Barry Fisher's Employment Law Blog

In Coutinho v Ocular Health Centre ( 2021 ONSC 3076) Justice Broad was faced with an issue that has become of vital importance in Ontario, namely whether a temporary layoff under the ESA ( now called Infectious Disease Emergency Leave ) constituted a constructive dismissal under the common law.

In holding that such a layoff was a a constructive dismissal, the Court made the following points:

1) Citing section 8(1) of the ESA which says that no civil remedy is affected by the ESA, the Judge determined that since all the jurisdiction to enact a Regulation flows from the enabling statute, a regulation cannot override a statutory provision. This is what the judge said :

[41] Ms. Allen for Ocular argues that, given the unprecedented emergency brought on by the global COVID-19 pandemic and the severity of its impact on employers and employees in Ontario, section 7 of the IDEL Regulation, which deems a temporary layoff by an employer for reasons related to COVID-19 not to constitute a constructive dismissal, ought to be interpreted to apply to not only constructive dismissals for the purposes of the ESA, but also at common law. 

[42] In the case of Bristol-Myers Squibb v. Canada (Attorney-General, 2005 SCC 26 (S.C.C.) Binnie, J., writing for the majority, citing Dreidger, Construction of Statutes (2nd ed. 1983) observed at para. 38 that 

…in the case of regulations, attention must be paid to the terms of the enabling statute: 

It is not enough to ascertain the meaning of a regulation when read in light of its own object and the facts surrounding its making; it is also necessary to read the 10 words conferring the power in the whole context of the authorizing statute. The intent of the statute transcends and governs the intent of the regulation. (Elmer A. Dreidger, Construction of Statutes (2nd ed.1983), at p. 247) 

This point is significant. The scope of the regulation is constrained by its enabling legislation. Thus, one cannot simply interpret a regulation the same way one would a statutory provision. 

[43] In my view, the scope of s. 7 deeming a temporary lay-off for reasons related to COVID-19 to not constitute a constructive dismissal is constrained by s. 8(1) of the ESA. It is not possible to reconcile the interpretation of the IDEL Regulation urged by Ocular with the section of the statute which unequivocally provides that an employee’s civil remedy against her/his employee ( my note, this should be employer) shall not be affected by any provision of the Act”

2) The Judge also relied on a recent Ministry of Labour publication in which it stated ” These rules affect only what constitutes a constructive dismissal under the ESA. These rules do not address what constitutes a constructive dismissal at common law.’ This is what the Court said on this point:

[44] The fact that s. 7 of the IDEL Regulation may not be interpreted so as to take away an employee’s right of action at common law against her/his employer for constructive dismissal is reinforced by the online publication of the Ontario Ministry of Labour, Training and Skills Development (the “Ministry”), cited by Ocular in its Factum, entitled “Your Guide to the Employment Standards Act: temporary changes to ESA rules” https://www.ontario.ca/document/your-guide-employment-standards-act-0/covid-19-temporary-changes-esa-rules (the “Ministry Guide”). 

[45] In the section entitled “Overview” at page 1 the Ministry Guide states that on May 29, 2020 the government made a regulation under the ESA in response to COVID-19. During the COVID-19 period, a non-unionized employee is “deemed” on a job-protected infectious disease emergency leave if their employer has temporarily reduced or eliminated their hours of work because of COVID-19. 

[46] Under the heading “Constructive dismissal” on page 4 the Ministry Guide stated as follows: 

O. Reg. 228/20 establishes that there is no constructive dismissal under the ESA where a non-unionized employee’s wages or hours of work are temporarily reduced or temporarily eliminated by their employer for reasons related to COVID-19 from March 1, 2020 to July 3, 2021. This rule does not apply where the termination or severance resulted from a constructive dismissal that occurred before May 29, 2020. For a termination or severance resulting from a constructive dismissal to occur before May 29, 2020, it means the employee must have been constructively dismissed and quit their employment within a reasonable timeframe, all prior to May 29, 2020. 

For a discussion of each of the conditions that must be met in order for this rule to apply, please see Conditions for O. Reg. 228/20 temporary layoff and constructive dismissal rules to apply. 

These rules affect only what constitutes a constructive dismissal under the ESA. These rules do not address what constitutes a constructive dismissal at common law. 

[47] In my view, in reviewing the purpose of the IDEL Regulation the court can consider not only the wording of the regulation itself but also extrinsic evidence such as the Ministry Guide. 

[48] The entitlement of the court to consider such extrinsic evidence in interpreting subordinate legislation was made clear by the decision of the Alberta Court of Appeal in Heppner v. Alberta (Ministry of Environment) [1977] A.J. No. 523 (Alta C.A.). Lieberman, J.A., writing for the panel stated as follows at para. 34: 

One further aspect involved in reviewing the purpose of subordinate legislation must be examined and that is what evidence a court can consider in coming to its decision. Is a court restricted to the order in council itself, or can “extrinsic” evidence be examined? This question was considered by the Ontario Court of Appeal in LaRush v. Metropolitan Toronto & Region Conservation Authority, [1968] 1 O.R. 300, 66 D.L.R. (2d) 310. In that case the court was examining the purpose which caused the Authority to expropriate a certain parcel of land, and it was argued by counsel for the Authority that certain documents and the testimony of officers of the Authority could not be considered in 12 determining the purpose behind the expropriation. Aylesworth J.A., in delivering the unanimous judgment of the court, said at pp. 316-17: 

Appellant, as I understand it, contends that none of these documents with the single exception of the appellant’s resolution to submit the scheme to the Minister may be looked at and that the evidence of Mr. Higgs called as a witness at the trial by appellant cannot be looked at to ascertain the purpose of the acquisition of respondent’s lands. The learned trial Judge thought he could consider these matters and I emphatically agree. The documents themselves are the appellant’s own records of appellant’s proceedings and of the action taken by it. The contents of these documents and anything which necessarily follows from a consideration of their contents bears in the most direct way upon the question of appellant’s real purpose. Again that real purpose properly may be tested in the light of the evidence of Mr. Higgs as to the need or the lack of it to acquire respondent’s lands for any purpose of conservation of natural resources; Mr. Higgs was well qualified to speak on matters of conservation and more particularly on such matters as affecting respondent’s lands and the surrounding area; he was appellant’s own witness. The admissibility of the documents and of the evidence of Mr. Higgs seems so clear as not to require authority. 

The learned justice of appeal then goes on to cite numerous cases as authority for the proposition he has stated. 

[49] Although it is not binding on the court, the Ministry Guide is of assistance by offering insight into the Ministry’s intention in promulgating the provisions of the IDEL Regulation respecting constructive dismissal, including the stipulation that they do not affect an employee’s common law right to advance a civil claim of constructive dismissal, a position which is consistent with s. 8(1) of the ESA. 

I cannot express how important this case is as it is the very first case to deal with this issue. In my mediation practice, this issue has already come up many times and there are numerous cases already being litigated on this issue . More importantly , if this ruling stands , there will undoubtably be a virtual tsunami of cases coming forth now that this issue has been addressed by the Courts.

If you wish a copy of this case email me at barryfisher@rogers.com

Interim Order 8 under the EI Act reads as follows :

153.193 The following are to be excluded from the earnings referred to in section 35 of the Employment Insurance Regulations:
(a) any pay or earnings referred to in subsection36(8), (9) or (19) of those Regulations if
(i) the claimant’s benefit period begins on or after September 27, 2020, or
(ii) the pay or earnings are declared to the Commission on or after September 27, 2020 and would otherwise have been allocated under section 36 of those Regulations to a week beginning on or after September 27, 2020;

Here is the link to the Interim Order: https://lnkd.in/gfZCfni

What this would seem to mean is that if a person were terminated on or after September 27, 2020 then any termination pay, severance pay or wrongful dismissal damages they receive does not affect their EI entitlement.

Thus you can now get EI and termination pay etc for the same period.

AND

You presumably do not have to repay EI for wrongful dismissal damages received if the termination took place on or after September 27, 2020.

This provision expires on September 25, 2021.

Thanks to Lisa Feld for telling me about this.

Therefore for terminations that take place between September 27, 2020 and September 25, 2021 you need not even check with EI regarding any overpayment owing.

That will certainly make my mediations easier.

In Currie v Nylene Canada ( 2021 ONSC 1922) Justice Smith had a situation where it was found that there were special circumstances which justified going over the general rule that 24 months notice was the maximum that a Plaintiff could recover.

This is what the Judge said about why this case had exceptional circumstances :

 

My Comments :

The Court of Appeal in Dawe was well aware of the previous cases involving notice periods of over 24 months. By setting the ceiling at 24 months except for exceptional circumstances, they were implicitly overruling those same cases that the Plaintiff was relying upon in this case.

Moreover every one of the factors that this judge sees as exceptional is already taken into account in the Bardal Factors. How can a factor that goes into the Bardal analysis be seen also as an exceptional circumstance? Should not these exceptional circumstances be limited something else that affected the Plaintiff’s ability to obtain employment ? For instance, if an employer alleged just cause without reasonable grounds or where the employer took active steps to obstruct the Plaintiff’s re-employment.

I have been observing the issue of how to determine notice periods all my entire professional career. I had the naive hope that over time the issue of predicting notice periods would become more  certain to both employers and  employees and therefore avoid unnecessary lawsuits over notice. This case puts us back to the pre Dawe days where there was  even less certainty in a already uncertain world.

I feel that judges often do not have a sense on what goes on in the world outside their courtrooms. We all know that 99% of these cases are settled. Settlements are easier to achieve when there is more predictability in the outcome. Since Dawe, both employers and employees knew that 24 months was the realistic maximum and that it was quite easy to hit that  mark. These two factors has made long service cases easier to settle. Now we will be  back to Plaintiffs claiming 30 months  notice and Defendants responding with 16 months.

This is not a good thing.

In Kosteckyj v Paramount Resources Ltd, 2021 ABQB 225, Justice Sidell found that a 20% reduction in the total compensation of a 6 year Engineer constituted a constructive dismissal even though it was. company wide compensation initiative because of the COVID situation and its affect on the company . This 47 year old Plaintiff was awarded 9 months notice.

Here is what the judge said :

[41] Paramount relies on Doran v Ontario Power Generation Inc, [2007] OJ No 4476, for the proposition that a compensation reduction of 14% to 17% is a not a breach that would give rise to a finding of constructive dismissal. Here the salary reduction and RRSP contribution nsuspension were collectively a 16% reduction. In addition, the 2019 Bonus Program was subject to “delay/cancelation”. In the previous two years, Ms. Kosteckyj had earned a cash bonus $1,000 and $6,267, plus restricted share units benefits (“RSUs”) which Paramount says were “worth a nominal value of $2,000 and $12,333” because at the vesting date the value was substantiallymreduced. Using her pre-April 1, 2020 salary of $154,800, the 16% reduction, together with the loss of a cash bonus of $1,000, would result in a 16.65% compensation reduction. The 16% reduction, together with the loss of a cash bonus of $6,267, would result in a total reduction of 20%. The effect of the Cost Reduction Program significantly affected Ms. Kosteckyj’s compensation in the range of 16.65% to 20%, without considering any value for the RSUs. I find that the implementation of the Cost Reduction Program resulted in the constructive dismissal of Ms. Kosteckyj.

 

For a copy of this case email me at barryfisher@rogers.com
For my date availability go to https://lnkd.in/gMhJFHF

In Kosteckyj v Paramount Resources Ltd, (2021 ABQB 225) Justice Sidnell had this to say about a defendant’s Statement of Defence which plead that the Plaintiff wrongfully turned down their reasonable offer to settle :

[10] Disclosing a settlement offer in a pleading undermines judicial impartially and can encroach on the fair and just system of judicial determination that we rely upon. While it may be appropriate to raise the existence of a settlement offer after a decision has been made, and in the context of the costs to be awarded, it cannot be disclosed in the pleadings or else where in the litigation before a decision has been rendered. When the defendant intentionally discloses it rebuffed settlement offer, it must be presumed that the defendant proposes an inference that the plaintiff, in not accepting the settlement offer, did not act reasonably. This type of inference has no place in our adversarial system.

[11] After termination of employment, an employee is not required to accept an employer’s settlement offer to mitigate the employee’s damages when that offer requires a release of the claim against the employee, as it did in this case. A defendant cannot argue that a rejection of a settlement offer was unreasonable until after the court makes its determination as to what are reasonable damages in lieu of notice. That is why, in relation to formal offers to settle, Rule 4.2 is clear that the formal offer to settle is to be “to be kept confidential and not disclosed to the Court” until accepted or “the remedy for the claim has been decided”.

[12] It is important for the proper functioning of our independent and impartial legal system to maintain the confidentiality of all settlement offers in litigation until the merits of the case are determined. Disclosing a rejected settlement offer may be appropriate on an application for costs.

Indeed, Rule 10.33(2)(h) contemplates that the court may consider “any offer of settlement made”, regardless of whether or not the offer of settlement is a formal offer of settlement under the Alberta Rules of Court. Disclosing a settlement agreed to may also be appropriate where a party seeks to enforce the terms of that agreement or relies on other exceptions to settlement privilege: Bellatrix Exploration Ltd v Penn West Petroleum Ltd, 2013 ABCA 10, para 29.

My Comments:

This restatement of a basic principle is welcomed. The Courts’ job is to assess what the reasonable notice period is , not whether the employer or the employee made reasonable offers. Similarly their is a line of “Ballpark Justice ” cases from long ago that also stated the Courts job is to assess the proper notice period , not whether the notice provided by the Employer was reasonable .

This often arises in my mediations when I have to explain to a defendant that the only thing a Court will see is that you only paid the ESA minimums and not that you offered 18 months if the Plaintiff signed a release. If the Employer wants to get credit for their reasonable offer, then they must unilaterally pay out that amount without the requirement of a release. If this is done upfront, then any Plaintiff’s lawyer who is on a contingency fee will think twice before taking on a case with little uphill potential .

If you wish a copy of this case, contact me at barryfisher@rogers.com

 

In Tacan v Sioux Valley Dakota Nation ( 2021 CarswellNat 507) Adjudicator Palamar held that in Manitoba only lawyers can represent parties in Unjust Dismissal hearings. He found that to allow non lawyers to do so would amount to the unauthorized practice of law. This is so even though the booklet put out by the Ministry says that a party may be represented by an ” agent”.

Query : In Ontario, paralegals are a regulated profession under the jurisdiction of the Law Society of Ontario. Can a licensed paralegal represent a client in these proceedings? If anyone has the answer, please post it and provide the explanation.

In Labrador Recycling v Folino ( 2120 ONSC 2195) Akbarali J. commented on the a restrictive covenant clause in the metal industry. In finding that one clause in particular was unreasonable , the Judge stated as follows:

It purports to prohibit Mr. Folino from soliciting and accepting business from any of the plaintiff’s current or prospective customers. It defines a “current or prospective customer of the company” as “an individual or entity with which [Mr. Folino] personally had direct or indirect contact, or access to conduct confidential information about, during the last two years of [his employment].” Notably, the definition of customer or potential customer of the company includes no relationship between the customer or potential customer and the plaintiff. For example, it does not say that a customer or potential customer is someone with whom Mr. Folino had contact in connection with his employment duties. The only limitation on who is customer or potential customer when it comes to someone with whom Mr. Folino had contact is that the contact take place within the last two years of his employment. As drafted, his drycleaner would qualify.

I love that comment. But there was more. Here the Judge lists in clear terms why this clause is unenforceable :

[25]In my view, the plaintiff has not established a strong prima faciecase that the clause is reasonable:

a.Given the evidence that deals come together in the aluminum scrap industry within hours, a one-year temporal limit is unreasonably long. The plaintiffagrees the point of a non-solicitation or non-competition period is to allow the employer to  solidify its relationships with its customers after the departure of the employee. Here, the plaintiff will have frequent contact with its vendors and purchasers due to the nature of the industry and so would not require a year to solidify any relationships that require solidifying.

b.There is no geographic limit set out in the clause. On its own, in a non-solicitation clause, no geographic limit may be reasonable if the customers are reasonably defined and identifiable. In this case, the definition current or prospective customers that the restrictive covenant purports to preventMr. Folino from accepting work from casts a very broad net and is imprecise.

c.The terms ofthe clause are not clear and unambiguous.For example, the clause restricts Mr. Folino from accepting work from a person he may never have had contact with but in respect of whom he had access to confidential information.It is not clear how he would identify such people.The clause also purports to restrictMr. Folino from soliciting or accepting work from someone with whom hehas hadindirect contact over the past two years. It is not clear what“indirect contact”means.

d.Moreover, in prohibiting Mr. Folino from soliciting or accepting work from anyone with whom he personally had direct contact during the last two years of his employment, the clause purports to restrict him from accepting work from his personal contacts who may have had nothing to do with the plaintiff at any time.The plaintiff says this is ridiculous but asI have noted, the definition in the agreement of customer or potential customer of the company does link that person in any way to the company or Mr. Folino’s employment duties.

My Comments:

In the olden days when I was a litigating lawyer, if I represented a client who was faced with one of these clauses, I would have the client send a letter to his former employer as follows:

” Dear Sir:

In your recent letter you reminded me that under the terms of my employment contract I am to have no contact with any of the Company’s customers for 12 months following my departure. Without admitting the enforceability of such a provision, I want to make sure that I do not breach this provision. I would therefore appreciate it if you could send me a complete list of all of the Company’s customers so that I may know exactly whom I may and whom I may not approach in the next 12 months . ”

Of course the former employer would refuse to give this information and therefore my client would approach whoever he or she wanted.

Another thing to remember, since injunctive relief is an equitable concept, the person requesting the injunction must come to Court with ” clean hands”.

If the ex-employee was terminated, then he or she presumably has a wrongful dismissal action against the ex employer seeking the relief. It seems clear that an employer who has breached their obligation to provide reasonable notice of termination does not come with ” clean hands “.

Third point. There is case law to say that the existence of a clause like this has an effect on the notice period. The reason for this is that if the purpose of the notice period is to allow the plaintiff to find employment in their chosen field , then disallowing a person from going after some or all  jobs in his or her chosen field, means that  they will need more time to get such a job.  Thus the notice period should be extended to take into account this additional barrier to employment.

Interestingly, the contracts with the longest non compete or non solicitation periods also tend to have the shortest notice periods for termination.

 

In Battiston v Microsoft ( 2021 ONSC 1341) Faieta J. awarded wrongful dismissal damages of $567,000 after a trial lasting 2.5 days.

In the course of the award, the following interesting  points were made:

1) The fact that the Plaintiff did not win on every disputed issue was not relevant in determining the quantum of costs.

This is what the judge said:

Who was the Successful Party?

2) For the losing party to not submit their own Bill of Costs when attacking the winners is a dangerous technique. This what the Judge said :

  Similarly, although there is no obligation to do so, the defendant did not file its own Bill of Costs to illustrate what amount of costs it would have reasonably expected to have been incurred by the plaintiff: as necessary to incur to respond to this claim: Smith Estate v. Rotstein, 2011 ONCA 491 (Ont. C.A.), para. 50. Given its failure to deliver its own bill of costs, the Applicant’s challenge regarding the amount of costs claimed by the Respondent is “no more than an attack in the air”, as former Chief Justice Winkler stated in Risorto, at para. 10.

When I was in that situation as the winning lawyer and the loser said that he spent less time on the file  than me , I would respond ” Well maybe that is why I won and you lost.”

2) Where the Plaintiff tenders a Rule 49 Offer to Settle, but upon inquiry by the Defendant, refuses to set out a number for costs , the Court may exercise its jurisdiction to not award substantial indemnity costs even though the Plaintiff beat their own Rule 49 offer.

This is what the Judge said:

My Comments :

What the Judge maybe did not appreciate is that if the Plaintiff had put forward a number for costs before the Defendant had accepted the Rule 49 offer , then the Defendant would have been in position to try to negotiate a total settlement without deciding whether or not to accept the offer. Rule 49 offers can be accepted without agreeing on costs because you can accept the offer and if you cannot later agree on costs then the Court will decide.

This is the type of bargaining and negotiation that goes on the the real world.

I do not think it is necessarily appropriate for the Court to involve themselves in this discussion. Remember that the Defendant also refused to tell the Plaintiff how much he had already billed his client.

The Plaintiff probably wanted to know what the Defendant had been billed, and if that amount was reasonable then the Plaintiff would have agreed with that amount. In that situation it would be hard for the Defendant to argue that the Plaintiff’s bill was excessive .

Note that even before the Judge, the Defendant refused to tell the Court how much they had been billed. Why, you may ask?

If you want a copy of this case, email me at barryfisher@rogers.com .

In Renzone v Onyx Homes ( 2020 ONSC 7722) Master Josefo stuck from the Statement of Defence a plea that the defendant had offered a terminated employee the chance to return to work after being dismissed so that she could work out her notice period. The Defendant presumably wanted to rely on this refusal as a basis for arguing that the Plaintiff failed to mitigate her damages, relying on the SCC decision in Evans v Teamsters ( 2008 SCC 20).

The Master ruled that this was clearly an offer to settle, and therefore was not admissible as evidence at a trial and therefore could not be plead.

The Master noted that the offer was labelled ” Without Prejudice “, that it contained a confidentiality clause and required the Plaintiff to sign a release.

My Comment:

If an employer wants to trigger a Evans v Teamsters defence, in my opinion they must set out clearly that the ex employee is free to return to work for the balance of the notice period without conditions. In other words, if the employee does choose to return to work, then they are still free to continue the lawsuit. If the employee refuses to return to work, this may well trigger a valid defence of a failure to mitigate.

This is how the Master said it:

Observations on Mixing Without Prejudice and With Prejudice Communications:

[25] The May 29th letter tried to be, in my view, “all things to all people”. It was, for reasons herein, an offer of compromise. It thus falls squarely within settlement privilege. Yet it also appears to me that defendant was trying to position itself in this within litigation, after it had retained counsel and after it unilaterally imposed new terms on the plaintiff which were to start within a few days but for her commencing sick leave first. This one letter confusingly tried to impart several different messages, including, significantly, I emphasize, that of settlement. Yet if settlement failed, another purpose of the May 29th letter was, as was specifically pleaded at paragraph 51 of the defence, the defendant trying to establish a “failure of mitigation” argument on the part of the plaintiff. Whether such would be viable over three weeks after the planned imposition of new terms of employment is an open question.

[26] Yet where the defendant ran into difficulties, in my observation, was in attempting to combine different elements and messages in the one letter. One take-away may be that, in future, counselshould not mix “with prejudice” and “without prejudice” elements in the same one item of correspondence. Writing separate letters or emails, each with their individual and clear messages, and each either clearly on or off the record, with or without prejudice, may assist to avoid such confusion.

If you like a copy of this case send me an email at barryfisher@rogers.com.