Category: Uncategorized

Plaintiff Gets Bonus for Only Part of Notice Period:

In Wilste v Saestar Chemicals ( 2020 BCSC 658) Saunders J. determined that an employee fired without cause in July of 2018 was entitled to 16 months notice. About 1/3 of his total comp was pursuant to a bonus plan which had a clause which said that in order to be entitled to a bonus payment, the employee had to be employed as of March 31st, the end of the fiscal year.

The judge awarded him the bonus for the period ending March 31, 2019 as he would have been employed on that date had he been given 16 months of working notice. However in order to be entitled to receive a bonus for the next fiscal year end  ( March 31, 2020) , he would have had to receive a notice period of 20 months. thus he did not receive any bonus payment for the period from March 31, 2019 to the end of his notice period , which was November 2019.

My Comments:

This judge did exactly what we are supposed to do in these cases, which is put the employee in the same financial position as if he been given 16 months working notice, or to phrase it another way, as if the plaintiff quit his employment at the end of the notice period. No more and no less.

If you keep this simple concept in mind ( which I learnt in first year contracts at OHLS way back in the 70’s) the issue of how to calculate damages in a wrongful dismissal action becomes quite straight forward.

Sask CA Upholds $20K in Bad Faith Damages:

In Cooper v Porcupine Opportunities( 2020 SKCA 33) Caldwell J. upheld a bad faith damage award of a long term foreman.

“In this regard, the trial judge based his award of moral damages on the cumulative consequence of three incidents: (1) the false allegations of theft; (2) the false explanation that Mr. Cooper’s position was to be eliminated; and (3) the false allegations of inappropriate and threatening communications.”

The interesting aspect of this case is that the employer never alleged just cause, instead they told him that his job was being eliminated. The allegation of theft was only discussed in an in-camera meeting of the Board of Directors. However the Court found that because he was employed in a small town, the fact that 9 members of the community (the Bd of Directors) were made aware of these allegations justified the finding of bad faith as his reputation in the community was adversely affected. Moreover as the true reason that the Board voted to fire Cooper was because of the theft allegation, lying to him and telling him it was without cause also constituted bad faith.

My Comments: Presumably this means that when firing someone, employers must be brutally honest. If the real reason Frank is being fired is because no one can stand his bad body odour  but in order not to hurt his feelings you tell him that his job has become redundant, that can give rise to bad faith damages.
This reminds me of the old joke about what do you say when your spouse asks “Do these pants make me look fat?”

Judge Awards One Month Per Year of Service in Group Dismissal :

In Pitre et al v Lake Shore Holdings ( 2019 NBQB 316) Judge Doyle awarded notice of approximately 1 month per year of service to a varied group of nursing home employees whose ages ranged from 22 to over 50 and whose service ranged from 1.5 to 5 years. The judge also awarded damages based on their net pay not thier gross pay . The judge also found that their employment was terminated because the plaintiffs had filed complaints with the government department responsible for the regulation of the home. However he only awarded modest aggravated damages of $2,000 and $2,700.

My Comments:


1. The judge purported to apply the Bardal principles but completely ignored the age issue.

2. Awarding $2,000 for aggravated damages is so modest as to be irrelevant, especially when he found that the plaintiffs were fired because they filed a complaint with the appropriate govt authority. He also denied them punitive damages.

3. Damages are to be calculated on gross income, not net. These damages are now subject to be taxed a second time as this is taxable income.

4. The judge also denied the claim against the personal owner. As this case was undefended, it seems unlikely that the plaintiff will ever recover anything. 

Damages Reduced 25% Due To Failure to Mitigate But Full Payment While Too Sick to Look for Work:

In Maticevic v Bank of Montreal ( 2020 CarswellNat 2661 )  Adjudicator Marvy had to determine the damages owing to an employee who had been out of work for 29 months following an unjust dismissal.

The employee had done nothing to look for a job in those 29 months. The Adjudicator found that for about 22 months he was too sick to work but that he had no good excuse for the other 7 months so he reduced the compensation by 25%.

As ia said,  he was too sick to work for 22 months. The Bank said that he should not be paid for this period either. They quoted a case where a part time employee with no disability benefits and who was ill during the while notice period received nothing as he would have earned nothing even if he had been dismissed.

But the Bank had both STD and LTD which one can only think the employee would have been on had he not been dismissed.

The Adjudicator however awarded him FULL PAY for the 22 months that he was too sick to work. This is what he said:

29. The Bank acknowledged the issue it relied on was only “briefly addressed”. I agree and I do not find that it provides sufficient support for the position the Bank asserts. I prefer the decision in Sylvester v. British Columbia, 1997 CanLII 353 (SCC), where the Supreme Court of Canada in finding that an employee, who was on a disability leave when he was terminated, was not entitled to both his disability payments and reasonable notice damages, but rather the salary he would have earned during the notice period. The SCC stated the following:

9. On appeal to this Court, there was no challenge to the finding that the respondent was entitled to short-term disability benefits under the STIIP from June 1, 1992 to December 31, 1992, and to long-term disability benefits under the LTDP from January 1, 1993 to December 31, 1993, nor to the finding that the respondent was entitled to 20 months’ notice from July 23, 1992. The appellant did not challenge the finding that the respondent was entitled to damages of $102,100, being the salary he would have earned had he worked during the notice period. This is consistent with the principle that an employee who is wrongfully dismissed without adequate notice of termination is entitled to damages consisting of the salary the employee would have earned had the employee worked during the notice period. The fact that an employee could not have worked during the notice period is irrelevant to the assessment of these damages. They are based on the premise that the employee would have worked during the notice period. Therefore, an employee who is wrongfully dismissed while working and an employee who is wrongfully dismissed while receiving disability benefits are both entitled to damages consisting of the salary the employee would have earned had the employee worked during the notice period. 15. [Damages] for wrongful dismissal are designed to compensate the employee for the breach by the employer of the implied term in the employment contract to provide reasonable notice of termination. As discussed above, the damages are assessed by calculating the salary the employee would have received had he or she worked during the notice period, notwithstanding that the employee may, in fact, have been prevented from doing so. The damages are based on the premise that the employee would have worked during the notice period. [Emphasis added]

30 Given the above principles, the fact that I have found that his medical issues reasonably prevented him for some time from mitigating his damages does not lead to the conclusion that this time must be deducted from his damages award. He was clearly still entitled to the salary he would have earned during this period.

My Comments :

First of all,  it is interesting that the Adjudicator deducted the entire 7 months from the award as the employee did nothing to look for a job during that period. However there was no evidence led by the Bank which would have showed that had he looked for a job that he would have got  one immediately. Imagine that the employee did nothing for the entire 29 month period and that he was not sick. Would this mean that he would get nothing? Other cases that I have recently blogged about show that even in those situations, the employer must lead some evidence that had he looked for a job he would have found one in some reasonable  time frame.

Secondly, I do not understand why the Bank took the position that when he was sick he should get no back pay. The better position would be to say as follows>

” If  the Bank had not breached his rights under the CLC and had not terminated him, then let us look at what he would have earned in the last 29 months, Well we know that for 22 of those months he would not have worked . Our STD plan pays 100% for 6 months and then LTD pays 66% . Oh, by the way the Bank pays all the LTD premium. For 22 months those payments equal $75,000 . That is what we owe him . That puts him in the exact same financial position had he not been terminated.”

What about Sylvester v. British Columbia? 

First of all this is not a wrongful dismissal case where the only remedy is damages for reasonable notice. Under the CLC the adjudicator is to make the employee ” whole” which can include reinstatement . The case law is clear that in assessing damages under the CLC one is not limited to reasonable notice .

Second making someone “whole ” is neither under compensating them nor over compensating them.

Third,  Sylvester was really about where a person receives a disability payment during the notice period, does this act as a  reduction to his wrongful dismissal damages. The SCC decided that where the employee pays the premium for the LTD, the damages are not reduced but where the employer pays the premium ( or in STD simply continues his salary) there is an offset otherwise the employee would be overcompensated.

There is no finding in the case as to who paid the premiums on the LTD policy .

 

 

New Brunswick ESA Termination Clause Upheld as Valid:

In Vienna v Joy Global ( Canada) ( 2020 NBBR 76) Justice Dysart upheld the validity of the following termination clause.

“Termination. The Company shall be entitled to terminate your employment without just cause for any reason upon the provision of reasonable notice or payment in lieu that meets the requirements of the applicable employment or labour standards legislation. By signing this Employment Agreement, you agree that upon the receipt of your entitlements and benefits in accordance with such legislation, no further amounts will be due and payable to you whether under statute or common law. Specifically, you understand and agree that your acceptance of this Employment Agreement limits your ability to claim any further damages for termination pay, termination notice, severance pay, payment in lieu of reasonable notice, or any other damages, other than as provided for in this Employment Agreement and that you are giving up any right to claim reasonable notice under common law. In the event the Company elects to pay you compensation in lieu of notice, the Company reserves the right to require you, prior to receipt of the payment, to sign the Company’s form of Release for the amount of the payment that exceeds the minimum termination pay required by the applicable employment or labour standards legislation.”

“I, Stephane Vienneau, have had a reasonable opportunity to obtain independent legal advice and to consider this Employment Agreement and the matters set out therein. I acknowledge that I have not signed this document under any type of duress and hereby accept the above terms and conditions as outlined in this Employment Agreement, pages one (1) through three (3) and certify that I am legally entitled to work in Canada.”

The Plaintiff’ s main attack on  this clause was as follows:

The reference to ” reasonable notice ” in the first sentence means that the clause was not intending to exclude the common law or at least is ambiguous . The judge disagreed  and pointed out the following :

 

[64] In my view, it would be nonsensical to conclude that that Mr. Vienneau had a legitimate expectation that upon termination without cause, he was entitled to reasonable notice under the common law, and that he was entitled to sue Joy Global for reasonable notice at common law. The termination clause clearly provides “you are giving up any right to claim reasonable notice under common law.” That sentence simply cannot be reconciled with the Plaintiff’s argument, nor does that wording bring this within the Cybulski, Gillespie and Bellini line of cases.

My Comments:

This was a New Brunswick case, not an Ontario case.

Under the current law in Ontario, because the clause refers to “just cause”, it would be in violation of the ESA and thus void . As The New Brunswick ESA refers to ” cause” and not the ” wilful misconduct ” language in the Ontario ESA, this argument would not work in this case.

Furthermore, in Ontario the ESA termination language ( section 57)  requires the the dismissed employee receive ” at least” so many weeks. There is a line of cases that stand for the proposition that simply referring  to ” meeting the requirements ” of the ESA is not enough because the requirements themselves only set the floor . The better language is to refer to ” the minimum requirements of the ESA ” . Again, the New Brunswick ESA does not use the “at least” language.

Third, the language says “upon the provision of reasonable notice or payment in lieu that meets the requirements of the applicable employment or labour standards legislation.

The use of the word ” or” could be read two ways :

1.Both “reasonable notice” and “payment in lieu” are subject to the condition that this payment “meets the requirements of the applicable employment or labour standards legislation.” 

OR

2. “Reasonable notice” stands alone and only the ” payment in lieu ” is required to”meets the requirements of the applicable employment or labour standards legislation.” 

The caselaw says that where there is a ambiguity, the interpertation that favours the employee wins.  So unless the second interpretation is simply ridiculous, this alone should create a sufficient ambiguity that requires the clause to be read in a way most favourable to the employee, which in this case means reasonable notice.

The fact that the clause also refers to the employee giving up “any right to claim reasonable notice under common law”  simply adds more  fuel to the ambiguity argument rather than clarifying the parties intentions.

The net result is that a 40 year old Technical Service Rep making over $100,000 who had 11 years of service got only 4 weeks termination pay, all in accordance with the New Brunswick Employment Standards Act, set out below:

Notice of termination

30(1) Except where cause for dismissal exists, and subject to subsection (3) and to sections 31 and 32, an employer shall not terminate or lay off an employee without having given at least

(a) two weeks notice in writing, where the employee has been employed by the employer for a continuous period of employment of six months or more but less than five years; and

(b) four weeks notice in writing, where the employee has been employed by the employer for a continuous period of employment of five years or more.

The judge found that had the contract not been enforceable, he would have awarded 12 months notice .

 

 

 

 

 

Manager Asks Subordinate to Buy Dope for Her = Just Cause :

In Gaucher v Manitoba Public Insurance ( 2020 MBQB 84) Justice Perlmutter had a situation involving a 18 year manager with colitis who asked her subordinate ( and good friend) to buy her cannabis edibles at the same time he was ordering some for himself. She did this because she was scared to order it herself. At that time cannabis were illegal unless she had a medical certificate, which she did not . The stupid subordinate delivered the dope to the manager while the manager was at a meeting with other managers.

They caught her. They fired her .

When she asked the Court to consider mitigating factors, the Court said:

1) The conduct was both criminal and contrary to the defendants policies.
2) As a manager she was responsible for managing the behaviour of her staff but instead she used her staff to commit the criminal act.
3) She had her staff do the buying because she knew it was illegal.
4) She did not come forth and admit her actions even when she knew they were questioning her stupid subordinate .

The termination for just cause was upheld.

Lessons Learned: Buy your own dope.

Jury Instructions in a Wrongful Dismissal Case:

In Thom v Canada Safeway ( 2014 BCSC 2697) Justice Saunders gave a mid trial ruling on a number of issues involving his charge to the jury and what the lawyers could and could not say.

Reasonable Notice :

[11] In the present case, I do perceive a risk that the jury may exceed the

maximum, without guidance. Mr. Thom was not in the upper levels of corporate

management. He was, however a store manager, and in previous postings had been

given responsibility for one of the defendant’s largest volume stores in Alberta. He

had 38 years of employment with the defendant, and was 55 years of age. In my

view, the jury, left to its own devices as to what constitutes reasonable notice, may

very well see fit to award Mr. Thom a notice period equal to or greater than the

rough upper limit.

[12] Particularly in light of the agreement of counsel, I view it appropriate that a

specific instruction on the upper limit of the notice period be given to the jury.

Counsel, in their closing addresses, may advise the jury only that the jury is to set a

period they consider to be reasonable in the circumstances, subject to what

instructions I will be giving them as to the law. Counsel may refer to or anticipate the

court instructing the jury as to what the appropriate range might be. Counsel will be

free to emphasize those circumstances of this case which they say should militate in

favour of a higher or lower reward; for example, the plaintiff may ask the jury to note

Mr. Thom’s years of service and his age; the defendant may ask the jury to note that

Mr. Thom, was not in upper corporate management, i.e. not at the rank of vice

president, or higher.

[13] The jury will be instructed that other than in exceptional circumstances, the

rough upper limit of the notice period in cases involving managers with some

seniority is a period of 18 to 24 months.

[14] What is more troubling in this case is the possibility – though I do not think it

so likely as an uninstructed jury exceeding the upper limit – of the jury straying down

below the floor, or the lower end of the range. In that regard, I have been provided

with no appellate authority as to what would be regarded as an award sufficiently low

to attract appellate scrutiny. Plaintiff’s counsel submits that an instruction may be as to a

lower end of 12 months; defence counsel has indicated he does not

object to a soft instruction – my phrase – on that lower end being conveyed to the

jury.

[15] Accordingly, what I am going to do with regard to the low end of the range is

take a path informed by the decision in a pre-Ter Neuzen case, Foreman v. Foster,

2001 BCCA 26, and by the recent decision of Bryk J. in Riedle v. McCaskill, 2013

MBQB 222. I am going to suggest to the jury that they may wish to consider an

award within the range of 12 to 24 months, but that I am giving them this range for

their guidance and assistance, and that ultimately the determination of the notice

period, subject to what I have said about there being a rough upper limit, is their exclusive function.

Aggravated Damages :

I will instruct the jury that to succeed in the claim for aggravated damages, the plaintiff must

have proven

on the balance of probabilities that he has suffered mental distress due to the

defendant having engaged in conduct during the course of the dismissal which is

unfair or in bad faith by being, for example, untruthful, misleading, or unduly

insensitive, or any similar bad faith conduct.

[19] The jury will be instructed that they must find a causal connection between

the plaintiff’s mental distress due to the wrongful conduct they find the employer

engaged in in regard to the manner of the constructive dismissal, and that mental

distress arising from the constructive dismissal by itself is not compensable.

[20] The defendant has asked that there be illustrations given as to conduct which

is not compensable, e.g. that it is not enough to find that an employer has been cold;

or another phrase used in the case law is, “simply shabby”. In my view this additional

instruction is unnecessary. Counsel are free to suggest to the jury, in their

submissions, any particular adjectives or characterizations they view as appropriate,

but in my view the instruction stated above is sufficient, and to elaborate or qualify it

further would possibly cause confusion.

[21] The jury will also be instructed that any aggravated damages they may award

should be such as to compensate the plaintiff for all losses that these parties, as

employer and employee, would reasonably have contemplated would flow from the

employee’s mental distress. They will be instructed that it is open to them to

consider whether this includes payment for his suffering and loss of enjoyment of life

on account of his depression and anxiety, and any pecuniary loss or loss of income

that he may have suffered on account of his ability to begin seeking work being

delayed during or out past the end of the notice period.

Deductibility of Disability Benefits :

The plaintiff in this action received disability benefits for at least part of the time that would be covered by the notice period. The Plaintiff wanted the issue of deductibility to be decided by the jury. The judge said no, that was his job. This is what he said ;

Deductibility of Disability Payments

[30] The plaintiff invites me to put to the jury that there is some evidence upon

which they could conclude that the parties intended the contract to be one in which

both disability benefits and payment in lieu of notice would be provided in the event

of a disability. I am urged to find that there is evidence from which the jury could

conclude that Mr. Thom took less salary, and notionally or indirectly contributed to

the disability benefits premiums. Reliance is placed, among other cases, on the

comments of Sproat J.in Fedorowicz v. Pace Marathon Motor Lines Inc. (2006), 48

C.C.E.L. (3d) 260 (Ont. S.C.J.) [Fedorowicz] at para. 110(b). I note that the Supreme

Court of Canada has since ruled, in IBM Canada Limited v. Waterman, 2013 SCC

70 [Waterman], that the plaintiff’s contributions are a relevant consideration,

although the basis is debatable (para. 76).

[31] However, in the present case I find no evidence upon which a jury could

reach the conclusion as to the contractual intent that the plaintiff contends for. If

anything, the evidence points most clearly to a situation analogous to that found in a

decision of this Court, Morris v. ACL Services Ltd., 2014 BCSC 1580 – see

para. 137 therein. Mr. Thom did not testify that the existence of the disability benefits

package was ever even a consideration in his decision to seek or to continue

employment with Safeway. The jury cannot be asked to engage in conjecture or

speculation as to what Mr. Thom considered the consideration for entering into the

employment relationship to be.

[32] This absence of evidence on the question of the contract’s terms leaves the

plaintiff with the default position, as I have termed it, expressed in the Ontario

decisions in Sills v. Children’s Aid Society (2001), 8 C.C.E.L. (3d) 232 (Ont. C.A.)

and McNamara v. Alexander Centre Industries Ltd. (2001), 8 C.C.E.L. (3d) 204

(Ont. C.A.); and as described by Sproat J. at paras. 108 and 111 of Fedorowicz: the

supposed “common sense” proposition that payment in lieu of notice and severance

payments serve two completely different purposes. That reasoning, in my respectful

view, is completely at odds with the Supreme Court’s decision in Sylvester v. BritishColumbia, [1997] 2 S.C.R. 315, at paras. 17 – 20, as affirmed and elaborated upon in

Waterman, see esp. at paras. 61 and 75.

[33] The only reasonable conclusion that can be drawn from the evidence is that

short-term and long-term disability benefits were to provide indemnity against

income lost. There is an overlap between those benefits and the severance payment

which is in substitute of the income that would have been paid had no notice been

given, for the duration of the notional or actual notice period. There is no basis for

the jury to infer a contractual intention that the employee receive both disability

benefits and severance. Accordingly, the jury, in respect of the notice period, will be

instructed that they are to determine the notice period without reference to

Mr. Thom’s medical condition and without reference to or consideration of the

disability benefits that have been paid to him.

[34] The jury will be advised that how short-term and long-term benefits factor into

the notice period has been discussed by myself and counsel, and that once they

give their verdict, counsel and I will make any adjustments that are required. They

will be told that the issue of the disability benefits need not and should not concern

them.

Termination of a Teacher at a First Nation School Covered by CLC Unjust Dismissal :

In an exhaustive 44 page decision entitled Kaiswantu v Piapot First Nation
( 2020 CarswellNat 2008) Adjudicator Cameron had to decide whether he had jurisdiction over the termination of a teacher on a First Nation teacher located on a First Nation.

For many years it was a given that teachers in this situation were covered by the CLC as the Constitution gives jurisdiction over “Indian” matters to the feds. Then some time ago, the analysis changed so that if the function performed by the employee was akin to what was done in non native societies, then the jurisdiction was provincial. Thus a teacher who taught reading and writing would be under provincial jurisdiction but an employee of the band who was responsible for negotiating treaty matters would be under federal labour jurisdiction.

In this case, the Adjudicator found that the teacher was governed by the Canada Labour Code. He does so by examining the actual relationship between the First Nation and the Federal Crown with respect to the education of students on a reserve. It is fascinating reading, especially for those who have an extensive understanding af aboriginal law. That group does not include me.

This clarity should be welcomed. The idea that First Nation employees could be under two different labour relations jurisdictions  always struck me as absurd and unnecessary. Hopefully this case will simplify this area of law and provide all First Nation employees with the same protections accorded to a clerk in a bank.

Termination Provision in Commission Plan Illegal as it Purports to Deny Commission Over the Statutory Notice Period:

In Kerner v Information Builders ( Canada ) (2020 ONSC 2975 ) Pollak J. had a case which involved whether the employee was entitled to commissions over the notice period in addition to his base salary. There were two different provisions at stake.
The 2017 Plan said that in order to receive a commission you must be employed at the time the sale was booked and billed.
It read as follows:

 

2017 Sales Plan

Please note that the governing principles set forth below are applicable in all cases. In order to be entitled to receive a commission you must met all of the requirements of paragraphs 1 through 3 below, as well as all applicable provisions of the attached documents. Unless you do so, no commission is earned, due, owing, or payable to you:

1.      You must have been a procuring cause of the sale and complied with all other applicable requirements. In some cases commissions may be payable in installments.

2.      No commissions are payable until the sale has been booked and billed.

3.      In order to be entitled to receive a commission you must be employed by IB at the time the sale has been booked and billed.

The 2018 Plan said that you get no commissions after you end active employment for any reason and also excluded statutory notice periods.
It added the following paragraph :

 

2018 Sales Plan

Commissions are not payable in respect of any period of notice, whether contractual, statutory or based upon the common law, following termination of your employment for any reason whatsoever, unless the sale transaction was booked and billed prior to the date of termination of your employment, The date of termination is the date on which your active employment with Information Builders ceases and you are no longer providing services to the company. [emphasis added]

 

In regards to the 2017 Plan, the Court found that the reference to ” termination” must mean lawful termination, thus at the end of the notice period. As such he was entitled to his commissions during the notice period.

In relation to the 2018 Plan, the Court found that the Employer failed to satisfy its onus to prove that they properly communicated this important change to the plaintiff when it was implemented thus it was not binding on him . Although the changes were in the 2018 Plan which the plaintiff was given, because this change was not not referred to in an accompanying document called “Major Changes ” nor was it discussed at a sales meeting intended to explain the new plan, the Judge accepted the plaintiff’s testimony that he was not aware of this change .

She also found that as this was an significant modification to the implied term of reasonable notice, that as there was no consideration , it was unenforceable . This is what she said :

Changes to the 2018 Sales Plan are not supported by the necessary consideration

[54]           The employer also has the burden of proving that a unilateral change to a significant term of employment is supported by consideration.

[55]           The Defendant’s alleged changes to the termination clause in the 2018 Sales Plan could have significantly modified the Plaintiff’s entitlements upon termination. The changes had the potential to disentitle the Plaintiff to a significant part of his income during his notice period. The evidence was that in the last four months of 2018, had the Plaintiff remained employed, he would have earned $99,237.36 in commission income but only $50,000.00 in base salary.

[56]           Our jurisprudence has held that a significant change to the terms and conditions of employment requires consideration. In this case, I find that there was no consideration.

[57]           The Court of Appeal, in Hobbs v. TDI Canada Ltd., 2004 CanLII 44783 (ON CA), [2004] O.J. No. 4876 (C.A.), described the law as follows:

“The requirement of consideration to support an amended agreement is especially important in the employment context where, generally, there is inequality of bargaining power between employees and employers. Some employees may enjoy a measure of bargaining power when negotiating the terms of prospective employment, but once they have been hired and are dependent on the remuneration of the new job, they become more vulnerable: at para. 42.”

[58]           There was no evidence regarding how the changes to the 2018 Sales Plan would benefit the Plaintiff. The Plaintiff testified that the changes to the Plan would help some but not others.

[59]           The Defendant’s attempt to limit the Plaintiff’s right to commission during the notice period is a significant modification which would require reasonable notice.

[60]           Further, A new notice of termination provision in an employment contract is “a significant modification of the implied term of reasonable notice” that requires consideration. There was no consideration for this change.


However the big takeaway is her finding that as the 2018 Plan purported to deny his right to commissions during the statutory notice period under the ESA, the clause was illegal as commissions are wages under the ESA. 

This is what she said :

 

Limiting provision in the 2018 Sales Plan is void because it potentially violates the ESA

[61]           In Covenho v. Pendylum Inc., 2017 ONCA 284, 43 C.C.E.L. (4th) 99, the Court of Appeal held, at para. 7:

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

[62]           The language in the 2018 Sales Plan has the potential effect of contracting out of the Defendant’s statutory obligation to provide the Plaintiff with his full wages during the statutory notice period, which includes commissions that become payable during the notice period.

[63]           Commissions are included as “wages” pursuant to s. 1(1) of the ESA. The Court of Appeal, in North v. Metaswitch Networks Corporation, 2017 ONCA 790, 417 D.L.R. (4th) 429, has held that commissions must be paid during the notice period. If no notice period is provided, commissions must be paid as part of the lump sum wage payment in lieu of notice (s. 61).

[64]           The Plaintiff argues that the “termination clause” in the 2018 Sales Plan contracts out of the ESA, contrary to s. 5(1) of the Act, and is therefore void and unenforceable.

[65]            Section 5(2) of the ESA does permit an employer to contract out of the ESA as long as a greater benefit is given to the employee. There is no evidence that the 2018 Sales Plan gives Mr. Kerner a greater benefit. The termination clause in the 2018 Sales Plan does not substitute a greater benefit by providing reasonable notice; rather, it provides for the ESA’s minimums.

[66]           The Plaintiff submits that there are circumstances where the Plaintiff would be better off if he were to be paid his minimum ESA entitlements instead of his base salary during a reasonable notice period determined at common law. Pursuant to the ESA, the Plaintiff would be entitled to two weeks’ notice of termination and 17.92 weeks’ severance pay. Pursuant to s. 60 of the ESA, the Plaintiff would be entitled to receive his wages, including any commissions that become payable in those weeks.

[67]           Therefore, the Plaintiff’s minimum statutory entitlement to termination of employment must include notice of termination, severance pay, and any commissions payable during the notice period. These payments would not be subject to the duty to mitigate.

[68]           If the provision in the 2018 Sales Plan’s termination clause were enforceable to exclude commission payments to the Plaintiff earned during his notice period, the greatest entitlement benefit the Plaintiff could receive would be reasonable notice at common law, based on his base pay only, excluding commissions. I find that there is a real possibility that a common law notice period calculated using the Plaintiff’s base pay would be less than the Plaintiff’s minimum statutory entitlements. Section 5 of the ESA prohibits such a result.

[69]           The Plaintiff’s evidence was that his largest booking and billing was an $11,000,000 deal with a commission earned between $150,000 to $200,000. It would be better for the Plaintiff to be paid commission during the statutory notice period instead of being paid base salary during the reasonable notice period.

My Comments :
This case is one of a spate of recent cases which deals with the enforceability of clauses that seek to limit the implied term of reasonable notice. It is important because it deals with four key areas, namely :
1) lack of clarity in excluding the common law
2) failure to properly identify the restrictions
2) lack of consideration for the change
3) illegality as it offends the ESA
One last comment. I am not sure that Justice Pollak’s analysis of the ” greater benefit shall prevail ” arguments is correct. As I understand this provision you look at each employment standard on its own and you do not do the comparison on a a cumulative basis. In other words if someone were to be paid only one week vacation per year but had a wage of $40 per hour, the one week vacation clause would still be in violation even though the wage was considerably higher than the minimum wage .
Therefore, in this case the simple issue is if commissions are wages and you must get your wages over the statutory notice period , then any attempt to deny that payment is illegal. Imagine that the employee was fired on January 1st and was entitled to 8 weeks of his full wages. However he gets a new job on January 2 ( or he dies ) so he has no common law damages. This clause would deny him his full wages. Thus it is illegal. Period , End of story.

Failure to Give Proper Notice of Forfeiture of Unvested Stock Options Makes Clause Unenforceable :

In Battiston v Microsoft Canada ( 2020 ONSC 4286 ) Justice Faieta had to determine the enforceability of a clause in a Stock Option Agreement that said in essence that the employee’s entitlement to have the benefit of future unvested stock options ceased immediately upon the cessation of employment, even where that termination was unlawful.

The Judge found that ” the Stock Award Agreement unambiguously excludes Battiston’s right to vest his stock awards after he has been terminated without cause.”

Normally you would think that the Plaintiff would therefore lose the argument.

But you would be wrong.

[70]           I find that the termination provisions found in the Stock Award Agreements were harsh and oppressive as they precluded Battiston’s right to have unvested stock awards vest if he had been terminated without cause.  I also accept Battiston’s evidence that he was unaware of these termination provisions and that these provisions were not brought to his attention by Microsoft.  Microsoft’s email communication that accompanied the notice of the stock award each year does not amount to reasonable measures to draw the termination provisions to Battiston’s attention.  Accordingly, the termination provisions in the Stock Award Agreements cannot be enforced against Battiston.  Battiston is entitled to damages in lieu of the 1,057 shares awarded that remain unvested.

In other words, the ” harsh and oppressive ” provision was buried in the plan text and there is no evidence that the employer brought this to the attention of the employee.

It looks like this case stands for the proposition that where the employer wants to rely on a termination type clause, they must bring it to the employee’s attention and if they fail to do so , and the employee testifies that he never saw it , the employee wins. It would also seem that the defendant  has the burden of proof on this issue, once the plaintiff says that he or she never saw it .

Lessons learnt from this case.

  1. The more harsh and oppressive a clause is,  the more likely a Court will find a way around it . So Lesson # !. Don’t draft harsh and oppressive termination clauses.
  2. As the employer must prove that the clause was brought to the attention of the employee do so in a transparent and clear way. So Lesson #2. Instead of burying the clause in a complicated legalese filled document ( like a consumer licensing agreement which is designed not to be read) rather insert the termination provision in every letter granting the award and get the employee to acknowledge that he or she has read that particular  provision . I even have drafted the clause  for you :

” Please note that all of the nice stuff that we promised you in this  letter will be forfeited if we decide to fire you for any reason, even if we fire you illegally. So don’t you go buying a new house on the assumption that you will ever get any of these options, because we may fire you the day after you sign the house deal and there ain’t nutting you can do about it . ” 

One other thing. Plaintiff counsel also made the argument that the clause was contrary to the ESA, presumably because the clause changes the terms of his compensation within the statutory termination period. The judge decided he did not have to decide this issue. This is a shame because this critical issue needs to be resolved some day . Even the Supreme Court of Canada shied away from looking at ESA arguments in Heller v UBER.

One more comment. In his conclusions, the judge ordered compensation for these lost stock options in the following manner:

5)   Battiston is awarded damages for the granted stock awards that would have vested during the notice period had his employment not been terminated.  Such damages are to be assessed as of the date of the breaches using the closing market price for the stock on those dates.

One can make many arguments as to how to properly measure the loss of stock options. This method  assumes that the  employee would have cashed in his shares on the vesting date. Any other method leads to speculation . Although not perfect, this method is at least certain and easy to calculate.

My very rough calculation of the value of this part of the award is approximately $150,000 USD. I came up with this number  by looking at the average price of Microsoft from date of termination to the present .