Barry Fisher's Employment Law Blog

The Ontario Court of Appeal in Kerzner v American Iron & Metal Co. ( 2018 ONCA 989) had a situation where an employee (who was also a 1/3 owner of the vendor ) sold his shares to a new owner and signed a release in favour of the new owner. He went onto to be employed under a new written contract of employment for 7 more years.

The new employment contract had a termination clause requiring 26 weeks notice. The Court held that under the ESA his seniority goes back to 1980 when he joined the vendor and that the parties could not agree otherwise as this would be an illegal attempt to contract out of the Act. As under the Act his entitlement to both termination and severance pay was 34 weeks, the 26 week termination clause was illegal.

However because the release was still valid, in considering his common law entitlement to reasonable notice, his service was from the time of the sale, a mere 7 years. He was awarded 7 months notice, even though he was age 58 and held a senior position. The Court noted that he got a new job within 2 months.

In Bassanese v German Canadian News Company ( 2019 ONSC 1343) Justice Soosin, in a motion for default judgement, had the following fact situation:

The Plaintiff, a 73 year old female clerk with 19 years service, was verbally harassed by a male co-worker on a number of occasions. Twice she complained to her employer, who did zilch.

One day the co-worker slapped the plaintiff in the face three times. The Plaintiff complained to her employer an filed a police report.

The employers’ response?

She was fired the same day and given no notice.

The judge awarded $15,000 for the assault under the doctrine of vicarious liability.

The judge went on to award $50,000 aggravated  damages because the employer ignored her prior complaints, failed to investigate the assault or take steps to discipline her abusive co-worker.

Interestingly, the judge did not seem to rely on what I see as the most obnoxious behaviour of the employer, which was to fire her, rather than her abuser.

The plaintiff was also awarded notice of 19 months.

The total award, with costs,  came to $204,433.

Counsel for the Plaintiff was Maria Esmatyar of Lecker & Associates. My son, Matthew Fisher, is a partner at this firm but he had nothing to do with this file.

In O’Reilly v Imax Corp ( 2019 ONSC 1239) Justice Faieta found that the plaintiff was entitled to payment for the RSU’s that would have vested over the 24 month notice period. However the issue remained as to when to value those RSUs as presumably the price varied over the period . The Plaintiff said that he would have exercised them as soon as they were vested . The Defendant said that they should replicate what he had done in the past, which was to exercise the RSUs about 13 months after they vested. The judge ruled that the best indicator of what he would have done and he been given reasonable notice was to see what he actually did with the RSU’s that were vested but not sold during the notice period. This led the judge to determine the relevant date as being 5 months from vesting date .

I have two comments:

One : 5 is more or less the midpoint between 0 and 13.

Two: Clearly the value of the RSU’s declined over the notice period. I suspect the legal arguments would have been reversed had the value gone up over the same period.

This decision was recently upheld by the Ontario Court of Appeal ( 2019 ONCA 991)

In Alexander v Huron Commodities ( 2019 CarswellNat 377) Arbitrator Howard Snow, in a Canada Labour Code Unjust Dismissal case, ruled that the decision of a EI Officer ( which is first level of decsion under the Act) that there was no misconduct acts as an estoppal on that issue in the CLC case. This means that the Employer cannot even  raise the argument of just cause in the CLC proceeding.

Mr Brown found that the three elements of estoppal were proven:

1. The same question has been decided, that is whether the employee had committed any misconduct.
2. Whether the decision was judicial and whether it was final.
3. The  parties were the same in both proceedings.

I have grave concerns about this award:

1. The decision of the EI officer was made solely on two phone calls, one with the employee and one with the employer. Neither side seemed to know what the other side said to the officer. Of course there was no chance to cross examine the other party or even to refute the other side. How could this ever  be characterized as a ” judicial decision ?
2. What if it went the other way? What if the employee, acting on his own with no legal knowledge were to fail to tell the EI officer an important fact. Should he or she be denied access to a completely different legal process because of this lay person error? I have actually appeared as counsel on various EI matters and the level of “evidence ” that even the Board of Referees ( the appeal level from the EI Officer ) is well below the level of any court or administrative tribunal. In my experience,  the Board of Referees will consider as “evidence” the notes taken by the EI officer of a conversation with a HR representative of the Employer who is relating what some manager told him or her. This is at best double hearsay. This again shows that this is not a judicial decision .
3. Prior to this case, rulings of EI Board of Referees have been found to create valid estoppal arguments in civil cases of wrongful dismissal. This led to the common practice of most employers and many employees  to not appeal cases from the officer level so as to avoid being stuck with an adverse ruling . This is especially important for employers because they actually have no financial stake in the outcome of a EI case. Now however, both parties take a huge risk if they even talk to the EI Officer because an adverse ruling could have a huge effect on future legal proceedings.

Therefore employers should be advised not to even talk to EI officers as there is no upside at all to doing this and it can only worsen their position later on. Employers have a statutory duty to fill out an ROE, but I don’t believe that they have such legal duty to even talk to an EI Officer.

Employees are in a much  worse bind. If the employer alleges ” Dismissal” on the ROE and provides some  evidence  to the officer, but the employee refuses to participate in the process to avoid the estoppal argument, the employee will likely  lose their entitlement to EI, creating even more economic pressure on the dismissed employee to settle with the employer on a unfavourable basis.

One can only hope that no court or other adjudicators will follow this non-binding decision.

In Menard v The Centre for International Governance Innovation ( 2019 ONSC 858) Gray J. considered the validity of the following termination clause in a contract :

2.3 Termination of Employment.  During the Term, the Employee’s employment may be terminated:

a)      By the Employer,

i)        For Just Cause at any time by the Employer without notice and without any payment in lieu of notice.  “Just Cause” includes, without limitation, misconduct by the Employee, any breach or non-observance by the Employee of any of the conditions or obligations of this Agreement, any neglect or refusal by the Employee to carry out any the Employee’s responsibilities hereunder, any negligent performance of such responsibilities, and any insubordinate or insulting behaviour towards the Employer, its customers, donors, fellows, employees or contractors, the public or any other person, individual, entity or party in the habit or business of dealing with the Employer; or

ii)      Without cause, upon providing the Employee with the minimum notice for the time employed as determined under the Employment Standards Act, 2000 (Ontario), as amended or replaced from time to time,

And the Employee specifically acknowledges and agrees to the above and hereby waives any claim to further notice or payment or compensation. 

The Court reasoned that this clause was contrary to the ESA because as follows:

[105]            In the case before me, the language is clearly of the type considered by the Court of Appeal in Wood.  It sets up an entitlement to only the minimum notice under the Employment Standards Act, 2000, and thereafter specifically states that the employee “waives any claim to further notice or payment or compensation.”  It is clear that statutory entitlements, such as severance pay and benefit continuation, are excluded.  Thus, according to the reasoning of the Court of Appeal in Wood, the clause is void. 

The judge went onto to find that reasonable notice was 12 months for a 55 year old VP Finance making $172,0000/ annum with 6 years service.

In Gent v Strone ( 2019 ONSC 155) Pollak J. assessed the notice period for a 50 year old Health & Training Specialist with 23.5 years service at 18 months .

The Plaintiff had been given a notice of temporary layoff, which the Court found was breach of his employment contract. Some two weeks later the plaintiff’s lawyer sent a demand letter claiming wrongful dismissal. Within a few days defence counsel says that the plaintiff would likely be recalled within a few days.

Surprisingly,  Plaintiff’s counsel then wrote  to defence counsel and said that his client would not return to work as the relationship had broken down .

Less than two weeks later the Plaintiff was recalled to his old position. The plaintiff refused the recall.

The Court found that his refusal to accept the recall was unreasonable for the following reasons :

1. Although the Plaintiff testified that it would be embarrassing and humiliating to return to work, he gave no evidence to support this conclusion.
2. The employer acted reasonably in the layoff.
3. Even if, as the Plaintiff believed, the recall was a legal tactic to avoid having pay severance, that alone does not make it reasonable to refuse the recall.
4. The plaintiff had made the decision not to return to work even before he was recalled.
5. In his 23 years with the defendant, the plaintiff admitted that the relationship was ” harmonious and amicable”.
6. The defendant had continued his benefits during the 3.5 weeks of layoff, thus they complied with the temporary layoff provisions of the Employment Standards Act.

The Plaintiff was entitled to actual damages for the period of the layoff. This came to 3.5 weeks or $4,846.15.

My Comments :

I see this application of the Evans v Teamsters principle often in my mediations. It is a extremely risky tactic for the plaintiff to refuse such a recall. It is also a risky defence tactic to make such an offer if your client actually dreads the idea of the plaintiff coming back to work.

It is important to note that this recall notice was not done as an offer to settle the case. Had it been framed that way, then the correspondence between counsel would have been ” without prejudice” and thus not admissible.

The plaintiff could have accepted the recall and still preserved his right to claim and then sue for his lost wages between the time of the layoff and the  time of the recall.

This threat will often convince the employer that he better off getting rid of the employee and negotiating an overall severance package rather than employing someone who is actively suing them.

In Johnston v The Corporation of the Municipality of Arran-Elderslie Justice Conlan awarded a Chief Building Official ( CBO) $200K in punitive damages and $100K for aggravated damages.

With the full knowledge of his employer, the Plaintiff had, in addition to his job  as CBO, a private design company in which he designed buildings.  The Court found that he was permitted by the employer to conduct inspections on buildings that he had designed himself. The Court noted that this was a conflict of interest but that as the employer had full knowledge of the conflict, this action could not be just cause.

The real allegation of cause had to do with the issue of whether the Plaintiff tried to deceive  from his employer his involvment in two inspections on buildings that he had designed.

The Court found that there was no such deception and in fact it looked like certain persons at the employer may have “set up” the evidence so as to try to get the Plaintiff fired.

Citing a similar case called Pate v Galway-Cavendish ( Township( ( 2011 ONSC 3594) the judge found that punitive damages were appropriate for the following reasons:

[158]                 Similarly, Johnston’s career as a CBO has never recovered since June 2009, despite numerous job applications that he has submitted.  His marriage ended in part due to the events leading up to and on June 25, 2009.  His private design business fell nearly dormant during the latter half of 2009.  And the repeated media coverage, in a small area, partly inaccurate, caused Johnston much embarrassment and humiliation.

[159]                 The especially egregious conduct of the Township in Mr. Pate’s case, in withholding exculpatory evidence, is not present in our matter.  Having said that, the manner in which Johnston was fired is very concerning to this Court.

[160]                 To invite Johnston to attend at the Municipal building on June 25, 2009, and not tell him why, and have police there to essentially guard him, and have a termination letter and press release already prepared, and ambush him with some kind of interrogation by Tunnock, and then put out for public consumption a grossly misleading statement that gave the false impression that Johnston was banned outright from designing buildings located within the Municipality, was very unfair, in my view.

………

[162]                 In my opinion, quite apart from the unjustified termination of Johnston’s employment, the manner of his dismissal amounts to a wrong that is deserving of an award of punitive damages.

The Court also awarded $100,000 for aggravated or moral damages, with the following reasoning.

[164]                 Turning to aggravated damages, sometimes referred to as moral damages, Johnston must “prove actual damages resulting from the employer’s conduct in the manner of dismissal that exceed the normal distress associated with dismissal.  This is a high evidentiary threshold that many plaintiff employees will simply not be able to meet”.  2018 Update on Extraordinary/Moral/Aggravated Damages, by Alan Whyte.

[165]                 Moral damages are compensatory in nature.  This Court should ask itself whether the Municipality engaged in conduct during the course of Johnston’s dismissal that was “unfair” or “in bad faith” and caused Johnston mental distress that went beyond “normal distress and hurt feelings resulting from a dismissal”.  2018 Update, supra, quoting from Keays v. Honda Canada Inc., 2008 SCC 39 (CanLII), at paragraphs 56 and 57.

[166]                 I disagree with the Municipality that there is no evidence apart from Johnston’s own testimony to substantiate his claims about weight loss, the demise of his marriage and the inordinate stress that he was under just before and after June 25, 2009.  There is also the corroborative evidence of Donna and McLean.

[167]                 I am of the opinion that the Municipality acted in bad faith in having Johnston attend at the Municipal building on June 25, 2009 and then surprise him with another “audit”, the result of which was a forgone conclusion given that Council had already decided to terminate him earlier in June, and the ink was still wet on the dismissal letter and press release.

[168]                 I am also satisfied that Johnston’s mental distress on and after the date of his dismissal went beyond that reasonably expected of any employee who is fired.  Weight loss, loss of appetite, irritability, sleeping problems, marital breakdown, and social isolation were just some of the emotional consequences suffered by Johnston as a direct result of his harsh dismissal.  I accept the evidence of Johnston, his mother and, to some degree, McLean in support of those findings.

[169]                 Johnston is entitled to an award of aggravated damages.  On quantum, I must keep in mind the overall principle of proportionality.  I have already decided to punish the Defendant with a sizeable award of punitive damages.  The potential for double recovery must be guarded against.

[170]                 I do not agree with the Plaintiff’s suggestion of aggravated damages in an amount equivalent to what Johnston would have earned over the course of his contract that existed on the termination date.  That is not the proper measure of aggravated or moral damages.  It sounds more like the concept of expectation damages for breach of contract.

[171]                 In Pate, supra, the mental distress suffered by the dismissed employee was no greater in degree than that sustained by Johnston.  Mr. Pate was awarded $75,000.00 in aggravated damages.  That quantum was not disturbed on appeal.

[172]                 I award to Johnston the sum of $100,000.00 in aggravated damages.  Although that is a little higher than what was given to Mr. Pate, I have taken into account the total award of both aggravated and punitive damages in the two cases.

My Comments:

This case just reinforces my belief that there is little ascertainable difference between the grounds for punitive damages and aggravated/ moral damages.

The judge mentions the same following issues in both the  reasoning for punitive and aggravated damages:

1. The collapse of the plaintiff’s marriage .
2. The manner of the dismissal.
3. The publishing of the false reasons for the dismissal.

In my opinion the law would be better served in we collapsed both these concepts into one and simply awarded damages beyond reasonable notice where the conduct of the employer was outrageous and/or outside the range of conduct that we as a society expect from employers and employees.

In Spalti v MDA Systems ( 2018 BCSC 2296 ) Gomery J. assessed the reasonable notice period for a 55 year old salesman  with 13.7 years service at 16 months. However because this motion for summary judgement was held only 4 months after termination , the judge applied contingency reduction of 2 months.

This is the judges’ reasoning :

Assessment of a contingency reduction

[35]        It is well established that consideration of a contingency reduction in the notice period is appropriate in the context of a notice period that is not yet close to expiring when judgment is given.

[36]        In an appropriate case, the notice period may be reduced to mitigate the possibility of double recovery.  Gray J. addressed this issue in Luchuk v. Starbucks Coffee Canada Inc., 2016 BCSC 830 (CanLII) at paras. 46-51 and observed:

[46]            Wrongful dismissal cases are awkward, because the claim arises when the individual has been dismissed without reasonable notice, and then there is a bit of a race. Naturally the person who was dismissed would prefer to have an award from the Court and then afterwards get a job, because they would have a windfall, in the sense of receiving income from two sources representing the same time period. Naturally the defense would prefer that the plaintiff had found a job before the court hearing, because if the plaintiff has replaced the employment with another job, then he or she will not have suffered the loss of their entire employment income for the notice period. This tension is always present in wrongful dismissal cases, and it is something that the Court has to be mindful of.

[37]        The reduction is driven by the court’s assessment of the likelihood that the plaintiff, exercising reasonable diligence, will obtain alternate employment before the notice period would have expired.  It is therefore relevant to consider the length of the unexpired portion of the notice period and the likelihood that the plaintiff will obtain employment that would be have to be taken into account, in mitigation of his damages, if the trial had taken place later.

[38]        Where a reduction is warranted, the cases cited by counsel all involved reductions of one or two months.  In Luchuk, the case was decided five months into an 18 month notice period, and Gray J. reduced the notice period by one month to reflect the contingency.  In Earl v. Canada Bread Company, Limited, 2007 BCSC 1574 (CanLII), the case was decided four months into a 17 month notice period and Ehrcke J. reduced the notice period by two months to reflect the contingency.

[39]        In this case, the matter is being decided four months into a 16 month notice period.  Absent a contingency reduction, the notice period still has approximately a year to run.  While Mr. Spalti faces substantial obstacles in his search for alternate employment, I have already noted that I do not think they are insurmountable.  It is possible that he will find work within the notice period that pays significantly less than he was earning with MDA, and partially mitigate his loss in that way.  In my judgment, a two month contingency is appropriate.

[40]        Taking this contingency into account, I conclude that Mr. Spalti is entitled to a damages award based on an adjusted notice period of 14 months.