No Warnings Means No Just Cause:
In Cumberland v Maritime College of Forest Technology ( 2023 NBKB 065) Justice DeWare awarded a 7 year, 52 year old, Academic Instructor, a 7 month notice period .
This case, which went on for 9 trial days, focused largely on the various grounds of just cause. In the end this is what the Judge had to say on the issue:
CONCLUSION ON JUST CAUSE DISMISSAL
[72] In the event Mr. Marshall or Mr. Davies had provided clear warnings regardingnhis conduct to Mr. Cumberland throughout 2018 and 2019, they would have been successful in convincing this Court that Mr. Cumberland was dismissed for just cause.
Mr. Cumberland’s communications with several students are completely inappropriate regardless of the culture of the academic institution. Mr. Cumberland’s interactions with several of his colleagues are equally unacceptable. Mr. Cumberland’s insubordination demonstrated towards both Mr. Davies and Mr. Marshall is simply untenable. All these issues, if properly brought to Mr. Cumberland’s attention, and if likely ignored by Mr. Cumberland, would have easily paved the way for a just cause dismissal. However, Mr. Marshall and Mr. Davies did not take that approach and in so doing deprived Mr. Cumberland of the ability to curb his behaviour and address their concerns. Given the rigidity of Mr. Cumberland’s mindset, I find it unlikely that he could have adequately addressed their concerns if properly advised; however, he was never given the chance, and he is therefore entitled to the benefit of the doubt. For these reasons alone, I do not accept the College has met the burden upon them to establish just cause for the dismissal.
My Comments:
If there was ever a case which showed the importance of due process in proving just cause, this is the one.
In the olden days when I actually practiced law like a real lawyer, I would be asked by my employer client what it would take to build a case for just cause for a particular employee who they were having problems with.
I would ask them a simple question. Is the employee a keeper?
In other words, is this an employee who you think can improve and that you want to improve?
If yes, then you do not need me as I know zilch about how to manage employees.
If the answer is no, then let’s look at what it will cost to terminate without alleging cause. Otherwise you will have to :
- Continue to pay this employee for the period it will take for you to document sufficient warning letters. This could take months. In the meantime this incompetent employee will likely cause you to lose money, clients and have other employees quit.
- Assuming that you may have just cause but not wilful misconduct , you will still have to pay out the ESA amounts.
- You will probably be sued. You will have to pay me and we will probably settle and you will then pay out more money.
In this case the award was $48,644 for the claim and $6,700 for costs.
The cost to the Defendant of this action would likely be as follows :
Paid to Plaintiff and his counsel $55,344
Paid to Defence counsel for 9 day trial $45,000
( I am assuming $5000 per day of trial )
Total $100,344
The Recovery for the Plaintiff may be as follows:
Received from Defendant $55,344
Less Lawyers Contingency Fee of 25%. $13,836
Then Less tax withholding of 30% $12, 452
Net Received by Plaintiff $29,056
If the Plaintiff received any EI during this period, the net recovery would even be less.
If the termination had been without just cause, a likely settlement would be around 6 months lump sum. That would have cost the Employer $45,500 and the the Employee would have received after tax around $31,850.
Instead the Employer probably paid $100,000 and the employee probably got $29,000.
Does this make sense to anyone ?
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Void Termination Clause Does Not Void Fixed Term Contract.
Failure to Accept Offer of Reemployment By Acquiring Company Before Termination is Not a Failure to Mitigate:
In Giduturi v LG Electronics Canada (no CANLI citation yet) Justice Dinnen had a situation of a 49 year old warehouse worker of 13 years service whose employer ( LG ) announced that it ws outsourcing its warehousing operation in 8 weeks time to a third party company ( Pantos) who would be offering employment on the same terms and would respect their LG seniority.
However Pantos did not do so in that they offered inferior compensation and purported to say that the employment was ” at will” .
The Plaintiff refused the Pantos offer. Pantos then filled the job. Only after the Plaintiff’s refusal did LG terminate the Plaintiff.
The Court found that the Plaintiff’s failure to accept the Pantos offer was not a failure to mitigate for two reasons:
- It was not comparable in terms of the compensation.
- Citing the Court of Appeal in Dussault v. Imperial Oil Limited 2018 ONSC 1168. where it held “ it is fatal to an employer’s argument that an employee failed to mitigate his damages by working for his old employer where the offer of alternative employment was made before the termination: “
The Plaintiff was awarded 12 months notice.
My Comments:
In many situations where a company is sold, it is common for the purchasing employer to offer employment to the employees of the seller before closing and before the seller gives notice of termination. The seller does not wish to give notice of termination as this may trigger the obligation to pay ESA termination and severance pay. If the purchaser does employ the employee then the seller is likely off the hook for any termination obligations.
One way to avoid this situation is for the purchaser to agree that it will keep all its offers of employment open for acceptance to some point after the closing of the transaction. However the purchaser may be unwilling to do so because this would likely create an unacceptable level of uncertainty in so far as staffing is concerned.
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Why Claim a Breach of Fiduciary Duty When a Breach of Confidentiality Already Exists ?
Does Fresh Consideration Require an Improvement for the Contracting Party ?
Following the Waksdale decision by the Ontario Court of Appeal ( which overnight made most ESA only contracts null and void) many employers have revised their contracts for existing employees by substituting enforceable ESA termination clauses. They often make no other changes to the agreement other than a nominal cash payment.
Where a nominal payment has been made, the employers have relied upon the fact that this was fresh consideration and therefore the new and improved ESA termination clause is enforceable.
The counter argument made by employee counsel is once the old ESA termination clause is voided the common law presumption of reasonable notice becomes the relevant termination provision. Therefore if the employee then signs a valid ESA termination agreement, the employee is giving up a significant benefit ( especially if their common law entitlement would vastly exceed the ESA minimums ) and in exchange is only getting a nominal cash payment. On any objective basis, the employee is worse off under the new agreement than they were under the common law regime of reasonable notice.
In a recent case of the Ontario Court of Appeal called Goberdhan v Knights of Columbus ( 2023 ONCA 327) the issue was the enforceability of a arbitration clause newly introduced by the employer in an ongoing employment relationship.
The actual issue in the appeal was whether the arbitration clause was invalid because of a failure to provide fresh consideration.
This is what the Court said :
[16] In our view this was a clear case where the motion judge was able to determine the question at issue – whether there was fresh consideration to support the contracts containing arbitration clauses – on the evidence before him. In this case, the motion judge was able to find on the evidence before him that there was no fresh consideration for the agreements containing an arbitration clause. This was not a proposition that was “merely arguable”. Accordingly, we did not accept the appellant’s first challenge to the motion judge’s decision.
[17] Second, the appellant asserted that the motion judge’s conclusion that the second and third contracts were void for want of fresh consideration was based on insufficient evidence, and that he wrongly focused on the appellant’s failure to prove consideration rather than on whether the respondent had met his burden to prove that the arbitration agreement was invalid.
[19] The respondent’s evidence on the motion with respect to lack of consideration consisted of the following: at para. 2 of his affidavit, he stated that his contract was modified without consideration. At para. 4 he stated that the second contract materially modified the employment relationship by altering the severance/termination pay he would receive, altered the terms of employment for cause and inserted an arbitration agreement, and that he had no choice to sign if he wanted to continue his employment. The respondent stated at para. 7 that he did not receive any additional consideration for the modification of his contract beyond continued employment, and at para. 8 that he never received a promotion nor was provided with additional benefits after signing an agreement.
[20] The appellant submitted that these statements were insufficient in light of the changes to the contracts which themselves could constitute consideration, and that the respondent failed to meet his onus to explain why the various changes did not amount to fresh consideration.
[21] We did not agree. The respondent’s statements were not bald or conclusory. They amounted to his evidence that the new contracts were not advantageous to him and that he had not received any benefit other than continued employment. The respondent’s evidence was not challenged by cross-examination, nor did the appellant put forward any evidence that there had been fresh consideration for the new contracts. Instead, at the hearing of the motion the appellant pointed to the differences between the original contract and the later contracts, to argue that the changes constituted consideration. In particular, the appellant pointed to the addition of a provision for non-binding mediation and mandatory arbitration of disputes and the change from Connecticut to Ontario as the governing law.
[22] These arguments were addressed by the motion judge, who concluded that the mediation and arbitration clauses were not fresh consideration: giving up the right to trial by jury, to participate in a class action, and to institute a court action were a detriment to the respondent, and that the change of law could not be considered a benefit without evidence (on appeal the respondent correctly pointed out that to the extent he was an employee, Ontario law would prevail in any event: see Employment Standards Act, 2000, S.O. 2000, c. 41, s. 3(1)).
[23] The motion judge concluded that, on the evidence, the respondent “had no practical choice but to sign the new contracts if he wished to continue to work for the [appellant].” There was no error in his approach to and application of the evidence in determining that the second and third contracts, and accordingly the arbitration clauses that they contained, were invalid for lack of fresh consideration.
My Comments:
What I find fascinating about this case is that the Court seems to be weighing both the advantages and the disadvantages of the new contract and concluding that as the changes were an overall detriment to the employee, therefore there was no fresh consideration.
The Court also reinforces the concept that simply agreeing to continue the existing employment relationship is not in itself fresh consideration.
If this same analysis were applied to the ESA example I set out above, how could it be considered an advantage to the employee to have given up their entitlement to common law reasonable notice in exchange for $500?
This case reminds me of a conversation I had with the late Mr Justice Randall Echlin many years ago. Randy always told me that as a lawyer drafting employment agreements he would always make sure that his agreements were at least a little better than the ESA minimums. His concern was that since the ESA was a statutory minimum guaranteed to all employees covered by the Act, what advantage ( in other words “fresh consideration” ) would flow to an employee who agreed to only receive what he was statutorily entitled to anyways?
Because of this conversation, I also adopted a practice that when drafting termination clauses for employers I made sure that the termination clause was at least a little bit better than the ESA.
I am proud to say none of those clauses that I drafted were even contested in court.
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Use of “and/or” Renders ESA Termination Clause Illegal:
In Quesnelle v. Camus Hydronics Ltd. ( 2022 ONSC 6156 ) Justice Charney was faced with the following termination clause :
“During your Probation Period and afterwards, you will be entitled only to notice of termination, termination pay and/or severance pay as required by the Ontario Employment Standards Act.”
The Judge found that this clause contravened the ESA for the following reasons:
1. The ESA requires the payment of both termination pay AND severance pay, not one or the other . Th employer probably meant to say that severance pay would only be paid if the underlying conditions were met ( 5 years service an a payroll in excess of 2.5 million dollars) , but they did not say it properly.
2. The clause does not include for the provision of benefits during the termination period and by inserting the word “only” it cannot be inferred that they intended to include benefits.
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Dinner With Wife Leads to Dismissal For Just Cause:
In Mechalchuk v Galaxy Motors (1990) Ltd., 2023 BCSC 635 (CanLII) Justice Weatherill had a situation where the president of a number of car dealerships took his wife out for a $250 dinner and then sought reimbursement from his employer while claiming it was a business meeting with two employees.
When confronted by his employer, he continued to lie.
This was held to be just cause . This what the judge said :
[65] I agree with the submissions of counsel for the defendant that the facts in Roe are analogous to those before me in this case. Although the total amount of the Parksville restaurant dinner and breakfast receipts (approximately $250) was relatively small, the misconduct went to the very root of the plaintiff’s employment relationship with the defendant. He was in the most senior management position at the defendant. His position commanded a high level of authority, responsibility, and trust. He breached that trust by submitting false expense receipts and thereafter being untruthful about them when given an opportunity to explain them on July 11, 2022. Moreover, he failed to “come clean” when he had a second opportunity to do so during the meeting on July 13, 2022. His conduct was such that the defendant’s loss of faith and trust in him was justified.
Lesson to be learned:
Don’t be a schmuck. When you take your spouse out for dinner, pay for it yourself.
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Refusing a Return to Work after Layoff Found to be a Complete Failure to Mitigate:
In Blomme v. Princeton Standard Pellet Corporation, 2023 BCSC 652, Justice Mac Naughton had a situation involving a 64 year old Plant Supervisor with 20 years service in a small town who was initially laid off due to COVID on April 4, 2020 with an unexpected date of recall. She accepted the layoff at that time and did not claim constructive dismissal. She had never been laid off before .
The Plaintiff met with her boss on July 2 and expressed her anger that a more junior supervisor had been recalled but not her.
They met again on August 6 at which time the boss told her that they would extend her benefit coverage to December 31 and then if she was not recalled by that date, they would pay her her 8 weeks termination pay under the ESA.
On October 1 2020 the Plaintiff sent a demand letter from a lawyer claiming that she had been wrongfully dismissed as of August 30 as this was the end of the ESA temporary layoff period and asked that all responses be directed to him.
Rather than respond to the Plaintiff’s lawyer, the boss continued to communicate directly with the Plaintiff asking her if she wanted to return to her old job. Again her lawyer directed that all communication be directed to him .
The boss again ignored the lawyer and told the Plaintiff that she could return November 3 to her regular job.
On October 30, the Defendant’s lawyer sent a letter to the Plaintiff’s lawyer and confirmed that she was owed 8 weeks pay and repeated the offer of the return to work on November 3.
That offer was not accepted .
The Judge found the following :
- The Judge found that the Defendant did not understand that as of August 30 the Plaintiff was deemed to be terminated under the ESA until they got the demand letter of October 1. The Judge found that the employer never intended to terminate her employment.
- The Judge nothing wrong with the Defendant ignoring the Plaintiff’s lawyer letter to direct all comments to him not his client.
- The Defendant always intended to recall the Plaintiff, the only issue was the timing .
- Pursuant to the ESA, her employment was terminated on August 30 and the ESA termination pay of 8 weeks was owing. This was also her termination date under the common law.
- The reasonable notice period was between 15 and 16 months.
The real issue was whether or not the Plaintiff failed to mitigate her damages by refusing the offer returning to work on November 3 and to receive 8 weeks termination pay.
This is what the Judge said on this issue :
[95] Reframed for the circumstances in this case, the issue is whether Ms. Blomme, who was terminated by operation of statute after a temporary layoff that she initially agreed to, and who by October 1, 2020, took the position that she had been terminated, was required to mitigate by returning to work for Princeton in the same job as she had before the termination. Ms. Blomme’s circumstances are far-removed from a termination based on concerns about her performance. There was nothing personal about the decision to lay off Ms. Blomme, and I have accepted that Princeton had a legitimate reason for deciding to recall Mr. Mills before her. Even if Princeton was wrong in that assessment, it was not a decision made with the intent to humiliate Ms. Blomme.
[96] In this case, Ms. Blomme was not singled out for layoff. She was one of a number of management and union staff at Princeton who were laid off as a result of the unprecedent global pandemic faced by many employers.
[97] In the absence of conditions that would render her return to work unreasonable, on an objective basis, Ms. Blomme was expected to mitigate her damages by returning to work for Princeton. A reasonable person would be expected to do so.
[112] I conclude that, in the circumstances of this case, a reasonable person in Ms. Blomme’s position would have accepted Princeton’s offer. Although the specific terms of her re-employment were not set out in Mr. White’s October 8, 23, and 26 emails, it was incumbent on her to at least explore the option of returning to work. Ms. Blomme was being asked to return to the same position, salary, and benefits, which had never been cut off: see e.g. Davies at para. 43. There was no evidence to support that she would be returning to an atmosphere of hostility, embarrassment, orn humiliation. There was no evidence that either Mr. White or Mr. Andrews bore Ms. Blomme any animus. Ms. Blomme’s mistrust of Mr. White appears to have been an unfortunate result of their miscommunication and misunderstanding.
[113] In any event, on October 26, 2020, Mr. White wrote to Ms. Blomme, suggesting a return to work as soon as November 3, 2020, on her regular shift. Again, Ms. Blomme did not respond.
[115] Even if Princeton’s decision to offer Ms. Blomme the option of returning to work was triggered by the Demand Letter and its wish to avoid litigation, it was an offer she should have considered: see e.g., Hooge at para. 89. Her failure to do so resulted in a failure to mitigate.
[116] The layoff occurred in the context of a global pandemic during which many employees were laid off, including many others at Princeton. There was a reasonable explanation for why Ms. Blomme was not recalled when other employees were.
[117] Alternatively, Ms. Blomme should have accepted Princeton’s offer of eight weeks’ pay in lieu of notice and re-employment set out in its letter dated October 30, 2020.
[118] Had Ms. Blomme returned to work as offered, and based on a termination date of October 1, 2020, she would have been made whole.
Thus her entire claim was dismissed.
My Comments:
This case illustrates the extreme risk that Plaintiffs take when they refuse an offer to return to work. As long as the offer is not tied to a release and the employer offers to pay any losses up to the date of the return to work date, there is a real chance that the Plaintiff’s claim will fail .
In this case, the Plaintiff only claimed that the dismissal took place at the end of the ESA temporary layoff period. The outcome may have been quite different had she claimed that her dismissal took place either at the time of the original layoff or at least when she expressed her anger at not being recalled in July.
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ESA Savings Clause Does Not Save the Illegal Termination Clause:
In Tan v. Stostac Inc., 2023 ONSC 2121 Justic Dineen was faced with a termination clause that said the following in part :
The Employer may end the employment relationship at any time without advanced notice and without pay in lieu of such notice for any just cause recognized at law.
The provisions of the Ontario Employment Standards Act, 2000, as they may from time to time be amended, are deemed to be incorporated herein and shall prevail if greater.
This is why the judge found the clause illegal :
[11] In my view, the termination clause in this case suffers from the same flaw identified in the line of cases cited above by giving the defendant the right to terminate the plaintiff’s employment without notice or payment for just cause that might fall short of non-trivial willful misconduct. I do not accept that the attempt to incorporate the ESA’s provisions in the final sentence of the clause’s “without cause” portion detracts from the clear assertion of a right to terminate without notice for any just cause.
My Comment:
This case again declares that any illegality in a termination clause anywhere in the employment documents is not made suddenly legal because they have one of these savings clauses.
The clause itself must be in compliance with the ESA. It is not sufficient to have an illegal clause and then say ” In any event you shall always receive no less than required by the ESA “.
The policy reason behind this case seems to be that a person should be able to read their employment contract and know what he or she will and will not receive upon termination, without the requirement of also having intimate knowledge of the numerous provisions in the ESA that deal with termination and that might conflict with the plain reading of the termination provision.
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This was an action from 2015 when there was no restriction on costs.
Had this action been commenced today and had the Plaintiff limited his claim to under $200,000 ,and therefore proceeded as a Simplified Procedure under Rule 76, the maximum cost award would have been $50,000 and up to $25,000 for disbursements. In most wrongful dismissal actions, disbursements are minimal.
Moreover, under Rule 76.13 (3) if the Plaintiff starts an ordinary action but recovers less than $200,000 they run a real risk that they get no cost award at all.
The lesson to plaintiffs is clear.
Unless you have a really good shot at getting an award in excess of $200,000 , do not use the ordinary procedure but rather use the Simplified Procedure. So if your notice claim alone is worth less than $200,000 but you are tempted to add a punitive damage claim for $500,000 to scare the Defendant, think twice about it.
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