Author: barryfisher

In Russell v The Brick Warehouse ( 2021 ONSC 4822) Justice Vella awarded 24 months notice to a 57 yearly Senior Supervisor making $75k with 36 years service.

However the surprising part of this case is that the Judge also awarded $25,000 for certain events following the termination. In essence, the Defendant failed to tell the Plaintiff that if he did not accept their offer ( which was in excess of the ESA minimums) they would nevertheless pay him his ESA minimums.

This is what the Judge had to say about the employer’s behaviour

[51] In considering the factors that inform an award for moral damages, the court is to look at the manner in which the dismissal was carried out. This can include conduct at the time of the dismissal and following the dismissal provided it is related to the dismissal: See Doyle at paras. 26 and 39. 

[52] The termination letter provided to Russell, dated July 21, 2020, is the focus of this analysis. It provided a without prejudice offer to settle Russell’s termination and severance obligations by providing terms that were, generally, more generous than the statutory minimum entitlement, but less than his common law entitlement for other aspects of his compensation. Russell had three days to accept this offer and would have had to sign a Release in favour of the employer. 

[53] The termination letter was not fully compliant with the minimum statutory entitlements of the ESA insofar as it did not reflect an extension of Russell’s employment related long term disability, accidental death and dismemberment coverage or ongoing participation in the Group RRSP and DPSP programs during the statutory notice period. Furthermore, the termination letter provided that vacation pay would only be paid accrued to the date of termination. Under the ESA, vacation pay continues to accrue over the statutory notice period, or eight weeks beyond termination in Russell’s case. 

[54] More importantly, the termination letter did not advise that if Russell declined the offer, he would be immediately provided with his statutory entitlements under the ESA. I find this to be a serious defect with the termination letter, as it implies employees will know that they can demand their statutory entitlements forthwith upon rejection of these types of offers. This defect reflects a failure by The Brick to deal fairly with Russell. By failing to include this proviso in the termination letter, The Brick was not being honest and forthright with Russell. 

[55] Furthermore, while The Brick’s failure to immediately transfer the correct amount of severance and termination pay into Russell’s RRSP was largely due to a series of “inadvertent” missteps on its conduct post termination, it nonetheless reasonably caused Russell distress beyond the “normal” hurt feelings that accompany termination without cause. 

[56] There is some evidence in the record that supports the requisite degree of mental distress, recognizing that mental distress need not be proven by medical evidence: Groves v. UTS Consultants Inc., 2019 ONSC 5605 at para. 113. 

[57] I recognize that an employee, like Russell, does not have a statutory entitlement to have his severance and termination pay directed to an RRSP. However, there is no suggestion by The Brick that it would not accommodate such requests from terminated employees and Russell made this request on July 23, 2020 – three days’ after receiving the termination letter – and this request was repeated by his lawyer. Eventually, The Brick did arrange for a direct deposit into Russell’s RRSP. 

[58] Russell was without income or, to his knowledge, benefits for approximately seven and a half months post termination. His spouse was forced to go back to work full time and Russell had to use his savings to make ends meet for the family during this period. Russell has been receiving some medical treatment and medication for stress related issues according to his unchallenged evidence. There was no good reason for The Brick to have failed to advise Russell by at least July 23, 2020 (after receiving his counterproposal) or shortly thereafter that the majority of his benefits would be extended beyond termination, in compliance with the ESA. There was also no good reason for The Brick to have not immediately advised Russell that he would receive his statutory notice and severance pay in the event its without prejudice offer was rejected. This is no way to treat any employee, much less a long-term loyal employee of over 36 years. 

[59] The fact that The Brick offered for Russell to keep the funds totalling the net ESA entitlements does not relieve it from its errors and lack of timeliness (see the chronology and evidentiary cites at para. 16 of Russell’s factum). The whole point was that Russell wanted the funds deposited into his RRSP so that there would be no personal tax withholdings from it. The 

Brick had already taken far too long to get the statutory entitlements right irrespective of the date when it was provided with the RRSP bank deposit information by Russell’s lawyer. 

[60] Furthermore, The Brick used the same basic template termination letter, modified to the circumstances of each terminated employee, as was used for Russell. While no direct evidence was led on the issue of how the “template” termination letters were modified, the inference is either none of the termination letters reflected the advice to employees terminated at around the same time as Russell that if The Brick’s offer to settle was rejected, they would receive the statutory minimum entitlements, or the other letters did reflect that advice and it was omitted from Russell’s termination letter. Either way, this factor supports an award of moral or aggravated damages, in combination with the other factors reviewed. 

[61] Russell asks for an award of $50,000 as moral or aggravated damages. 

[62] In the circumstances of this case and having regard to awards made by this Court in other cases featuring similar types of unfair dealings during the course of termination, I am awarding $25,000.00 as moral damages for the following reasons: 

a) A lack of transparency and fair dealing by The Brick in the termination process by failing to advise that Russell would be provided with his full statutory (ESA) entitlements in the event he rejected the offer reflected in the termination letter; 

b) A lack of transparency and fair dealing by failing to advise Russell that his benefits would be extended consistent with his statutory notice period irrespective of whether he accepted The Brick’s offer; 

c) The failure of the offer to meet all of the statutory entitlements, including vacation pay accrued over the course of the statutory notice period; and 

d) Mental distress Russell suffered beyond the usual hurt feelings and distress of being dismissed, and which was reasonably foreseeable to The Brick arising from its lack of transparency and fair dealing in the manner of terminating his employment. 

My Comments:

This is another example of how the Courts are reacting to behaviours by the employer that in their opinion fall below the acceptable standard.

For instance ,the Court felt that not telling the Plaintiff that if did not sign the release he would still be paid his ESA minimums was wrong. However, within one month of his termination he retained an experienced employment counsel who would have told him this. In fact, within 10 days of his termination the employer not only paid the ESA minimums but overpaid it by paying it twice. Therefore how was the Plaintiff possibly misled?

The problems seem to arise from this “overpayment “. Once they realized this “overpayment” the Defendant  asked that the Plaintiff return the portion in excess of his ESA. The Plaintiff refused and instead the Plaintiff returned the whole net amount. Why did he not simply keep all the money and tell the defendant it was a credit to his common law entitlement?

Through a series of screw ups the ESA payment was not properly paid to his RRSP until 7 months later.

The Judge made references to  some without prejudice offers made by both the Defendant and the Plaintiff . Funny, I always  thought that offers that were not accepted were not even to be disclosed to the Court, let alone referred to or relied upon.

One of the basis for the moral damages was the failure to pay vacation pay on the termination pay. At 12% of 8 weeks salary  at $75,000 /year this would amounted to $1,385.  But in fact the Defendant paid twice the ESA amount , an overpayment of 34 weeks ( $50,480) which more than covered the vacation pay underpayment of $1,385. Remember, the Plaintiff chose to repay the entire amount ( presumably because he wanted it in RRSP not subject to tax withholding ) and now was complaining that he did not get his ESA payments for 7 months.

My personal feeing is that certain judges feel compelled by the Court of Appeal to cap notice periods at 24 months absent special circumstances. However they feel that the Plaintiff should receive more than this informal cap and therefore will find other creative ways of rewarding extra monies to plaintiffs they believe are deserving by focusing closely on the Employer’s actions at the time of and following the termination.

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

In Fogelman v IFG ( 2021 ONSC 4042) Justice Vella made three interesting decisions on some recent COVID related issues:

1. IDEL Layoffs are Constructive Dismissals: This is what the Judge said :
2. [45] O. Reg. 228/20 was enacted by the Ontario government as a measure to provide temporary relief to employers from paying statutory notice and severance under the ESA during the course of the COVID-19 pandemic by providing that, for purposes of the ESA, temporary lay-offs would not constitute constructive dismissal (subject to stated exceptions) within the meaning of that statute. Section 7 of O. Reg. 228/20 states: 

   7. (1) The following does not constitute constructive dismissal if it occurred during the COVID-19 period: 

   1. A temporary reduction or elimination of an employee’s hours of work by the employer for reasons related to the designated infectious disease. 

   2. A temporary reduction in an employee’s wages by the employer for reasons related to the designated infectious disease. 

   (2) Subsection (1) does not apply to an employee whose employment was terminated under clause 56(1)(b) of the Act or severed under clause 63(1) (b) of the Act before May 29, 2020.

   [46] Subsection 56(1)(b) of the ESA states: 

   56 (1) An employer terminates the employment of an employee for purposes of section 54 if, 

   (b) the employer constructively dismisses the employee and the employee resigns from his or her employment in response to that within a reasonable period; 

   [47] Furthermore, the Ontario Ministry of Labour bulletin entitled “COVID-19: temporary changes to ESA rules” states: “These rules do not address what constitutes a constructive dismissal at common law.” 

   [48] The ESA provides the answer to this issue under s. 8(1): 

   8 (1) Subject to section 97, no civil remedy of an employee against his or her employer is affected by this Act. 

   [49] In other words, s. 8(1) provides that the ESA does not supercede the civil remedies otherwise available to an employee at common law or in equity. 

   [50] As Mr. Fogelman was not pursuing his rights under the ESA but rather was pursing his civil remedies, O. Reg. 228/20 does not apply to Mr. Fogelman’s claims made under the common law pursuant to s. 8(1) of the ESA. 

   [51] In the alternative, if I am in error regarding my conclusion, then, Mr. Fogelman was not captured by s. 7(1) of O. Reg. 228/20 because he was constructively dismissed within the meaning of s. 56(1)(b) of the ESA. Mr. Fogelman effectively resigned within a reasonable time thereafter (within days), and the constructive dismissal and Mr. Fogelman’s response occurred before May 29, 2020. Therefore, pursuant to s. 7(2) of O. Reg. 228/20, s. 7(1) did not apply to Mr. Fogelman’s termination by IFG. 

2. CERB is not deductible from wrongful dismissal damages. This is what the Judge said :

ii. Canada Emergency Response Income Support Payments  

[91] Mr. Fogelman applied for, and received, the income support payment under the Canada Emergency Response Benefit Act, S.C. 2020, c. 5, s. 8 (“CERB Act”), in the sum of $2,000 per month, for five months from April to August 2020. 

[92] IFG submits that I should reduce any award I make by the sum Mr. Fogelman received under the CERB Act. 

[93] The CERB Act does not offer much guidance on this topic. However, s. 12(1) does impose a repayment obligation on recipients of the income support payment should it be determined that the recipient should not have received it, or was overpaid: 

Return of erroneous payment or overpayment 

12 (1) If the Minister determines that a person has received an income support payment to which the person is not entitled, or an amount in excess of the amount of such a payment to which the person is entitled, the person must repay the amount of the payment or the excess amount, as the case may be, as soon as is feasible. 

[94] I have reviewed the legislation, and the decision of S.F. Dunphy J. rendered in Iriotakis v. Peninsula Employment Services Limited, 2021 ONSC 998, at paras. 20-21. I agree with Dunphy J. that the CERB Act payments should not be treated as income for purposes of mitigation. 

[95] Accordingly, I decline to deduct the CERB Act income support payments received by Mr. Fogelman from the damages awarded. 

3) Awarding Punitive Damages: This is what the Judge said :

[113] I am concerned that IFG refused to provide Mr. Fogelman with any statutory entitlements under the ESA once it received notice that Mr. Fogelman considered the lay-off to be constructive dismissal. It is well established that an employer cannot lay-off employees absent a contractual right to do so, and that any such purported lay-off will be treated as a constructive dismissal at common law. Initially, it will be recalled, IFG took the position Mr. Fogelman had no employment contract. 

[114] Even after IFG acknowledged that an employment contract existed, IFG did not pay the notice and severance requirements stipulated by the employment contract. 

[115] IFG has not behaved well in its dealings with Mr. Fogelman over the termination. First, it took the position that Mr. Fogelman was an employee since 2009 and produced sworn evidence to this effect. This position was also reflected in its statement of defence.

[116] Then, later, by way of a supplementary affidavit, IFG changed its position and stated that Mr. Fogelman was actually an independent contractor for the first five plus years of his employment and produced an employment contract. IFG did not amend its statement of defence to plead the employment contract and its termination clause. 

[117] IFG admits it knew that Mr. Fogelman took the position that the lay-off was a constructive dismissal almost immediately following his termination. IFG used this position as the excuse for not advising Mr. Fogelman of the prospects of his being recalled to work, notwithstanding its advice, reflected in its letter to Mr. Fogelman dated March 16, 2020, that it would provide him with an update of his lay-off status. At no point did IFG provide any such update, and at no point did it recall Mr. Fogelman back to work. 

[118] Indeed, efforts by Mr. Fogelman’s lawyer to initiate settlement discussions and his demands that Mr. Fogelman be paid at least his minimum entitlements under the ESA were met with radio silence after an initial letter from IFG’s lawyer saying that IFG would consider the proposal and would respond. 

[119] IFG also made it difficult for Mr. Fogelman to effect service of the statement of claim, notwithstanding the pandemic. According to Mr. Fogelman’s affidavit evidence, which I accept, IFG’s lawyer declined to accept service, and when Mr. Fogelman contacted IFG to ask if he could come and serve the statement of claim, he was advised that IFG’s personnel had been instructed not to accept service of his lawsuit. As a result, Mr. Fogelman, through a private process server, had to serve an IFG official at his place of residence. Even then, the official sent back the statement of claim by courier saying that IFG personnel were not allowed to accept service. This pattern of conduct, during the course of a pandemic, was designed to make it as difficult as possible for Mr. Fogelman to proceed with his lawsuit. 

[120] It is also my view that the failure to comply with the ESA is an independent wrong that is outrageous and reprehensible behaviour deserving of punitive sanction. The purpose of the ESA is to provide employees with minimum standards, including minimum notice and severance in the case of termination without cause. Employers cannot be permitted to ignore their obligations under the ESA while awaiting the outcome of a court proceeding where the termination was conceded to be without cause. It is critical that the courts protect the statutory rights of employees, especially in harsh economic times. I agree with Mr. Fogelman’s position that IFG’s refusal to pay anything to Mr. Fogelman was an attempt to play hardball with him.

[121] I have considered the compensatory aspects of the damages award and determined that “there is a shortfall between the amount of that compensation and the total amount required to accomplish the objectives of retribution and deterrence and denunciation of the defendant’s misconduct” to use the words of Cronk J.A. in Pate Estate v. Galway-Cavendish and Harvey (Township), 2013 ONCA 669, 117 O.R. (3d) 481, at para. 228. 

[122] Having reviewed the case law submitted, and recognizing that IFG’s business has suffered an economic downturn in the wake of the pandemic, it is my view that an award of $25,000 is an appropriate award of punitive damages. This award proportionately meets the goals of retribution, deterrence, and denunciation of IFG’s misconduct. It also sends an appropriate message to employers that the mandatory requirements imposed upon them by the ESA, in favour of employees, must be abided by promptly. 

My Comments:

This is another in an increasing long line of cases about COVID related employment issues .

These are my concerns:

This case was heard on January 28, 2021 and released on June 2, 2021. The case of Taylor v Hanley Hospitality ( 2021 ONSC 3135) which came to the opposite conclusion on the IDEL issue was heard on April 2021 and released on June 7, 2021. In other words neither judge had the benefit of reading the others decision.

The Employer was whacked with a punitive damage award largely because they did not instantly pay the ESA minimums once the employee claimed that the layoff was a constructive dismissal However, if they would have won the IDEL argument , then the layoff would have been legal and no constructive dismissal would have occurred.

Moreover, since the entitlement to ESA termination pay and severance pay flows only from the ESA and not the common law, and the layoff was legal under the ESA but illegal under the common law, how can it flow that the employer should be punished for in effect following the exact wording of the ESA?

How can the employee claim a payment under a statute which the statute itself says there is no entitlement? You may agree or disagree with whether an IDEL layoff is a dismissal but certainly reasonable people ( including fellow judges of the same Court) can disagree without the punishment of punitive damages.

Some of the reasons for awarding punitive damages related solely to litigation tactics, which used to be covered in the costs aspect of the case but increasingly is finding its way into the punitive damages sphere. I am not convinced that this is a good development for the law where court time will be spent arguing over the various litigation tactics of each side before the issue of liability has even been determined. Why not shift these arguments to the cost aspect where the Court could award full indemnity costs as a way of regulating the litigation process?

In Mazanek v Bill & Son ( 2021 ONSC 4512) Justice Steele found that a tow truck driver was an employee and not a independent contractor for the following reasons :

1) The fact that he was paid through a company and not personally was not important.
2) The Plaintiff drove a branded truck owned the Defendant . All the tools of the trade were owned by the Defendant.
3) The Plaintiff wore a Company uniform.
4) He was paid on a strictly hourly basis.
5) He had been an employee of the predecessor company when the Defendant took over the towing contract and continued using the Plaintiff’s services.
6) There was a GPS in the truck so the Plaintiff could be tracked by the Defendant at all times .
7) Most importantly, his duties of driving a tow truck was the business of the Defendant. It was central to the business, not an adjunct to the business.

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

In Mazanek v Bill & Son Towing ( 2021 ONSC 4512) Justice Steele awarded a 6 month notice period to a 44 year old tow truck driver with 5.5 years service. The employer failed to prove multiple allegations of theft and other misdeeds.

At no time during his employment was he paid statutory vacation pay as he was wrongly considered to be an independent contractor. The Court considered the usual factors and found that he was an employee and not an independent contractor .

This finding that the Plaintiff was in fact an employee governed by the Employment Standards Act led to a claim for vacation pay for the entire period of employment. However  the Judge found that the Limitations Act restricted claims for unpaid vacation pay to the date 2 years from the commencement of the claim. However the comments on this issue  was very brief on this issue, one single paragraph in an award of 80 paragraphs. This is all that the  judge said on the vacation pay issue :

[77] As I have determined that Mr. Mazanek was an employee of Bill & Son, he is also entitled to damages on account of vacation pay under the ESA. Mr. Mazanek claimed damages for accrued but unpaid vacation. Bill & Son argues that if there was any vacation pay due and owing it would only be due and payable two years preceding the commencing of the action. Any claimed amount preceding that date would be statute barred under the Limitations Act. I agree. 

My Comments:

The Judge did not list any of the counterarguments that I assume were made by the Plaintiff’s lawyers. This issue has come up before me in many mediations and  it would appear that the issue may not be as cut and dry as set out in this case.

For instance, since the Plaintiff was treated by the defendant as a contractor and not an employee, how could he “discover ” his entitlement to vacation pay until a Court , the Ministry of Labour or CRA declared him to be an employee?

This principle of discoverability was set out in the leading case of Evangelista v. Number 7 Sales Limited ( 2008 ONCA 599) in which the Ontario Court of Appeal said as follows:

[43]         Finally, the appellant argues that the trial judge erred in allowing public holiday and vacation pay going back to 1996 notwithstanding the two year statutory limitation period in s. 96(3) of the Act and/or the two year limitation period in the Limitations Act 2002, S.O. 2002, c. 24, Sch. B. 

[44]         Section 96(3) of the Act does not apply to civil lawsuits.  It applies to filing complaints with the Ministry of Labour.[2]

[45]         As to the Limitations Act, 2002, the appellant first paid the respondent vacation pay in December 2003.  The trial judge accepted the respondent’s evidence that he was not aware of his entitlement to vacation or public holiday pay before that time.  The trial judge held that the respondent’s lack of awareness as to his entitlement went to the issue of discoverability.  As a result, the respondent’s action, which was commenced in July 2004, was well within the two year limitation period in the Limitations Act, 2002. 

[46]         I see no basis to interfere with the trial judge’s conclusion that the respondent’s entitlement to public holiday and vacation pay should not be reduced on the basis of the operation of a limitation period. 

In this case it was only when the Court determined that the Plaintiff was in fact an employee and not a contractor that the Plaintiff could have ” discovered ” that he was entitled to vacation pay. Therefore , following the logic of the Court of Appeal in Evangelista, should he have not been awarded his unpaid vacation pay for his entire period of employment?

I am not sure that this case is the final word on this issue.

For a copy of this case email me at barryfisher@rogers.com.

In Hawkes v Max Aicher ( North America ) Lt ( 2021 ONSC 4290 Dambrot J. overturned a OLRB decision on judicial review and hopefully has ended the debate about whether when calculating the $2.5 million payroll threshold you only look at the payroll in Ontario or whether you look at the payroll of the the whole company and any related companies.

The Court found that the OLRB was plainly wrong and said as follows:

“The calculation of payroll under s. 64 of the ESA is not restricted to Ontario employment; employment outside of Ontario, including employment outside of Canada, must be included.”

Winning counsel was Wade Poziomka and Andrew Astritis at Ross McBride.

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

In Hawes v Dell Canada ( 2021 BCSC 1149) Justice Iyer had to determine the amount of commission that would have been earned over the notice period, much of which had not yet occurred.

This what the Judge said

[24] The parties’ disagreement about the calculation of the commission component of damages revolves around Mr. Hawes’ commission earnings for 2018. He made a couple of large sales to one of his public sector clients that year, earning a significantly larger commission. Mr. Hawes’ commission earnings from 2013 – 2019, the last full year of employment are:

2013 $162,156

2014 $133,166

2015 $163,822

2016 $66,709

2017 $166,042

2018 $346,959

2019 $167,328

[25] Mr. Hawes argues that the best indicator of what he would have earned in commissions during the notice period is the average of his last three years, which is $226,776.

[26] Dell argues that Mr. Hawes’ unusually high commission in 2018 and his unusually low earnings in 2016 should be excluded as outliers, and that his average commissions from the other five years from 2013 to 2019 represent the best estimate of what he would have earned in the notice period. This figure is $158,502.

[27] It is clear from the authorities that, where an employee’s earnings are variable, there is no set formula. The court must award what is fair in the circumstances to approximate what the employee would have earned during the notice period. Sometimes courts have used the average of the past five years of commission earnings: Veach v. Diversey Inc., [1993] B.C.J. No. 2420. Where an employee’s commission earnings have been on an increasing or declining trend in the years prior to dismissal, it may be preferable to use only the last year’s earnings: O’Reilly, at para 43. Where the past is not a reliable indicator, the court has made an estimate based on the whole evidentiary record: TCF Ventures at para 43.

[28] Mr. Hawes’ annual commission earnings were not inclining or declining. The evidence shows that were usually in the range of $162,000 to $167,000. It is not appropriate to take the average of the last three years of commission earnings because 2018 was an outlier and the evidence shows Mr. Hawes was very unlikely to have comparable sales during the notice period. Further, there is some evidence that the pandemic-driven economic downturn was likely to adversely affect sales to Mr. Hawes’ client list and his sales in 2018 would have increased his quota during the notice period. Considering all of the evidence, I find that the best estimate of what his annual commission would have been during the notice period is $165,000.

My Comments :

The calculation of incentive income can be very important in wrongful dismissal cases especially where that type of income forms a significant portion of the total compensation plan .

This case clearly sets for the various ways that Courts have dealt with this issue and that there is not one perfect way of doing it.

What this judge effectively did was use the  statistical  median  rather than the average, which is found by ordering the set from lowest to highest and finding the exact middle.

If we arrange the numbers from lowest to highest it looks like this

$66,709

$133,166

$162,156

$163,822

$166,042

$167,328

$346,959

The exact middle number is $163,822 .

The Judge found the right number to be $165,000.

The advantage  of the medium rather than the average is that it ignores the distorting effect of outlier numbers.

What I find interesting is that neither party led any evidence as to what sales there actually were in the Plaintiff’s territory after he left, as presumably his territory and/or clients were given to another sales rep. If this evidence was ascertainable, it would have provided the Court with a more reliable basis for determining the actual income loss.

By the way, I never took a stats course and math was my second worse mark in high school.

P.S. My worst mark was French.

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

In Taylor v Hanley Hospitality ( 2021 ONSC 3135 ) released June 7, 2021, Ferguson J. ruled that Countinho v Ocular Health Centre ( 20121 ONSC 3076 was wrongly decided and thus does not have to be followed. .The Plaintiff was put on IDEL leave on March 27, 2020, then recalled and returned to work on September 3, 2020.

In essence the Court found that the ESA provisions displace the common law which says that in most cases a temporary layoff is a termination . Furthermore to rule otherwise would make the ESA amendments irrelevant as it would not protect employers from lawsuits.

Here is part of the Judges’ analysis :

[21] I agree with the defendant’s submissions regarding this case:

(i) no matter which authority one wants to consider on the point – it offends the rules of statutory interpretation to give an interpretation that renders legislation meaningless. That issue was never addressed in Coutinho; 

(ii) Coutinho never addressed the consequential analysis – what does IDEL and the Regulation actually mean if not what Tim Hortons says it means?;

(iii) what we see from the cases is that s. 8(1) simply sets out that the ESA does not set out an exclusive forum for addressing matters set out in the Act. The employee can make a complaint under the Act or seek redress in the courts; 

(iv) the courts have never said that the Act does not or cannot displace the common law. In fact, they have said the opposite. The Court of Appeal addressed this in Elsegood4 (relied upon by the plaintiff in this case):

(v) if we paraphrase and apply that reasoning to this case, we get this: 

(a) the irony is that Elsegood was a constructive dismissal case; 

(b) the court put it succinctly: “Simply put, statutes enacted by the legislature displace the common law”; 

(c) in Elsegood, the court addressed the fact that s. 56 provides that a person was terminated “for the purposes of section 54″ of the ESA. The employer was arguing that the employee was not terminated at common law. The court disagreed. The court found that “A s. 56(1) termination is a termination for all purposes”. The court stated that it is a “faulty premise that the common law continues to operate independently of the ESA”.

v) if we paraphrase and apply that reasoning to this case, we get this: 

(a) The employee was on a leave of absence (IDEL) for all purposes; 

(b) The employee was deemed not to be laid off for all purposes; 

(c) The employee was not constructively dismissed for all purposes; 

(d) The employee cannot be on a leave of absence for ESA purposes and yet terminated by constructive dismissal for common law purposes. That is an absurd result. That is the same kind of “untenable” result that the employer was seeking in Elsegood.

(vi) in summary, s. 8(1) has never been interpreted to go as far as the court went in Coutinho and the courts have never before held that s. 8(1) prevents the ESA from displacing the common law. The Court of Appeal, which is binding on this court and the court in Coutinho, has said the opposite, in a constructive dismissal case;

(vii) S. 8(1) of the Act merely confirms that the ESA is not the exclusive forum to seek redress for issues involving the Act;

My Comments :

We now have two cases within two months which come to completely opposite conclusions. I am sure that this will be heading to the Court of Appeal soon. Hopefully they will give us a clear and concise answer.

Insofar as this Judge is concerned, an employee could be put on IDEL from March 2020 to July 3, 2021 ( 17 months) and have no remedy in law.

Presumably to this judge  the pre-COVID rules would also displace  the common law. This would mean that employers could temporarily layoff any employee for up to 35 weeks. Does the mean that an employee could be recalled from IDEL on July 3, 2021 and then immediately be put on a 35 week temporary layoff, again without any legal recourse? That would mean that employee could be without pay for up to 25 months without any legal recourse.

That would certainly be a very big change in the law.

Does this now mean that instead of terminating an employee, any employer could just  issue a temporary layoff notice of 35 weeks.? When they issued a recall notice 35 weeks later, many employees would either have started another job or simply did not wish to return to such unstable employment. Furthermore I am not sure that the ESA allows for the employee to claim that the layoff is a sham ( for instance because the employer immediately hires a replacement ) and therefore the temporary layoff is a disguised termination. This could easily lead to abusive employer behaviour.

In this particular case, the employer did in fact recall the employee after 5 months. What would be the result if instead of alleging constructive dismissal the Plaintiff claimed breach of contract for non-payment of wages? The law of contract allows the innocent party to either sue on the contract ( thus only claiming lost wages ) or to repudiate the contract ( by claiming constructive dismissal ). In this case, the employees’ loss would be limited to the actual loss which was 5 months, so suing for back wages vs claiming constructive dismissal damages would produce the same result. My quick reading of the IDEL rules would only seem to exclude the right to claim constructive dismissal, not wages owing from a breach of contract.

The one thing you can say about employment law in Ontario is that it certainly not getting easier or more predictable .

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

In Hogan v 1187938 B.C. Ltd ( 2021 BCSC 1021 Justice Gerow held that the damages for wrongful dismissal damages should be reduced by the amount of CERB payments received by the Plaintiff for the time that these two periods overlapped.

This is what the Judge said on this issue:

[99]      The EI benefits should not be deducted. Section 45 of the Employment Insurance Act, S.C. 1996, c. 23, requires a claimant to repay any unemployment benefits if an employer becomes liable to pay their earnings. 

[100]    The plaintiff received $14,000 in CERB payments in 2020. The CERB payments raise a compensating advantage issue. If the CERB payments are not deducted the plaintiff would be in a better position than he would have been if there had been no breach of the employment contract. 

[101]    But for his dismissal, the plaintiff would not have received the benefit. The nature of the benefit is an indemnity for the wage loss caused by the employer’s breach of contract. There is no evidence that the plaintiff contributed to obtain the benefit by paying for it directly or indirectly. 

[102]    In my view, this case is distinguishable from Iriotakis where the CERB payments were not deducted. In Iriotakis, the plaintiff was terminated after 28 months. The court determined the reasonable notice period was three months, and determined that on the specific facts of the case, particularly the disparity between the payments and the employee’s loss of salary and significant loss of commission, it would not be equitable to reduce his entitlement to damages by the CERB payments. In Iriotakis, the employment contract provided the plaintiff was not entitled to commission income upon termination. The evidence in Iriotakis was that the plaintiff’s salary on which his past wage loss was based amounted to less than half of his actual income. 

[103]    In this case, the plaintiff’s damages per month are based on the income he would have earned if he had continued to work during the reasonable notice period. In other words, the plaintiff will be compensated for the income he would have lost. He did not suffer additional losses due a loss in commission income. As a result, there is not a large disparity between the plaintiff’s actual loss and the amount of damages he will receive. 

[104]    In Iriortakis the award for the lost wages was reduced by more than half as a result of the plaintiff’s employment contract, and retaining the CERB payments would not have put the plaintiff in a better economic position than he would have been but for the breach. In this case, if the CERB payments are not deducted the plaintiff will be in a better economic condition than he would otherwise be.

[105]    The CERB payments are not private insurance, and neither the employer nor the employee contributed to them. As a result, they are not delayed compensation or part of the plaintiff’s earnings. There is no evidence that the plaintiff will have to repay the CERB. 

[106]    The CERB payments were intended to be an indemnity for the type of loss resulting from the employer’s breach but the employee had not contributed in order to obtain the entitlement. In my view, this is similar to the situation in Sylvester and Ratych, where the benefits were deducted as the employee had not contributed in order to be entitled to the benefit. 

[107]    As a result, I see no basis to depart from the general rule that contract damages should place the plaintiff in the economic position he would have been in had the defendant performed the contract. 

[108]    Having considered the case law and the evidence, I have concluded the CERB benefits of $14,000 should be deducted from the award of damages. 

My Comments :

This case will undoubtably create a lot of controversy in the employment law field as the general practice up to this point is that the employer did not get to take into account CERB payments when calculating wrongful dismissal damages.

One of the main reasons that this judge ruled in this way was that EI is repayable and this avoids the overcompensation argument. However for EI benefit periods that started after September 27, 2020 and until September 25, 2021, this is no longer the case as a result of amendments to the EI regs, which are explained below :

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.

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.

The question then becomes, since EI is not repayable now in certain cases, should the employer also get to claim that as a damage reduction? Personally I think not because the employee pays into EI and thus is dramatically different than CERB. In that case there is a tradeoff between two legal principles, the principle to avoid overcompensation vs the collateral benefit rule which says that the wrongdoer should not benefit from the innocent party purchasing insurance against a loss.

But who knows what will happen next in these weird times. Stay tuned.