Author: barryfisher

In Toole v Northern Blizzard Resources ( 2017 CarswellAlb 2692) Master Robertson had a situation where an employee of 21 years was recruited by a headhunter to join  the defendant. The job requirement was that the person have at least 10 years experience in the field. He was let go by the defendant after only 19 months due to an economic downturn.

This is what the Master had to say about the concept of inducement as it affects the notice period;

[20]           The nature of the recruitment, using a recruiter (rather than relying on advertisements in a newspaper, other periodicals, or online), suggests that Northern Blizzard intended to recruit someone who already had employment.  In early 2014, it would have been unlikely, given the minimum 10 years’ experience that it was instructed to seek, that the recruiter would be looking at an employee who did not currently hold a secure position.  In fact, when the recruiter identified Mr. Toole, management decided that he was their first choice, and management knew that he had 21 years’ experience.

[21]           The concept of “inducement” of an employee to leave secure employment involves a spectrum of facts.  At one end is an employee who is already on working notice when he or she is contacted by a recruiter.  That employee would be very motivated to pursue the opportunity, because his or her job is not secure.  At the other end of the spectrum is an employee who is securely employed and not interested in leaving for a new job until the recruiter offers some specific inducement, such as a signing bonus, more valuable benefits, or a better salary.  Most cases are somewhere along the spectrum.

[22]           Mr. Toole was 48 years old when his employment was terminated at Northern Blizzard.  His job title was Senior Development Engineer, and that was a relatively senior position within the company.  He had no reports, but he worked in a relatively niche position in the upstream exploration and development subset of the oil and gas industry.  It was his specialty.  That was what Northern Blizzard wanted; they also wanted someone with some significant experience in the area.  That is why they hired Mr. Toole.

[23]           Mr. Toole was not being hired to work on project work, which is inherently volatile as projects are completed and new ones are started, or not.  His area of work was more stable in nature – that’s why he remained at Devon for 21 years – and long service at Northern Blizzard would have been expected by both parties.

[24]           One of the Bardal factors is length of service, and it often is the single most important factor in assessing “reasonable notice”.  However, in the circumstances of this case it is only a small factor.  When the employer knows that the individual has given up a long-term position – and was recruited for that factor – the actual length of service at the new job becomes only one of several factors to be considered in assessing the reasonable notice period.

[25]           In my view, the facts here suggest that Mr. Toole’s secure employment at Devon should be taken into account, but not to the point that he should be treated as an employee with imputed service of 24 years.  Rather, it is a factor that tends to militate in favour of a somewhat elevated notice period.  It related to their mutual understanding – that he was giving up a secure position and was being hired to a secure position, but with no express promises of just how secure it was.

He awarded 10 months notice.

He also commented on some significant bonus issues. The plaintiff was terminated in December. The bonus was payable the following March.

The bonus plan had the following clause :

You will be eligible to receive an annual bonus.  The annual bonus pool is determined by the Board of Directors and created by achieving corporate targets.  Payment of the 2014 bonuses will be calculated based on achieving corporate targets (50%) and on individual performance (50%).  Annual bonuses are paid in March of the following year and you must be a current employee of Northern blizzard to receive your bonus payment.

The Employer made the usual argument that bessie he was not an employee at the time of the payout he was not entitled to a payout.

The Master had this to say about that argument:

In my view this misses the point: the claim is not for the bonus, but for damages for the loss of the opportunity to earn the bonus, just as the claim is not for the salary that he would have earned, or the benefits he would have enjoyed, but rather for damages for them not being provided because the employer breached his contract of employment because it did not give him reasonable notice of termination.  The only reason he was not a current employee in March 2017 is because Northern Blizzard breached the contract by dismissing him without giving him reasonable notice. This is discussed in Lalonde v Sena Solid Waste Holdings Inc, 2017 ABQB 374 (CanLII) at paragraphs  54-56, citing  Sylvester v British Columbia,1997 CanLII 353 (SCC), [1997] 2 S.C.R. 315 (S.C.C.) and Paquette v TeraGo Networks Inc, 2016 ONCA 618 (CanLII) and other cases.

But the Plaintiff also claimed a pro-rata share of the next years bonus to the end of the notice period. This is what the Master said :

[39]           In addition to the opportunity to receive a bonus in March 2107, the plaintiff claims a pro-rated bonus for those months of 2017 that he would have worked had he been given reasonable notice.  However, this argument would only have traction if the period of reasonable notice would have extended his deemed notice period past March of 2018, and if it did then it would not be pro-rated.  That would be at least 16 months’ of reasonable notice, and his claim does not extend that far. 

[40]           He is not entitled to damages for a lost “2017/payable in 2018” bonus.

Now the kicker. Having found that the Plaintiff was entitled to the bonus that he would have earned had he been allowed to work until the March payout, that number would have been ZERO, because the Defendant ended up having a terrible year and no bonuses were paid out at all.

The Plaintiff said that he should have been paid out the bonus based on prior years performance because his case had crystallized at that point and the actual events following his termination should be ignored.

The Master had no trouble dismissing that argument :

[43]           The concept that the amount of the damages are “crystallized” in this sense is not consistent with the assessment of damages in contract  and tort claims alike.  Courts virtually always look at subsequent events to assess damages.  A victim of a personal injury may have a cause of action in negligence immediately following the injury, but the quantum depends on the extent of the injury, the extent of the recovery, the pace of recovery, lost wages, special damages subsequently suffered, and other factors.  A landlord whose tenant leaves before the lease has expired has a claim for breach of contract for lost rent and occupancy costs but that claim is affected by mitigation efforts, costs and success, and the actual occupancy costs claim that becomes payable after the breach.  A claim for breach of confidence by an employer against a former employee is assessed based on the actual damages suffered, not on a speculative and theoretical estimate of what might happen if the release of the employer’s secrets leads to damages.

[44]           And in a wrongful dismissal claim, the assessment takes into account mitigation and other post-termination factors.  A long-term senior employee who otherwise has a claim for 24 months’ compensation, but who finds a replacement job at comparable compensation only two months later has a claim for two months’ compensation (technically it may be described as a claim for 24 months’ compensation less twenty two-months’ credit for mitigation).

[55]           In a wrongful dismissal claim, there are many questions that must be asked to allow a proper assessment of damages.  Did he find a job?  What is the compensation for it?  Did he refuse to try to mitigate his damages by looking for work when it should have been available?  Did he incur costs in his attempts at mitigation?  Was he able to replace his group benefits at no or little cost by being added to his wife’s benefit plan with her employer?  Did he need dental work that was no longer covered by a dental plan and exceeded the premiums paid for the benefit?   Did he die or become disabled without life or disability insurance during the reasonable notice period, after his entitlement to the group insurance coverage was cancelled?  One can imagine all sorts of post-termination events that inform the assessment of damages.

[56]           In my view, his expectation should be given the proper assessment that it deserves, which is that when March came and went, there was no bonus for anyone.  His damages on that point are the loss of the opportunity to be paid his share of that amount, which was zero.

In other words, when looking at a bonus issue the very first question to ask oneself is:

Assuming that the Plaintiff had been at work at the payout date what would he have received, or what did his peers get as a bonus ?

If the answer is zero or minimal, forget the bonus issue and focus on the notice period.

 

 

In Thambapillai v Labrash Security Services ( 2017 CarswellOnt 19618 ) the Ontario Divisional Court overturned an award of $7,500 given to a 71 year old security guard making $24,000/ year . One of the reasons that the award was given initially  by the trial judge was because the uncertain nature of the termination notice ” left him hanging in the wind for some seven months before his abrupt termination”. The Court did not think that warranted any damages for mental distress.

However the Superior Court in Galea v Wal-Mart Canada ( 2017 CarswellOnt 245) the Court awarded $250,000 in aggravated damages for just such behaviour. In that case Walmart left the Plaintiff, ( a senior executive making hundreds of thousands of dollars)  ” drifting in the wind for almost a year ” from the time they told her that she was being removed from her position until they actually let her go, which was aproximately one year.

In neither case was there any medical evidence presented as to the Plaintiff’s medical condition

.It is difficult how such similar fact situations could result in such different legal outcomes.

 

 

This is what the judge had to say:

The evidence of Mr. and Mrs. Ensign on these matters is uncontroverted and while it is uncorroborated by physicians or other third parties, I nevertheless accept it in its entirety.  The defendant was not truthful and candid with Mr. Ensign about the reasons for his termination.  It had the benefit of legal counsel before Mr. Ensign’s working notice period had expired and, given the absence of any written employment agreement limiting notice, must be taken to have known that eight weeks’ notice was woefully inadequate.  Instead of righting the wrong by reinstatement or offering an alternative position with appropriate encouragement, training and remuneration “top ups” or guarantees for the ensuing 10 months, the defendant embarked on aggressive and unmeritorious defence tactics that it must have known would cause financial stress and considerable worry on the part of Mr. Ensign.  There can be no doubt that this is the type of conduct and impact upon a wrongfully dismissed employee that an award of aggravated damages is designed to address.

Whoever said that the ” best defence is an offence” was wrong. This is a prime example of how some Courts will treat overly aggressive litigation tactics that cause real damage to their litigation opponents.

 

In Skov v G&K Services Canada ( 2017 ONSC 6752) Justice Diamond initially set the reasonable notice period for a 54 year old Customer Development Manager with 21 years service at 18 months.

However the Plaintiff had posted in his LinkedIn profile that he had held the position of Director of Process Improvement and Customer Development, a position which did not even exist. Furthermore the Court found that his actual position was not even managerial   and that by limiting his job search to only real managerial jobs, he had ” overshot” by only applying for jobs that he was not qualified for, therefore  he  had  failed to conduct a reasonable job search.

His notice period was reduced by 2 months to 16 months

In Fulmar v Nordstrong Equipment ( 2017  ONSC 5529) Justice Diamond had a plaintiff who was terminated on December 12, 2016 and was awarded 10 months notice. His bonus arrangement called for discretionary bonus for based on the calendar year. The judge had no difficulty awarding him a bonus for 2016 as the ESA termination period alone ( 6 weeks ) would have taken him past the year end. However as the Plaintiff was awarded 10 months notice, his deemed end of employment was October 12, 2017, which was 2.5 months short of the bonus year end.

The judge denied the bonus over the notice period as he found that payment over that period was “not in the reasonable expectation of the plaintiff”.

Then in another case by the same judge and the same defendant (Singer v Nordstrong Equipment 2017 ONSC 5906) the judge awarded a 17 month notice period which covered all of the 2016 bonus year and 5 months of the 2017 bonus year. However the Judge decided against the Plaintiff saying as follows:

Issue #3         Is Singer entitled to payment of a 2017 and 2018 bonus? 

[40]           I have found that Singer is entitled to 17 months’ reasonable notice.  Singer further claims entitlement to a bonus that he would have received over that notice period (i.e. for all of 2017 and the first five months of 2018).  Singer argues that it is reasonable to forecast that his bonus over the 17 month notice period would have been at least equal to his 2016 bonus. 

[41]           As per my comments in Fulmer v. Nordstrong Equipment Limited 2017 ONSC 5529 (CanLII), I believe that Singer’s argument is overreaching.  The purpose of reasonable notice is to provide a terminated employee with sufficient time to locate comparable employment.  Historically, bonuses were earned and calculated at the conclusion of the defendant’s fiscal/calendar year, and no doubt granted on the basis of an employee’s positive efforts and contributions to Nordstrong East’s business. 

[42]           Subject to successful mitigation efforts, Singer’s employment with the defendant would have ended in or around May 2018.  The purpose of the defendant’s incentive plan is to maximize efforts to generate profits.  As in Fulmer, I do not find it to be within Singer’s reasonable expectation to be able to earn a bonus for the 2017 and 2018 fiscal years while he searched for alternative comparable employment. 

[43]           I therefore decline to award Singer any bonus for the 2017 or 2018 fiscal years. 

With the greatest of respect I think that this case is wrongly decided.

Why wouldn’t the Plaintiff believe that he would receive his total compensation during the notice period?

What if 90% of his income came from this bonus scheme, which is very common in the financial industry?

It is the Employer who decided to give pay in lieu of notice and not working notice as is required by law. Why should the employer benefit from their own decision to breach the plaintiff’s contract?

The law of damages is very simple, I learnt it in first year contracts.

In a case of breach of contract, the plaintiff is entitled to be put in the same position had the contract not been breached.

The Employer breached the contract by not giving reasonable notice of termination. The Plaintiff is entitled to every penny that he would have earned had he been given the opportunity to work out his notice period, including the bonus.

I am advised that these cases are being appealed.

 

In Wood v CTS of Canada  Co. ( 2017 ONSC 5695, Justice Sproat held that in a mass termination under the ESA of Ontario that the employer only gets credit for working notice, under both the ESA and the common law of reasonable notice, from the date that the Form 1 is filed with the Ministry of Labour and then is posted in the workplace.

Furthermore, in any week of working notice that the employee works in excess of the maximum overtime ( usually 48 hours ) that week does not count as working notice.   In this case the Employer gave termination letters on April 17, 2014 giving them working notice ending March 27, 2015 , some 11 months. However all that working notice was useless as the Employer did not file the Form 1 until May 12, 2015.

In Nogueira v Second Cup ( 2017 ONSC 6315) Justice Morgan was faced with determining the validity of this termination clause :

If the Second Cup terminates your employment, it will comply with its obligations under the employment standards legislation in the province in which you work (the ‘Employment Standards Act’).

The judge held that this clause did not oust the common law term of reasonable notice. This is what he said on that issue :

10]           It is evident that the clause in Machtinger is considerably more explanatory than that in the case at bar. In Machtinger, the employer went out of its way to advise the employee of what he would get (or, more accurately, what he would not get) upon termination. Likewise, in Roden v. Toronto Humane Society, 2005 CanLII 33578 (ON CA), 2005 CanLII 33578, the Court of Appeal found a termination clause displaced the common law where it provided that the employee would receive “the minimum amount of advance notice or payment in lieu thereof as required by the applicable employment standards legislation”. Along similar lines, in Farah v. EODC Inc., 2017 ONSC 3948 (CanLII), the contract provided that, “Upon termination, the Applicant would only be entitled to the statutory entitlements prescribed under the Employment Standards Act” [emphasis added].

[11]           No such explanation or warning sign appears in clause 13 of the Employment Agreement here. Using the barest possible language, it says nothing more than that the employer will obey the statute. The new employee being asked to sign this contract could be forgiven for assuming that the clause is there to reassure her that none of her rights are being curtailed, when in fact the very opposite is true.

[12]           It is evident that the Defendant, as employer, is responsible for drafting the Employment Agreement. It is addressed to the Plaintiff in the form of a letter agreement and refers to the employee as “you”. To the extent that an ambiguity exists in interpretation, the Employment Agreement should be interpreted contra proferentem against the employer as drafter. As Stinson J. stated in Singh v. Qualified Metal Fabricators Ltd. [2010] OJ No 4219, at para. 15, “I am not prepared to find that the Employment Agreement operated to nullify or detract from the implied common law requirement of reasonable notice of termination”…especially “having regard to the power imbalance that exists between an employer and employee as a matter of course.”

[13]           In my view, the words of the Employment Agreement are ambiguous at best. They do not convey the meaning that the Defendant attaches to them, and I do not see them as curtailing in any way the common law principal of reasonable notice or pay in lieu thereof.

There now seems to be at  least three basic attacks on ESA contracts that the Ontario Court of Appeal  has endorsed.

1. Failure of consideration. ( Hobbs v TDI Canada Ltd , 2014 ONCA 44783)
2.  Finding of an ambiguity in the wording. ( Wood v Fred Deeley Imports Ltd ( 2017 ONCA 158)
3. Finding that any part of the  termination clause is contrary to the ESA and thus the whole provision is held to be invalid even if there is a severability clause. ( North v Metaswitch Networks Corp, 2017 ONCA 790)

What future grounds for attack exist in the future?

If and when it happens you will read about it first on this blog.

In Smith v Vauxhall Co-Op Petroleum Limited ( 2017 ABQB 525) Justice Dario had a situation where she had to determine the proper notice period for a 57 year old Divisional Manager of 22 years service who made $70,000 per year.

The employer had alleged just cause , including an allegation of sexual assault and sexual harassment. .The Judge found that these particular allegations  were unproven.

In assessing the proper notice period ( which she found to be 20 months ) the Judge commented as follows:

[ 152] Based on the Bardal Factors, I find Mr. Smith would be entitled to a notice period of 20 months. He is entitled to such an award given his length of service, level of seniority, and the difficulty he may have had securing comparable employment.

[153]      In calculating Mr. Smith’s notice period, I have also taken into consideration Ms. AM’s allegations of sexual harassment and sexual assault: see Elgert at para 68. Consequently, I have assessed the notice period as higher than it would normally be for someone in similar circumstances. This is due to the impact the allegations may have had on Mr. Smith’s ability to find new employment.

Here is the kicker. This assessment of 20 months was a provisional assessment solely for the purpose of a potential appeal.

In fact the Judge upheld the discharge for just cause on the basis that the Plaintiff had engaged in a pattern of personal harassment of, but not sexually assaulted or sexually harassed,  his female subordinate. The other element of just cause was that he lied to his employer during the investigation about the nature of his relationship with the female subordinate.

That is what you call a Pyrrhic Victory.

Quite frankly, 20 months notice would see to be the correct notice period under normal circumstances so it is odd that the judge emphasized that she would have  awarded  an increased notice period because of the unproven allegations of sexual assault and sexual harassment.