Author: barryfisher

In Caskanette v Bong-Keun Choi Dentistry ( 2016 ONSC 6448) Justice Mitchell was hearing an appeal from the Small Claims Court where the Plaintiff was found to have dismissed with just cause. In the alternative, the Small Claims Court judge said that if he had found no just cause, he would have awarded a notice period of 4 months , which worked out to be worth $7,575.

The Superior Court found that just cause was not proven and awarded the Plaintiff $7,575.

In their costs submission, Plaintiffs’ counsel ( who was 31 years at the bar) claims he spent 87.6 hours on the appeal, and another 20.5 hours by law clerks and students.

The Superior Court judge commented on the excessive amount of time spent by Plaintiff’s counsel and ultimately awarded costs of $10,000, inclusive of HST and disbursements. This is only $1,000 more than the Plaintiffs’  lawyer claim for HST and disbursements.

If in fact Plaintiffs’ counsel actually charged his client $56, 320 for the appeal and he recovered $17,375, then this “win” only cost her a mere $38,945. The plaintiff, by the  way, made $22,725 per annum in the job that she lost.

In Pisko v. Trican Well Service Ltd. ,( 2016 ABQB 500) Master Farrington found that a provision of the employment agreement offended the Alberta Employment Standards Act in that it excluded a certain rotational shift allowance from the calculation of wages when determining how much money was payable for each week of termination pay.

The contract provisions were as follows:
Clause 9: Compensation-your base salary will be $110,652.00 per year (“Base Salary”). In addition, you will receive a Rotational Assignment Allowance (“RAA”) of 25% of your base salary in accordance with the Rotational Policy, bringing your total compensation to $138,315.00 per year, less applicable statutory deductions. The RAA percentage is subject to change in Trican’s sole discretion.
Clause 14: Termination-In the event that this Agreement or your employment is terminated by Trican after completion of your probationary period, for any reason other than cause, Trican will provide you with either: (i) sixty (60) calendar days notice of such termination, i.e. the equivalent of one full rotation; or (ii) a severance payment equivalent to sixty (60) calendar days of your Base Salary, excluding the RAA and less applicable statutory deductions; or (iii) a combination of notice and Base Salary, excluding the RAA and less applicable statutory deductions, equivalent to sixty (60) calendar days total.
Clause 19: Severability-If any provision of this Agreement is determined to be void or unenforceable in whole or in part, it will not be deemed to affect or impair the validity of any other covenant or provision of this agreement.

Rather than declaring the whole provision invalid as it breached the ESA, the Master chose to ” rewrite the contract” so that it complied with the ESA. His comments were as follows:

Severability
25. The question then becomes whether all of Clause 14 of the employment contract (including the 60 day notice provision) is void, or whether some type of alternative result should flow. The plaintiff argues that all of Clause 14 is void and that Machtinger applies preserving the common law position on notice periods and reasonable notice.
26. The employment agreement in this case has a severability clause. The agreements in Machtinger did not appear to have had such a clause.
27. When one reviews the termination clause in this case there are three alternatives for the employer. The first alternative permits termination on 60 days notice. Nothing in that concept violates the Employment Standards Code in any way. The second alternative allows for a severance payment equivalent to 60 calendar days, but it excludes the RAA in the calculation of the payment. I have found that excluding the RAA from the calculation violates the Employment Standards Code. The third alternative, and the one chosen here, also excludes the RAA in the calculation of the payment in lieu of notice portion of the severance payment. Similarly, that provision, as drafted, violates the Employment Standards Code.

28. Machtinger was a case about an aggressive employer who attempted to take advantage of employees and who then asked for a fallback position that its contract be interpreted as if it had been drafted with the employment standards minimum notice periods as its severance obligation. The Supreme Court of Canada found that to be objectionable, as finding for the employer would have been an incentive for employers to attempt to take advantage of employees by attempting to shorten notice periods with no consequences to them if their attempts were not successful if they were allowed to have a fallback position based upon the employment standards minimum notice periods in any event. In Machtinger , there was a common law alternative on notice periods if the agreement was declared to be void. The readily available common law alternative to a void contractual notice period was the common law doctrine of reasonable notice.
29. In this case, the issue is not with respect to the notice period itself, but rather in the calculation of wages. The working notice provision allowed for 60 days notice. There was no suggestion in the evidence or argument that anyone was attempting to intentionally avoid the provisions of the Employment Standards Code in the drafting of the payment in lieu of notice provisions.

30. The preamble of the Employment Standards Code provides in part:
RECOGNIZING that legislation is an appropriate means of establishing minimum standards for terms and conditions of employment;
(Emphasis added)
31. There is support for considering the preamble of the Employment Standards Code in section 12(1) of the Interpretation Act which provides:
(1) The preamble of an enactment is a part of the enactment intended to assist in explaining the enactment.
32. The Employment Standards Code is meant to ensure that employees receive guaranteed minimum protections as set out in the Code. That is an important objective which must never be compromised. The Employment Standards Code is not, however, meant to necessarily serve as a conduit to remedies in excess of the minimum standards for every breach by an employer, regardless of the nature of the breach. In some instances, such as in Machtinger , the result of a breach and a declaration that a provision in an employment contract is void results in reliance upon common law remedies where they exist and are available to deal with the issue that rendered the contract void.
33. In this case the offending provision is with respect to the calculation of wages. The remedy for that type of breach is to calculate the wages properly. The remedy is not to rewrite the agreement of the parties regarding the applicable notice period when that notice period complied with the Employment Standards Code. I find that the issue of the notice period and the calculation of wages are two separate issues. While there may be some subtle differences between the calculation of income or wages for severance purposes under the Code and under the common law, there is no suggestion that any of that type of income is a factor in this case.
34 Trican argued that the severability clause was available to provide formal severance of the offending portions of Clause 14 of the letter agreement. I do not believe that it is necessary to formally do so based upon the facts of this case.
35 The Employment Standards Code provides for a minimum set of standards that must be met by an employer. The employment agreement permitted termination with notice. The notice that was given in this case was 16 days of working notice, plus a severance payment of 60 days including the RAA. The notice given and the payment made clearly exceeded the guaranteed minimums under the Employment Standards Code. In the circumstances, I find that it is sufficient for the employer to simply have paid more than the correct amounts without the exclusion of the RAA as has been done by the employer.
Conclusion
36 In accordance with Hryniak v. Mauldin, 2014 SCC 7 (S.C.C.) , I find that the record before me is sufficiently complete to allow me to make a fair and just disposition on the merits, and that there are no material facts in dispute. Accordingly, I grant Trican’s application for summary dismissal. It has more than met its obligations under the employment agreement, as affected by the Employment Standards Code, and it has exceeded the minimum standards required under the Employment Standards Code when wages are properly calculated. There is an enforceable notice period provision in the employment contract. Trican has paid 60 days of payment in lieu of notice (including the RAA) when it was obliged to pay 44 days (including the RAA) having given 16 days of working notice. There are no further issues that remain.

At first blush this case looks like it is a license for employers to avoid illegal contracts by simply having the Court correct the contract by insuring that the Employer pays no less than the ESA.

However in this  case, the contract provided that the Employer had to pay 60 days of base pay, whereby the ESA provided that they had to pay 44 days of base pay plus the shift allowance. The base wage was $110,652 thus 60 days of that wage would equal $25,535 whereas 44 days of the full wage of $138,315 would be equal to $23,407.

In other words, at the end of the day, the contract termination amount exceeded the ESA minimum amount, so of course, the contract did not violate the ESA.

Therefore the Master’s comments would seem to be unnecessary verbiage ( obiter dicta ) and as such probably do not change the law on the enforceability of illegal ESA contracts.

Moreover some of the Masters comments are troubling from a policy perspective :

1) “There was no suggestion in the evidence or argument that anyone was attempting to intentionally avoid the provisions of the Employment Standards Code in the drafting of the payment in lieu of notice provisions.”

Why would this matter? How could any employee have evidence of the motivation behind a contract clause drafted by the Employer? Surely we look at the effect of the contract and not the motivation of the drafter.

2) Although the contract provided that the allowance ( RAA) was not to be included in calculating termination pay, in fact it seems that when actually paying out the termination pay, the Employer did include the RAA. The Court seemed to take that into effect when it decided that the termination provision was valid. However when examining the legality of a contract, you are only to look at its language, not how  one party acted on the contract. To do otherwise would mean that an Employer could avoid a finding of illegality by simply paying the ESA amount even though the contract called for a lesser payment. This is exactly the policy evil that the Supreme Court of Canada was trying to stop in Machtinger.

In Ozorio v Canadian Hearing Society ( 2016 ONSC 5440) Justice O’Marra awarded  24 months months notice to a 60 year old Regional Director with 30 years service making $102,000 per annum.

The judgement also lists  14 cases where a Court awarded 24 months notice or better.

What I found even more interesting however was the judges detailed comments about the prior offers that the Employer had made. Here are those comments:

7. On November 18, 2015, the defendant’s new President and CEO, Ms. Julia Dumanian, met with the plaintiff and “without any warning” according to the plaintiff presented her with a “voluntary separation offer”. The terms of the offer would have provided the plaintiff with $93,000, less than her annual salary, in exchange for a release. Ms. Dumanian left the offer with the plaintiff for her review and any independent advice. On or about November 25, 2015, the plaintiff declined the offer as in her view it was unfair and inadequate given her long tenure and senior role in the organization,
8. On November 30, 2015, the defendant sent the plaintiff a termination letter then offering 12 months’ pay (approximately $97,000) and limited contribution of benefits for 2 months. No offer was made to provide the plaintiff with a letter of reference or any out-placement counselling services to assist her with alternative employment.
9. In lieu of acceptance, the defendant chose to pay the plaintiff her regular salary from November 30, 2015 to July 27, 2016, the minimal 34 week period for statutory notice and severance pay compliance under the Employment Standards Act, 2000 S.O. 2000 C. 41, in addition to benefit coverage for 8 weeks.

12. The defendant’s position has changed considerably since its original offers. Initially, the offer was basically 12 months’ salary in lieu of notice however, in its written and oral submissions the defendant urged the court to find that the reasonable notice period in the circumstances of this case is one of 18 to 20 months, relying on cases set out in Appendix B – a tacit acknowledgment of the inadequacy of the original offers.

I assume that when a judge refers to a fact in their judgement it is because they find that fact relevant in determining the outcome.

In effect the judge took into account the fact that the Employer had made settlement offers which he found to be grossly inadequate in deciding what the proper notice period would be.

Funny, I always thought that offers were always without prejudice  and thus were not admissible.

Who cares what offers anyone made, other than for the purpose of determining  costs after the decision has been rendered ?

What if the Employer had offered 23 months from the start and the Plaintiff didn’t accept it ? Would the judge still have found that reasonable notice was 24 months? I doubt it .

This consideration of offers as a factor in determining what is reasonable notice is a throwback to the previously discredited concept of ” ballpark justice ” that flourished for a short time in the 1980’s and 90’s. In those cases the Court would determine whether the Employers’ offer was “in the ballpark ” of reasonable notice and if it was, the Court would often award the Employers’ offer. Thus if the ballpark was between 12 and 15 months, and the Employer offered or paid 12 months, then the Court would find that 12 months was reasonable.

Thus  the Court , instead of determining what they thought was reasonable notice , was simply examining if the Employers actions or its offers were reasonable. The Court was in effect abdicating its role to determine the proper notice period  to the Employer rather than doing that job themselves.

The net effect of this was of course that notice periods over time would go down because  to get into the safe zone of ballpark notice, all you had to do was pay or offer the low end of the notice period.

However Courts of Appeal across Canada finally rejected this doctrine and re-emphasized that the Court decides what is reasonable notice, not the parties. ( see Walsh v. UPM-Kymmene Miramichi Inc. ( 2003 NBCA 32) .

In my opinion the only information that the judge should have considered is what the Employer actually did, not what they offered to do. In this case the only relevant information was that the Employer paid the Plaintiff the bare statutory minimums and not a penny more.

If Employers want to get credit for being reasonable, they can simply pay the Plaintiff what they feel is reasonable notice, without a release,  preferably by way of salary continuance so as to not lose the advantage of mitigation.

In this case the Employer at trial  apparently thought that the plaintiff should get at least 18 months notice. Can you imagine the effect on the Court if the Employer had told the Plaintiff in a with prejudice letter that the Employer intended to keep the Plaintiff on full salary and benefits until the earlier of 18 months or when the Plaintiff mitigated her damages by finding another job ?

I strongly suspect the Court would look more kindly upon such an Employer and either consciously or subconsciously moderate the notice period in the Employers’ favour.

In my experience as an employment law mediator I rarely see employers take the     approach set out above. Most employers adopt the same position as the defendant in this case of paying out only the minimum statutory payments and litigating over the balance. Those are the employers who  often get hit with headline grabbing notice periods.

 

 

In Evans v Paradigm Capital ( 2016 ONSC 4286) Justice Gans determined that a 44 year old Senior Institutional Salesperson with 4.5 years service was entitled to 11 months notice.

In deciding what level of compensation that the Plaintiff was entitled to for the notice period the Plaintiff argued that it should be based on her three year backward average , which came to $621,000 per annum.

The Defendant argued that it should be based on her rate of pay as of the date of termination, which came to $149,000.

This is what Gans J. said about this issue:

55 In the first place, as the Ontario Court of Appeal observed, there is no hard and fast rule that mandates a trial judge to adopt an averaging absent compelling reasons to the contrary.23 The British Columbia Court of Appeal adopted the following statement from Harris in Wrongful Dismissal, looseleaf (Toronto: Carswell, 1989) at 4-52.9:
Whatever assessment of damages is made, the standard of salary is not to be an average of prior years, but rather should be based on the income of the employee at the date of termination. In Lawson v. Dominion Securities Corp., [1977] 2 A.C.W.S. 259, the Ontario Court of Appeal stated:
The governing principle is that damages for wrongful dismissal are “prima facie the amount that the plaintiff would have earned had the employment continued according to the contract subject to a deduction in respect of any amount accruing from any other employment which the plaintiff, in minimizing his damages, either had obtained or should reasonably have obtained”. McGregor on Damages 13th edition, para. 884 at p. 594. The judgment appealed from erred in measuring damages by the remuneration of the dismissed employee in the year or years prior to his dismissal: Findlay v. Howard (1919), 58 S.C.R. 516.
(See also Cappelli v. Promospec Specialty Advertising Ltd. (1997), 31 C.C.E.L. (2d) 202, 97 C.L.L.C. 210-026, 39 O.T.C. 328, 1997 CarswellOnt 3704 (Ont. Gen. Div.).)
On the other hand, in some cases the plaintiff’s earnings in the last year of employment may not be representative of his or her usual earnings. The court undoubtedly has jurisdiction to look at preceding years in order to determine a “representative income” for the plaintiff.24
(Emphasis added)
56 Assuming without deciding at this moment in time, whether such a method would permit me to include an amount in respect of the Shareholders’ Bonus, which is very much in issue, I am not persuaded that the use of an averaging of Total Remuneration is appropriate in the circumstances of this case. In my view, the income averaging method is more appropriate in circumstances where the size of the income pool is uncertain; when the dismissed employee is, for example, a commissioned salesperson; or when there is marked volatility in the employee’s remuneration as a result of his or her own efforts over the preceding years leading to termination.
57 In the instant case, the math is fairly straightforward — it is simply a matter of multiplying the ‘last percentage allotment’ established by the Compensation Committee against the Performance Bonus and Shareholders’ Bonus ‘pots’, both of which latter numbers are derived from the charts and appendices that were filed on consent as part of the JBDs. The computation is not dependent on what success — or otherwise — Evans might have enjoyed or suffered in the period of reasonable notice. The trickier issue is determining the appropriate percentage allotment for inclusion in the calculation.
58 While the Performance Bonus could be said to be subject to an upward adjustment had the Compensation Committee determined in any quarter that such were warranted, having regard to the fact that Evans’ client base was dramatically altered for 2009, I am at a loss to see how she might have improved upon her relative ratings during the notice period after this alteration. She had been allotted a 0.5% participation rate for seven straight quarters prior to the moment of termination as a result of point allocation generated from a reasonably static client roster. This track record, as it were, undercuts the notion that she was perhaps on an up-tick. It would not, therefore, be unreasonable to fix her Performance Bonus percentage at the number with which she ended in 2008, being 0.5%. As a corollary, I would not reduce the percentage because her relative performance might very well have declined in light of the loss of clients. In my view, Paradigm can’t have it both ways.
59 Finally, I find the decision of my colleague Wilton-Siegel J. in Chann, supra, in circumstances not too dissimilar to the instant case, to be most instructive:
First, the plaintiff suggested that a three year average of bonus payments should be used as the base rather than the level of the bonus payment in fiscal 2001. This approach may be appropriate in circumstances where bonuses fluctuate only moderately. However, it is not appropriate for the investment banking business in which significant fluctuations occur from year to year. In this industry, bonuses are adjusted yearly for all employees to address results within the most recent fiscal year and performance in prior years is discounted quickly. I see no basis for departing from this approach in the case of the plaintiff. The plaintiff also suggested his 2001 bonus was already reduced to a certain extent as a result of the defendant’s determination in that year that his origination activities were unsatisfactory. I do not see a reason, however, to use a three year average to reduce the effect of that determination which was made while the plaintiff was employed and was, therefore, not included in the plaintiff’s claim.25
60 In the result, I would hold that the plaintiff should recover the sum of $68,750 for the fixed portion of the salary for the 11-month period of notice, and $86,771.21 for her share of the Performance Bonus for the same period.26

This is often a fundamental issue in cases where the compensation is varied and complicated. This case reminds us that using a backward average is only appropriate where it is unfeasible to determine what would have happened if the Plaintiff had been given the chance to work out the notice period. Creative counsel can often put together a compelling case showing what would have actually occurred over the notice period. This can sometimes benefit the plaintiff or , as in this case, benefit the employer.

This is especially important where an employee’s compensation comes from a definable source, like a list of ongoing long term clients for whom responsibility has been transferred to another employee after dismissal. By simply tracking what sales were actually made to those same clients over the notice period, you can have a pretty good picture of what would have happened if the Plaintiff had been allowed to work out her notice period.

In Cheong v Grand Pacific  Travel &Trade, ( 2016 BCSC 1321) Justice Warren held that a Employee Handbook containing a ESA only termination provision was unenforceable for the following reasons:

1) The handbook came into existance after the Plaintiff was hired and no consideration was provided for her giving up her common law right to reasonable notice upon termination.

2) The handbook did not state that it intended to be a contractual agreement.

3) As the handbook provided that the Employer could unilaterally ” repeal, amend , modify add to or delete from the handbook at any time” the Court found that this is inconsistent with a contract as ” It almost goes without saying that a contract cannot be unilaterally varied “.

4) Many of the provisions refer to theft that the Company” may” provide this or that but is not required to do so. The Court commented that ” Such discretionary language is not reflective of a contract document but, rather, a document intended for informational purposes only”.

5) There was no manifest acceptance by the employee, i.e. her signature acknowledging that she was bound by the terms of the handbook. Nor did her silence constitute acceptance.

I find  the third reason the most interesting as almost every employee handbook I have ever read contains such a boilerplate clause. Moreover some handbooks, especially US based ones, contain an express clause stating that” nothing in this handbook is intended to create a contractual relationship”. This is often mixed in with a clause reinterating the American “at will” concept.

It is now open to counsel to argue that these seemingly boilerplate clauses have the effect of making the booklet unenforceable at least in regards to the enforceability of the termination clause.

There is simply no substitute for  clearly setting out in the employment agreement at the time of hiring the termination provisions that the parties agree on. Why employers continue to try to limit their termination obligations in anything other than the proper way always amazes me.

 

In Lin v Ontario Teachers’ Pension Plan Board ( 2016 ONCA 619)  the Court was faced with the following language in two bonus plans :

87] Again, the relevant language in the 2009 AIP is as follows:

In the case where a Participant resigns or the Participant’s employment is terminated by [Teachers’] prior to the payout of a bonus (normally the first pay period in April), no bonus shall be earned or payable to the Participant.

[88] The language in the 2008 LTIP is similar. It provides that:

In the case the Participant resigns or the Participant’s employment is terminated by [Teachers’], the Participant’s Dollar Grants not yet vested at the time of termination shall be forfeited forthwith without any right to compensation.

The Court found that this language was not sufficient  to take away the Plaintiffs’ common law right to his full compensation over the notice period. The Court said it this way :

[89] I reject the appellant’s assertion that these terms restrict Lin’s entitlement to compensation for lost bonuses in the event of wrongful dismissal. The wording does not unambiguously alter or remove the respondent’s common law right to damages, which include compensation for the bonuses he would have received while employed and during the period of reasonable notice. A provision that no bonus is payable where employment is terminated by the employer prior to the payout of the bonus is, in effect, the same as a requirement of “active employment” at the date of bonus payout. Without more, such wording is insufficient to deprive a terminated employee of the bonus he or she would have earned during the period of reasonable notice, as a component of damages for wrongful dismissal: Bernier v. Nygard International Partnership, 2013 ONCA 780, 14 C.C.E.L. (4th) 155, affirming 2013 ONSC 4578, 9 C.C.E.L. (4th) 41; Paquette, at para. 31.

[90] And, as Goudge J.A. explained in Veer v. Dover Corporation (Canada) Limited (1999), 45 C.C.E.L. (2d) 183 (Ont. C.A.), at para. 14:

[T]he termination contemplated must, I think, mean termination according to law. Absent express language providing for it, I cannot conclude that the parties intended that an unlawful termination would trigger the end of the employee’s option rights. The agreement should not be presumed to have provided for unlawful triggering events. Rather, the parties must be taken to have intended that the triggering actions would comply with the law in the absence of clear language to the contrary.

Again what does an employer need to do so as to deprive a terminated employee of his bonus over the notice period ?

This is the language that the Teachers tried to rely upon but failed because having asked for the employees’ consent these changes they backed down when the senior managers refused to agree to these changes.

In the event that a Participant resigns his or her employment with [Teachers’] or the Participant’s employment with [Teachers’] is terminated for any reason (whether with or without Cause), the Participant shall on the Termination Date forfeit any and all rights to be paid a bonus under the Plan (or any amount in lieu thereof) or to accrue any further bonus under the Plan. For further certainty, in the event a Participant’s employment terminates after completion of a calendar year in respect of which a bonus had been earned by the Participant under the Plan but prior to payment of that bonus, no bonus (or any amount in lieu thereof) shall be paid to the Participant.

“Termination Date” was defined as:

The date on which a Participant ceases to be employed by or provide services to [Teachers’] and, for greater certainty, does not include any period following the date on which a Participant is notified that his or her employment or services are terminated (whether such termination is lawful or unlawful) during which the Participant is eligible to receive any statutory, contractual or common law notice or compensation in lieu thereof or severance payments unless the Participant is actually required by [Teachers’] to provide services during such notice period.

Would that clause have ben enforceable? Could the Plaintiff apply for relief from forfeiture ?

The real issue is why do employers work so hard at first devising bonus plans that inspire employees to succeed and then work even harder to deprive those same employees of bonuses which in many cases they have already earned?

I strongly suspect that if employers devised plans that were fairer to terminated employees ( for instance providing for pro rata bonuses) , the Courts would be much more willing to uphold the contractual provisions, even if they did not provide for the  full common law entitlements that the employee would normally be entitled to.

I understand why you would not want to pay a bonus to an employee who has quit or was fired for just cause, but why the same treatment for an employee that you decide no longer fits your plans? Why should that employee be deprived of the bonus that he would have earned if he had been terminated legally, i.e. by providing reasonable working notice.

I thought that there was a general legal principle that a person should not benefit from their own illegal or wrongful conduct.

Why not apply that overriding tenet of justice rather that adhering to the out dated concept that an employment contract is simply a commercial contract between sophisticated parties of equal bargaining strength?

 

In Pacquette v TeraGo Networks ( 2016 ONCA 618 ) the Ontario Court of Appeal reviewed a decision in which Perell J. had denied the Plaintiff his bonus over the 17 month notice period because there was a provision in the bonus plan which required the employee to be ” actively employed” at the time of payout in order to receive his bonus.

The Court held that there was a two step process in calculating damages in a wrongful dismissal action:

First, because it was found that the bonus was an intergral part of the Plaintiff’s compensation plan, his damages are to be calculated on the basis of what they would have been had he been permitted to work out his notice period.

Secondly, the Court is to then look at the language of the relevant plan to see if there is anything which would disentitle the Plaintiff to the bonus over the notice period

To quote the judgement:

30] The first step is to consider the appellant’s common law rights. In circumstances where, as here, there was a finding that the bonus was an integral part of the terminated employee’s compensation, Paquette would have been eligible to receive a bonus in February of 2015 and 2016, had he continued to be employed during the 17 month notice period.

[31] The second step is to determine whether there is something in the bonus plan that would specifically remove the appellant’s common law entitlement. The question is not whether the contract or plan is ambiguous, but whether the wording of the plan unambiguously alters or removes the appellant’s common law rights: Taggart, at paras. 12, 19-22.

The Court went on to find that the term “active employment” did not have the effect of limiting the bonus entitlement over the notice period.

A term that requires active employment when the bonus is paid, without more, is not sufficient to deprive an employee terminated without reasonable notice of a claim for compensation for the bonus he or she would have received during the notice period, as part of his or her wrongful dismissal damages.

How then can an employer effectively deprive an employee of their bonus over the notice period? What language will be sufficient?

The Court had this to say about Kieran v. Ingram Micro Inc. (2004), 33 C.C.E.L. (3d) 157 (Ont. C.A.),

[38] Kieran is a stock option case. The issue was whether Mr. Kieran’s time for exercising stock options upon the termination of his employment was extended by the common law notice period where he had been dismissed without cause. The stock option plans provided that he had 60 days from the termination of his employment for any reason other than death, disability or retirement to exercise any rights then vested. “Termination of employment” was defined as the date the employee “ceases to perform services for” the employer “without regard to whether the employee continues thereafter to receive any compensatory payments therefrom or is paid salary thereby in lieu of notice of termination.”

[39] Lang J.A. explained, at para. 56, that under Ontario law, “Mr. Kieran would be entitled to damages for the loss of the plans, as they formed part of his compensation, absent contractual terms to the contrary. In the presence of contractual terms, those terms govern”. She then concluded that the plans were unambiguous as they “specifically provided that Mr. Kieran’s employment terminated on the date he ceased to perform services, without regard to whether he continued to receive compensatory payments or salary in lieu of notice.” Accordingly, Mr. Kieran’s right to exercise the stock options was not extended by the period of reasonable notice. He was not entitled to damages for the stock options.

Therefore this case, although interesting on its facts, simply stands for the proposition that the words ” actively employed ” are ineffective in denying a plaintiff a payment that would have occurred over the notice period, however smart employers will probably be changing their plans immediately to include Kierans’ type language rather than the active employment clause.

 

In Morrison v Ericsson Canada ( 2016 ONSC 3908 Madame Justice Darla Wilson was faced with a dispute over a sales plan that contained the  following clause:

H. Arbitration. Should the participant be dissatisfied with the final outcome of the Dispute Resolution procedure, the participant and Ericsson agree that any dispute or controversy arising under or concerning this Plan (including the payment and amounts of commissions and bonuses) shall be settled by final and binding arbitration in the City of Dallas, Texas in accordance with the Commercial Arbitration Rules of the American Arbitration Association…. The participant’s and Ericsson’s signature upon the participant’s Goal Sheet reflects the parties’ agreement to be bound by this arbitration provision.

As the employee was not paid what he felt he was owed, he claimed that he was constructively dismissed and sued both for the commission owing as well as damages for wrongful dismissal.

The Court found that they were obligated to enforce the choice of arbitration and dismissed the lawsuit.

The final paragraphs of the judgement says it all :

23 In my opinion, the matters at issue fall directly within the terms of the SIP agreement, which requires that if a dispute arising out of the agreement cannot be resolved, the parties must arbitrate the dispute in Texas. The Plaintiff cannot avail himself of the appeal procedures specified in the agreement and when he does not like the decisions rendered, choose to abandon the final dispute mechanism that is set out and which he agreed to. The arbitration has not taken place because the Plaintiff has refused to participate. The fact that it might be inconvenient or expensive for Morrison to arbitrate in Texas is not a compelling reason to find that he ought to be permitted to pursue the Ontario action. Even if there were an issue of whether the dispute was properly sent to the arbitrator, which was not an argument advanced before me, the matter must be referred to the arbitrator for that determination. In my view, the issues Morrison complains of arise from his employment and in particular arise from the administration of the SIP program and as such, he must proceed to arbitration in accordance with the agreement.
Conclusion
24 The motion of the Defendant is granted. The Ontario action is stayed and the Plaintiff is directed to proceed with arbitration of his dispute in accordance with the terms of the agreement he signed.

As the judge noted, this was not a case involving the issue of forum conveniens or choice of law. Once Section 7 of the  Arbitration Act, 1991 is invoked, there is no discretion in the Court to allow a lawsuit to continue. That section reads as follows:

If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.

Therefore it is incumbent on lawyers for both parties to closely examine these types of agreements to see whether an arbitration clause is applicable. Arbitration clauses are quite common in US based employment agreements, where they are used primarily to avoid crazy jury verdicts.

In Fillmore v Hercules SLR Inc ( 2016 ONSC 4686 CanLII) , Justice Diamond had a situation where the plaintiff , at the time of termination , was offered a choice between termination and a demotion with a 20% pay cut ( to be implemented in 6 months ). The employee did not elect to take the demotion. The defendant argued that this constituted a failure to mitigate his damages. This is what the Court had to say:

Issue #2: Should the plaintiff’s damages be reduced by reason of his alleged failure to mitigate?

[17] On Thursday, August 20, 2015, the plaintiff was asked to meet with the defendant’s general manager, Randy Tollefson (“Tollefson”). The plaintiff sat down with Tollefson, who presented the plaintiff with two separate letters, both dated August 20, 2015.

[18] The first letter, marked “Without Prejudice”, advised the plaintiff, inter alia, as follows:

“Further to our conversation today, this letter confirms that upon review of our business operations, it has been determined that your services with the Company are no longer required. Your employment with Hercules SLR Inc. is being terminated on Monday, August 24, 2015 without cause.”

[19] Accordingly, the plaintiff’s employment as Director (Purchasing) would be terminated the following Monday. The first letter further advised that the defendant would provide him eight weeks’ written notice in accordance with the requirements of the Employment Standards Act, 2000, S.O. 2000, C. 41, and offered the plaintiff an additional payment of 12 weeks’ severance in exchange for the plaintiff executing and returning a Full and Final Release no later than Friday, August 28, 2015 (the “Severance Offer”).

[20] The plaintiff also received a second letter dated August 20, 2015. In that second letter, the plaintiff was offered the “permanent, full time role of Supervisor Service”, with an expected start date of Monday, August 24, 2015. The salary for this new position would be $60,000.00 per annum (i.e. more than 20% less than his former salary). The defendant’s offer further provided the plaintiff with a six month income guarantee at his old salary to “assist him in the transition from current role to new role”. In other words, the defendant was prepared to maintain the plaintiff’s old salary for six months before the new salary would commence (the “New Employment Offer”).

[21] Both the Severance Offer and the New Employment Offer were open for acceptance until Monday, August 24, 2015. The plaintiff did not accept either offer by the defendant’s deadline.

[22] On Tuesday, August 25, 2015, the plaintiff sent an email to Laura Hubley (“Hubley”), the defendant’s Human Resources Generalist. The plaintiff asked for confirmation that the “termination letter is now in effect” and that “as of Monday, August 24 he was no longer employed with the defendant”.

[23] In response, Hubley delivered the following email to the plaintiff:

“This is to confirm our conversation this morning that as a result of a review of business operations and a restructuring initiative, your current role as Procurement Director has been eliminated as of August 24, 2015. On Thursday, August 20, you were presented with 2 options to consider.

The first option in the letter dated Thursday August 20, we have offered you a termination letter which outlined a severance package. This package includes a Full and Final Release Agreement with an expiry date of Friday, August 28, 2015. If you agree to the terms of the severance package and return the signed release agreement, we agree to pay you a severance package equal to 20 weeks of pay in a lump sum on the next regular pay date of September 3, 2015. If we do not receive the signed release agreement, we will pay you a lump sum of 8 weeks in accordance with Ontario Employment Standards.

The second option is to consider a job offer also dated August 20, 2015. If you accept the new job offer, your employment will continue with Hercules SLR Inc. To assist you in transitioning to the new role, we are offering you a 6 month income guarantee ending February 26, 2016.

If you decide not to accept the job offer, your employment with Hercules SLR Inc. ended on Monday. August 24, 2015. We have not had specific direction from you stating which option you prefer. Therefore, unless otherwise directed, we will proceed with termination.”

[24] The defendant submits that Hubley’s email renewed the expired New Offer of Employment to the plaintiff, and as such the plaintiff was offered a reasonable opportunity to mitigate his damages by returning to work for the defendant. The defendant thus submits that by not accepting the New Offer of Employment, the plaintiff failed to discharge his duty to mitigate his damages. For clarity, I note that the defendant is not challenging any of the plaintiff’s other mitigation efforts (or lack thereof) on this motion. The defendant’s position is that the plaintiff failed to mitigate his damages solely by reason of his refusal to accept the New Offer of Employment.

[25] As held by the Supreme Court of Canada in Evans v. Teamsters Local Union No. 31 (2008) 2008 SCC 20 (CanLII), S.C.J. No. 20, in some circumstances it may be necessary for a dismissed employee to mitigate his/her damages by returning to work for the same employer. As wrongful dismissal damages are intended to compensate for the lack of reasonable notice, in the absence of the employee facing a potential hostile atmosphere, embarrassment or humiliation, the Court may require the employee to mitigate his/her damages by “taking temporary work with the dismissing employer” (my emphasis in bold).

[26] The plaintiff relies upon the decision of the Court of Appeal for Ontario in Farwell v. Citair, Inc. 2014 ONCA 177 (CanLII), and specifically the following extract:

“To paraphrase Evans, the appellant’s mitigation argument presupposes that the employer has offered the employee a chance to mitigate damages by returning to work. To trigger this form of mitigation duty, the appellant was therefore obliged to offer Mr. Farwell the clear opportunity to work out the notice period after he refused to accept the position of Purchasing Manager and told the appellant that he was treating the reorganization as constructive and wrongful dismissal.”

[27] Both of the offers presented to the plaintiff were set to expire on Monday, August 24, 2015, being the date the plaintiff’s position with the defendant was being terminated. The New Offer of Employment is not an offer to work through the notice period (which the defendant originally suggested was 20 weeks). The nature of the New Offer of Employment was not time restricted or limited. It was a new, full time position with the defendant.

[28] The Farwell decision obliges the defendant to offer the plaintiff the “clear opportunity to work out the notice period” after the plaintiff refuses to accept the new, lesser position. I do not view Hubley’s email as being consistent with Farwell. Hubley’s email seems to keep both the Severance Offer and the New Offer of Employment on the table even though the plaintiff’s employment as Director (Purchasing) was “eliminated” the previous day. The New Offer of Employment does not trigger the duty to mitigate as discussed in Evans and particularized in Farwell; rather, it was an offer to accept a demotion.

[29] The defendant further submits that even if the New Offer of Employment failed to comply with Evans or Farwell, it was nevertheless a reasonable offer of employment which the plaintiff ought not to have refused in the circumstances. I disagree. Had the exact same offer been presented to the plaintiff by a third party employer during the notice period, and even assuming the terms of that third party employer’s offer were reasonable enough for the plaintiff to accept, as the offer included a lesser salary than the plaintiff should have received from the defendant during the notice period, the plaintiff could still look to the defendant for compensation for that missing amount. In other words, had the plaintiff accepted such an offer from a third party employer, he could still seek compensation from the defendant for the difference between his new salary and his old salary during the notice period.

[30] The defendant’s New Offer of Employment invites the plaintiff to become the “permanent, full time Supervisor Service” at a lesser salary going forward with no end date. Unlike traditional offers from dismissing employers that the employee work through the notice period, the New Offer of Employment required the plaintiff to accept the terms of the new position “as is”. There is nothing in the second letter which confirms that the potential acceptance of the New Offer of Employment would be without prejudice to the plaintiff’s rights arising from his dismissal from his former position.

[31] Had he accepted the New Offer of Employment, the defendant would likely have argued that the plaintiff condoned his right to seek additional compensation. The proposed transitional six month salary guarantee could arguably amount to consideration in exchange for a waiver of the plaintiff’s rights arising from his dismissal. There is no obligation on the plaintiff to effectively risk handing the defendant a Full and Final Release through the back door and under the guise of mitigation efforts.

On the other hand had the Employer told the Plaintiff that his job would be eliminated  6 months in the future but that if he wanted to stay on after that at a reduced position and salary, then the employer would have received credit for the 6 months working notice, whether the employee worked it or not. Moreover after 6 months of looking for a comparable job, the employee may have been more inclined to take the lesser position than face the continued uncertainty of unemployment.

In my experience, having been terminated from one job, the next job that people obtain is very often of a lesser quality than the one from which they recently removed. This is especially true when the employee does not have the paper qualifications for the job that new employers insist upon even though they are perfectly capable of performing the job functions. For example, the Controller who never completed her CMA degree.

In Wilson v AECL ( 2016 SCC  29  ) the Supreme Court of Canada clearly set out that  an employer must prove just cause in order to avoid an order of reinstatement under the Unjust Dismissal provisions of the Canada Labour Code. This is from the headnote of the majority opinion.

Returning to this case, the issue is whether the Adjudicator’s interpretation of ss. 240 to 246 of the Code was reasonable. The text, the context, the statements of the Minister of Labour when the legislation was introduced, and the views of the overwhelming majority of arbitrators and labour law scholars, confirm that the entire purpose of the statutory scheme was to ensure that non‑unionized federal employees would be entitled to protection from being dismissed without cause under Part III of the Code. The alternative approach of severance pay in lieu falls outside the range of “possible, acceptable outcomes which are defensible in respect of the facts and law” because it completely undermines this purpose by permitting employers, at their option, to deprive employees of the full remedial package Parliament created for them. The rights of employees should be based on what Parliament intended, not on the idiosyncratic view of the individual employer or adjudicator. The Adjudicator’s decision was, therefore, reasonable.

When the provisions were introduced, the Minister referred to the right of employees to fundamental protection from arbitrary dismissal and to the fact that such protection was already a part of all collective agreements. These statements make it difficult to draw any inference other than that Parliament intended to expand the dismissal rights of non‑unionized federal employees in a way that, if not identically, at least analogously matched those held by unionized employees. This is how the new provisions have been interpreted by labour law scholars and almost all the adjudicators appointed to apply them, namely, that the purpose of the 1978 provisions in ss. 240 to 246 was to offer a statutory alternative to the common law of dismissals and to conceptually align the protections from unjust dismissals for non‑unionized federal employees with those available to unionized employees. The new Code regime was also a cost‑effective alternative to the civil court system for dismissed employees to obtain meaningful remedies which are far more expansive than those available at common law.

The most significant arbitral tutor for the new provisions came from the way the jurisprudence defined “Unjust Dismissal”. In the collective bargaining context, “unjust dismissal” has a specific and well understood meaning: that employees covered by collective agreements are protected from unjust dismissals and can only be dismissed for “just cause”. This includes an onus on employers to give reasons showing why the dismissal is justified, and carries with it a wide remedial package including reinstatement and progressive discipline. The foundational premise of the common law scheme — that there is a right to dismiss on reasonable notice without cause or reasons — has been completely replaced under the Code by a regime requiring reasons for dismissal. In addition, the galaxy of discretionary remedies, including, most notably, reinstatement, as well as the open‑ended equitable relief available, is also utterly inconsistent with the right to dismiss without cause. If an employer can continue to dismiss without cause under the Code simply by providing adequate severance pay, there is virtually no role for the plurality of remedies available to the adjudicator under the Unjust Dismissal scheme. Out of the over 1,740 adjudications and decisions since the Unjust Dismissal scheme was enacted, only 28 decisions have not followed this consensus approach.

The remedies newly available in 1978 to non‑unionized employees reflect those generally available in the collective bargaining context. This is what Parliament intended. To infer instead that Parliament intended to maintain the common law under the Code regime, creates an anomalous legal environment in which the protections given to employees by statute — reasons, reinstatement, equitable relief — can be superseded by the common law right of employers to dismiss whomever they want for whatever reason they want so long as they give reasonable notice or pay in lieu. This somersaults the accepted understanding of the relationship between the common law and statutes, especially in dealing with employment protections, by assuming the continuity of a more restrictive common law regime notwithstanding the legislative enactment of benefit‑granting provisions to the contrary.

The argument that employment can be terminated without cause so long as minimum notice or compensation is given, on the other hand, would have the effect of rendering many of the Unjust Dismissal remedies meaningless or redundant. Only by interpreting the Unjust Dismissal scheme as representing a displacement of the employer’s ability at common law to fire an employee without reasons if reasonable notice is given, does the scheme and its remedial package make sense. That is how the 1978 provisions have been almost universally applied. It is an outcome that is anchored in parliamentary intention, statutory language, arbitral jurisprudence, and labour relations practice. To decide otherwise would fundamentally undermine Parliament’s remedial purpose.

Per McLachlin C.J. and Karakatsanis, Wagner and Gascon JJ.: The standard of review in this case is reasonableness and the Adjudicator’s decision was reasonable and should be restored. Justice Abella’s disposition of the appeal on the merits and her analysis of the two conflicting interpretations of the Unjust Dismissal provisions of the Code are agreed with. 

It is wonderfully refreshing that our Supreme Court took a thoughtful review of this issue and actually got it right. This should put to rest a controversy that never should have happened in the first place.

Moreover this decision may well spark a renewed interest in this little known section of federal employment law that many employees and many lawyers are not aware of . The rights and remedies available to non-unionized federally regulated employees under the Code are far superior to those available under the common law.

Maybe one day the Supremes will have a chance to look at the confused state of the law on ESA only termination agreements and also provide some thoughtful law on that topic.