Category: Uncategorized

In Humphrey v Mene Inc ( 2021 ONSC 2539) Justice Papageorgiou in a 68 page decision awarded 12 months notice to a 32 year old COO making $90,000/year with 2.7 years service.

There was a number of interesting issues decided by the Court :

1. The Court found that the  termination provision was unenforceable because there was no fresh consideration when it was introduced mid term. The Court found that merely changing her status ( but not her pay ) from a consultant  to an employee did not suffice as she had in law been an employee throughout this period anyways .
2. More interestingly, the Court also invalidated the without cause termination clause on the basis of repudiation. This is the concept that an employer cannot rely on an otherwise lawful  without cause termination provision in certain circumstances . This is how the Judge set it out

[135] I do not read any of the cases before me as laying down the proposition that in all cases where an employer asserts cause and fails it may nevertheless rely upon a without cause termination provision afterwards. The law of wrongful dismissal is based in contract. In all of the above cases, the courts had before them specific agreements with specific clauses which the courts construed. If the parties specifically agreed that the without cause termination provision required an election at the time of termination or that it expressly covered only certain acts of constructive dismissal, I see no reason why a court should not enforce that.

[136] In my view, the following principles emerge from the above cases:

a. Where an employer alleges cause and fails, or withdraws its cause allegation, or repudiates an employment agreement through acts which constitute constructive dismissal, the employer is not precluded from subsequently invoking a without cause termination provision for the purpose of calculating the employee’s damages: Roden, Moore, Simpson

b. However, in all cases, it is a question of construction of the without cause termination provision before the Court as to whether, properly construed, the without cause termination provision applies. Such clauses are subject to strict construction: Ebert, Matthews.

c. Even if the contract, properly construed, permits an employer to terminate without cause after a failed for cause termination, there are some breaches or acts of repudiation which are so significant, or of such an order of magnitude, that they render a without cause termination provision unenforceable: Dixon. Although Dixon has not specifically been considered and accepted by appellate courts I find the reasoning compelling. All employment agreements are negotiated and agreed to on the basis of certain implied minimum expectations as to how the employer will conduct itself, the duty of good faith being one. An employee’s agreement to accept terms which significantly impact on the employee’s common law rights must be taken to be made in the expectation that the employer will comply with these minimum implied expectations. Where the employer significantly departs from such expectations, in my view, the employee should not be held to extremely disadvantageous provisions which he, she or they agreed to. This is not rewriting the contract but giving effect to what the parties must reasonably have intended.

d. However, minor or technical mistakes made in good faith by the employer will not constitute a repudiation sufficient to prevent the employer from relying upon the without cause termination provision: Amberer, Oudin.

In other words, if the Employer acts in a manner inconsistent with the duty of good faith, this may invalidate the termination clause because good faith is part of all contractual provisions.

The Judge then goes on to set out why in this case the Employer’s conduct was such that it had repudiated its own agreement

[137] I am satisfied that in the circumstances of this case outlined above, Ms. Humphrey has established on a balance of probabilities that Men’s conduct, objectively viewed, demonstrates an intention to no longer be bound by the December 2018 Employment Agreement, thus repudiating it. The conduct which I have found includes setting her up to fail, subjecting her to a toxic workplace, embarrassing and humiliating her before co-workers and clients after her suspension, significantly exaggerating performance issues and the evidence it had in support of these at the time of termination, and alleging cause when it knew or should have known it did not have it. These are not mere technical breaches made in good faith. Men’s conduct in this case goes to the heart of the employment relationship.

My Comment on Repudiation:

This concept of repudiation has the potential of forever changing the way employment law is practiced. It is an unfortunate common employer practice to allege just cause in situations where it is clear that it will fail and is being alleged simply as an intimidation tactic in order to get a better deal for the employer.  In this same category is the defendants’ counterclaim which alleges huge damages because of the plaintiff’s actions.

In the past if this tactic did not succeed in getting a settlement, the employer could simply drop the defence with little worry of any serious consequences. Now it seems that deploying tis tactics could have a serious blowback by invalidating an otherwise valid termination clause.

It is important to know that in this case, the Defendant had originally alleged just cause but had dropped the allegation before trial.

3. The trial judge also awarded the Plaintiff $25,000 punitive damages  because of the Defendant’s litigation tactics. The Judge referred to these actions of the Defendant as grounds for awarding these damages :

a) They led extensive evidence as to the Plaintiff’s poor performance even though they no longer alleged just cause .

b) Some of these performance issues related to a time before the Plaintiff was promoted to her COO position.

c) The Defendants pleadings referred to irrelevant matters which rose to the level of malice.

d) The Defendants never formally amended their pleading withdrawing the just cause allegation so that the public record was not corrected .

e) The Defendant either lied about the existence of certain documents or destroyed them.

f) The defendant breached two Court orders regarding production.

g) Most upsetting, the Defendant in their material made reference to the Plaintiff’s dating patterns in that she used an on line dating service . As the Judge said “ I find that Mene’s. need to refer to Ms Humphrey’s personal life very troubling. Who and how Ms Humphrey dates is no business of Men’s or they Court’s. 

By the way, the Court also awarded $50,000 in aggravated damages because of the mental distress suffered by the Plaintiff given the manner of the dismissal

Lessons to be Learned:

Although it seems OK for Plaintiff’s to routinely make out sized claims for unfair treatment, harassment and discrimination, it now seems quite risky for Defendant’s to use the same scorched earth tactics.

In any event, it is becoming clearer that the Court will scrutinize employer’s actions both before and during litigation and severely punish employers who act in a fashion outside the Courts’ vision of acceptable  behaviour.

Employment litigation may not be a tea party, but neither is it supposed to be a fist fight.

 

 

 

 

In Ristanovic v Corma ( 2021 ONSC 3351) Justice Dunphy had a situation where two long service employees were given temporary lay off notices, one on January 31, 2020 and the other on February 18, 2020. The reasons given for the layoff notices did not reference COVID and they were promised to be recalled within 35 weeks . In fact they were not recalled within that period. Neither plaintiffs were ever subject to temporary layoffs before .

The Defendant advanced a defence that there is an implied term of employment that where an unprecedented event such as a global pandemic occurs, then the employer would be allowed to temporarily lay employees off without constituting it a dismissal.

The Judge said “NO’ to this theory for two reasons:

1) The layoff letters occurred “significantly before the facts that evolved to the point of a global pandemic impacting our entire Province or country.” Here is the extract :

[16] The defendant took no serious issue with the foregoing summary of the law. Instead, the defendant urged me to find that there is an implied term in the contract of employment of both plaintiffs authorizing the employer to lay off an employee as was done here when faced with the extraordinary circumstance of a global pandemic. I was urged to give consider the admonition of the Court of Appeal in Mifsud v. MacMillan Bathurst Inc., 1989 CanLII 260 (ON CA) concerning implied terms in a contract of employment. In Mifsud, McKinlay J.A. said that when “there is no written contract it is necessary first to determine what terms are implied in the specific contract involved, and those terms are not those which the court considers reasonable, but rather what the parties would have agreed to when forming the contract, had they turned their minds to the type of situation which later transpired” (at para. 18). Mr. Prentice forcefully urged me to find that the pandemic is a once in a lifetime occurrence. Had the parties turned their mind to it when the contract was first entered into, they would reasonably have agreed to permit a temporary lay-off to safeguard the ability of the employer to re-hire them when the situation improved. 

[17] It might be noted that only a few lines below the foregoing passage from Mifsud that I was urged to consider, McKinlay J.A. also cautioned that the exercise of implying terms into an unwritten employment agreement should not be undertaken to impose upon the parties the Court’s view of a “reasonable and just” contract. The exercise is one of determining the objective terms of the contract the parties entered actually entered into.

[18] In effect, the defendant is asking me to imply into a contract of employment a form of force majeure clause. I am mindful of the need to decide only those matters that require a decision in this or any other case. On the facts of this case, I don’t think that the question of an implied “global pandemic” exception to the well-settled law prohibiting non-consensual lay-offs properly arises. I reach this conclusion for two reasons. 

[19] First, the lay-offs in this case arose significantly before the facts had evolved to the point of a global pandemic impacting our entire Province or country. The lay-off letters sent did not, in fact, purport to justify the lay-offs of either plaintiff on the basis of an emergency that was global in scope impacting all sectors of the economy. The defendant itself told the plaintiffs in writing that they were being laid off because of “political instability” and a fall-off in orders. These circumstances were only beginning to produce impacts in Canada even if they were nevertheless having an out-sized impact on the defendant’s business. Over the coming weeks and months, the situation in China that side-swiped the defendant’s business in late 2019 and early 2020 morphed into a global phenomenon affecting businesses and employment the world over. There were no lock-down orders in effect in Ontario at the time the plaintiffs were laid off. The plaintiff was not prohibited from operating and the plaintiffs were not forbidden from coming to work.

[20] Without employing hindsight, there is little to distinguish the situation as regards Corma in late January/early February 2020 from any other adverse situation that might commonly affect a business, even to the extent of causing 40% of its revenues to dry up. A retailer may find business impacted by a big-box store opening a block away; a manufacturer may find the market flooded with imports as a result of a change in tariffs or a free-trade agreement. Insolvency, recessions or the evolution of the competitive marketplace have never justified unilateral lay-offs under our law. 

[21] Whether it may be reasonable to imply some kind of a force majeure clause in the case of a business prohibited from operating or placed under severe and unforeseen operational limitations by government action is something that I do not need to determine here on these facts. The circumstances existing when these plaintiffs were laid off do not reasonably lead to the conclusion that the parties would have mutually agreed to allow an indefinite lay-off with minimal compensation to be imposed upon employees had they but turned their mind to the prospect of their employer suffering headwinds – even material headwinds – in the operation of their business due to events abroad over which the employees have no control nor ability to provide for. 

2) Even if there was such an implied term, as the layoff extended beyond 35 weeks, the ESA deemed it to be a retroactive dismissal and thus this implied term would be in violation of the ESA.

My Comments:

This case is very fact specific.

At the time of both layoffs there was no Infectious Disease Emergency Leave in the ESA. However we now know that in light of the recent case of Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076 that the existence of that legislation does not prevent the plaintiff from claiming constructive dismissal 

This case starts to deal with the more interesting and troubling question of frustration of contract. If when  the employer is shut down by governmental mandate and therefore is prohibited from using the services of the employee does the the employment contract become  frustrated? This issue  remains to be determined in future cases.

ALERT: Winning plaintiff counsel was Jordan Reiner of Lecker and Associates in which my brilliant son, Matthew Fisher, is a partner.

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

In Coutinho v Ocular Health Centre ( 2021 ONSC 3076) Justice Broad was faced with an issue that has become of vital importance in Ontario, namely whether a temporary layoff under the ESA ( now called Infectious Disease Emergency Leave ) constituted a constructive dismissal under the common law.

In holding that such a layoff was a a constructive dismissal, the Court made the following points:

1) Citing section 8(1) of the ESA which says that no civil remedy is affected by the ESA, the Judge determined that since all the jurisdiction to enact a Regulation flows from the enabling statute, a regulation cannot override a statutory provision. This is what the judge said :

[41] Ms. Allen for Ocular argues that, given the unprecedented emergency brought on by the global COVID-19 pandemic and the severity of its impact on employers and employees in Ontario, section 7 of the IDEL Regulation, which deems a temporary layoff by an employer for reasons related to COVID-19 not to constitute a constructive dismissal, ought to be interpreted to apply to not only constructive dismissals for the purposes of the ESA, but also at common law. 

[42] In the case of Bristol-Myers Squibb v. Canada (Attorney-General, 2005 SCC 26 (S.C.C.) Binnie, J., writing for the majority, citing Dreidger, Construction of Statutes (2nd ed. 1983) observed at para. 38 that 

…in the case of regulations, attention must be paid to the terms of the enabling statute: 

It is not enough to ascertain the meaning of a regulation when read in light of its own object and the facts surrounding its making; it is also necessary to read the 10 words conferring the power in the whole context of the authorizing statute. The intent of the statute transcends and governs the intent of the regulation. (Elmer A. Dreidger, Construction of Statutes (2nd ed.1983), at p. 247) 

This point is significant. The scope of the regulation is constrained by its enabling legislation. Thus, one cannot simply interpret a regulation the same way one would a statutory provision. 

[43] In my view, the scope of s. 7 deeming a temporary lay-off for reasons related to COVID-19 to not constitute a constructive dismissal is constrained by s. 8(1) of the ESA. It is not possible to reconcile the interpretation of the IDEL Regulation urged by Ocular with the section of the statute which unequivocally provides that an employee’s civil remedy against her/his employee ( my note, this should be employer) shall not be affected by any provision of the Act”

2) The Judge also relied on a recent Ministry of Labour publication in which it stated ” These rules affect only what constitutes a constructive dismissal under the ESA. These rules do not address what constitutes a constructive dismissal at common law.’ This is what the Court said on this point:

[44] The fact that s. 7 of the IDEL Regulation may not be interpreted so as to take away an employee’s right of action at common law against her/his employer for constructive dismissal is reinforced by the online publication of the Ontario Ministry of Labour, Training and Skills Development (the “Ministry”), cited by Ocular in its Factum, entitled “Your Guide to the Employment Standards Act: temporary changes to ESA rules” https://www.ontario.ca/document/your-guide-employment-standards-act-0/covid-19-temporary-changes-esa-rules (the “Ministry Guide”). 

[45] In the section entitled “Overview” at page 1 the Ministry Guide states that on May 29, 2020 the government made a regulation under the ESA in response to COVID-19. During the COVID-19 period, a non-unionized employee is “deemed” on a job-protected infectious disease emergency leave if their employer has temporarily reduced or eliminated their hours of work because of COVID-19. 

[46] Under the heading “Constructive dismissal” on page 4 the Ministry Guide stated as follows: 

O. Reg. 228/20 establishes that there is no constructive dismissal under the ESA where a non-unionized employee’s wages or hours of work are temporarily reduced or temporarily eliminated by their employer for reasons related to COVID-19 from March 1, 2020 to July 3, 2021. This rule does not apply where the termination or severance resulted from a constructive dismissal that occurred before May 29, 2020. For a termination or severance resulting from a constructive dismissal to occur before May 29, 2020, it means the employee must have been constructively dismissed and quit their employment within a reasonable timeframe, all prior to May 29, 2020. 

For a discussion of each of the conditions that must be met in order for this rule to apply, please see Conditions for O. Reg. 228/20 temporary layoff and constructive dismissal rules to apply. 

These rules affect only what constitutes a constructive dismissal under the ESA. These rules do not address what constitutes a constructive dismissal at common law. 

[47] In my view, in reviewing the purpose of the IDEL Regulation the court can consider not only the wording of the regulation itself but also extrinsic evidence such as the Ministry Guide. 

[48] The entitlement of the court to consider such extrinsic evidence in interpreting subordinate legislation was made clear by the decision of the Alberta Court of Appeal in Heppner v. Alberta (Ministry of Environment) [1977] A.J. No. 523 (Alta C.A.). Lieberman, J.A., writing for the panel stated as follows at para. 34: 

One further aspect involved in reviewing the purpose of subordinate legislation must be examined and that is what evidence a court can consider in coming to its decision. Is a court restricted to the order in council itself, or can “extrinsic” evidence be examined? This question was considered by the Ontario Court of Appeal in LaRush v. Metropolitan Toronto & Region Conservation Authority, [1968] 1 O.R. 300, 66 D.L.R. (2d) 310. In that case the court was examining the purpose which caused the Authority to expropriate a certain parcel of land, and it was argued by counsel for the Authority that certain documents and the testimony of officers of the Authority could not be considered in 12 determining the purpose behind the expropriation. Aylesworth J.A., in delivering the unanimous judgment of the court, said at pp. 316-17: 

Appellant, as I understand it, contends that none of these documents with the single exception of the appellant’s resolution to submit the scheme to the Minister may be looked at and that the evidence of Mr. Higgs called as a witness at the trial by appellant cannot be looked at to ascertain the purpose of the acquisition of respondent’s lands. The learned trial Judge thought he could consider these matters and I emphatically agree. The documents themselves are the appellant’s own records of appellant’s proceedings and of the action taken by it. The contents of these documents and anything which necessarily follows from a consideration of their contents bears in the most direct way upon the question of appellant’s real purpose. Again that real purpose properly may be tested in the light of the evidence of Mr. Higgs as to the need or the lack of it to acquire respondent’s lands for any purpose of conservation of natural resources; Mr. Higgs was well qualified to speak on matters of conservation and more particularly on such matters as affecting respondent’s lands and the surrounding area; he was appellant’s own witness. The admissibility of the documents and of the evidence of Mr. Higgs seems so clear as not to require authority. 

The learned justice of appeal then goes on to cite numerous cases as authority for the proposition he has stated. 

[49] Although it is not binding on the court, the Ministry Guide is of assistance by offering insight into the Ministry’s intention in promulgating the provisions of the IDEL Regulation respecting constructive dismissal, including the stipulation that they do not affect an employee’s common law right to advance a civil claim of constructive dismissal, a position which is consistent with s. 8(1) of the ESA. 

I cannot express how important this case is as it is the very first case to deal with this issue. In my mediation practice, this issue has already come up many times and there are numerous cases already being litigated on this issue . More importantly , if this ruling stands , there will undoubtably be a virtual tsunami of cases coming forth now that this issue has been addressed by the Courts.

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

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.

Thanks to Lisa Feld for telling me about this.

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.

That will certainly make my mediations easier.

In Currie v Nylene Canada ( 2021 ONSC 1922) Justice Smith had a situation where it was found that there were special circumstances which justified going over the general rule that 24 months notice was the maximum that a Plaintiff could recover.

This is what the Judge said about why this case had exceptional circumstances :

 

My Comments :

The Court of Appeal in Dawe was well aware of the previous cases involving notice periods of over 24 months. By setting the ceiling at 24 months except for exceptional circumstances, they were implicitly overruling those same cases that the Plaintiff was relying upon in this case.

Moreover every one of the factors that this judge sees as exceptional is already taken into account in the Bardal Factors. How can a factor that goes into the Bardal analysis be seen also as an exceptional circumstance? Should not these exceptional circumstances be limited something else that affected the Plaintiff’s ability to obtain employment ? For instance, if an employer alleged just cause without reasonable grounds or where the employer took active steps to obstruct the Plaintiff’s re-employment.

I have been observing the issue of how to determine notice periods all my entire professional career. I had the naive hope that over time the issue of predicting notice periods would become more  certain to both employers and  employees and therefore avoid unnecessary lawsuits over notice. This case puts us back to the pre Dawe days where there was  even less certainty in a already uncertain world.

I feel that judges often do not have a sense on what goes on in the world outside their courtrooms. We all know that 99% of these cases are settled. Settlements are easier to achieve when there is more predictability in the outcome. Since Dawe, both employers and employees knew that 24 months was the realistic maximum and that it was quite easy to hit that  mark. These two factors has made long service cases easier to settle. Now we will be  back to Plaintiffs claiming 30 months  notice and Defendants responding with 16 months.

This is not a good thing.

In Kosteckyj v Paramount Resources Ltd, 2021 ABQB 225, Justice Sidell found that a 20% reduction in the total compensation of a 6 year Engineer constituted a constructive dismissal even though it was. company wide compensation initiative because of the COVID situation and its affect on the company . This 47 year old Plaintiff was awarded 9 months notice.

Here is what the judge said :

[41] Paramount relies on Doran v Ontario Power Generation Inc, [2007] OJ No 4476, for the proposition that a compensation reduction of 14% to 17% is a not a breach that would give rise to a finding of constructive dismissal. Here the salary reduction and RRSP contribution nsuspension were collectively a 16% reduction. In addition, the 2019 Bonus Program was subject to “delay/cancelation”. In the previous two years, Ms. Kosteckyj had earned a cash bonus $1,000 and $6,267, plus restricted share units benefits (“RSUs”) which Paramount says were “worth a nominal value of $2,000 and $12,333” because at the vesting date the value was substantiallymreduced. Using her pre-April 1, 2020 salary of $154,800, the 16% reduction, together with the loss of a cash bonus of $1,000, would result in a 16.65% compensation reduction. The 16% reduction, together with the loss of a cash bonus of $6,267, would result in a total reduction of 20%. The effect of the Cost Reduction Program significantly affected Ms. Kosteckyj’s compensation in the range of 16.65% to 20%, without considering any value for the RSUs. I find that the implementation of the Cost Reduction Program resulted in the constructive dismissal of Ms. Kosteckyj.

 

For a copy of this case email me at barryfisher@rogers.com
For my date availability go to https://lnkd.in/gMhJFHF

In Kosteckyj v Paramount Resources Ltd, (2021 ABQB 225) Justice Sidnell had this to say about a defendant’s Statement of Defence which plead that the Plaintiff wrongfully turned down their reasonable offer to settle :

[10] Disclosing a settlement offer in a pleading undermines judicial impartially and can encroach on the fair and just system of judicial determination that we rely upon. While it may be appropriate to raise the existence of a settlement offer after a decision has been made, and in the context of the costs to be awarded, it cannot be disclosed in the pleadings or else where in the litigation before a decision has been rendered. When the defendant intentionally discloses it rebuffed settlement offer, it must be presumed that the defendant proposes an inference that the plaintiff, in not accepting the settlement offer, did not act reasonably. This type of inference has no place in our adversarial system.

[11] After termination of employment, an employee is not required to accept an employer’s settlement offer to mitigate the employee’s damages when that offer requires a release of the claim against the employee, as it did in this case. A defendant cannot argue that a rejection of a settlement offer was unreasonable until after the court makes its determination as to what are reasonable damages in lieu of notice. That is why, in relation to formal offers to settle, Rule 4.2 is clear that the formal offer to settle is to be “to be kept confidential and not disclosed to the Court” until accepted or “the remedy for the claim has been decided”.

[12] It is important for the proper functioning of our independent and impartial legal system to maintain the confidentiality of all settlement offers in litigation until the merits of the case are determined. Disclosing a rejected settlement offer may be appropriate on an application for costs.

Indeed, Rule 10.33(2)(h) contemplates that the court may consider “any offer of settlement made”, regardless of whether or not the offer of settlement is a formal offer of settlement under the Alberta Rules of Court. Disclosing a settlement agreed to may also be appropriate where a party seeks to enforce the terms of that agreement or relies on other exceptions to settlement privilege: Bellatrix Exploration Ltd v Penn West Petroleum Ltd, 2013 ABCA 10, para 29.

My Comments:

This restatement of a basic principle is welcomed. The Courts’ job is to assess what the reasonable notice period is , not whether the employer or the employee made reasonable offers. Similarly their is a line of “Ballpark Justice ” cases from long ago that also stated the Courts job is to assess the proper notice period , not whether the notice provided by the Employer was reasonable .

This often arises in my mediations when I have to explain to a defendant that the only thing a Court will see is that you only paid the ESA minimums and not that you offered 18 months if the Plaintiff signed a release. If the Employer wants to get credit for their reasonable offer, then they must unilaterally pay out that amount without the requirement of a release. If this is done upfront, then any Plaintiff’s lawyer who is on a contingency fee will think twice before taking on a case with little uphill potential .

If you wish a copy of this case, contact me at barryfisher@rogers.com

 

In Tacan v Sioux Valley Dakota Nation ( 2021 CarswellNat 507) Adjudicator Palamar held that in Manitoba only lawyers can represent parties in Unjust Dismissal hearings. He found that to allow non lawyers to do so would amount to the unauthorized practice of law. This is so even though the booklet put out by the Ministry says that a party may be represented by an ” agent”.

Query : In Ontario, paralegals are a regulated profession under the jurisdiction of the Law Society of Ontario. Can a licensed paralegal represent a client in these proceedings? If anyone has the answer, please post it and provide the explanation.

In Labrador Recycling v Folino ( 2120 ONSC 2195) Akbarali J. commented on the a restrictive covenant clause in the metal industry. In finding that one clause in particular was unreasonable , the Judge stated as follows:

It purports to prohibit Mr. Folino from soliciting and accepting business from any of the plaintiff’s current or prospective customers. It defines a “current or prospective customer of the company” as “an individual or entity with which [Mr. Folino] personally had direct or indirect contact, or access to conduct confidential information about, during the last two years of [his employment].” Notably, the definition of customer or potential customer of the company includes no relationship between the customer or potential customer and the plaintiff. For example, it does not say that a customer or potential customer is someone with whom Mr. Folino had contact in connection with his employment duties. The only limitation on who is customer or potential customer when it comes to someone with whom Mr. Folino had contact is that the contact take place within the last two years of his employment. As drafted, his drycleaner would qualify.

I love that comment. But there was more. Here the Judge lists in clear terms why this clause is unenforceable :

[25]In my view, the plaintiff has not established a strong prima faciecase that the clause is reasonable:

a.Given the evidence that deals come together in the aluminum scrap industry within hours, a one-year temporal limit is unreasonably long. The plaintiffagrees the point of a non-solicitation or non-competition period is to allow the employer to  solidify its relationships with its customers after the departure of the employee. Here, the plaintiff will have frequent contact with its vendors and purchasers due to the nature of the industry and so would not require a year to solidify any relationships that require solidifying.

b.There is no geographic limit set out in the clause. On its own, in a non-solicitation clause, no geographic limit may be reasonable if the customers are reasonably defined and identifiable. In this case, the definition current or prospective customers that the restrictive covenant purports to preventMr. Folino from accepting work from casts a very broad net and is imprecise.

c.The terms ofthe clause are not clear and unambiguous.For example, the clause restricts Mr. Folino from accepting work from a person he may never have had contact with but in respect of whom he had access to confidential information.It is not clear how he would identify such people.The clause also purports to restrictMr. Folino from soliciting or accepting work from someone with whom hehas hadindirect contact over the past two years. It is not clear what“indirect contact”means.

d.Moreover, in prohibiting Mr. Folino from soliciting or accepting work from anyone with whom he personally had direct contact during the last two years of his employment, the clause purports to restrict him from accepting work from his personal contacts who may have had nothing to do with the plaintiff at any time.The plaintiff says this is ridiculous but asI have noted, the definition in the agreement of customer or potential customer of the company does link that person in any way to the company or Mr. Folino’s employment duties.

My Comments:

In the olden days when I was a litigating lawyer, if I represented a client who was faced with one of these clauses, I would have the client send a letter to his former employer as follows:

” Dear Sir:

In your recent letter you reminded me that under the terms of my employment contract I am to have no contact with any of the Company’s customers for 12 months following my departure. Without admitting the enforceability of such a provision, I want to make sure that I do not breach this provision. I would therefore appreciate it if you could send me a complete list of all of the Company’s customers so that I may know exactly whom I may and whom I may not approach in the next 12 months . ”

Of course the former employer would refuse to give this information and therefore my client would approach whoever he or she wanted.

Another thing to remember, since injunctive relief is an equitable concept, the person requesting the injunction must come to Court with ” clean hands”.

If the ex-employee was terminated, then he or she presumably has a wrongful dismissal action against the ex employer seeking the relief. It seems clear that an employer who has breached their obligation to provide reasonable notice of termination does not come with ” clean hands “.

Third point. There is case law to say that the existence of a clause like this has an effect on the notice period. The reason for this is that if the purpose of the notice period is to allow the plaintiff to find employment in their chosen field , then disallowing a person from going after some or all  jobs in his or her chosen field, means that  they will need more time to get such a job.  Thus the notice period should be extended to take into account this additional barrier to employment.

Interestingly, the contracts with the longest non compete or non solicitation periods also tend to have the shortest notice periods for termination.

 

In Battiston v Microsoft ( 2021 ONSC 1341) Faieta J. awarded wrongful dismissal damages of $567,000 after a trial lasting 2.5 days.

In the course of the award, the following interesting  points were made:

1) The fact that the Plaintiff did not win on every disputed issue was not relevant in determining the quantum of costs.

This is what the judge said:

Who was the Successful Party?

2) For the losing party to not submit their own Bill of Costs when attacking the winners is a dangerous technique. This what the Judge said :

  Similarly, although there is no obligation to do so, the defendant did not file its own Bill of Costs to illustrate what amount of costs it would have reasonably expected to have been incurred by the plaintiff: as necessary to incur to respond to this claim: Smith Estate v. Rotstein, 2011 ONCA 491 (Ont. C.A.), para. 50. Given its failure to deliver its own bill of costs, the Applicant’s challenge regarding the amount of costs claimed by the Respondent is “no more than an attack in the air”, as former Chief Justice Winkler stated in Risorto, at para. 10.

When I was in that situation as the winning lawyer and the loser said that he spent less time on the file  than me , I would respond ” Well maybe that is why I won and you lost.”

2) Where the Plaintiff tenders a Rule 49 Offer to Settle, but upon inquiry by the Defendant, refuses to set out a number for costs , the Court may exercise its jurisdiction to not award substantial indemnity costs even though the Plaintiff beat their own Rule 49 offer.

This is what the Judge said:

My Comments :

What the Judge maybe did not appreciate is that if the Plaintiff had put forward a number for costs before the Defendant had accepted the Rule 49 offer , then the Defendant would have been in position to try to negotiate a total settlement without deciding whether or not to accept the offer. Rule 49 offers can be accepted without agreeing on costs because you can accept the offer and if you cannot later agree on costs then the Court will decide.

This is the type of bargaining and negotiation that goes on the the real world.

I do not think it is necessarily appropriate for the Court to involve themselves in this discussion. Remember that the Defendant also refused to tell the Plaintiff how much he had already billed his client.

The Plaintiff probably wanted to know what the Defendant had been billed, and if that amount was reasonable then the Plaintiff would have agreed with that amount. In that situation it would be hard for the Defendant to argue that the Plaintiff’s bill was excessive .

Note that even before the Judge, the Defendant refused to tell the Court how much they had been billed. Why, you may ask?

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