In Fogelman v IFG ( 2021 ONSC 4042) Justice Vella made three interesting decisions on some recent COVID related issues:
- IDEL Layoffs are Constructive Dismissals: This is what the Judge said :
- [45] O. Reg. 228/20 was enacted by the Ontario government as a measure to provide temporary relief to employers from paying statutory notice and severance under the ESA during the course of the COVID-19 pandemic by providing that, for purposes of the ESA, temporary lay-offs would not constitute constructive dismissal (subject to stated exceptions) within the meaning of that statute. Section 7 of O. Reg. 228/20 states:
7. (1) The following does not constitute constructive dismissal if it occurred during the COVID-19 period:
1. A temporary reduction or elimination of an employee’s hours of work by the employer for reasons related to the designated infectious disease.
2. A temporary reduction in an employee’s wages by the employer for reasons related to the designated infectious disease.
(2) Subsection (1) does not apply to an employee whose employment was terminated under clause 56(1)(b) of the Act or severed under clause 63(1) (b) of the Act before May 29, 2020.
[46] Subsection 56(1)(b) of the ESA states:
56 (1) An employer terminates the employment of an employee for purposes of section 54 if,
(b) the employer constructively dismisses the employee and the employee resigns from his or her employment in response to that within a reasonable period;
[47] Furthermore, the Ontario Ministry of Labour bulletin entitled “COVID-19: temporary changes to ESA rules” states: “These rules do not address what constitutes a constructive dismissal at common law.”
[48] The ESA provides the answer to this issue under s. 8(1):
8 (1) Subject to section 97, no civil remedy of an employee against his or her employer is affected by this Act.
[49] In other words, s. 8(1) provides that the ESA does not supercede the civil remedies otherwise available to an employee at common law or in equity.
[50] As Mr. Fogelman was not pursuing his rights under the ESA but rather was pursing his civil remedies, O. Reg. 228/20 does not apply to Mr. Fogelman’s claims made under the common law pursuant to s. 8(1) of the ESA.
[51] In the alternative, if I am in error regarding my conclusion, then, Mr. Fogelman was not captured by s. 7(1) of O. Reg. 228/20 because he was constructively dismissed within the meaning of s. 56(1)(b) of the ESA. Mr. Fogelman effectively resigned within a reasonable time thereafter (within days), and the constructive dismissal and Mr. Fogelman’s response occurred before May 29, 2020. Therefore, pursuant to s. 7(2) of O. Reg. 228/20, s. 7(1) did not apply to Mr. Fogelman’s termination by IFG.
2. CERB is not deductible from wrongful dismissal damages. This is what the Judge said :
ii. Canada Emergency Response Income Support Payments
[91] Mr. Fogelman applied for, and received, the income support payment under the Canada Emergency Response Benefit Act, S.C. 2020, c. 5, s. 8 (“CERB Act”), in the sum of $2,000 per month, for five months from April to August 2020.
[92] IFG submits that I should reduce any award I make by the sum Mr. Fogelman received under the CERB Act.
[93] The CERB Act does not offer much guidance on this topic. However, s. 12(1) does impose a repayment obligation on recipients of the income support payment should it be determined that the recipient should not have received it, or was overpaid:
Return of erroneous payment or overpayment
12 (1) If the Minister determines that a person has received an income support payment to which the person is not entitled, or an amount in excess of the amount of such a payment to which the person is entitled, the person must repay the amount of the payment or the excess amount, as the case may be, as soon as is feasible.
[94] I have reviewed the legislation, and the decision of S.F. Dunphy J. rendered in Iriotakis v. Peninsula Employment Services Limited, 2021 ONSC 998, at paras. 20-21. I agree with Dunphy J. that the CERB Act payments should not be treated as income for purposes of mitigation.
[95] Accordingly, I decline to deduct the CERB Act income support payments received by Mr. Fogelman from the damages awarded.
3) Awarding Punitive Damages: This is what the Judge said :
[113] I am concerned that IFG refused to provide Mr. Fogelman with any statutory entitlements under the ESA once it received notice that Mr. Fogelman considered the lay-off to be constructive dismissal. It is well established that an employer cannot lay-off employees absent a contractual right to do so, and that any such purported lay-off will be treated as a constructive dismissal at common law. Initially, it will be recalled, IFG took the position Mr. Fogelman had no employment contract.
[114] Even after IFG acknowledged that an employment contract existed, IFG did not pay the notice and severance requirements stipulated by the employment contract.
[115] IFG has not behaved well in its dealings with Mr. Fogelman over the termination. First, it took the position that Mr. Fogelman was an employee since 2009 and produced sworn evidence to this effect. This position was also reflected in its statement of defence.
[116] Then, later, by way of a supplementary affidavit, IFG changed its position and stated that Mr. Fogelman was actually an independent contractor for the first five plus years of his employment and produced an employment contract. IFG did not amend its statement of defence to plead the employment contract and its termination clause.
[117] IFG admits it knew that Mr. Fogelman took the position that the lay-off was a constructive dismissal almost immediately following his termination. IFG used this position as the excuse for not advising Mr. Fogelman of the prospects of his being recalled to work, notwithstanding its advice, reflected in its letter to Mr. Fogelman dated March 16, 2020, that it would provide him with an update of his lay-off status. At no point did IFG provide any such update, and at no point did it recall Mr. Fogelman back to work.
[118] Indeed, efforts by Mr. Fogelman’s lawyer to initiate settlement discussions and his demands that Mr. Fogelman be paid at least his minimum entitlements under the ESA were met with radio silence after an initial letter from IFG’s lawyer saying that IFG would consider the proposal and would respond.
[119] IFG also made it difficult for Mr. Fogelman to effect service of the statement of claim, notwithstanding the pandemic. According to Mr. Fogelman’s affidavit evidence, which I accept, IFG’s lawyer declined to accept service, and when Mr. Fogelman contacted IFG to ask if he could come and serve the statement of claim, he was advised that IFG’s personnel had been instructed not to accept service of his lawsuit. As a result, Mr. Fogelman, through a private process server, had to serve an IFG official at his place of residence. Even then, the official sent back the statement of claim by courier saying that IFG personnel were not allowed to accept service. This pattern of conduct, during the course of a pandemic, was designed to make it as difficult as possible for Mr. Fogelman to proceed with his lawsuit.
[120] It is also my view that the failure to comply with the ESA is an independent wrong that is outrageous and reprehensible behaviour deserving of punitive sanction. The purpose of the ESA is to provide employees with minimum standards, including minimum notice and severance in the case of termination without cause. Employers cannot be permitted to ignore their obligations under the ESA while awaiting the outcome of a court proceeding where the termination was conceded to be without cause. It is critical that the courts protect the statutory rights of employees, especially in harsh economic times. I agree with Mr. Fogelman’s position that IFG’s refusal to pay anything to Mr. Fogelman was an attempt to play hardball with him.
[121] I have considered the compensatory aspects of the damages award and determined that “there is a shortfall between the amount of that compensation and the total amount required to accomplish the objectives of retribution and deterrence and denunciation of the defendant’s misconduct” to use the words of Cronk J.A. in Pate Estate v. Galway-Cavendish and Harvey (Township), 2013 ONCA 669, 117 O.R. (3d) 481, at para. 228.
[122] Having reviewed the case law submitted, and recognizing that IFG’s business has suffered an economic downturn in the wake of the pandemic, it is my view that an award of $25,000 is an appropriate award of punitive damages. This award proportionately meets the goals of retribution, deterrence, and denunciation of IFG’s misconduct. It also sends an appropriate message to employers that the mandatory requirements imposed upon them by the ESA, in favour of employees, must be abided by promptly.
My Comments:
This is another in an increasing long line of cases about COVID related employment issues .
These are my concerns:
This case was heard on January 28, 2021 and released on June 2, 2021. The case of Taylor v Hanley Hospitality ( 2021 ONSC 3135) which came to the opposite conclusion on the IDEL issue was heard on April 2021 and released on June 7, 2021. In other words neither judge had the benefit of reading the others decision.
The Employer was whacked with a punitive damage award largely because they did not instantly pay the ESA minimums once the employee claimed that the layoff was a constructive dismissal However, if they would have won the IDEL argument , then the layoff would have been legal and no constructive dismissal would have occurred.
Moreover, since the entitlement to ESA termination pay and severance pay flows only from the ESA and not the common law, and the layoff was legal under the ESA but illegal under the common law, how can it flow that the employer should be punished for in effect following the exact wording of the ESA?
How can the employee claim a payment under a statute which the statute itself says there is no entitlement? You may agree or disagree with whether an IDEL layoff is a dismissal but certainly reasonable people ( including fellow judges of the same Court) can disagree without the punishment of punitive damages.
Some of the reasons for awarding punitive damages related solely to litigation tactics, which used to be covered in the costs aspect of the case but increasingly is finding its way into the punitive damages sphere. I am not convinced that this is a good development for the law where court time will be spent arguing over the various litigation tactics of each side before the issue of liability has even been determined. Why not shift these arguments to the cost aspect where the Court could award full indemnity costs as a way of regulating the litigation process?