Barry Fisher's Employment Law Blog

In Khashaba v Procom Consultants Group ,        ( 2018 ONSC 7617) Justice  Carole Brown  had to rule on the legality of the following clause in an employment contract.

(b)        Termination for Cause           Procom may, at its option, terminate your employment immediately for cause, without prior written notice or compensation of any nature. For these purposes, “cause” means any grounds at common law for which an employer is entitled to dismiss an employee summarily without notice or compensation in lieu of notice.

The judge ruled that this clause was illegal. Here is her reasoning :

Does the Employment Agreement violate the ESA?

[52]           The “Termination for Cause” provision of the Employment Agreement does not comply with the ESA as it allows for termination without notice or termination pay for conduct meeting the standard of just cause at common law, while the ESA requires the higher standard of “wilful misconduct”.

[53]           Plester v. Polyone Canada Inc., 2011 ONSC 6068 (CanLII), aff’d 2013 ONCA 47 (CanLII), considered the difference between wilful misconduct and just cause at common law, concluding that wilful misconduct is a higher standard. Wilful misconduct involves an assessment of subjective intent, whereas just cause is a more objective standard. Wilful misconduct is colloquially described as “being bad on purpose.” Careless, thoughtless, heedless, or inadvertent conduct, no matter how serious, does not meet the ESA wilful misconduct standard. By contrast, common law just cause for dismissal may be found on the basis of prolonged incompetence, without any intentional misconduct. See also Cummings v. Quantum Automotive Group Inc., 2017 ONSC 1785 (CanLII) at para. 37.

[54]           The saving language in the “Termination without Cause” provision, which states that no employee will get less than they are entitled to under the ESA, cannot apply to save the “Termination for Cause” provision. Procom relies on  Burton v. Aronovitch McCauley Rolley LLP, 2018 ONSC 3018 (CanLII), in which the court found that interpreting the employment agreement in accordance with the intention shown in a “saving provision” meant that there was no violation of the ESA. However in Burton, the saving language was obviously applicable to the part of the termination clause that allegedly violated the ESA. The saving language came after the part of the termination clause that allegedly violated the ESA and stated that “notwithstanding the foregoing, and for greater certainty” an employee will be entitled to everything the ESA requires. Here, the provisions are separate, and it is not at all clear that the saving language within the “Termination without Cause” provision applies to terminations under the “Termination for Cause” provision.

[55]           The principle that “where the language of a termination clause is unclear or can be interpreted in more than one way, the court should adopt the interpretation most favourable to the employee” must also be considered: Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158 (CanLII)at para. 40, citing Ceccol v. Ontario Gymnastics Federation (2001), 2001 CanLII 8589 (ON CA), 149 O.A.C. 315.

So far this looks like a victory for the employee.

However the judge then effectively severed this illegal section from the rest of the clause.

[61]           The “Early Termination” provision of the fixed term contract is made up of five separate clauses. Clause (b) is “Termination for Cause”, Clause (c) is “Termination without Cause.” The remaining clauses are not about the manner in which the employer can terminate the employee. Clause (a) governs resignation by the employee, Clause (d) provides that “these provisions” shall remain in effect throughout the agreement and any renewal or extension of the agreement, and Clause (e) governs the employee’s responsibility to return the client’s property if the employment terminates for any reason.

[62]           The non-compliance with the ESA is within only one of the five clauses: the “Termination for Cause” clause. This distinguishes it from the cases the applicant cites which state that one violation of the ESA renders an entire termination provision void. In North v. Metaswitch Networks Corporations, 2017 ONCA 790 (CanLII), Wood v. Fred Deeley Imports Ltd., 2017 ONCA 168 (CanLII) and Miller v. A.B.M. Canada Inc., 2014 ONSC 4062 (CanLII), relied on by the applicant, all terms of the agreement governing an employee’s termination were contained within one clause. The illegal aspects were sentences or missing words that resulted in an illegal attempt to contract out of an ESA minimum. The courts in those cases held that the entire clause should be void because of the illegality. In Andros v. Colliers Macaulay Nicolls Inc., 2018 ONSC 1256 (CanLII), the termination provision contained two sub-clauses. The trial judge analyzed each separately and found that each were separately illegal and void.

[63]           I interpret the references in the case law to a single violation of the ESA rendering an “entire termination clause” void to mean that the entire clause which contains the illegality should be void. No words or sentences in the clause containing the illegality should be valid or enforceable for any purpose. In this context, the entirety of the “Termination for Cause” clause should be void.

[64]           The other clauses of the “Early Termination” provision remain valid and enforceable. This result accords with the objectives of the ESA. The “Termination without Cause” provision does not violate the ESA. It also contains explicit language showing the parties’ intent that it should comply with the ESA. The other clauses in the “Early Termination” provision do not relate to the manner in which an employer can terminate an employee’s employment. There is no reason why they should not remain valid and enforceable.

[65]           Although I do not rely on this clause, I also note that the agreement contains a severability clause which indicated the parties’ intention that illegal portions of the agreement should be severed.

[66]           I am aware of Iacobucci J.’s statement in Machtinger, confirmed by the Ontario Court of Appeal in Wood, that termination clauses should be interpreted in a way that incentivizes employers to draft ESA-compliant termination clauses at the outset. However, in finding only the “Termination for Cause” clause void, I am not interpreting, rewriting or reading down any part of the Employment Agreement to make it comply with the ESA. I am interpreting the illegal clause, the “Termination for Cause” clause as void.

[67]           I am not of the view that Machtinger, and the jurisprudence that follows it, require that upon finding a violation of the ESA in a termination clause, a court must ignore ordinary contract principles, the intentions of the parties, and common sense. I agree with the statement of the B.C. Court of Appeal in Miller v. Convergys, 2014 BCCA 311 (CanLII), leave to appeal denied, at paras. 14-15 that “the construction of an employment contract remains an exercise in contractual interpretation, and the intentions of the parties will generally prevail, even if this detracts from employment law goals that are otherwise presumed to apply.” In this case, the contract evinced a clear intention to comply with the ESA, the violation of the ESA was in a separate provision from the rest of the contract, and the contract contained a severability clause.

[68]           Furthermore, the way that Procom breached its contract with Mr. Khashaba bears no resemblance to a typical termination. It is difficult to understand the termination of the agreement between Procom and Mr. Khashaba as a termination for cause or without cause. What happened was that the position he was promised was not available. The wrong done to Mr. Khashaba is more sensibly understood as a negligent misrepresentation. Queen v. Cognos Inc., 1993 CanLII 146 (SCC), [1993] 1 S.C.R. 87 at paras. 43-46 held that representations made by an employer to a prospective employee in pre-contractual negotiations are subject to a duty of care. At para. 62, the Supreme Court defined the standard of care:

A duty of care with respect to representations made during pre-contractual negotiations is over and above a duty to be honest in making those representations. It requires not just that the representor be truthful and honest in his or her representations. It also requires that the representor exercise such reasonable care as the circumstances require to ensure that the representations made are accurate and not misleading.

[69]           In Queen v. Cognos Inc., Cognos represented to Mr. Queen that the job he was applying for existed, when in fact it was subject to budgetary approval. Similarly, Procom represented to Mr. Khashaba that the job with Alectra existed, when in fact it knew that Alectra had decided to give the job to another candidate. Procom was not truthful and honest in its representations. There is no doubt that it should have taken more care to ensure that Mr. Khashaba was aware of the truth of the situation. However, the relationship between the wrong done to Mr. Khashaba and the violation of the ESA in the Employment Agreement is no more than a coincidence.

[70]           For all of these reasons, I find that while the “Termination for Cause” provision is void, the other clauses of the “Early Termination” provision remain valid and enforceable.

My Comments :

As the judge seemed to rely more on the fact that in this case there might not have even been a termination of employment, it may be that her reasoning on the illegal aspects of the case are obiter, in other words, not binding .

It also seems to flow that if the termination with just clause sentence is contained in the same paragraph as the  clause as the termination without cause clause, then the whole clause is illegal .

This minor grammatical difference would seem to add even more uncertainty to an already uncertain area of the law.

In Movati Athletic ( Group) Inc v Bergeron ( 2018 ONSC 7258) the Divisional Court heard an appeal regarding the following termination clause :

Movati Athletic Inc. may terminate your employment without cause at any time during the term of your employment upon providing you with notice or pay in lieu of notice, and severance, if applicable, pursuant to the Employment Standards Act, 2000 and subject to the continuation of your group benefits coverage, if applicable, for the minimum period required by the Employment Standards Act, 2000 as amended from time to time.

The Analytical Process :

What is interesting about this case is that the Court sets out in detail the issue how you go about analyzing whether a ESA contractual provision rebuts the presumption of common law entitlement to reasonable notice. This is what they say :

The steps to be followed in determining whether a contractual provision can rebut common law notice are as follows:

1.      All contractual provisions must meet the minimum notice requirements for termination without cause set out in the ESA: Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC), [1992] 1 S.C.R. 986, [1992] S.C.J. No. 41, at p. 998;

2.      There is a  presumption that an employee is entitled to common law notice upon termination of employment without cause;

3.       Provided minimum legislative requirements are met, an employer can enter into an agreement to contract out of the provision for reasonable notice at common law upon termination without cause: Nemeth v. Hatch Ltd., 2018 ONCA 7 (CanLII), 287 A.C.W.S. (3d) 291 (Ont. C.A.) at para. 11 citing Machtinger at pp. 1004-1005;

4.      The presumption that an employee is entitled to reasonable notice at common law may be rebutted if the contract specifies some other period of notice as long as that other notice period meets or exceeds the minimum requirements in the ESA: Machtinger supra, at p. 998;

5.      The intention to rebut the right to reasonable notice at common law “must be clearly and unambiguously expressed in the contractual language used by the parties”: Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158 (CanLII), 134 O.R. (3d) 481, at para. 40;

6.      The need for clarity does not mean a specific phrase or particular formula must be used, or require the contract to state that “the parties have agreed to limit an employee’s common law rights on termination”. The wording must however, be “readily gleaned” from the language agreed to by the parties: Nemeth at para. 9;

7.      Any ambiguity will be resolved in favour of the employee and against the employer who drafted the termination clause in accordance with the principle of contra proferentum: Miller v. A.B.M. Canada Inc., 2015 ONSC 1566 (CanLII), 27 C.C.E.L. (4th) 190, at para. 15 (Div. Ct.); Ceccol v. Ontario Gymnastic Federation (2001), 2001 CanLII 8589 (ON CA), 55 O.R. (3d) 614 (C.A.), at para. 45; and

8.      Surrounding circumstances may be considered when interpreting the terms of a contract but they must never be allowed to overwhelm the words of the agreement itself: Sattva at para. 57.

Why the Clause is Unenforceable:

Applying those above  principles the Divisional Court found that the ESA clause was not enforceable for the following reasons:

1. [36]           The words “pursuant to the ESA” may be interpreted to mean that the notice period in the termination clause complies with the minimum requirements in the legislation, but they do not clearly provide that reasonable notice at common law no longer applies.
2. The contract must be read as a whole. In this case the parties used different language in the probationary clause  than they did in the termination clause. The fact that they used different language for different clauses means that they desired different results . In the probationary clause they were careful to use the words ” only ” and “minimum ” whereas in the termination clause they used ” pursuant to the ESA “
3. The judge found that there was ambiguity in the termination clause:

[45]           The words in this termination clause provide that “the notice provision” is “pursuant to the Employment Standards Act” and group benefits coverage payments must be in accordance with the “minimum period required by the Employment Standards Act”.  Read together, the minimum period required by the ESA could refer to both the notice provision and the group benefits coverage, or only to the group benefits coverage.

[46]           The rule of contra proferentum provides that, where there are two plausible interpretations, the courts should prefer the interpretation that grants better rights to the employee, who did not draft the provision:  Wood at para. 28.

4.  The trial judge said that the situation would have been different if the clause had used the word “only” as that would have brought home the concept that the employee would only get his ESA minimums and not any common law entitlements.

The Divisional Court noted that ” there is no requirement at law to include a warning sign in a termination clause. ”

The judgement notes that the parties agreed that the ESA clause complied with the ESA, however the Court found that it did not sufficiently rebut the common law term of reasonable notice .

I disagree that this clause complies with the ESA for the following reasons :

1. The clause is applicable to terminations without cause. Presumably that means that for terminations with cause the employee gets zilch. The ESA  has a different and higher standard which is ” an employee who has been guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer ” ( see ESA Reg 288/01 sections 2(1) 3 and 9 (1) 6 ) . This makes the clause illegal as it offers less than the ESA . In other words an employee can be terminated at common law for just cause and not receive any reasonable notice but still be entitled to their ESA minimums.
2. Vacation pay is payable on termination pay but not on severance pay. The clause makes no reference to that separate entitlement and by not requiring this to be paid , it pays out less than the ESA, thus the clause is illegal.

I note that neither of these arguments have been been yet adjudicated upon by the Courts.

In Evans v Paradigm Capital ( 2018 ONCA 952) the Court had a situation where the plaintiff held private shares in the defendant which, pursuant to a shareholders agreement, were deemed to be sold back to the defendant upon termination of employment. From time to time the defendant would issue bonuses to shareholders, which I assume were like dividends. The trial judge awarded the plaintiff the bonuses that would have been paid to her had she been employed during the 11 month notice period that was awarded.

The appeal court said no way. Citing Love v Acuity ( 2011 ONCA 130) they held that the proper date for valuing shares that the employer had the right to repurchase upon termination was the actual date of termination, not the end of the notice period. The Court seemed to assume that it would be unfair to give the Plaintiff her return of share capital immediately and also give her the bonuses over the notice period without her capital being at risk .

I think that this is wrong.

The plaintiff is entitled to be in the same economic position as if she had been permitted to work through the notice period. Only at the end of the notice period should  she get her capital back and thus she should get whatever dividends would have been paid to her ( and was paid to other shareholder who fired her).

Now the OCA has created an difference between a employee who has stock options ( these will generally continue during the notice period ) and the employee who actually owns shares that are subject to redemption upon termination.

Both of these mechanisms are part of an employee’s total compensation. Why should they be treated so differently upon a wrongful termination?

There is only one rational reason that I can think of for making this distinction.

If one owns stock options and the strike price is below water throughout the notice period, then the lost options are worthless.

However if the market  price exceeds the strike price, then  once you determine the notice period and assume that the employee would have exercised the options and sold the underlying shares immediately, the calculation of the loss is simple.  You  calculate the difference between the strike price and the price on the day of sale and that is the measure of damages.

If the employee holds the stock and the repurchase price is set at the end of the notice period, then the parties position on the appropriate notice period may be driven not by the Bardal factors but by the share price on a given day .

Imagine a stock whose price fluctuates significantly from day to day. Since the notice period is determined by the Court well after the event, if the stock price dropped 50% from month 6 to month 9 , the plaintiff would be arguing for the shorter  notice period and the defendant for the longer period.

In the current case, if the share price had dropped from date of termination to the end of the notice period and no dividends were paid, then the parties would have reversed their arguments.

In other words, for purposes of commercial certainty and legal predictability, it may make sense to treat stock options differently than stocks held by the employee that are subject to repurchase upon termination of employment.

In Hampton Securities v Dean ( 2018 ONCA 901) the Ontario Court of Appeal was called upon to determine the validity of the following clause :

In the event Hampton wishes to terminate your employment without cause they may do so by paying you the minimum amounts required pursuant to the Employment Standards Act of Ontario in force at the time of termination; no further compensation shall or will be provided. You agree by signing this agreement that such amounts are the total compensation you will receive if terminated without cause.

Both the trial judge and the Court of Appeal held that this clause was illegal because it excluded benefit continuation for the ESA termination period, which in this case was only 2 weeks .

It rejected the Employer’s argument that the words “ by paying you the minimum amounts required pursuant to the Employment Standards Act ” included benefits.

On this point the Court said:

In Bois v MD Physician Services ( 2017 ONCA 857) the Plaintiff had received a bonus entitlement that was to be paid out over the following 3 years. He quit before the 3 years was up but claimed immediate entitlement to the unpaid bonus.

His bonus plan read as follows:

In the event a Participant’s continuous Active Employment terminates, either voluntarily or involuntarily and whether for cause or not for cause, the Participant will immediately forfeit any entitlement to any payments under this plan whether attributable to prior years or to the current year.

In any given year, you must be a permanent employee of the CMAH Group of Companies on December 31 of the year for which the incentive is paid and continue to be so employed on the payment date(s) to receive a payment. Any employee who is no longer employed with the organization or has given notice of termination prior to the payout date will not be eligible to receive a payment.

The Plaintiff relied upon Sections 11(5) and 13(1)  of the Employment Standards Act, 2000 to say that since he had already earned the bonus, it could never be forfeited and should be paid within 7 days of his resignation.

In Cottrill v Utopia Day Spas and Salons  ( 2018 BCCA 383) Justice Goepel reviewed a mental distress award of $15,000. In this decision the Judge reiterated in order to win aggravated damages the Plaintiff must prove 4 elements :

a) That the employer engaged in conduct during the course of the dismissal that was unfair or in bad faith , AND

b) That the manner of dismissal caused the mental distress, AND

c) That the damages must be more than the normal distress and hurt feelings resulting from dismissal AND

d) There must be real demonstrable evidence regarding the mental distress .

Here is the quote regarding the 4th requirement.

In this case, as in Lau , there was no evidence from the plaintiff or from family members, friends or third parties concerning the impact of the termination on Ms. Cottrill and her mental state. Although not required, there was no expert evidence, medical or otherwise. The only evidence of mental distress is that Ms. Cottrill cried during the March meeting, following which she had to go home early because she was so upset, and that at the June meeting, she went numb and could not take anything in. The evidence of Ms. Cottrill’s reactions at the two meetings at its highest establishes a transient upset. It falls well short of the legal standard that requires a serious and prolonged disruption that transcends ordinary emotional upset or distress.

Remember this was a fairly modest award for aggravated damages and still the Court required real third party evidence of the mental distress.

What is interesting about the trial decision is that the Judge found that the Plaintiff’s employment agreement had an enforceable ESA termination clause so that her recovery was limited to a lousy 8 weeks pay.

I suspect that the trial judges willingness to award aggravated damages was in part influenced by his inability to award reasonable notice. The trial judge seemed determined to award this plaintiff more than her minimal contractual entitlement. After all, she was a 11 year employee who was fired for poor performance and given no termination pay at all.

Call me a cynic or a realist, but I bet that if there was no termination clause, the judge would have awarded her a generous notice period and nothing for aggravated damages.

But what do I know. I am just meditator.

In Guthrie v St Joseph Print Group ( 2018 ONSC 1411) Master Champagne had to decide whether a series of emails between senior management and the human resources department had to be produced in an Affidavit of Documents .

The Plaintiff alleged that he was constructively dismissed when after 34 years as a salesman his compensation was reduced by 10% after being placed on  Performance Improvement Plan.

The Defendant claimed privledge on two grounds:

Litigation Privilege: Because the emails in question were about a year before the constructive dismissal, the Master held that it is not plausible that the Defendant contemplated litigation that far in advance and that because the predominant purpose of the  emails was performance issues, no privilege applied.

Wigmore Test : There are 4 required parts to the common law test as to whether or not a non statautory  privilege should exist.

In Lawis v ProCabinet Design and Coastal Marine ( 2018 CanLII 95659) Judge Orr of then Provincial Court of Nfld and Labrador has a situation where the contract contained the following provisions:

This contract shall have a duration of 24 months from the date the Employee assumes his functions.

Notice of Resignation Should he /she wish to terminate the present contract, The Employee, agrees to give the Employer written notice thereof at least one week in advance.”

“The Employer must give written notice before terminating the contract of the Employee if the Employee has completed 3 months of uninterrupted service with the employer and if the contract is not about to expire. This notice shall be provided at least one week in advance.”

The Employee was terminated after 12 months due to lack of work.

The issue thus was whether the Employee was entitled to the balance of the contract ( 12 months ) or the one week notice.

Interestingly the Judge noted that ” there no provisions with respect to notice periods”.

In finding that the Employee was entitled to the 12 month balance of the term, the Judge said as follows:

 In Miller v. Convergys CMG Canada Limited, 2014 BCCA 311 (CanLII) 

The Court of Appeal considered the interpretation of employment contracts holding:

• The court should strive to give effect to what the parties reasonably intended to agree to when the contract was made.
• The language of the contract should be given its plain and literal meaning, and be interpreted in the context of the entire agreement. Consideration also may be given to the factual matrix surrounding the creation of the contract.
• If the contractual language reveals two possible interpretations, the court should seek to resolve this ambiguity by searching for an interpretation that reflects the true intent and reasonable expectations of the parties when they entered the contract, and achieves a result consistent with commercial efficacy and good sense. Considerations of reasonableness and fairness inform this exercise.
• If these principles do not resolve the ambiguity, then extrinsic evidence may be admissible to assist in ascertaining the parties’ intent.
• As a last resort only, the principle of contra proferentem may be invoked to favour construction of the ambiguity against the party who drafted the agreement. The principle of contra proferentum may not be used, however, to create or magnify an ambiguity.
• Employment contracts should be interpreted in a manner that favours employment law principles, specifically the protection of vulnerable employees in their dealings with their employers. Even so, the construction of an employment contract remains an exercise in contractual interpretation, and the intentions of the parties will generally prevail, even if this detracts from employment law goals that are otherwise presumed to apply.

[21]        In Mr. Lawis’s case, it would be unreasonable to interpret the clause in such a way that it allowed the employer to terminate the agreement without cause on one weeks’ notice. Considering all the facts and specifically that the agreement was for a term of two years and involved the employee leaving his current employment and traveling from the Philippines at his own expense. The clause does not specify any notice period and as a result must be read as not setting out a notice period. I find as a result that Mr. Lawis is entitled to be paid the balance of the unexpired term of the agreement.

The contract interpretative principles cited in this case are very similar to those set out in the Ontario Court of appeal case called Wood v Fred Deeley Imports (2017 ONCA 158) where Laskin J. set out the following guiding principles:

(c)       The jurisprudence on interpreting employment agreements

[25]     The question of the enforceability of the termination clause turns on the wording of the clause, the purpose and language of the ESA, and the jurisprudence on interpreting employment agreements. That jurisprudence is now well-established. I will summarize it briefly.

[26]     In general, courts interpret employment agreements differently from other commercial agreements. They do so mainly because of the importance of employment in a person’s life. As Dickson C.J.C. said in an oft-quoted passage from his judgment in Reference re Public Service Employee Relations Act (Alberta), 1987 CanLII 88 (SCC), [1987] 1 S.C.R. 313, at p. 368:

Work is one of the most fundamental aspects in a person’s life, providing the individual with a means of financial support and, as importantly, a contributory role in society. A person’s employment is an essential component of his or her sense of identity, self-worth and emotional well-being.

[27]     As important as employment itself is the way a person’s employment is terminated. It is on termination of employment that a person is most vulnerable and thus is most in need of protection: see Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (SCC), [1997] 3 S.C.R. 701. 

[28]     The importance of employment and the vulnerability of employees when their employment is terminated give rise to a number of considerations relevant to the interpretation and enforceability of a termination clause:

•        When employment agreements are made, usually employees have less bargaining power than employers. Employees rarely have enough information or leverage to bargain with employers on an equal footing: Machtinger, p. 1003

•        Many employees are likely unfamiliar with the employment standards in the ESA and the obligations the statute imposes on employers. These employees may not seek to challenge unlawful termination clauses: Machtinger, p. 1003

•        The ESA is remedial legislation, intended to protect the interests of employees. Courts should thus favour an interpretation of the ESA that “encourages employers to comply with the minimum requirements of the Act” and “extends its protections to as many employees as possible”, over an interpretation that does not do so: Machtinger, p. 1003.

•        Termination clauses should be interpreted in a way that encourages employers to draft agreements that comply with the ESA. If the only consequence employers suffer for drafting a termination clause that fails to comply with the ESA is an order that they comply, then they will have little or no incentive to draft a lawful termination clause at the beginning of the employment relationship: Machtinger, p. 1004.

•        A termination clause will rebut the presumption of reasonable notice only if its wording is clear. Employees should know at the beginning of their employment what their entitlement will be at the end of their employment: Machtinger, p. 998.

•      Faced with a termination clause that could reasonably be interpreted in more than one way, courts should prefer the interpretation that gives the greater benefit to the employee: Ceccol v. Ontario Gymnastics Federation (2001), 2001 CanLII 8589 (ON CA), 149 O.A.C. 315, Family Counselling Centre of Sault Ste. Marie and District (2001), 2001 CanLII 4698 (ON CA), 151 O.A.C. 35.

In spite of these clear statements from two Courts of Appeal, in my opinion some judges still seem to apply a strictly commercial interpretation to employment agreements and simply do not properly follow the special rules of interpretation that apply to employment agreements .

In Fontaine v White Buffalo Youth Inhalant Treatment Centre ( CLC -YM2707-10984) Adjudicator Koskie had a a situation where the employee on a fixed term contract worked for one week after the expiry of the contract and was then terminated.

Normally when one works beyond a fixed termination date, the contract morphs into a term of indefinite employment which can only be terminated upon providing reasonable notice.

However in this case the parties were in the process of actively negotiating whether to extend her contract, renew it for another term or bring the relationship to an end. As such there was no agreement between the parties and therefore the employers’ decision to not renew was not a dismissal, even though it was a week after the expiry date in the original contract.

In what what must be one of the largest award of costs in a wrongful dismissal actions Justice Chiappetta in Ruston v Keddco ( 2018 ONSC 5022) awarded the plaintiff full indemnity costs of this extraordinary amount. The trial judgement was for $604,627, of which $125,000 was for extraordinary damages.

On February 7, 2019 the Ontario Court of Appeal upheld both the decision on the merits and the appeal from the order for costs . The Plaintiff Respondent was also awarded $35,000 for costs of the appeal.

In simple terms the total  cost award was $591,684.

This was the Trial Judges reasoning :

(1) The costs requested are proportionate to the result. $700,000 was in dispute for the plaintiff’s claim plus $1,750,000 in the conter-claim. Out of a total of $2,450,000 in dispute, the plaintiff was successful on $2,354,628.00, calculated as the amount won, plus the entire value of the conter-claim which was dismissed in its entirely.

(2) The defendant pursued unfounded allegations of fraud. This was a matter of utmost importance to the plaintiff. Both his financial and professional future were at risk if the allegations were proven in court.

(3) It was the defendant’s conduct that contributed to the plaintiff’s costs. The plaintiff’s costs can be said to be what a reasonable party would expect to spend upon pursuing litigation against a party who engaged in conduct like that of the defendant. The defendant refused to admit facts but failed to contest them at trial. The defendant only provided relevant financial documents after the plaintiff brought a motion. The defendant provided will say statements 14 days in advance of the trial and not 30 days in advance as ordered. The defendant relied on only 45 of the 163 documents it produced on the first day of trial. The defendant caused an adjournment of the first trial less than six weeks before the date scheduled due to the introduction of a 25 person witness list. This led to a one year delay, double preparation and the requirement to have a second pre-trial. The defendant called only two fact witnesses at trial. By this conduct, the defendant caused the plaintiff to incur far greater costs than expected, substantially increasing the costs of trial preparation and the length of trial.

(4) The counter-claim rendered this action much more complex than a simple case of wrongful dismissal. Because of the fraud accusations the plaintiff had to hire an expert witness costing approximately $30,000. 

(5) The defendant threatened the plaintiff with expensive litigation if he pursued his wrongful dismissal matter and then proceeded to follow through on the threat. The plaintiff would have been denied access to justice had his lawyers not agreed to defer their fees. The plaintiff survived financially by relying on his RRSP’s, selling his house below market value and breaking his car lease.

(6) The use of two counsel at trial was reasonable for this case, considering the complexity of the counter-claim and the serious consequences to the plaintiff if he was unsuccessful in defending the counter-claim. Having adjudicated the trial, I observed that the work done during the trial by both counsel was different.

(7) The amounts claimed by the plaintiff to prepare the trial record were reasonable as the plaintiff had to determine if it was appropriate to set the matter down for trial. This requires a detailed documentary review to ensure full disclosure and that there will be no need for further motions.

(8) Having reviewed the costs outline submitted by the plaintiff, I have concluded that the time spent for various steps in the litigation is reasonable. It cannot be compared to the costs outline submitted by the defendant which is not certified. Further, my observation at trial was that plaintiff’s counsel was well prepared for trial while the defendant’s counsel was comparatively unprepared in that he arrived late or not at all in one instance, could not advise the court of the sequence and timing of his witnesses, failed to effectively use his book of documents and delivered materials at the last minute. The plaintiff’s costs outline is reflected of more time spent than the defendant in preparing for trial. This difference was demonstrated at trial to the detriment of the defendant’s counsel.

(9) The plaintiff was awarded both punitive and moral damages. The costs awarded herein are done so to indemnify the plaintiff, as the successful litigant, for the costs of litigation. Any references to the defendant’s conduct are meant to explain why the plaintiff’s costs are higher than one would reasonably expect from litigating a simple claim for wrongful dismissal and in no way reflect an overlap of the punitive or moral damages awarded.

That is what happens when the Judge hates what your client and/or lawyer has done.

Compare that with Justice Arrell in Wickens v Chambers Insurance Professionals ( 2018 ONSC 2412). In a three day wrongful dismissal trial in which the judge commented on the co-operation of counsel and their conduct of the trial in a ” most efficient manner ” he awarded the winning defendant costs of only $18,000.

Acting like a jerk cost the loser in Keddco the sum of $49,698 per day of trial.

Acting like a mensch cost the loser in Wickens only $6,000 per day of trial

Plaintiff’s counsel in Rushton  was Andrew Monkhouse and Samantha Lucifora of Monkhouse Law.