How Not to Conduct A Wrongful Dismissal Trial :

In Gibb v Pallieter Regional School Division # 26 ( 2020 ABQB 113) Justice Kubik dismissed the plaintiff’s constructive dismissal and harassment claim.

1. The trial was 7 years after the event.

2. The trial took 11 days.

3. The Plaintiff amended her claim at trial to increase her  claim  for punitive and aggravated damages to $700,000.

4. The Plaintiff found alternative employment almost immediately after she left this employer.

5. If the Plaintiff had been found to be constructively dismissed, her employment contract would have required the employer to pay her $35,750

How to Prove Failure to Mitigate :

In Samuel v Benson Kearley ( 2020 CarswellOnt 1125) Justice Charney awarded the plaintiff a 6 month notice period . Then he reduced the notice period to 4 months as a result of two pieces of evidence :

One, she did not even start looking a job until 4 months after her termination. The judge didn’t buy her ” shock and distress” argument.

Second, the defendant led evidence that a specialzed insurance website ( which the Plaintiff had used to get her the job in the first place ) had 38 comparable  jobs posted in the four months that the plaintiff did nothing to look for a job.

In light of this work, the Judge said that the ” the defendants have met their onus of proving that the plaintiff failed to mitigate her damages”.

Character of Employment Ignored in Assessing Notice :

In Slipp v Woodstock First Nation Economic Development Corp ( 2020 NBQB 020) Justice Petrie had to assess the notice period for a 56 year old Bingo Caller making $39,000 with 17 years service.

In deciding age quantum of reasonable notice, the judge said the following

36.     Character of employment simpliciter is generally not a relevant factor unless there is evidence establishing otherwise.
          
• Bramble v. Medis Health & Pharmaceutical Services Inc. 1999 CarswellNB 270 ( NBCA)
• AMEC Americas Limited v. MacWilliams, 2012 NBCA 46
41.     I also wish to note that there was no evidence provided by either party as to the job market, nor the economic conditions facing the plaintiff at the time of and following termination. I also have not considered the character of her employment as a factor.
My Comments :
As neither party led evidence on how the character of employment may have affected how long the plaintiff should reasonable take to get a job, the Judge simply ignored it as a factor.
In my experience, I have almost never read a trial decision in which either party has led any evidence on this issue. Instead both counsel and judges do what they have always done, which is simply make the factually unsupported assumption that people who make only a little money will have a easier time getting a job than those making lots of money.
This case can be used by either party. Plaintiff counsel  can rely on it to say that their client of modest means should not be penalized in the notice period assessment. Defence counsel can use it to offset the high awards that often go to executives with short service .
By the way, this is already the law in Ontario. Read  the case of Di Tomaso v. Crown Metal Packaging Canada LP ( 2011 ONCA 469) in which the Court said :
27      Crown Metal would emphasize the importance of the character of the appellant’s employment to minimize the reasonable notice to which he is entitled. I do not agree with that approach. Indeed, there is recent jurisprudence suggesting that, if anything, it is today a factor of declining relative importance: see Bramble v. Medis Health & Pharmaceutical Services Inc. (1999), 175 D.L.R. (4th) 385 (N.B. C.A.) (“Bramble”) and Paulin c. Vibert (2008), 291 D.L.R. (4th) 302 (N.B. C.A.).
28      This is particularly so if an employer attempts to use character of employment to say that low level unskilled employees deserve less notice because they have an easier time finding alternative employment. The empirical validity of that proposition cannot simply be taken for granted, particularly in today’s world. In Bramble, Drapeau J.A. put it this way, at para. 64:
The proposition that junior employees have an easier time finding suitable alternate employment is no longer, if it ever was, a matter of common knowledge. Indeed, it is an empirically challenged proposition that cannot be confirmed by resort to sources of indisputable accuracy.
Here’s the rub. Although this principle is the law of Ontario, this case and its guiding principles are either unknown or ignored in the overwhelming bulk of cases that go to Court.
Why is this ?

 

Employee Gets Advantages of Both Fixed Term and Reasonable Notice :

In Rice v Shell Global Solutions ( 2019 ABQB) Eamon J. had a situation where an employee who had already worked for the defendant for about 8 years under a number of different fixed term and indefinite term agreements, was offered a new position which had the following language :

Your Assignment Length will be : 4 years.

She was let go without cause 10 months later and was provided with working notice and termination pay for another 3 months. She found new employment 7 months after her notice of termination.

The Judge had to decide what meaning to put to the reference to 4 years. This is how the Judge sets out the alternative interpretations

57      Consequently, a reasonable person interpreting this contract, having carefully thought about the matter, could see more than one meaning. In my opinion, there were three alternative meanings. One could reasonably ask:
By “Assignment Length” do you mean that
(1) she is a fixed term employee whose employment is over at the end of four years,
(2) she is an indefinite term employee who cannot apply for other positions without her manager’s permission for four years, or
(3) you are promising her work or an assignment for at least four years?
The Judge concludes that the correct interpertation is the the third one .
63      The objective interpretation which gives reasonable meaning to the explicit phrase “Assignment Length”, does not impose the harsh consequences of a traditional fixed term contract, is the most plausible meaning in the limited surrounding circumstances which both parties knew or ought to have known, and is most favourable to Ms Rice, is that Ms Rice receive the promised assignment of four years (absent termination for cause) but not that the contract would automatically end at the conclusion of that time. Thus the contract is terminable effective any date thereafter in accordance with the common law. The use of the word “assignment” rather than “employment” in the contract supports this interpretation. The relatively short duration of the assignment distinguishes this case from the long, and therefore unlikely, claim to employment duration considered by the Manitoba Queen’s Bench and Court of Appeal in Wallace.
In assessing damages the Court calculated what she she would earned with Shell during the balance of the 4 years but deducted what she actually did earn by way of mitigation income. The Judge examined the Ontario Court of Appeal case which said that these earnings are not deductible ( Howard v Benson Group Ltd 2016 ONCA 256) but ruled that where the language does not exclude mitigation earnings, it must be deducted .
Interestingly the Judge also went on to find that if the contract was not a fixed term, the common law notice would be 15 months. However the actual damage award only reflected the losses to the end of the 4 year fixed term but not  also the 15 months after the end of the notice period. Apparently Plaintiff’s counsel did not seek that remedy as the Plaintiff only requested payment until the end of the fixed term.

Mitigation Earnings of 30% of Former Salary are Deductible as Mitigation Earnings :

In Dengedza v CIBC ( YM2707-10905) Adjudicator Montieth in a CLC Unjust Dismissal complaint had to determine whether or not a former senior  investigator with the Bank was entitled to not have his mitigation earnings affect his 14 month notice award.

In his job at the Bank, the Complainant earned $62,379 for presumably a 40 hour work week. After his dismissal he worked 60 hours a week as an UBER driver and made $600 a week or $31,200/ year. This works out to $10/hour as opposed to the $30/hour that he was making at the Bank.

The Adjudicator then applied the test in Brake v PJ-M2R Restaurant ( 2017 ONCA 402) which stands for the proposition that post termination income that is “minimal, trivial or inconsequential ”  should not be considered as mitigation earnings.

Even though the UBER income was 1/3 of his Bank income, the Adjudicator found that these amounts were sufficently large enough to be characterized as amounts received in mitigation of loss.

My Comments :

I think the Adjudicator approached this analysis incorrectly.

He seemed to look at the weekly earnings without regard to the hourly rate. Sure, the Plaintiff earned about 50% of his former income on a weekly basis but that is only because he worked 50% longer every week.

Moreover, as the Complainant was making $4.00 less than the ESA minimum wage driving for UBER, it seems somewhat inappropriate to find that these UBER earnings did not qualify as ” minimal and trivial “.

In other words the comparison should be based on the hourly rate, not on the weekly income. Effectively the Complainant was working 1/3 of his former rate . No Court would require an employee to mitigate his losses by taking a job at 1/3 of his previous rate, especially when that rate itself was below the minimum wage .

In effect the Complainant was punished for taking the crappy UBER job, and the Bank got a windfall because its former employee needed to eat and put a roof over his head.

Although there is no reference to this in the decision, it seems likely that as the Bank alleged just cause, the Complainant  probably did not get EI. Had he received EI, that amount would not have reduced his damage award, although in certain circumstances he may have had to repay some or all of it to the Government.

Service Advisor Taking Secret Pics of Female Clients = Just Cause

In Durant v Aviation A. Auto ( 2019 NBQB 214 ) Justice LeBlanc had a situation where a 34 years service advisor at a car dealership took secret videos of  female clients and shared them with co-workers. The Plaintiff’s explanation that he was doing it to protect the dealership was not accepted by the Judge.

The Judge considered the following factors in determining   whether there was just cause.

The nature and extent of Mr. Durant’s conduct on August 30, 2018, is  the following:

  1. He surreptitiously took a first video of the female client in attendance at the Audi Moncton premises for improper purposes;
  2. The first video was taken with his work issued tablet computer;
  3. He surreptitiously took a second video and a photograph of the female client with his personal cellphone;
  4. He showed the first video to several co-workers while making inappropriate comments, including mocking the female client;
  5. He showed the second video to Audi Moncton employee Justin Guimond while making inappropriate comments about the female client;
  6.   Over the course of the labour day weekend, he texted the photo of the female client on his cellphone to his co-worker, Mr. Donovan.

In deciding that just cause had been proven the Court made the following comments :

For the reasons already given, a consideration of the full range of misconduct leads to the conclusion that it was very serious.  That misconduct, the invasion of the female client’s privacy and the derogatory comments made during the subsequent viewings of the video, were incompatible with Mr. Durant’s employment obligations toward Audi Moncton.  No plausible explanation was offered for the misconduct and none is evident on an examination of the evidentiary record.

  Durant’s misconduct on August 30, 2018 is very serious as a stand alone incident but it is made more egregious considering that he had been warned of the inappropriate nature of similar conduct in the past, i.e. the warning letter issued in relation to the November 2014 incident and the discussion with Mr. Hambrook in January 2018.  In addition, after August 30, 2018, it came to light that the very behaviour shown by Mr. Durant on August 30, 2018, had occurred several times in the past. 

My Comments :

I take 3 things from this case :

  1. The conduct of the plaintiff was obviously throughly obnoxious and disgusting.
  2. His failed attempt to justify his behavoir, as opposed to apologizing for it, hurt his otherwise slim chance of winning.
  3. The fact that he had been previously warned about similar behaviour sealed his fate.

One can see that if this was the first and only time in 34 years  that he acted in this fashion and if he accepted  responsibility from the beginning, the result may have been very different.

Insubordination Not Enough to Terminate With Cause:

Patruniuk v Candu Energy ( YM2707-11352) Arbitrator Price in a CLC unjust dismissal case had a employee who repeatably refused to take a refresher course in basic radiation protection. Despite numerous meetings to hear his concerns, he still refused . Finally he  he was told by email that if he did not complete the training that day, he would be fired .

The employee did not see the email until after work on that same day .

He was fired the following day, which was a Friday

However, after finally seeking legal advise, the employee, on the Tuesday following his dismissal  emailed his employer an apology and agreed unconditionally to take the training, which was a one hour computer PowerPoint exercise.

The Complainant at the hearing wisely admitted that he had been insubordinate but simply argued that dismissal was not warranted but rather he should have received some lesser degree of discipline.

In deciding to reinstate the employee with a two month suspension, the Adjudicator took the following matters into account:

  1. The insubordination was of of a minor nature which was only tangentially related to his job duties.
  2. He did not openly challenge management in front of other employees.
  3. The employee remained civil in his dealings with management.
  4. The workplace encouraged employees to adopt a ” questioning attitude “
  5. The Employer never used progressive discipline. The fact that upon termination he immediately apologized and agreed to take the training was seen as evidence of the fact that a lesser penalty would have modified his behaviour.
  6. The employment relationship was not irredeemably fractured.

My Comments :

It must be remembered that reinstatement with a suspension is a remedy open to CLC Adjudicators, but not judges in a civil action.

This case also illustrates the wisdom of not trying to argue the impossible. Some  lawyers would have attempted to dream up some bizarre rationale for their clients behavoir and only when that argument failed, would they argue  for a lesser penalty.

It is a much better tactic to admit the wrong and argue the penalty. Judges and arbitrators so rarely see people taking responsibility for their misdeeds that when they actually encounter it, they will often exercise their discretion and do something to lessen the blow of the termination.

Ontario Court of Appeal Reaffirms Entitlement to Stock Options Over Notice Period Unless the Exclusionary Language is Clear and Unambiguous :

In O’Reilly v Imax Corp ( 2019 ONCA 991) the Court was faced again with the issue of what type of language in a bonus or stock option plan effectively denies the dismissed employee compensation for these elements over the notice period .

The exact wording under review was as follows

III. THE CONTRACTUAL PROVISIONS
18      The LTIP contained provisions for the award of both RSUs and stock options:
RSUs under the LTIP
This Agreement sets forth the general terms and conditions of Restricted Share Units (“RSUs”). By accepting the RSUs, the Participant agrees to the terms and conditions set forth in this Agreement and the IMAX 2013 Long Term Incentive Plan (the “IMAX LTIP”). . . .
4. Termination of Employment Generally. In the event that the Participant’s employment with the Company terminates for any reason other than death, Disability or for Cause, the RSUs shall cease to vest and any unvested RSUs shall be cancelled immediately without consideration as of the date of such termination. Any vested RSUs shall continue to be settled on the applicable Settlement Date.
5. Death; Disability. If the Participant’s employment with the Company terminates as a result of the Participant’s death or Disability, a portion of the RSUs shall vest such that, when combined with previously vested RSUs, an aggregate of 50% of the RSUs granted pursuant to the Agreement shall have vested. Any vested RSUs shall be settled on the applicable Settlement Date and any unvested RSUs shall be cancelled immediately without consideration as of the date of termination.
6. Termination for Cause. If the Participant’s employment with the Company terminates for Cause, any outstanding RSUs, whether or not vested, shall be cancelled immediately without consideration as of the date of termination, and the Participant shall have no further right or interest therein.
Stock Option Grants under the LTIP
This Agreement sets forth the general terms and conditions of Options. By accepting the Options, the Participant agrees to the terms and conditions set forth in this Agreement and the IMAX Corporation Long-Term Incentive Plan (the “IMAX LTIP”). . . .
(5) Termination of Employment Generally. In the event that the Participant’s employment with the Company terminates for any reason other than death, Disability or for Cause, the Options shall cease to vest, any unvested Options shall immediately be cancelled and revert back to the Company for no consideration and the Participant shall have no further right or interest therein. Any vested Options shall continue to be exercisable for a period of thirty (30) days following the date of such termination; . . . To the extent that any vested Options are not exercised within such period following termination of employment, such Options shall be cancelled and revert back to the Company for no consideration and the Participant shall have no further right or interest therein.
19      A separate Stock Option Plan provided for the award of stock options in addition to those provided under the LTIP. The relevant provision stated as follows:
Stock Option Grants under the Stock Option Plan
7. Termination of Employment, Consulting Agreement or Term of Office
(a) In the event that a Participant’s employment, consulting arrangement or term of office with the Company or one of its Subsidiariesterminates for any reason, unless the Board or the Committeedetermines otherwise, any Options which have not become Vested Options shall terminate and be cancelled without any consideration being paid therefor. [Emphasis in original.]
The Court of Appeal upheld the trial judges’ finding that these clauses did not oust the Plaintiff’s common law entitlement to compensation for these elements of compensation during the reasonable notice period. This is what they had to say :
56      In the application of the second step, the motion judge, referring to Veer, found that the reference to “terminates for any reason” in the plans could not be presumed to refer to termination without cause. Further, he found that the phrase “cancelled immediately without consideration” was not “a clear, express provision that remove[d] the common law right of an employee, terminated without cause, to claim damages in respect of lost unvested RSUs”: at para. 64.
57      The motion judge applied the correct legal principles and arrived at the correct conclusion. As I have explained in the discussion of Kieran, above, in the absence of unambiguous contractual language, as there was in Kieran, the awards continued to vest during the reasonable notice period. The respondent was entitled to damages for the loss of his entitlement to exercise his rights.
My Comments :
This issue is, as the Court said in a footnote ( see below)
” fertile ground for litigation”.
Maybe, just maybe, this decision will provide some much needed guidance on how to properly approach the issue not only of these bonus clauses but also ESA termination clauses.
This case illustrates that it is NOT an exercise in determining which interpretation is more reasonable, as it would be in a normal commercial contract.
Rather, you start with the assumption that the dismissed employee is entitled to receive his or her total compensation over the notice period and only then do you see if the plan language is so clear and unambiguous that the employee should get less than his or her common law entitlement.
Any reasonable ambiguity means the clause is ineffective.
Yes, it does look like legal hair splitting.
But remember, the Courts realize that there is no real bargaining in these relationships and  that these agreements are more like a contract of adhesion.
Moreover, it seems that Courts are bothered by the idea that the party breaching the contract of employment, by failing to give reasonable working notice, should then seek to benefit by this breach and claim that the employee is not entitled to payment solely because they are no longer working for the company.
Case Footnote :
That this area remains fertile ground for litigation is demonstrated by the fact that in the past year there have been four decisions of this court on the same subject: Dawe v. The Equitable Life Insurance Company of Canada, 2019 ONCA 512, 435 D.L.R. (4th) 573 (bonus plans); Mikelsteins v. Morrison Hershfield Limited, 2019 ONCA 515, 56 C.C.E.L. (4th) 1, leave to appeal requested, 38806 (shareholders’ agreement and share bonus); Manastersky v. Royal Bank of Canada, 2019 ONCA 609, 146 O.R. (3d) 647, leave to appeal requested, 38788 (incentive plan); and Andros v. Colliers Macaulay Nicolls Inc., 2019 ONCA 679, 437 D.L.R. (4th) 546 (bonus).

 

OCA Finally Nixes ESA Savings Clauses:

In Rossman v Canadian Solar Solutions ( 2019 ONCA 992 ) the Ontario Court of Appeal had a situation where the ESA termination had an illegal clause ( “Benefits shall cease 4 weeks from the written notice”) which the Defendant argued was remedied by a clause that said  as follows:
” In the event that the minimum statutory requirements as at the date of termination provide for any greater right or benefit than that provided in this agreement such statutory requirements will replace the notice or payments in lieu of notice contemplated under this agreement”.
The Court held that:
a) the language was ambiguous because the Plaintiff could not know if, after 4 years of service, he would get his ESA benefits ( max 8 weeks ) or the 4 weeks under the contract.
b) from a policy point, savings clause cannot help employers who attempt to contract out of the ESA.
This is what the Court said :

[39]      I make a final observation. Employees need to know the conditions, including entitlements, of their employment with certainty. This is especially so with respect to an employee’s termination – a fragile moment of stress and uncertainty.

[40]      In this context, saving provisions in termination clauses cannot save employers who attempt to contract out of the ESA’s minimum standards. Holding otherwise creates the risk employers will slip sentences, like the four-week benefits clause, into employment contracts in the hope that employees will accept the terms. This outcome exploits vulnerable employees who hold unequal bargaining power in contract negotiations. Moreover, it flouts the purpose of the ESA – to protect employees and to ensure that employers treat them fairly upon termination: Machtinger, at pp. 1002-3.

[41]      While employers are entitled to contractually amend the ESA’s notice requirements, as long as they respect the minimum standards, they are not entitled to offend them. Employers must have an incentive to comply with the ESA’s minimum notice requirements. They cannot be permitted to draft provisions that capitalize on the fact many employees are unaware of their legal rights and will often refrain from challenging notice provisions in court: Machtinger, at p. 1004. Attempting to reconcile the provisions of the Termination Clause with the benefit of hindsight runs counter to the remedial purpose of the ESA.

My Comments:

It is refreshing to see that the Court is finally putting  policy considerations front and centre in these cases involving the enforceability of ESA clauses. The Court also quotes extensively from Wood v Fred Deeley, another leading case on how to interpret ESA termination clauses.

Too often the Courts have treated these cases as one off contract interpretation cases as if they were normal commercial contracts between parties of equal bargaining power. This has led to a series of often contradictory court decisions. Hopefully this method of legal analysis will be adopted by all courts so that some well deserved certainty will finally come to this issue of interpreting termination clauses.

There is no reason in the world that employers cannot draft  fair and enforceable termination provisions that can be easily understood by the average employee, without having to have to refer to a statute  as complicated as  the Employment Standards  Act, 2000 which has 142 sections and 14 Regulations.

No Obligation to Mitigate while Disabled:

In Fenos v Manulife ( 2019 ONSC 6861) Pomerance J. had a situation where  a settlement agreement required the employer ( not Manulife but rather Facca Inc.) to make severance payments over a period of time subject to the Plaintiff’s obligation to seek reasonable alternate employment, with a corresponding reduction in the severance payments if he failed to do so .

Shortly after the settlement, the Plaintiff became very ill and was completely disabled. He therefore stopped looking for a job.

Facca stopped the payments saying that the Plaintiff had failed to seek alternate employment.

The Court disagreed with the Defendants literal interpretation. The Judge said as follows:

27      The interpretation of a contract requires consideration of the objective intentions and expectations of the parties. In this case, those expectations crystallized on the date of termination. One can presume that the condition was placed in the contract to ensure that Fenos was diligent in mitigating his loss, with a view to reducing the amount of the second and third payments. If Fenos was capable of searching for work, and did not do so, this would be a wilful failure to mitigate and that was the mischief sought to be addressed.
28      That is not what happened. Fenos did not willfully fail to comply. He became unable to do so. I find that his disability and resulting incapacity was not within the reasonable contemplation of the parties at the time of the agreement. Fenos would not logically agree to a condition that required him to do that which was physically impossible. Similarly, the company could not, in good faith, have imposed such a condition without clearly stipulating that that was their intent. The only rational inference is that both the employee and the employer contemplated that Fenos would be required to seek reasonable alternate employment so long as he was capable of doing so. This qualification is an implied term of the agreement, reasonably expected by the parties, and not overridden by the language of the agreement.

 

The Employer then tried to analogize to those cases where the Plaintiff dies during notice period and the issue is whether that ends the employers’ obligation to pay after the date of death. This is how the Court dealt with that argument:

30      Facca relies on the case of Rickards (Estate of) v. Diebold Election Systems Inc., 2007 BCCA 246, 241 B.C.A.C. 263, in which the court held that a similar termination agreement was frustrated by the death of the employee. The court in Rickards noted “[t]hat the death of a party brings to an end a contract requiring personal performance is a venerable principle of the common law” (para. 40). I see Rickards as being distinguishable. First, death is distinguishable from disability. One might reasonably presume that a termination agreement would only continue so long as the employee recipient was alive to receive the benefits. In Rickards, the employee died. The employee’s death prevented him from seeking alternate work but it also extinguished his personal need for compensation.

31      How different this case is, where the employee is still alive, in need of compensation, and unable to seek alternate employment. The decision in Rickards must be considered against the Court of Appeal’s decision in Brito v. Canac Kitchens, 2012 ONCA 61, 287 O.A.C. 293, in which, at para. 16, Cronk J.A. observed that “[t]here can be no obligation to mitigate damages by finding alternate employment where the employee is totally incapable of working.” While Brito did not involve interpretation of a termination agreement, the reasoning is equally persuasive in this context.

34      In short, the reference to “reasonable alternate employment” must logically refer to employment reasonably available in all of the circumstances. Mr. Fenos’ circumstances make it impossible for him to work anywhere. There is no reasonable alternate employment to be sought. A failure to seek out that which does not exist cannot be seen as a breach of the terms of the contract.
My Comments :
It is important to remember that this case involved the  interpretation of a settlement agreement, not the application of the law of reasonable notice.
The common law requires the giving of working notice or in the alternative, to compensate the employee in the same way as if he or she had been given a chance to work out the notice period ( pay in lieu of notice ) .
In this case if the employer had given him 12 month working notice ( assume that 12 months was proper notice ) but he became sick after 3 months and therefore could no longer work, what obligation would the employer have ?
Assume that this employer had no benefit plans like STD or LTD.
Is the employee on working notice entitled to more than would be provided if he had not been terminated ?
This issue has come up in a number of cases but it usually deals with situations  where the employer has decided not to give working notice and provides pay in lieu. In these cases the employer usually has received STD or LTD for the same period and the question is whether or not the wrongful dismissal damages are reduced by the amount of the disability payments.
Remember that there is absolutely no obligation either in the common law or under statute for an employer to pay wages to an employee who is not working due to illness. Only the existence of a contractual STD or LTD plan changes this premise.
I would invite the reader to send me any cases that has dealt with this issue of whether an employee under working notice is entitled to be paid his her wages for a period in which they cannot work due to illness. I am of course not talking about any period covered by statutory ESA payments.
In fact I faced this exact situation in a mediation I did a few years ago. The case did not settle ( not my fault of course) and frankly I don’t know if it has gone to trial yet.