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In Dynamic Tire v Borelli ( 2016 ONSC 1526 ) the plaintiff was awarded 16 months notice, exactly what the defendant offered in its pre-litigation offer.  His partial indemnity costs were $20,334.

In light of the fact that the plaintiff  acted unreasonably in not accepting the pre-litigation offer which if he had would have resulted in more money than he got at the trial, the judge awarded him nominal costs of only $6,000 plus HST.

In Muntean v Enablence Canada Inc. ( 2016 ONSC 1521) the Plaintiff sued in Superior Court but only recovered two months salary, which came to $13,076.

The plaintiff had partial indemnity costs of $20,702.

The defendant said that the plaintiff should not get any costs as he should have either started or transferred his case to Small Claims Court and because he had refused a time limited offer of $20,000 inclusive of costs.

Justice Timothy Ray awarded the Plaintiff only $5,000 costs based on the the issues referred to above and ” the overarching principle of proportionality”

If in fact the two lawyers in these cases actually charged their clients even what they told the Court their partial indemnity costs were, then both clients would have been much better off accepting the employers’ pre trial offers.

 

In Roberts v Zoomermedia Ltd ( 2016 ONSC 1567) the executive employee had a fixed term contract ending Oct 31, 2011 which provided for a lump sum payment of two years salary plus a 6 month paid sabbatical leave if either the employee was terminated before the end of the term or if the term expired. The term expired and the employee stayed on as an employee until terminated by the employer in March of 2012 when he was given working notice of termination of  6 months notice plus 2 months severance.

The Employee took the position that as the term of his employment contract had expired on October 31. 2011, he was entitled to his contractual severance payment of 2 years plus the 6 month paid sabbatical even though he continued on in his employment for another 4 months.

Mr Justice Perell agreed with the plaintiff. The judge treated the employment as being divided into two periods; the period covered by the term certain contract  and the period after the term had expired. After the expiry of the term the employee was under the doctrine of reasonable notice, which the plaintiff did not pursue.

Thus the employee was paid severance pay even though his employment had not ended. Great deal if you can get it.

This was a very unusual termination clause. One wonders why they bothered to make it a term certain contract with an express end date. If the purpose of the termination cause is to agree what the employee will receive in the event his employment ends without just cause, then you are better off not making a term certain contract and just keep it a term of indefinite duration.

I find that employment contracts drafted by corporate lawyers often having a definite end date, even when the contracting parties have no business need for such a term. Worse, these clauses can be misleading to the employee who mistakingly believes that he has a guaranteed 2 year contract, only to find that a later provision in the contract allows the employer to terminate the contract prior to its term upon one month notice.

I used to tell clients that the term of their contract is equal to the shortest amount of time in which  one party can lawfully terminate the relationship.

In Specialized Property Evaluation Control Services Ltd v Les Evalauations MarcBbourret Appraisals Inc and Ross Huartt ( 2016 ABQB 85) the Court was faced with a non-solictation clause which prohibited the Defendant from doing business with any customer of the Plaintiff for a period of 6 months from the date of termination of employment.

The Court found that this provision was too broad because it forbade the ex-employee from soliciting the Plaintiffs’ customers for any business at all, not just from solicting them for business competative with the business of the Plaintiff.

For example, if the employer is in the business of providing forensic accounting services to law firms, and in particular the ASBC Law Firm , this prohibition would purport to prevent the ex-employee from selling office supplies to the ABCS Law Firm.

On this basis alone the judge found that the non-solicitation clause was unenforceable.

The better practice is to:

a) Restrict the solicitation of customers only to the same business as the Employer’s, in other words, you cannot go after the ABCS Law Firm for the provision of forensic accounting services.

b) Define the term ” customer ” in some fashion in a temporal sense. A common definition is ” any customer who has purchased goods from us in the 12 months prior to the date in which you left employment”

c) Define “customer” to include only those customers with which whom the employee has had contact. This is especially true in a large organization that may have thousands of clients.

One should realize however that a strategy of counsel for ex-employees faced with a cease and desist letter or a lawsuit from the ex-employer is to request that the ex-employer provide a complete list of those customers that they consider covered by the non-solicitation clause to insure that their client does not inadvertently violate the agreement. Most employers are quite reluctant to give out such a list, especially to an competing ex-employee and his or her new employer. If they refuse to provide such a list, it might be difficult later on to allege a breach of the clause as the employee could rightly claim that he or she  was not sure who was on this list and who was not.

In Nagribianko v Select Wine Merchants ( 2016 ONSC 490) Sanderson J. , in an appeal from a Small Claims Court judgement, had the following comments about probationary employment :

40) A reasonable person in the same circumstances as the Respondent/Plaintiff would have understood the term “probation” to mean a period of tentative employment during which Select would determine whether the Respondent/Plaintiff would be a suitable employee and would decide whether or not to make him a regular/non probationary employee.

41) On his own evidence, the Plaintiff /Respondent understood that during the 6 month probationary period he would be at risk. He may have believed that the employer would find him to be a suitable employee, but a reasonable person in those circumstances would also have understood that that might not happen.

42) A reasonable person would have understood, and on his own evidence, the Plaintiff/Respondent did understand that probationary is inherently unstable and tentative.

43) Probationary employment, on its face and by its nature, is inconsistent with any inducement or promise of long-term employment.

I find the comment in paragraph 43 most interesting. On many occasions an employee who claims that they have been induced away from prior secure employment then signs an employment contract with a probationary clause. This case stands for the proposition that the mere existence of a probationary clause would likely negate the issue of inducement. This concept would apply whenever the employee was terminated, whether during or after the probationary period, because it is evidence at the time of hiring as to what was is the mind of the contracting parties. This case also stands for the proposition that a reasonable person, having decided to leave his or her current position and join a new employer, would know that there was not any promise of long term employment if the new agreement contained a probationary clause.
Of course, if the probationary period exceeds three months, the employee is still entitled to his termination pay under the Employment Standards Act of Ontario, even though the he or she was properly terminated pursuant to the probationary regime. Therefore a probationary clause in excess of three months should contain a clause that limits one’s recovery to a termination within the probationary period to one weeks termination pay plus benefits and accrued vacation pay, as long as the probationary period is less than one year.

In fact, if the probationary clause was in excess of three months and purported to say that an employee could be terminated within the notice period without just cause and without any notice, then there is a good argument that the entire clause would be illegal as it offends the ESA. This would mean that employer had lost the protection of the probationary clause and the employee would be entitled to common law reasonable notice.

In Gagnon & Associates v Jesso ( 2016 CarswellOnt 233) Gordon RSJ decided that a 10 year Senior Salesperson of a small HVAC company was required to give two months notice of his resignation, especially when he knew that the other senior salesman would;d be leaving his employment on the same day.

This is one of the few “wrongful resignation” cases that the Courts have dealt with.

The Court determined that the loss incurred by the company for the failure to provide proper notice was $35,164, based on lower sales after his abrupt departure.

In Maasland v City of Toronto ( 2015 CarswellOnt 19525) Mew J. awarded 26 months notice in a constructive dismissal case involving a 57 year old Senior Engineer with 25 years service earning $142,000 / year. He also found that she did not fail to mitigate her damages by not applying for a job offer with York Region as this would have involved a commute of 50 km.

There was no mention of any special circumstances that  pushed this notice period above what was previously considered to a the “cap’ of 24 months.

In Lalani v Canadian Standards Association ( 2015 CarswellOnt 19003) Diamond J. dealt with a clause in a bonus plan that required the employee to be “actively employed” at the end of the fiscal year to be entitled to a payout of the bonus. The employer paid the employee a prorated bonus for the period up to his actual date of termination plus the 34 week termination and severance period under the Employment Standards Act but not for the balance of the 24 month notice period.

The Court held that ” While the plaintiff may be notionally an employee during his 24 month notice period, he is no longer an “active employee” and does not qualify for the STIP payment.”

The interesting aspect of this case is not that the term “active employment” was found to be different than the period of reasonable notice, but rather that both the termination pay period of 8 weeks and the severance pay period of 26 weeks were both determined to be ” active employment “.

Section 62(1) of the ESA ( which deals with Termination Pay ) reads as follows:

If an employer terminates the employment of employees without giving them part or all of the period of notice required under this Part, the employees shall be deemed to have been actively employed during the period for which there should have been notice for the purposes of any benefit plan under which entitlement to benefits might be lost or affected if the employees cease to be actively employed. 2000, c. 41, s. 62 (1).

However no such parallel provision exits for severance pay in the ESA. This is because severance pay is a different concept than termination pay. Termination pay is a substitute for termination notice and thus must mimic what the employee would have received had he or she been given actual working notice. Severance pay however is an entitlement to receive a lump sum payment and in fact cannot be provided by giving working notice.

This case treats both statutory payments as constituting “active employment” and thus may have the effect of expanding the rights of dismissed employees to bonus plans.

In Keenan v. Canac Kitchens Ltd., 2016 ONCA 79 the Court upheld a 26 month notice period for a husband and wife who both worked as dependant contractors for Canac as Delivery and Installation Leaders., which were determined to be supervisory/ foreman positions. The husband had 32 years with Canac and was 63. The wife had 25 years with Canac and was 61 .

There are a few aspects of this case that are interesting;

1) The Court did not lessen the notice period because they were dependant contractors as opposed to employees.

2) Even though there were no special circumstances other than the usual Bardal factors of age, service and position, the Court had no trouble upholding a 26 month notice period, thereby shattering the myth that 24 months is a cap.

3) Most important, at least to me, is that winning counsel was Matthew Fisher  ( my son ) and his partner Bram Lecker.

In Asgari v 975866 Ontario Limited, ( 2015 ONSC 7508 ) Dow J. held that a an otherwise valid ESA termination clause was not binding on the Plaintiff because the same Employee Handbook which contained the termination clause had a provision on the page  which the plaintiff signed which said ” the Employee Handbook is not a contract of employment, that my employment with the company  is not for a specified term”.

The Judge said as follows:

[7] As a result, it is confusing if not contradictory about whether the plaintiff waived his right to seek common law damages beyond that available pursuant to the Employment Standards Act, S.O. 2000 c.41, which was paid to him, that is, one week or $1,711.54. I conclude those cases referred to me by counsel for the defendant requiring my enforcement of only Employment Standards Act notice provisions are distinguishable given the Employee Handbook as it states (at page 29) that it is not (part of) a contract of employment. I am reinforced in this conclusion by the lack of evidence that the plaintiff accepted this policy in respect of his employment.

These types of ” this is not a contract ” clause originate in the US where they are routinely inserted to offset the American implied term of “employment at will”. They make no sense in the Canadian context.

The much better practice is to insert the termination clause right in the hiring letter or the employment agreement, and not attempt to  have it incorporated by reference from a different document or website.

 

In Chapman v GPM Investment Management ( 2015 ONSC 6591) the CEO was found by the Court to be entitled to a bonus payment of $328,862 as per his contract. When he was not paid this bonus he claimed constructive dismissal. The Court held that the non payment of this bonus was not a constructive dismissal as it was one off and the situation would not arise again. Moreover as his total compensation was $1,173,239 , it was only a reduction of 28%. The judge emphasized that nothing had changed regarding his role and in the future the Employer was committed to honouring the contract.

In what I find is a surprising decision  the Court of Appeal of Ontario ( Justices Miller, Hourigan and van Rensberg upheld the trial decision ( 2017 ONCA 227) .

Trial Decision :

So what is an employee to do when he is screwed by his employer out of a $328,862 payment? This is what Gunsolus J. had to say:

67 Mr. Chapman’s position that he was left in a position such that he would have had to sue his employer, and thus would be in the untenable position of having to leave his employment, does not persuade me that this was a constructive dismissal. In today’s modern commercial world, there were many other steps that Mr. Chapman could have considered. For example, mediation and/or arbitration could have been pursued. Mr. Chapman could have pursued the other investors in the EE Project as suggested by Mr. Johnson. Mr. Chapman was not put in an untenable position. He left his employment at a time when he had earned more than he ever had in his nine year history with the defendants. In addition to that, he received over $557,000.00 as a return on his personal investment in the EE Project. No reasonable person, in the shoes of Mr. Chapman, would consider themselves to have been constructively dismissed.

Court of Appeal Decision :

The Court of Appeal found that the trial judge made no overriding error in his reasoning. Of particular interest was what the Court said about the trial judges comments quoted above .

34]      Furthermore, the trial judge considered all of the relevant surrounding circumstances in concluding that there were no other factors that could lead a reasonable person in the appellant’s position to conclude that GPM’s breach indicated an intention not to be bound by the memorandum of understanding.

[35]      Against this, the appellant argues that the trial judge erred in not finding that he had been placed in the untenable position of having to either forego the $329,000 in bonus income and keep his job, or sue to recover the $329,000 and lose his job.

[36]      The trial judge, however, found on the evidence that the appellant had options other than suing GPM on the one hand and foregoing the bonus on the other, including proposing arbitration and/or following up on Johnson’s suggestion that GPM might reconsider paying something towards a bonus if the other investors in the Ellerslie lands agreed. 

[37]      In my view, it was open to the trial judge to find that there were, on the facts of this case, dispute resolution alternatives that the appellant, a commercially sophisticated party, could have been expected to explore, and that a reasonable person in the appellant’s position would not have considered himself to have been constructively dismissed when the bonus on the sale of the Ellerslie lands was refused.

There is no indication in the judgement that  there was an arbitration clause in the CEO’s employment agreement. As one cannot be forced into either mediation or arbitration absent a contractual provision, it is difficult to understand this logic. Furthermore suggesting that he pursue a remedy against other entities rather than the one with which he had a direct contractual relationship seems rather  odd.

Why should an aggrieved employee have to chose an ADR process to resolve this issue? Surely they have the right ( absent a mandatory arbitration clause ) to pursue their remedy in Court ?

Does this now mean that that the law in Ontario is that is perfectly  OK for an employee to sue their current employer over an allegation of unpaid wages  and remain at work ?

Another option that would have been open to the Plaintiff was to file a complaint with the Ministry of Labour under the ESA for non-payment of wages, as bonuses are wages under the ESA, and there is no longer any monetary cap on recovery. Any attempt by the employer to terminate or discipline the employee for filing a claim would bring about further liability to the employer under the Reprisal section ( s.74) of the ESA.

The message from this case must be that quitting to obtain back wages is highly risky. You are much better off remaining in your job and commencing some sort of adjudication or litigation. According to this judgement, you can pursue legal remedies against your current employer and not have to worry about the problem of a conflict of interest.

Speaking for myself, if you screwed me out of $328,262, you sure would not want me working for you any more.

If the test for a constructive dismissal is based on the ” reasonable employee”, then I am pretty sure that if you polled 100 working people and asked them how they would feel is they were illegally denied $328,262 of their wages, virtually everyone of them would think that the employee would be amply justified in feeling they had no option but to quit, even if their boss promised that he was only going to screw them this one time.

What if the shoe were on the other foot and the employee stole $328,262 from his employer but, after being caught, returned it and promised never to do it again ?

Would the Court of Appeal say that this was not just cause for dismissal ?

How is wrongfully not paying me what I am owed any any different from me wrongfully taking what is yours?