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Case Provides Useful Analysis of Difference Between Independent vs Dependent Contractor:

In Glimhagen v GWR Resources ( 2017 BCSC 761) Justice Rogers was faced with a plaintiff who during the course of his 23 years association with the defendant had been an independent contractor, then a dependant contractor and finally an employee.

However in order to determine the amount of reasonable notice, the judge had to determine the period of time in which the Plaintiff was either an employee or a dependant contractor, as his time as an independent contractor did not count towards reasonable notice.

Most of the reported cases deal with the difference between an employee and an independent contractor whereas this case deals with more exacting differences between two different types of contractors.

This distinction is becoming more important as the rights given to dependant contractors are increasing. Under the common law, dependant contractors are entitled to reasonable notice of termination ( see Keenan v Canac Kitchens 2016 ONCA 79) . Under the Canada Labour Code, dependant contractors are deemed to be employees for the purpose of the Code. One of the key recommendations of the just released Changing Workplace Review by the Ontario Ministry of Labour had this to say about the issue :

We identify the issue of employees who are misclassified – intentionally or unintentionally – as independent contractors not covered by the ESA as a significant one and recommend that the Ministry make misclassification a priority enforcement issue. We further recommend that the term “dependent contractor” be added to the definition of “employee” in the ESA Finally, we recommend that where there is a dispute about whether a worker is an employee, the person receiving the worker’s services has the burden of proving the worker is not an employee and an obligation to provide all relevant evidence.

The Judge in this case went over all the relevant factors and determined whether each factor favoured either the dependant or the independent contractor status .

I will quote extensively from the judgement as it best shows the judges’ reasoning .

Discussion
Dependent or Independent Contractor
48      The point of departure in this case is to determine whether the plaintiff was a dependent contractor and if he was, when he acquired that status. The relevant factors are:
Whether the agent was largely limited exclusively to the service of the principal
49      The defendant never required the plaintiff to provide services exclusively to it. In fact, even after he went on the defendant’s payroll the plaintiff continued to be free to provide accounting and consulting services to other parties.
50      The factor militates against a dependent relationship at any time prior to August 2012.
Whether the agent was subject to the control of the principal, not only as to the product sold but also as to when, where and how it was sold
51      The evidence demonstrates that at the outset, the plaintiff provided computer consulting services to the defendant. The defendant had no expertise in computer based accounting systems. The plaintiff controlled the advice he gave to the defendant about what kind of accounting system to install and how to operate it. Further, the plaintiff testified that he designed and set up the digital accounts and control systems for the defendant. The plaintiff also designed and implemented an on-line system for tracking the defendant’s accounts receivable and accounts payable. The evidence was quite clear that the defendant did not direct the plaintiff in those tasks.
52      The physical bookkeeping that the plaintiff performed for the defendant was done at the defendant’s direction.
53      The accounting processes that the plaintiff carried out were the kinds of processes required of any in-house accountant. He was directed to prepare quarterly financial statements and to put together the information necessary for the defendant’s auditors. The defendant made it clear to the plaintiff that these were among the things he was expected to do. The defendant did not, however, provide the plaintiff with a set of instructions on how to do those tasks — the defendant left it to the plaintiff to apply his own expertise.
54      The defendant also required the plaintiff to ensure that its corporate filings and account keeping complied with the policies and regulations of the TSX. Again, the defendant did not provide the plaintiff with an instruction manual to carry out his responsibilities. The defendant relied on the plaintiff to educate himself as to the relevant elements of TSX operations and to comply with those strictures.
55      This factor militates somewhat against the plaintiff being a dependent contractor.
Whether the agent had an investment in or interest in the tools necessary to perform his service for the principal
56      The plaintiff always used equipment and software supplied by the defendant. He carried out his tasks at the defendant’s places of business. Only occasionally did the plaintiff do the defendant’s work from his home office.
57      The factors argue in favor of the plaintiff being a dependent contractor.
Whether by performing his duties the agent undertook risk of loss or possibility of profit apart from his fixed rate remuneration
58      The plaintiff was not required to show up at the defendant’s office at any particular time of day, nor was he required to put in a given number of hours of work in a day. The defendant did not control the plaintiff’s hours of work; the defendant only required that the plaintiff properly perform the tasks assigned to him. To the extent, then, that the plaintiff performed his work efficiently more hours of the day were available for him to devote to promoting his other business interests. On the other hand, the plaintiff might have to forego other remuneration if his work for the defendant increased in a given month due to, say, the need to prepare accounts for a quarterly or annual report.
59      Further, the plaintiff regularly accepted shares issued by the defendant in lieu of cash for his work. In so doing, the plaintiff took a risk that he would not be fully paid, as would be the case if the value of the stocks fell, or make a profit over his monthly stipend, as would happen if the shares increased in value.
60      The factor argues against the plaintiff being a dependent contractor.
Whether the agent’s activity was part of the principal’s business organization — in other words ‘whose business was it?’
61      The plaintiff’s work for the defendant was an integral part of the defendant’s operation. It would not have been possible for the defendant to have carried on its business without a set of properly functioning books of account. The same is true of the document management that the plaintiff performed for some years ahead of his appointment as corporate secretary. It cannot be said that the plaintiff’s duties were peripheral to the defendant’s business.
62      Further, the plaintiff carried out some degree of financial control over the defendant’s operations. He usually assessed whether an account ought to be paid and determined when to pay it. While the plaintiff was not wholly in charge of the firm’s finances, he did act as a watchdog over inappropriate use of the defendant’s money. To that extent, then, the plaintiff was looking out for the defendant’s business, not his own.
63      The evidence relevant to this factor argues in favor of the plaintiff being a dependent contractor.
Whether the relationship was long standing — the more permanent the term of service the more dependent the contractor
64      The relationship between the plaintiff and the defendant started in 1989 and persisted through to 2012 — a span of 23 years. It may be important to note that the plaintiff’s tenure with the defendant was not punctuated by his coming and going. The plaintiff provided services to the defendant steadily and without interruption throughout that period.
65      Significantly, the plaintiff’s ‘job description’ changed considerably when his sister Margret passed away. With her passing he began to take over the things that Margret had been doing for the defendant. Those things included some office management and financial control.
66      The evidence establishes that not only was this a long-standing relationship, it was an evolving one as well. Over time there was an increase in the plaintiff’s tasks and responsibilities for the defendant.
67      This factor militates for a dependent contractor relationship.
Whether the parties relied on one another and closely coordinated their conduct
68      There can be no doubt that prior to his becoming an employee in August 2010, the defendant relied heavily on the plaintiff. Although there was no direct evidence on the point, I find that it is more likely than not that by the late 1990’s the plaintiff was the only person in the defendant’s organization who thoroughly understood the systems managing the defendant’s finances. And again, while there was no direct evidence on the point, I find that it is more likely than not that the plaintiff relied on the defendant’s monthly stipend to tide him over droughts in his other business enterprises. Both parties relied on each other.
69      Additionally, they coordinated their interaction, especially when it came to the preparation of quarterly and annual financial reports. For those reports to make sense and be delivered on time, the plaintiff and other members of the defendant’s management had to work together to gather, collate and process the relevant data. Mr. Shives testified to an example of that coordination when he described how and why the plaintiff would regularly visit his field office in Lac La Hache, B.C.
70      This factor argues in favor of a dependent contract relationship.
Summary
71      Taking all of the evidence into account, I have concluded that prior to the late 1990’s the parties were not so tightly bound together and their efforts were not so integrated with one another as to have made the plaintiff a dependent contractor.
72      I find that when the plaintiff took on his late sister’s role with defendant, that status began to evolve. By the year 2000, the plaintiff was an integral part of the defendant’s operation — it would have been very difficult for the defendant to have carried on efficiently in the plaintiff’s absence. By the same token, although the plaintiff was free to pursue other business interests and he did in fact pursue those interests, his relationship with the defendant was, by the year 2000, well ingrained and established.
73      For these reasons, I find that as of the year 2000 the plaintiff was a dependent contractor for the defendant. It is from that year that the plaintiff’s entitlement to notice credits starts to accumulate.
As the Plaintiff  was found to be either an employee or a dependant contractor for 12 of the 23 years and the judge found that the proper notice was 12 months.

Arbitrator That Finds Employer’s ” Generous” Actions at Termination are Grounds for Not Upholding Just Cause:

In an adjudication under the Unjust Dismissal section of the Canada Labour Code, Arbitrator Allan Kaufman decided in Navaneethakrishnan v Bell Mobility ( YM2707-10699) ( 2017 CarswellNat 1825) as whether a single act of insolence constituted just cause.

The Employee was called into a meeting to be told that she was being promoted, but not to the job that she had hoped for. The employee was not a happy camper.

In the course of that meeting with her boss she said the following things:

7      This meeting of May 11, 2016 then went downhill. According to an e-mail that Luca sent to Tomassina in HR later that same day, the employee stated during that meeting with Luca that:
• “Marco and Luca do not know how to lead”;
• “Luca’s group have the absolute worst reputation”;
• “Luca does not have a clue when it comes to budgeting”;
• “I have zero respect for you(Luca) and Marco – zero.”
• “Luca never stood up for the team and gave her zero support”;
• “I’m way too smart for this, I studied Finance, I did my CFA, I’m way too smart.” At which point she unilaterally walked out and ended the meeting with her boss, Luca.
 
Luca was her boss and Marco was the boss of Luca.
The Adjudicator was not impressed with the Employee’s conduct :
18      I regard this conduct on the part of the employee, if true, as being very serious, since was accusing her immediate boss, and his boss, of not knowing how to lead, and of basically being incompetent. After all, there are not too many worse comments that an employee can hurl at her boss’ face than what this particular employee was alleged to have said. Fortunately for the employee, there was nobody else in the meeting room who heard her comments, except Luca. Yet he was her immediate boss and she is alleged to have said these things directly to his face.
19      At the Hearing, the employee denied making most of the above quoted statements during the May 11th meeting. Whereas Luca testified that all of those quotes were accurate. I tended to believe Luca’s version of those events…
However the Adjudicator found that the employee was entitled to a warning before a termination for just cause could be upheld. I have no problem with that finding.
However, the Adjudicator went on to find that two of the Employer’s actions also contributed to his finding that the employment relationship was not totally severed.
1. Before termination, Bell wrote the employee a letter.
5. However, the main problem for the employer is that the employer’s own letter of termination dated May 17, 2016 suggests that the employment relationship had not been totally severed between the parties. This is evidenced by the fact that the employer took the highly unusual but very generous step of writing in its letter of termination to her dated May 17, 2016 that if she could come forward and advise the employer of any adverse medical condition or other personal issues in her life that might have explained her outburst during the May 11th meeting, the employer would consider re-hiring her. I believe this to have been a most generous gesture on the part of the employer. However, it served at the same time to undermine the employer’s legal argument that the employment relationship between the employee and the employer could not subsist. If the relationship was completely irreparable, as the employer contended before me at the Hearing, how could the employer have offered in its letter of termination to even consider the possibility of taking her back to work? Yet the employer did so.
The answer to the adjudicator’s question is obvious. If in fact  her outburst had a medical basis then this would trigger a duty by Bell to accommodate her under human rights legislation. Surely the Employer’s legitimate and arguably legally required inquiry should not be held as evidence against the employer.
2. The Employer paid the employee three weeks termination pay .
6. The employer’s own letter of termination dated May 17, 2016 also contained the unusual step of paying the employee the statutory two week notice of termination pay under the Canada Labour Code, plus two weeks of continuing coverage under the employer’s medical plan. In addition, not only did the employer pay to her that two weeks’ pay, but it also paid her a third week of pay following her termination – up to June 5, 2016. I view all of this as “unusual”, since if the employer was taking the position in its letter of termination that it was terminating the employee for cause, I would not have expected the employer to have paid her three weeks’ pay thereafter – or any other amount for severance pay. It was almost as if the employer – while asserting at the Hearing before me that it had cause to terminate the employee – did not fully believe it, as reflected by its conduct at the time of the dismissal.
The effect of this thinking is to reward employers who treat dismissed employees cheaply ( paying then nothing by way of termination pay ) and to punish those employers who chose to pay a dismissed employee some minimal termination pay, even when they have alleged just cause.
Moreover the issue of whether the employer believes they have or do not have cause should be irrelevant.
Just cause is a matter of law. It is not based the opinion of the parties.
In almost every mediation I have regarding the issue of just cause, one party feels strongly that there is just cause and the other that there is not.
That’s nice.
I only care about predicting the opinion of one person. The judge.

Employee Who Went to Welder School Instead of Accepting General Labourer Job Failed to Mitigate :

In Benjamin v Cascades Canada ULC ( 21017 ONSC 2583) Justice Glustein was faced with assessing the correct notice period for a unskilled general labourer with 28 years service who upon termination was only given his ESA minimum payment of 34 weeks.

The major issue was whether or not the Plaintiff had reasonably mitigated his damages.

The relevant facts were as follows:

  1. He was terminated on May 12, 201 as part of a plant closure that involved 41 other employees.
  2. He decided to retrain as a skilled welder and thus attended full time school for 6 months from August 2016 to February 2017. Because of this he did not apply for any job prior to the motion for summary judgement which was held on April 10, 2017. He also did not attend the outplacement counselling or coaching offered by the Defendant.
  3. His reason  for choosing retraining was so that he could improve his skills and so that he could restore himself to his former job security and income.
  4. Cascades brought to his attention  three comparable positions at other plants run by the Defendant. He ignored all of these opportunities. This was part of a program run by the Defendant to bring to the attention of all terminated employees job opportunities both inside and outside Cascades. The Defendant led evidence to the effect that had he applied for any of these positions, he likely would have been accepted .

The Judge then reviewed the law on mitigation:

[88]           The leading case on the duty to mitigate in wrongful dismissal cases is Michaels. In Michaels, Laskin C.J. held that:

(i)                 an employee is required to mitigate damages arising from wrongful dismissal;

(ii)               the onus is on the employer to establish a failure to mitigate; and

(iii)            the onus requires the employer to establish that (a) the employee did not take reasonable steps to seek comparable employment, and (b) if the employee had done so, the employee could have procured such comparable employment.

On the onus issue, the Judge had to decide whether the test required the Employer to prove that  the employee could have obtained alternative  employment or would likely have obtained alternative employment.

[106]      I agree that there are differences between establishing a “could have” onus as compared to a “would likely have” onus. For the reasons that follow, however, I find that the Michaels test sets out a “could have” onus and it is the proper approach to follow.[6]

[107]      The court in Cimpan v. Kolumbia Inn Daycare Society, 2006 BCSC 1828 (CanLII) (“Cimpan”) addressed the submission of the employee in a wrongful dismissal case that that an employer seeking to discharge its onus to establish a failure to reasonably mitigate ought to be required to prove that the dismissed employee “would have” been able to secure a particular job with another employer. Truscott J. rejected that submission. He held (Cimpan, at para. 108):

While the onus is on the defendant to prove the plaintiff has not mitigated, it would be impossible for any employer to prove that the employee would have been able to secure a particular job.

[108]      Counsel for Benjamin agreed that an onus requiring employers to establish that the employee “would have” obtained a comparable position would be logically “impossible” and is not appropriate. I agree for the reasons of Truscott J. in Cimpan.

[109]      However, to increase the onus on an employer to show that the employee “would likely” have obtained an available comparable position, as submitted by Benjamin, raises similar concerns as in Cimpan. Under such a proposed test, employers would somehow have to establish the “likelihood” of a dismissed employee obtaining a comparable job, potentially requiring the employer to lead evidence as to the number of candidates applying for a job with another employer,[7] and knowledge of the particular aspects of a candidate’s resumé that might be attractive to other employers.[8]

[110]      While the “would likely” test is not logically impossible in the same sense as the “would have” test discussed in Cimpan, it is nevertheless inconsistent with Michaels and is unreasonable.

[111]      In essence, the test proposed by Benjamin would require an employer to prove the “odds” of a terminated employee obtaining a comparable position with another employer. That approach is not consistent with the Michaels test that the onus is on the employer to establish that “by the exercise of proper industry in the search, [the employee] could have procured other employment of an approximately similar kind reasonably adapted to his abilities”. [Emphasis added]

[112]      It is not clear in either Fisher or Yiu that the court is attempting to impose a different onus on employers than the “could have” test in Michaels. In Fisher, Perell J. relies on Di Tomaso, which follows the Michaels analysis. In Yiu, D. Brown J. follows the analysis of Echlin J. in Link v. Venture Steel Inc., 2008 CanLII 61389 (QC SAT), [2008] OJ 4849 (SCJ) (“Link”), in which Echlin J. held (Link, at para. 49):

Nevertheless, it remains incumbent upon Venture to lead evidence that Link failed to pursue alternate employment opportunities that were of a comparable nature and that such opportunities were not only available, but that if pursued, Link could have minimized the damages sustained. [Emphasis added][9]

[113]      On appeal (cited as Link v. Venture Steel Inc., 2010 ONCA 144 (CanLII)), the court upheld the decision of Echlin J. on the mitigation issue (and allowed the appeal in part on another issue). The court held that the mitigation defence of the employer could not succeed because the employer had not led any evidence about the availability of comparable employment, a factor consistent with the “could have” onus under Michaels. O’Connor A.C.J.O. held (Link (CA), at para. 73):

Because Venture did not lead any evidence about the availability of suitable employment, the trial judge concluded that Venture had not met the second prong of the test set out above.[10]

[114]      In none of the above cases do the courts suggest that they are seeking to alter the onus as set out in Michaels. If there is any uncertainty as to whether the employer is required to establish that the employee “could have” obtained comparable employment or “would likely” have obtained comparable employment, I would adopt a “could have” test based on the decision in Michaels and my reasons discussed above.[11]

 

On the issue of choosing to retrain during the notice period, the Judge said :

[116]      A decision by a terminated employee to seek retraining is not, on its own, a basis for an employer to submit that the employee failed to reasonably mitigate damages.

[117]      However, if the employer meets the Michaels test and establishes that (i) the employee did not take reasonable steps to seek comparable employment “by the exercise of proper industry in the search”, and (ii) if the employee had done so, the employee “could have procured” such comparable employment, then the employee cannot choose to engage on a new career path as a “charge” to the employer.

[118]      Such an approach maintains the onus on the employer to establish (as required in Michaels), that there were comparable positions available for the employee but the employee did not take reasonable steps to pursue those opportunities.

[119]      Further, this approach maintains the Michaels principle that an employee must attempt to reasonably mitigate damages arising from wrongful dismissal.

[120]      If the employer can establish that the dismissed employee (i) chose to retrain instead of seeking comparable positions, and (ii) could have procured that comparable employment, a dismissed employee ought not to have a “free pass” to change careers to enhance job security or obtain better hours, and then collect damages for notice simply because of dismissal. In those circumstances, an employer should not be required to fund retraining (through payment of reasonable notice) when the employee could have obtained comparable employment.relied upon by Cascades. Retraining on its own is not evidence of a failure to reasonably mitigate damages; rather, if an employer can establish that comparable work is available and the employee made a choice to retrain and not to seek comparable employment, retraining would not constitute reasonable mitigation.

 [148]      In the cases relied upon by Benjamin, there was evidence as to efforts to find employment, the unavailability of employment, or other reasons why it was reasonable to make a career change, which allowed the courts in those cases to find that retraining was reasonable mitigation.

[149]      In the present case, by contrast, the evidence is that comparable employment was available, which Benjamin could have procured had he taken reasonable steps to seek employment. In these circumstances, the decision to retrain does not constitute reasonable mitigation.

The next issue was one of timing. Does turning down a job to retrain for 8 months simply mean you deduct 8 months from the notice period or does the notice cutoff occur when the employee turns down the job?

[157]      If a terminated employee chooses not to seek comparable employment that he or she could have procured after termination, the employee chooses to deprive the employer of the opportunity to avoid damages arising from the dismissal. If the plaintiff employee had made reasonable efforts and obtained such comparable alternate employment, the defendant employer would not have been exposed to any damages after that time. If the plaintiff had obtained the comparable position before the amount of months paid by the employer on termination, the plaintiff would not be entitled to damages.

[159]      Consequently, I do not agree with Benjamin’s submission. I find that the applicable law is that the plaintiff is not entitled to recoverable losses as of the date the employer establishes under the Michaels test that the plaintiff fails to reasonably mitigate damages.

The plaintiff got zilch as he turned down the job opportunity, or technically did not pursue it, before the end of the ESA period that he was already paid for.

Does this mean that a dismissed cannot go to school during his notice period? Is he or she stuck in the rut of having to look for another dead end job, just like the one he or she was terminated from?

NO.

The Plaintiff simply has to do two things at the same time :

  1. Take the retraining or schooling to improve their future. AND
  2. Look for comparable jobs.

Remember, the easiest thing to do in the whole world is to not get a job offer following a less than great interview for which you unfortunately were 15 minutes late for because your alarm was not working, or the TTC was slow or your dog was sick.

Employer Tries to Avoid 2 Year Termination Clause by Arguing That its Own Contract Violated the ESA

In Roberts v Zoomermedia Limited ( 2017 ONCA 327) the Plaintiff was found to be entitled to be paid two years lump severance pay upon the expiry of the contract as set out in the contract.

Among the arguments made by the Employer, it argued that because the contract disentitled the employee to STD and LTD during the 8 week termination pay period under the ESA, that the entire termination clause should be held to be null and void. The effect of this would be that the Plaintiff would simply get his common law reasonable notice, which would never be as good as his two year lump sum severance entitlement under the contract.

The Court of Appeal first found that the issue was not necessary to decide as the clause in question was really the actual dispute , but in any event , they had  this to say about the Employer’s some what novel argument.

Effectively, the appellant argues that because it did not agree to provide the respondent with all of his statutory entitlements – entitlements that were conditional on an early termination, an event which never occurred – the respondent must therefore forfeit his contractual entitlements: contractual entitlements that are far greater than what either the ESA or the common law would have provided. This would be a perverse application of a statute that is intended to protect the interests of employees, and I would reject it.

Plaintiff Wins $56,000 But Serves 20 Day Jail Sentence :

In Covenoho v Pendylum Ltd. ( 2017 ONCA 284) Justices Rouleau, Pepall and Roberts in a short endorsement dealt with an issue where an employee with less than 3 months service was terminated. She was employed by an agency which placed her at a clients location ( Ceridian) . She had a one year fixed term contract which had the following termination provision;

2.1 The term of this Agreement will commence on the date of this Agreement and will continue in full force and effect unless the Agreement is terminated as follows:

(a) immediately by PENDYLUM providing written notice to you if you violate or fail to honor any of these provisions of this Agreement or fail to perform your duties as set out in Appendix A in a satisfactory manner as determined by PENDYLUM (known as Cause); or if the PENDYLUM Client to which you have been contracted terminate[s] its contract with PENDYLUM for your services; OR

(b) by either party providing written notice of at least two (2) weeks to the other.

2.2 In the event of termination, we will have no liability to you, save and except to pay any accrued and earned compensation up to and including the date of termination.

The client then decided that they did not want the Plaintiff working for them anymore and thus the Defendant terminated the plaintiff with no notice, relying on the bolded section of the termination clause.

This was held by the Court of Appeal to be contrary to the ESA because if the termination had taken place after 3 months of employment, this clause, allowing termination without cause and without notice, would be illegal under the ESA.

This is how they said it :

In determining whether the contract is in compliance with the ESA, the terms must be construed as if the appellant  had continued to be employed beyond the three months ; if a provision’s application potentially violates the ESA at any date after hiring , it is void.

The Court went on to cite Wright v Young & Rubicon ( 2011 ONSC 4720), Shore v Ladner Downs ( 1998 BCJ 1045 BCCA) Machtinger v HOJ Industries ( 1992  1SCR 986 and the very recent decision of Justice Laskin in Wood v Fred Deeley Imports ( 2017 ONCA 158).

If the clause had said that the person would receive two weeks notice no matter what, as this was a fixed term contract of one year, that provision may have been enforceable as it would have complied with the ESA.

However the trial decision ( 2016 ONSC 4969) shows that in effect this was not a one year fixed term contract as it had an automatic renewal clause:

Term: 12 months, starting July 15, 2013 (Commencement Date) and ending July 14, 2014, automatically renewing for the same period unless either party gives to the other written notice at least 4 weeks prior to the current contract’s expiration of its desire not to renew the agreement.

The Court awarded her the balance of the contract, which came to $56,000.

Therefore even if the two week clause was in the agreement, as the contract could  have been extended, you could argue that that the two week provision was invalid.

The Plaintiff was originally terminated because she refused to provide her consent for the client to do a background check after her hiring, claiming that it was not a condition of her employment at the time of hiring.

The Defendant then terminated her.

After that she did the following. This is what the trial judge wrote:

Disclosure of Confidential Information – Threats, Injunction and Contempt Proceedings

[13] Over the course of the next several months, the Plaintiff threatened to release confidential information on several occasions. The Defendant and Ceridian commenced an action against the Plaintiff to prevent the Plaintiff’s disclosure of confidential information. On May 9, 2014, Justice Belobaba granted a five-day ex parte injunction that: 1) restrained the Plaintiff from publishing or otherwise disclosing any confidential information relating to the business methods and software applications of the Defendant and Ceridian; and 2) required the Plaintiff to provide the Defendant and Ceridian with a list of persons to whom she had disclosed the above information: see Ceridian Canada Ltd. v. Azeezodeen, 2014 ONSC 3801 (CanLII). The circumstances for the issuance of the injunction were described, at paras. 12-13, as follows:

In November 2013, the defendant sent a letter to Ceridian in which she made numerous defamatory statements about the plaintiffs’ business practices and operations, which she threatened to make public. [Covenoho] advised Ceridian that unless she was paid the sum of $23.2 million, she would make public confidential information relating to Ceridian, Pendylum and their customers. On January 6, 2014, [Covenoho] again wrote to Ceridian threatening to “go public” with numerous allegations about Ceridian and Pendylum. [Covenoho] now offered not to publicize the allegations in exchange for a “settlement” of $500,000.

On April 24, 2014, Ceridian received another letter from [Covenoho] in which she made another threat that she intended to circulate a “press release” to “every press agency and HR and payroll agency across Canada and the U.S.” and that she would do so on May 12, 2014. The “press release” [that Covenoho] threatened to publish contained confidential information regarding Ceridian and Pendylum’s business methods. It also made various defamatory statements regarding the business dealings of Ceridian and Pendylum, including their dealing with the independent contractors. On May 8, 2014, [Covenoho] wrote again to Ceridian repeating her threat that she would widely disclose her “press release” on May 12, 2014.

[14] After receiving a copy of the injunction, the Plaintiff paid for the publication of her press release containing the Defendant and Ceridian’s confidential information, in contravention of the injunction. The press release was published on May 13, 2014. On June 24, 2014, the Plaintiff was found in contempt of court by Justice Belobaba. On July 15, 2014, the Plaintiff was sentenced to 20 days in jail, to be served intermittently over five weekends.

 

Court Awards Both Commissions Owing at Time of Termination and Severance Based on Average Commission Earnings :

In Carroll v Purcee Industrial Controls Ltd. ( 2017 AMQB 516 Madam Justice Pentelechuk had to deal with two issues regarding commissions.

Commissions on Deals Signed but Not Completed as of the Date of Termination : 

The Plaintiff sold industrial products with a sales cycle of some months, by which I mean that first the salesman would get the order, then some time later it would be shipped to the customer and then after another time period the invoice would be paid and only then would the salesman receive his commissions.

The Employee was terminated on June 7. The Employer paid all his commissions on invoices paid up to the date of termination.

Over the next number of unspecified months, the Employer received payment on all of the orders that the Plaintiff had placed prior to his dismissal. The commission on these sales came to $71,000. The Employer said that they had never paid out commissions of this nature in the past and refused to pay the plaintiff. He sued.

This is what the Court had to say :

89      There is no dispute that commissions are payable to Mr. Carroll upon completion of the sales cycle — that is, if and when Purcee Canada received payment from the customer. This was an innate understanding by the parties and is consistent with industry standard. However, the point at which Mr. Carroll became entitled to the commission payment was not specifically discussed by the parties. Similarly, the parties did not discuss payment of commissions if Mr. Carroll’s employment ceased. While Mr. Carroll concedes that Purcee paid him commissions after Purcee received payment for sales he effected, he argues that his entitlement to eventually receive commissions crystallized at the time the sales were effected. Accordingly, he argues he is entitled to receive commissions for sales that he effected prior to his dismissal, regardless of whether payments were received by Purcee before or after the date of termination.
90      Purcee argues that Mr. Carroll’s entitlement to receive commissions crystallized at the date of payment. Accordingly, Purcee argues Mr. Carroll is not entitled to receive commissions for sales effected prior to the date of termination if the customer had not paid for the order until after the date of dismissal.
93      No doubt, if a written employment contract between the parties unambiguously states the employee is not entitled to receive commissions if payment is not received at the date of termination, the employer would be entitled to rely on that contractual provision unless the employee could prove that, in law, the employer is estopped or otherwise prevented from relying on the plainly-worded contract: Styles at paras 22-23. That is not the case here, since the written contract (which had expired in any event) is silent on the issue of Mr. Carroll’s entitlement to commissions post-termination.
 
104      It appears, from review of the case authority, the courts have not hesitated to imply a term in employment contracts requiring the employer to pay terminated employees commissions for sales effected but not concluded prior to the termination. In Rowles v Al-wood Manufacturing Ltd (1979), 17 AR 306, 9 Alta LR (2d) 61 (Dist Ct), Decore J, after providing a thorough review of the authorities, found that implication of a term in the employment contract was clearly applicable and the employee was entitled to commissions on sales he effected while employed, the invoices for which were sent out after his employment was terminated.
105      In rationalizing these apparently diverse lines of authority, I consider the following factors to be germane. It is clear from the evidence that Mr. Carroll completed his role for all of the commissions claimed. He was directly involved in each and every one of the sales in question, and the sales can be primarily attributed to his efforts (similar to the case in Micallef). Further, it is clear on the evidence that the Defendants have now been paid for all of the sales, although specific dates of payment are not in evidence. While there was evidence from the Defendants that their policy was not to pay commissions following termination of employment, there is no evidence before me that this policy was ever brought to the attention of Mr. Carroll, nor was he ever asked whether he was aware of this policy. Ms. Parra’s testimony supports that a general policy was in place, but her testimony does not prove that Mr. Carroll was subjectively aware of the policy.
106      Even if it is not reduced to writing, credible evidence establishing the existence of a term precluding employees from collecting commissions earned post-termination may well justify denial of commissions on sales paid after termination, as was the case in Bixby. Further, it is open to the parties to lead evidence as to a widely known and accepted industry standard. No such conclusive evidence is before me.
107      Furthermore, the fact that commissions were typically paid only after payment was received from the purchaser does not necessarily imply that such commissions are not payable following termination. Following Micallef, a term in an employment contract requiring that an order be paid before the salesperson receives his commission does not necessarily imply that the salesperson’s entitlement to that commission crystallizes at the date the customer pays the invoice. Rather, it is entirely reasonable to conclude that the employee’s entitlement to receive a commission crystallized at the date the sale was effected, even if payment is delayed until sometime thereafter. At that point, the employee’s job has been performed, and the employer is set to reap the benefit of the employee’s labour once the customer remits payment.
108      In my view, this interpretation properly applies the business efficacy test as set out by the Supreme Court in Grover and MJB Enterprises. The Court should imply terms that are necessary to give effect to the consideration agreed to between the parties. In this case, Purcee agreed to pay Mr. Carroll a base salary plus commissions in exchange for Mr. Carroll effecting sales on Purcee’s behalf. It is reasonable to imply a term that Mr. Carroll’s entitlement to commissions crystallized at the moment the sale was effected, because that best gives effect to the consideration agreed to between the parties. At that point, Mr. Carroll had performed his duties, and he is entitled to the compensation for his labour that he bargained for. To find otherwise would lead to a windfall for Purcee.
109      This, in my view, is also consistent with what I term the “modern approach” to this issue. After all, it is recognized that where an employee’s compensation is based in whole or in part on commissions, a dismissed employee will be compensated for the loss of the opportunity to earn commissions over the applicable notice period. Sparling v DH Howden & Company, 68 CLLC 573, [1968] OJ No 399 (QL) (H Ct J); Sublett v Facit-Addo Canada Ltd, (1977) 16 OR (2d) 791, 79 DLR (3d) 286 (H Ct J); Goldberg v Western Approaches Ltd, 7 CCEL 127, [1985] BCJ No 937 (QL) (BCSC).
110      I conclude where an employee has been dismissed and the employment contract is silent on this issue, absent evidence of known company policy or accepted industry standard, a Court should not hesitate to imply a term that commissions earned on sales generated before termination but paid to the employer after termination, should still be paid to the employee.
111      Accordingly, Mr. Carroll is entitled to commissions for sales generated, including on sales paid after his termination.
What if the employee had resigned? Should he still not been paid for those sales earned before his resignation but paid to the employer after the resignation ?
Calculating Projected Commission Income Over the Notice Period:
However the Court went on to also award him a notice period of 8 months based on his projected commissions over the notice period which was based on a  historical average of the last 2 years less a 15% reduction because sales were on the decline.
Is this a double payment ?
On the one  hand if we calculate damages for reasonable notice based on how much he would have earned over the next 8 months, then part of that 8 month income, had he worked it, would have been the $71,000 in commissions that would have been received from sales he completed before his termination date. Thus by simply paying him a severance payment based on his average commission earnings over the notice period are we not properly compensating him with that payment alone.?
On the other hand, if he had been given 8 months working notice, he would have continued to make sales up to his last day of work  and at that time there would have been commissions ” in the pipeline”, that is commissions owing on sales placed before the end of the notice period but not yet owing to the salesman because the client had not yet paid the invoice.
This case seems to stand for the proposition that the employee receives both of these payments, unless there is a clear agreement to the contrary.

Offering to Resign if you Get a Severance Package is Not a Resignation :

In Carroll v Purcee Industrial Canada (2017 ABQB 211) Madam Justice Peantelechuk was faced with the situation where an employee repeatably told his employer that he would resign if they could work out a “termination on professional terms” which involved payment of commissions owing, severance and moving expenses.

Rather than engage in these discussions, the Employer simply purported to accept his resignation.

This is how the Court dealt with the issue :

50      Importantly, each time Mr. Carroll offered to resign his employment, the offer was coupled with an invitation to negotiate the terms of his departure, including a severance package. There is no evidence before me to demonstrate that Mr. Carroll ever indicated an intention to resign on a specific date without reference to a severance package. This is important in two respects. First, it is difficult in such a circumstance to argue that the resignation is clear and unequivocal when it is tied to a proposal for terms of severance. But secondly, it calls into question an employer’s ability to accept that resignation, if in fact it is valid, if the employer does not also accept the terms proposed by the employee. Here, Mr. Carroll’s resignation was not accepted as offered by Mr. Carroll in his May 31, 2013 email. It was purportedly accepted on completely different terms: Oxman v Dustbaine Enterprises Ltd (1988), 32 OAC 154, 23 CCEL 157 (Ont CA) at paras 6-7.
51      At any time following receipt of Mr. Carroll’s offer to negotiate the terms of his departure, Mr. Peterson could have confirmed whether Mr. Carroll truly intended to resign, or otherwise negotiate the terms of his departure. Instead, Mr. Peterson’s June 7, 2013 letter purports to accept Mr. Carroll’s resignation without further discussion and on completely different terms than those offered by Mr. Carroll.
52      Considering all of the circumstances before me, I conclude that Mr. Carroll has satisfied the onus of proving that he was dismissed. His resignation was not clear and unequivocal, but rather an invitation to discuss the terms of his exit from the Defendant companies and in any event, the employer purported to accept his resignation on completely different terms.
The Court went on to award the 41 year old Regional Manager with 4 years and 8 months service a notice period of 8 months.

40 Day Trial Nets $141,000 ” Win”.

In Merrifield v Canada ( Attorney General ) 2017 ONSC 1333, Justice Vallee heard a case involving  serious allegations of harassment against a RCMP officer by his superiors over a number of years.

The trial took 40 days, and stretched out from November 2014 to April 2016.  The record shows five lawyers for the parties.

In a 896 paragraph decision  the plaintiff won and was awarded two heads of damages:

  1. The Plaintiff’s rise in rank had been delayed a for 18 months , resulting in a career wage loss of $41,000.
  2. For the tort of intentional infliction of mental suffering, the Court had this to say :

What amount should be awarded to Mr. Merrifield for general damages?
Analysis
877. Amounts awarded for damages for intentional infliction of mental suffering and harassment have increased significantly since the 1990s.
878. In Clark v.Canada, [1994] 3 F.C. 323, 3 C.C.E.L. (2d) 172, a female member of the RCMP was harassed by her male co-workers. She was told to be a “real woman” and go home and have children. Her co-workers watched pornographic movies while she was in the office. Plastic breasts were left on her desk. When her body armour was delivered, it was set up with a mocking note attached to it. These are a few examples of what the plaintiff endured. When she complained to her supervisors, they were dismissive. These events caused her to have a documented mental health crisis. She resigned her position.
879. The court reviewed awards for intentional infliction of nervous shock prior to 1994, considered a “reasonable measure of consolation” for her particular mental condition and awarded the plaintiff $5,000. The defendants’ state that based on this decision, if Mr. Merrifield is entitled to damages, the amount should be nominal.
880 .The plaintiff relies on four cases decided between 1997 and 2014. They are Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R.701, Tipple v. Canada (Attorney General), 2012 FCA 158, 431 N.R. 257, 158, Joseph v. Tl’azt’en First Nation, 2013 F.C. 767, 9 C.C.E.L. (4th) 173 and Boucher v. Wal-Mart Canada Corp. The defendants state that these cases are not applicable because the plaintiffs were either terminated or constructively dismissed.
881. I disagree with the defendants’ position. In all of these cases, the court considered the events leading up to the termination or constructive dismissal. The defendants’ actions caused the plaintiffs to suffer from mental health conditions. Damages were awarded to the plaintiffs for mental suffering. I find that these cases are relevant and helpful on this issue.
882. In Wallace, the Supreme Court of Canada determined that the trial judge had discretion to extend the notice period with respect to the termination. The possibility of recovery for mental health damages remained. It noted that a tort for breach of good faith and fair dealing regarding a dismissal was not yet recognized.
883. In Tipple, the employer alleged that the plaintiff’s actions were a form of misconduct. The matter attracted a considerable amount of media attention. The court found that the allegations were unfounded. In the interval, the plaintiff had suffered a significant loss of reputation. He was awarded $250,000 for the loss of reputation and $125,000 for the psychological injury that he sustained as a result of the manner of his termination.
884. In Joseph, an employer made vile and serious allegations of fraud upon the employee’s termination. This resulted in significant damage to the employee’s reputation. The employee had considerable difficulty in finding other employment. Prospective employers stated that the plaintiff had to be vindicated before they would consider hiring him. The court awarded $85,000 for damage to the employee’s physical health, well-being, integrity, dignity and personal and professional reputation.
885. In Boucher, the plaintiff was a cheerful and productive employee. When the personal defendant became her supervisor, he belittled, humiliated and demeaned the plaintiff in front of others continuously and relentlessly for approximately six months. She complained of her supervisors actions to management who determined that her complaints were unfounded and told her that she would be held responsible for making them. The plaintiff became broken and defeated. She suffered from a number illnesses including depression. A jury awarded the plaintiff $100,000 for intentional infliction of mental suffering. The award was upheld on appeal.
886. Mr. Merrifield suffered from significant depression and post-traumatic stress disorder as a result of the actions taken by the RCMP. He was unable to work for various periods of time. At one point, he disengaged from his family and spent his days lying on a sofa. He did not bathe and developed bed sores. His depression during these periods deprived him of meaningful interaction with his wife and young children. It deprived him of successful performance in a job that he loved and for which he was acknowledged to be a national expert. It also deprived him of the gratification of positive interaction and collaboration with his colleagues.
887. Not only did Mr. Merrifield suffer from significant mental health issues as a result of the actions taken by the RCMP, those actions also stained his reputation. A number of people knew that he had been removed from national security work. They assumed that he had done something wrong. Even Insp. Van Doren, who was not Mr. Merrifield’s supervisor, knew that he had been removed from national security work. As a result of this, he considered Mr. Merrifield to be unsuitable to work at the SOC during a national security emergency.
888. Supt. Proulx accused Mr. Merrifield of using his Amex card for personal reasons, in other words stealing money from the RCMP. Sgt. Dickinson interviewed a number of people during the Part IV investigation. All of them knew the serious allegations against Mr. Merrifield which were tantamount to criminal conduct. The allegations were insidious. For example, Supt. Jagoe still believes that the allegations were substantiated. Just as the news of Mr. Merrifield’s removal from national security work spread among the RCMP management and other members, so too would the allegations of disgraceful conduct. Sgt. Dickinson stated that the members that he interviewed would not have known of the outcome of the Part IV investigation or that the allegations were unfounded.
Conclusion
889 Taking all of this into account, I award Mr. Merrifield general damages against the defendants for harassment and intentional infliction of mental suffering in the amount of $100,000.

 

One cannot begin to imagine the legal fees involved in this case. I do not know what has or will happen at the costs stage or  if the AG was smart enough to put in a Rule 49 offer of more than $141,000 well before the trial.

If they did, ( and as a taxpayer I sure hope they did ) the cost award in their favour would easily wipe out the $141,000 award and the plaintiff would owe a considerable amount to the Crown for costs.

If the Plaintiff put in a Rule 49 offer and beat it, well then the Plaintiff’s costs will dwarf the award.

I have not seen the pleadings but I cannot imagine that a plaintiff would launch an action of this enormity and only expect to receive $141,000.

So here we have it. A legal process that costs hundreds of thousands of dollars that in the end results in the  transfer of  $141,000 from one party to another, maybe.

How is this process proportional as required by Rule 1.04 of the Rules of Civil Procedure ?

INTERPRETATION

General Principle

1.04 (1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.  R.R.O. 1990, Reg. 194, r. 1.04 (1).

Proportionality

(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.  O. Reg. 438/08, s. 2.

 

 

 

Another Woeful Case About Costs :

Regular readers of this blog will know that I often comment on costs awards in wrongful dismissal cases .

Have I got a doozy for you.

At the trial decision of Doyle v Zochem ( 2016 CarswellOnt 3188), the plaintiff was  awarded 10 months salary, human rights damages of $25,000 and moral damages of $60,000 for a total before costs of about $140,000.

The defendant made a number of Rule 49 offers, the last one being for $133,196.23.

Thus the defendant missed the mark by $7,653.

In a cost award found at 2017 CarswellOnt 1335,  Judge Trimble awarded the plaintiff costs of approximately $412,000.

The Defendant appealed but was only looking for a reduction in the moral damages award from $60,000 to a more modest $20,000.

Why spend more money on this appeal to save a lousy $40,000?

ANSWER: If the Court of Appeal had reduced the moral damages by at least $7654, the Defendants Rule 49 offer would have been operative and not only would they not have to pay the plaintiff anything for the actual trial ( 28 days ) but they would have received an offset for their trial costs, which would have wiped out the judgement and the Plaintiff would have owed the defendant a fortune .

Alas, the Court of Appeal denied the appeal and ordered further  costs of the appeal of $40,000.

According to the public record this little fiasco has cost the Defendant the following sums:

Judgement   :                                    $140,000

Costs to the Plaintiff for trial :      $412,000

Costs to the Plaintiff for appeal:  $40,000

Their  own costs of trial :               $682,415

Their costs of appeal ( my est.)      $40,000

TOTAL :                                              $ 1,314,415.

You gotta love our legal system.

CLC Adjudicator Denies Both Reinstatement & Costs to Winning Employee:

In Weed v Royal Bank of Canada (2017 CarswellNat 343) Adjudicator Michelle Somers heard an unjust dismissal case for 14 days, with 9 witnesses and ” voluminous ” documentary evidence.

Having found that Mr. Weed was unjustly dismissed , the Adjudicator declined to order reinstatement for the following reasons :

Reinstatement
196. It is well-established that s. 242 of the Code gives the Adjudicator broad powers of compensation, including reinstatement “Where an employee has been dismissed unjustly, there is a presumption in favour of reinstatement unless there is clear evidence to the contrary”: Pecoskie and Atomic Energy of Canada Ltd., 2015 CarswellNat 5573. The test whether there is a relationship of trust between the employer and employee is an objective one.
197. Counsel for RBC submitted that reinstatement would not be appropriate, while Counsel for Weed went no further than to acknowledge that I have the right to consider it In an October, 2014, email, Weed told a prospective employer that he was going through the Labour Board so he could have his position back with RBC but that he was sure that was a bad idea.
198. Weed believes that his role as a financial planner is to serve the best interests of his clients. He believes, apparently sincerely, that his employer’s emphasis on sales conflicts with those interests. RBC had shifted its business emphasis during Weed’s employment towards a drive to increase sales of its products, and I conclude that Weed either had difficulty or refused to accept this shift Prior to the onboarding of Leblanc as his manager, he had a clean record. Indeed, he was a very good performer. There may or may not have been insufficient training in the new business model.
199. These factors are not sufficient to excuse some of the decisions that Weed made during his employment As the Adjudicator said in Farrell v Royal Bank of Canada [1998] CLAD. No. 793, “My conclusion that the Bank did not meet the just cause standard in dismissing Farrell should not be understood as a vindication of her work performance in that regard.” [para. 144]
200. Although he did say to Leblanc and in his Decision-Making Exercise that he would change his conduct to be more in line with his employer’s standards, Weed did not acknowledge at the hearing that his conduct at the very least contravened his employer’s compliance standards, nor that he was in any way responsible for the breakdown in his relationship with his employer. That makes his prospects for a happy future with RBC dim. My lack of confidence is exacerbated by his avowal at the hearing that as between the bank’s standards and his own estimation of his client’s needs, he would disregard standards set by his employer.
201. I agree with RBC that the relationship between it and Weed has been irreparably damaged, and that reinstatement is not a feasible remedy.

The Adjudicator instead awarded him compensation in the sum of $230,000 which covered the period of time from his dismissal to the date of the award, a period of 35 months less mitigation income plus  a 15% reduction for what the Adjudicator thought was poor mitigation efforts.

In awarding costs the Adjudicator properly stated that :

It has now been established that an Adjudicator appointed under the Code has the jurisdiction to award costs. The leading case is Banca Nazionale del Lavoro of Canada Ltd. V Lee-Shanok [1988] F.C.J. 594, 1988 CarswellNat 254 (FCA). Stone J.A. determined the scope of the Adjudicator’s jurisdiction under s. 61.5(9)(c) of the Code [now s. 242(4)(c)]:
“I have no difficulty in reading it, with its broad reference to granting relief that is “equitable to require the employer to do in order to remedy or counteract any consequence of the dismissal”, as including the power to award costs. The difficulty I have is in viewing an award of compensation, gained at some considerable expense to a complainant in terms of legal costs, as having the effect of making him whole. Legal costs incurred would effectively reduce compensation for lost remuneration, while their allowance would appear to remedy or, at least, to counteract a consequence of the dismissal.” [para. 25]

 

The Adjudicator then went to refuse to award costs to the winning Mr Weeds with the following rationale.

212.  Counsel for Weed suggested that half of solicitor-client costs would be appropriate. However, I am going to adopt the reasoning in Pecoskie, supra. In that case, the Complainant was Executive Assistant to the Vice-President of Finance. She sent 35 emails that were “confidential and privileged” to her husband, who was a Project Leader in the same company. It was alleged she had also sent him emails that insulted and derided other managers and colleagues. Although her performance had previously been assessed in glowing terms, the company bypassed progressive discipline and dismissed her on the basis she had committed “a serious breach of trust, confidentiality and respectful workplace practices.” Adjudicator Clarke examined the emails in detail. They were largely related to issues that assisted her husband in his role at the company. A few said distasteful things about her manager and alleged that a colleague was not truthful. No one saw them but her husband. The Adjudicator determined that although she had violated the rules of the workplace, her actions were not sufficiently serious to warrant summary dismissal. Nevertheless, the Adjudicator made no costs award because the complainant could not be considered blameless.
213. Counsel for RBC submitted that no costs should be awarded given Weed’s conduct at the hearing. While I would not go so far as to say he made allegations that were proven to be false, I have already determined that that Weed has much to answer for in this matter, and I therefore decline to award costs.

This is a particularly troubling comment and result. The adjudicator seems to apply a exceeding high standard for a winning party to get costs, in that they apparently must be “blameless”, a standard which most of us would fail.

Although I am not usually the one to quote the New Testament, I am reminded of what Jesus said in John 8,  v 7. ESV:

“Let him who is without sin among you be the first to throw a stone at her.”

Let us do some math. The Adjudicator awarded $230,000.

Out of that amount he will have to pay his lawyer for a 14 day hearing and all the preparation. His lawyer was Richard Gilborn QC. Say a senior member of the bar in Calgary is charging his client $500/ hour or $4000 a day for a 8 hour day. Further assume that for every day of hearing there is about 2 days of preparation.

That makes for a bill of    14 X 3 = 42 days X $4000 / day = $168,000

The award was $230,000. After paying his lawyer he is left with $62,000 . Assume a conservative tax rate of 33%, he is left with $40,920.

Is that a  just result when one actually  wins a case ?