice after 6.3 years of service. He was 56 years old.

The plaintiff was also awarded $35,000 in aggravated damages for the mental distress caused by the unfounded allegations and the failure of the employer to conduct a proper investigation before termination .

It is interesting that the Judge awards damages under the three concepts of Bad Faith,  Aggravated Damages and Mental Distress. This proves a point that I have been saying for many years, which is , call it anything you want , but when a Court finds that the employer acted in a manner outside the pale, they will find a way to punish the employer.

Here are some  extracts for the judgement on this issue: ( Note : Mr. Frost is the owner of the Defendant )

(i) The inadequate investigation
197      I accept the plaintiff’s characterization of Central City’s investigation of the plaintiff’s alleged misconduct as adversarial and biased from the start. Mr. Frost had formed the conclusion as early as June 28, 2018, that the plaintiff’s conduct was blatantly wrong. His interactions with the plaintiff after that point were angry and confrontational. Having concluded at the outset that the plaintiff had deliberately taken unauthorized bonus payments, Mr. Frost made no genuine effort to review the full circumstances. He sent the Termination Letter before he had reviewed the relevant payroll records or interviewed Ms. Gizzi and Ms. Duque about the 2017 share bonus payments. When documents were later uncovered that tended to support the plaintiff’s understanding of his share bonus entitlement, Mr. Frost did not consider them with an open mind. His entrenched perspective did not countenance the possibility that the plaintiff was simply mistaken in his understanding, or that perhaps Mr. Frost was the one who was forgetful or mistaken.
198      The defendant similarly rushed to judgment by alleging in the Termination Letter that the plaintiff had attended at the Central City office over the Canada Day long-weekend to “remove/transmit/copy property and/or documents”. Although the Termination Letter asserts that the full scope of the plaintiff’s actions were “still under investigation”, in fact there had been no investigation of this allegation prior to the delivery of the Termination Letter. There was simply Mr. Frost’s suspicion.
199      Mr. Frost’s set views of the matter meant that the plaintiff had no genuine opportunity to be heard by his employer on the very serious allegations that were advanced against him. I do not agree with the defendant that this should be held against the plaintiff because he absented himself from the “investigation”. For the reasons already stated, I reject the defendant’s argument that the plaintiff was guilty of insubordination in failing to cancel his vacation and schedule an immediate meeting with Mr. Frost during the week of July 3, 2018. More to the point, the defendant did not, in any event, engage in any meaningful investigation prior to sending the Termination Letter.
200      Furthermore, Mr. Frost apparently took no steps after sending the Termination Letter to preserve Central City records that might have shed light on the issues. He directed Ms. Li to clean out the plaintiff’s office without instructions to preserve relevant material. An email allegedly including a summary of the plaintiff’s employment terms appears to have been simply put in a box for shredding. I agree with the plaintiff that the defendant’s lack of effort to preserve documents is particularly egregious given the explicit warning to the plaintiff in the Termination Letter not to delete documents in his possession.
201      Even by the defendant’s account, the plaintiff had been a loyal and competent employee of Central City for over six years up to the time that he was, virtually overnight, locked out of the office and terminated without notice. To the extent that the defendant had concerns as a result of the events around the plaintiff’s request for a share bonus payment in June 2018, the plaintiff deserved to have those concerns addressed through a process that was fair, objective, and respectful. In my view, the defendant’s closed mind and failure to objectively investigate the circumstances before purporting to terminate the plaintiff’s employment for cause was unfair, unduly insensitive to the plaintiff, and constituted a breach of the defendant’s duty of good faith and fair dealing.
(ii) Unfounded allegations of misconduct
202      The defendant’s unfairness and insensitivity to the plaintiff in failing to conduct an adequate investigation was compounded by the fact that allegations of serious misconduct, including allegations of deliberate misappropriation of company funds, were advanced against the plaintiff without any evidence to support them.
203      The defendant made these allegations public in repeating them in its filed pleadings in this case, which include a counterclaim seeking to recover damages from the plaintiff for the alleged unauthorized payments. The unfounded allegation that the plaintiff had taken unauthorized bonus payments was maintained throughout the legal proceeding despite the discovery by Mr. Frost of his signed approval on the January 2017 payroll change form. The defendant maintained that the plaintiff had secured Mr. Frost’s approval by misrepresenting the purpose of the payment despite the fact the defendant was aware as of May 2019 that this allegation was directly contradicted by Ms. Gizzi’s evidence.
204      The circumstances of the defendant’s allegation that the plaintiff stole his own personnel file from the Central City office are also egregious. The defendant has never had any evidence, at the time of the plaintiff’s termination or subsequently, to support the allegation. Mr. Frost conceded as much in evidence even as he refused to resile from the allegation. The following exchange from Mr. Frost’s cross-examination is illustrative:
A. We all know what happened to the file, counsel.
Q. Okay. Well, if you know what happened to the file, you should be bringing the evidence to this court. Can you do that?
A. No, I can’t.
205      In my view, it was a breach of the defendant’s duty of good faith and fair dealing to advance and maintain such baseless allegations of serious misconduct against the plaintiff. It was entirely foreseeable that the plaintiff would suffer mental distress and reputational harm as a result of such conduct in the course of his dismissal.

Two New Cases on Just Cause:

In Murphy v Factors Labs ( 2020 BCPC 163) Burnett J. upheld the termination of a long service factory employee who refused to wear a ” Bump Cap” (which is a form of hard hat) because she claimed it aggravated her migraine headaches. She provided a short medical note from her doctor. The Company asked for a more detailed medical report and the plaintiff refused, without giving a valid reason .

In Attzs v Saputo ( 2020 )NSC 5512) Kimmel J. had a short term warehouse worker who was caught vaping in the workplace which was against the no smoking policy. The Judge found that it was plausible that the worker did not know that vaping was included in that ban as the company had not made that clear. Moreover two other employees who were also vaping were only given warnings. The Judge held that the misconduct should have been dealt with in a proportionate manner with discipline but not termination.

SCC Clarifies Bonus Entitlements , No Bad Faith Required

In a unanimous decision, the Supreme Court of Canada in Matthews v Ocean Nutrition Canada ( 2020-SCC 26 ) made the following statements of law.

  1. The issue of good faith and bad faith in contractual relations is distinct from the issue of calculating damages due to the failure of the employer to provide reasonable notice of termination. There was no need in this case to determine whether or not the employer acted in bad faith as the same  outcome can be determined without the need to determine the bad faith issue.

The Court made the following comments about the issue of the duty of good faith in employment contracts:

[84]                         Further, I note that Mr. Matthews and several interveners argue that the general organizing principle of good faith described in Bhasin manifests itself in various ways throughout the whole of the contractual performance. Ocean answers that any extension of good faith would be an unwieldy precedent.

[85]                         Mr. Matthews’ argument is a serious one. Not all mistreatment by an employer will result in a constructive dismissal — some employees, for financial or other reasons, might choose not to leave their job. It might be that, as argued by various parties in this appeal, a duty of good faith will one day bind the employer based on a mutual obligation of loyalty in a non-fiduciary sense during the life of the employment contract, owed reciprocally by both the employer and employee. I recognize, however, that whether the law should recognize this is a matter of fair debate.

[86]                         This is a dismissal case. In light of the comment in Bhasin (at para. 40) that the common law should develop in an incremental fashion, I would decline to decide whether a broader duty exists during the life of the employment contract in the absence of an appropriate factual record.

2. Courts should ask two questions when determining whether the appropriate quantum of damages for breach of an implied term to provide reasonable notice includes bonus payments. First, courts should consider the employee’s common law rights and examine whether, but for the termination, the employee would have been entitled to the bonus or benefit as part of their compensation during the reasonable notice period. Second, if so, courts should determine whether the terms of the employment contract or bonus plan unambiguously take away or limit that common law right.

The actual clause purporting to limit the plaintiff’s entitlement to the bonus was as follows:

2.03 CONDITIONS PRECEDENT:

ONC shall have no obligation under this Agreement to the Employee unless on the date of a Realization Event the Employee is a full-time employee of ONC. For greater certainty, this Agreement shall be of no force and effect if the employee ceases to be an employee of ONC, regardless of whether the Employee resigns or is terminated, with or without cause.

2.05 GENERAL:

The Long Term Value Creation Bonus Plan does not have any current or future value other than on the date of a Realization Event and shall not be calculated as part of the Employee’s compensation for any purpose, including in connection with the Employee’s resignation or in any severance calculation.

This is what the Court said about why this limiting clause did not apply :

[65]                         To this end, the provisions of the agreement must be absolutely clear and unambiguous. So, language requiring an employee to be “full-time” or “active”, such as clause 2.03, will not suffice to remove an employee’s common law right to damages. After all, had Mr. Matthews been given proper notice, he would have been “full-time” or “actively employed” throughout the reasonable notice period (Paquette, at para. 33, citing Schumacher v. Toronto-Dominion Bank (1997), 147 D.L.R. (4th) 128 (Ont. C.J. (Gen. Div.)), at p. 184; see also para. 47; Lin, at para. 89). Indeed, the trial judge and the majority of the Court of Appeal agreed that an “active employment” requirement is not sufficient to limit an employee’s damages (trial reasons, at para. 398; C.A. reasons, at para. 66).

[66]                         Similarly, where a clause purports to remove an employee’s common law right to damages upon termination “with or without cause”, such as clause 2.03, this language will not suffice. Here, Mr. Matthews suffered an unlawful termination since he was constructively dismissed without notice. As this Court held in Bauer v. Bank of Montreal, [1980] 2 S.C.R. 102, at p. 108, exclusion clauses “must clearly cover the exact circumstances which have arisen”. So, in Mr. Matthews’ case, the trial judge properly recognized that “[t]ermination without cause does not imply termination without notice” (para. 399; see also Veer v. Dover Corp. (Canada) Ltd. (1999), 120 O.A.C. 394, at para. 14; Lin, at para. 91). Yet, it bears repeating that, for the purpose of calculating wrongful dismissal damages, the employment contract is not treated as “terminated” until after the reasonable notice period expires. So, even if the clause had expressly referred to an unlawful termination, in my view, this too would not unambiguously alter the employee’s common law entitlement.

[67]                         I therefore agree with the trial judge that clause 2.03 does not unambiguously limit or remove Mr. Matthews’ common law right. In my respectful view, the majority of the Court of Appeal erred in concluding otherwise.

My Comments :

  1. To me this means that bad faith in relation to employment terminations becomes just another way of awarding damages beyond the reasonable notice calculations. This same principle has been called damages for mental distress, moral damages , Wallace damages, aggravated damages, punitive damages and some that I probably have forgotten. I actually watched the oral argument at the SCC and I was immediately struck by how reluctant the Court was to expand or even apply the bad faith analysis.
  2. Calculating damages should now be easier. In my first year contracts course at Osgoode Hall Law school ( way back in 1975) Professor Larry Taman taught us how to calculate damages in a breach of contract case. You simply put the innocent party in the same position as if the contract had not been breached. ( Hadley v Baxendale ) In an employment termination the implied term is that to discharge an employee without just cause you must give reasonable WORKING notice. If you fail to give such WORKING notice, then you must pay the employee the same amount that he or she would have earned had they been permitted to work out the notice period. Only then do you look at the bonus or the LTIP plan to see if there is any clear and ambiguous language which would exclude some element of the compensation if the employer fails to give working notice and opts to give pay in lieu of notice.
  3. What is clear and unambiguous language sufficient to oust the inclusion of a bonus ? There are many ways to approach this issue , but here are my ideas of the most common ones other than the ” active employment” clause set out in this case .  First of all it cannot breach any statutory requirements like the Employment Standards Act which requires that there can be no change to an employee’s wages ( which normally includes bonus ) during the termination period , which is a maximum of 8 weeks. Many bonus plans breach this provision  by saying ” your entitlement to bonus ends on the day you receive notice of termination.” Secondly, an element of clear and unambiguous that has developed recently in the case law is that this limiting cause must not be buried in a long and complex agreement that no one would actually be expected to read. The limitation should be clearly brought to the attention of the employee both at the time he or she is hired, or brought into the plan and ,even better, every time they are awarded a bonus. Moreover, now that the Waksdale decision tells us that any defect in the termination provisions of a contract voids the entire termination clause, what if the bonus termination language is found to be illegal, does that mean the termination provision in the main employment contract also bites the dust?
  4. By downplaying the importance of bad faith and focussing on the core issue of reasonable notice, the Court is repeating what many experienced employment lawyers ( and some mediators ) have known all along, which is , that 99% of the money in a wrongful dismissal case is simply figuring out what a month of notice is worth and then figuring out how many months is in the notice period. Add some costs to that number and amazingly, most of these cases settle. Perhaps now lawyers will spend more of their effort on resolving these basic issues  rather than focussing on the more  exotic issue of extraordinary damages which seems to find its way into almost every lawsuit but rarely results in a meaningful payout in either a settlement or a trial decision.

 

 

 

Waksdale Followed Voiding Entire Termination Clause Because of “Just Cause ” Reference:

In Sewell v Provincial Fruit ( 2020 ONSC 4406) Mandhane J. had to determine if the following clause invalidated the termination provision of an employment contract:

“b) Termination by the Company for Just Cause
The Company is entitled to terminate your employment at any time and without any notice or any further compensation for just cause and the Company will not have any further obligations to you whether at contract, under statute, at common law or otherwise.”

In setting out why this made the whole termination clause, including the not for cause provision, illegal, the Judge said :

[19] Second, applying Waksdale, I find that the “Termination for Just Cause” provision of the contract was illegal insofar as it contracted around the ESA requirement to provide notice except in cases where an employee engaged in “willful misconduct.” Based on the Court of Appeal’s reasoning, I must read the contract as a whole and set it aside if one or more of the terms are illegal, even if the offending term is not at issue in the instant case.

This case is important because in Waksdale the parties agreed that the for cause termination clause was illegal. That clause was very different from this one as it set all sorts of things as just cause, including breaching any federal or provincial law.

In this case the reference to just cause is in line with most termination clauses which simply reference ” just cause” . More importantly, in this case the Court ruled that the clause was illegal, and thus sets a clear judicial precedent.

This case had a number of other issues :

  1. Even though the Plaintiff had been contacted by a head hunter the judge found that that did not constitute inducement:

“Rather, the arrangement was mutually beneficial as the plaintiff had tried to change jobs prior to accepting the defendant’s employment offer and seemed ready for a change.”

2. The not for cause provision read as follows

c) Termination by the Company without Just Cause

(A) The Company will be entitled to terminate your employment at any time without just cause by providing you with the following

(ii) a payment, or at the Company’s sole option, notice or combination of notice and pay in lieu of such notice representing termination pay and, if applicable, severance pay, as may be required under the Employment Standards Act, 2000, as amended from time to time (the “Separation Period”);

It is agreed that upon compliance with the above provisions, the Company will be release from any and all obligations to you, whether statutory, under contract, at common law or otherwise.

When I first read that clause it looked fine to me because it looked like you would get both termination pay and severance pay. The Judge saw it differently :

First, a plain reading of the contract supports the plaintiff’s argument that it combines notice and severance pay entitlements in violation of the ESA requirement to pay both notice and severance. The provision states:

The Company will be entitled to terminate your employment at any time without just cause by providing you with … a payment, or at the Company’s sole option, notice or a combination of notice and pay in lieu of such notice, representing termination pay and, if applicable, severance pay

[17]       Indeed, this provision is substantially similar to the one deemed illegal by the Court of Appeal for Ontario in Wood. The Wood termination clauses stated:

[The  Company]  is  entitled  to terminate your   employment   at   any   time   without cause  by  providing  you  with  2  weeks’ notice of termination or pay in lieu thereof for   each   completed   or   partial   year   of employment… The payments and notice provided for in this paragraph are inclusive of your entitlements to notice, pay in lieu of notice and severance pay

[18]       The only substantial difference between the provisions is that the Wood clause specified a notice and severance period of 2 weeks per year, whereas the contract in this case left the amount of notice and severance open. This difference is not significant in terms of the Court’s reasoning in Wood and I find that the contract at issue in this case is void.

It is not entirely clear to me what it is about this clause that ” combines notice and severance pay requirement “.

It appears that the judge read the clause as saying that the employee would get either :

a) a payment of termination pay and severance pay ( this is OK)

OR

b) working notice of the amount of weeks in the termination pay and severance pay provisions ( which is illegal as you cannot be required to work out the severance pay period, rather it must be paid as a lump sum )

3. The Judge made the following comments about the signing of the agreement when the Plaintiff was hired:[

8]       I accept the plaintiff’s evidence that he signed the contract expecting that it would accurately set out the main terms of his employment as discussed with the defendant, as well as comply with employment standards legislation. I also accept that he did not understand the full implications of the “termination” clauses and that they were never explained to him.

[9]       Given the power differential between the parties and the good faith basis upon which they had established their relationship, I accept that it was reasonable for the plaintiff to sign the contract without parsing out the potential meaning of the termination provisions or seeking independent legal advice.

First of all, this would seem to be one of the first cases to apply the doctrine of good faith to the initial hiring stage. Secondly it seems to say that unless the Employer clearly explains to the candidate the full legal implications of the termination clause, that they cannot rely upon it . What does this mean? How far does an employer have to go in explaining what the ESA vs the common law will get him upon termination?

Secondly, since it was found that the contract was null and void as a matter of law, it would not matter one way or the other if he had independent legal advice. Even if  the greatest employment lawyer in the land told the Plaintiff that the contract was fine, but a Court found that it breached the ESA was thus null and void, it is still null and void.

 

Plaintiff Wins $7,586 in Judgement and is Awarded $15,000 in Costs:

In Hefkey v Blanchfield Roofing ( 2020 ONSC 5094) Bawden J. awarded 7 months notice to a 6.5 year foreman. However because the Defendant had made a payment during litigation of almost $11,000 the extra payment awarded by the Court came to just under $7,500.

Regarding cost submissions the Judge ruled as follows:

1) Even though the recovery was within Small Claims limits , it was reasonable to start the case in the Superior Court because there was a real issue as to whether his seniority was 6 or 13 years.
2) The Defendant’s actions increased the costs, including spending a whole day on whether the action could be heard by way of summary judgement , which they lost. Even though both lawyers were based in Toronto, the defendant insisted that the cross examinations take place in North Bay, where the defendant lived.
3) The motion itself took three days spread out over a year.

Plaintiff Gets Bonus for Only Part of Notice Period:

In Wilste v Saestar Chemicals ( 2020 BCSC 658) Saunders J. determined that an employee fired without cause in July of 2018 was entitled to 16 months notice. About 1/3 of his total comp was pursuant to a bonus plan which had a clause which said that in order to be entitled to a bonus payment, the employee had to be employed as of March 31st, the end of the fiscal year.

The judge awarded him the bonus for the period ending March 31, 2019 as he would have been employed on that date had he been given 16 months of working notice. However in order to be entitled to receive a bonus for the next fiscal year end  ( March 31, 2020) , he would have had to receive a notice period of 20 months. thus he did not receive any bonus payment for the period from March 31, 2019 to the end of his notice period , which was November 2019.

My Comments:

This judge did exactly what we are supposed to do in these cases, which is put the employee in the same financial position as if he been given 16 months working notice, or to phrase it another way, as if the plaintiff quit his employment at the end of the notice period. No more and no less.

If you keep this simple concept in mind ( which I learnt in first year contracts at OHLS way back in the 70’s) the issue of how to calculate damages in a wrongful dismissal action becomes quite straight forward.