Month: April 2017

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

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

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

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

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

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

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

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

This is how they said it :

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

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

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

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

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

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

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

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

The Defendant then terminated her.

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

Disclosure of Confidential Information – Threats, Injunction and Contempt Proceedings

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

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

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

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

 

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

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

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

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

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

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

This is what the Court had to say :

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

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

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

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

This is how the Court dealt with the issue :

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