20 Month Wrongful Dismissal Award for Employee Upheld

The Ontario Court of Appeal has released several wrongful dismissal decisions over the past few months.  It has also released some employment law cases that are not specifically wrongful dismissal.  This is a first of a group of blogs to review those cases and provide some commentary.  There is no clear pattern to the decisions.  In some cases, the Ontario Court of Appeal has been very sympathetic to employees and to employee rights.  In other cases, the Court has shown a willingness to side squarely with employers, particularly when dealing with certain contractual clauses.  Ultimately, these cases seem to be dependent on the particular facts – as well as the particular panel of judges hearing the appeal.

Brake v. PJ-M2R Restaurant Inc. (2017) ONCA 402, is one of those wrongful dismissal cases in which the Court has sided with the dismissed employee completely.

Esther Brake was a McDonald’s restaurant manager for more than 25 years.  She had been working with a specific franchise owner for more than 20 years.  For most of her career, she had been given excellent performance reviews.

After years of receiving excellent reviews, she was given her first negative review in late 2011.  She was then transferred to a poor-performing location, one of the worst locations of all the McDonald’s in Canada.  Ostensibly, this was done to enable her to improve her performance.  After three months at the new location, she was called into a meeting and told that she was being put on a 90 day performance review program due to her poor performance.  The program included goals that were found to be “arbitrary and unfair” and very difficult to meet.  At the end of the 90 day program, in mid-2012, the employer gave Ms Brake a choice between accepting  a demotion and being fired, claiming that she had “failed” the program.  Ms Brake refused the demotion.  She brought a lawsuit for constructive dismissal.  She was successful at trial.  The trial judge held that this was a wrongful dismissal and awarded Ms Brake 20 months’ pay plus legal costs.

The trial judge had ruled that Ms Brake had not been given a sufficient and reasonable opportunity to correct issues that the employer may have had with her performance.  She was “set up to fail.”  The decision to demote her was “substantial and fundamental” and was a constructive dismissal.

The employer appealed on several grounds, all of which were dismissed.

The Court of Appeal came to the following conclusions, some of which will be quite helpful to other dismissed employees.

  1.  If a trial judge reviews the evidence carefully, articulates the relevant legal principles and applies those principles to the facts, the trial judge’s decision will be entitled to reasonable deference from the Court of Appeal;
  2. A demotion from a managerial or supervisory position to one that is non-supervisory is a constructive dismissal and does constitute a substantial or fundamental change to a an employee’s position;
  3. Despite the Supreme Court of Canada’s decision in Evans v. Teamsters, Local 31, an employee is NOT obliged to mitigate damages after being dismissed by accepting an offer of continued employment with the same employer in an atmosphere of hostility, embarrassment or humiliation.  In this case, it would have been unreasonable to require Ms Brake to continue working in the demoted role.
  4. A credit letter provided by the employer confirming years of service can be relied upon to demonstrate the length of service of the employee. The trial judge in this case was entitled to award 2o months to a 20 year McDonald’s employee.  The notice award was well within the reasonable range.
  5. With respect to mitigation – the Court of Appeal noted that any amounts earned during the statutory notice and/or severance period are NOT deductible from the dismissal award.  In other words, a 20 year employee would be entitled to 8 weeks’ statutory notice pay and 20 weeks’ statutory severance pay under the Ontario Employment Standards Act.  Any earnings during those first 28 weeks would NOT reduce the amount owing to the employee.
  6. The Court also noted that part time income that the employee was earning or could have earned while working in the previous position is not necessarily deducted from damages, especially in cases where the part-time employment is a continuation of part-time employment that the employee had while working in her or his old position.
  7. The Court concluded by noting that some income earned during the notice period need not be deducted from the damages award if the income is not really a “substitute” for the original loss of income.  The Court noted that the income earned was part of the income that the employee could have earned anyways, even if she had still been working for the employer.  The Court expressly stated that EI payments are NOT to be deducted from the amount owed by the employer in a wrongful dismissal case.

Having dismissed all of the grounds of appeal, the Court of Appeal awarded costs in the sum of $19,500 for the appeal, which would be in addition to the costs awarded at trial.

For the most part, these points are not particularly new.  Much of this decision is a review by the Court of Appeal of the trial judge’s factual findings and the trial judge’s application of wrongful dismissal and constructive dismissal law to those factual findings.

However, the case does illustrate that the Court of Appeal can be very sympathetic to employees in specific cases.  In this case, Justices Gillese, Feldman and Pepall were wholly supportive of the decision of the trial judge and have provided a decision that fully vindicates the rights of the dismissed employee.

As I will note in my other blog posts, some other employees who have come before the Ontario Court of Appeal recently have had measurably less success.  Of course the panels have been different.  Aside from the specific factual details of the particular case, it is quite clear that the specific judges who form part of any particular Court of Appeal panel will also have a major effect on the outcome of almost any employment law case.

Quick Justice? Bring a Summary Judgment Motion

The use of the summary judgment process is becoming more and more widespread in wrongful dismissal cases.

In this post, I look at three recent decisions to show how useful this process can be for plaintiffs.  The conclusion is that it is getting more difficult for employers to drag their feet and lowball their dismissed employees in non-cause wrongful dismissal cases.  Employees faced with low, out of the range offers can use the summary judgment process to get a fairly quick judgment with minimal risk.

In Beatty v. Best Theratronics Ltd., (2015) ONCA 247, the court upheld a 16 month notice period for a radiation safety officer.  Clifford Beatty was 58 years old when he was dismissed.  He had worked for the employer for a period of 16 years.  In a summary judgment motion, he was awarded 16 months’ notice by an Ontario Superior Court judge.  The defendant appealed the decision and tried to argue that the appropriate notice period was only 12 weeks.  Not surprisingly, this seems to have angered the appellate court panel which sided, quite firmly, on behalf of the plaintiff.  The defendant might have attracted a bit more court sympathy if it had put forward a reasonable alternate notice period – perhaps 10 or 12 months.  But there was no basis, on the record, for proposing 12 weeks.  The defendant also argued that the plaintiff had failed to apply for a sufficient number of positions over the course of the notice period.  This submission was also rejected by the court, which upheld the trial court’s decision that the plaintiff had conducted a “reasonable” job search.  The court also, once again, noted that there were no real credibility or factual issues that would have required a trial rather than the use of a summary judgment process.  The appeal was dismissed with a costs award of $16,500.  This certainly looks like a reasonable victory for the dismissed employee.

In Maxwell v. United Rentals of Canada Inc. (2015) ONSC 2580, the summary judgment process was used by a service manager who had worked for his employer for 31 years.  Kevin Maxwell was 51 years old when he was dismissed on a without cause basis.  He was earning an annual salary of approximately $64,700 but with bonuses and other amounts his annual income came to $81,100.  The case went to a summary judgment motion.  The plaintiff asked for 20 months’ compensation.  The defendant proposed that 16 months should be the proper number.  The court awarded 18 months’ compensation.  A key issue seems to have been the annual figure to be used.  The defendant argued that the plaintiff’s base salary should be the appropriate figure.  The court chose to use the plaintiff’s T4 amount, which included bonuses and other amounts.  This represented the plaintiff’s earnings more closely.  The court also rejected the defendant’s arguments that the plaintiff had failed to mitigate damages properly by applying to 120 jobs.  The court specifically noted that the defendant had not provided any assistance and this “is an important factor to be taken into consideration when the employer then accuses the former employee of not taking adequate steps to secure alternate employment.”  While this decision highlights the fact that dismissed employees are entitled to be paid on the basis of their full annual income rather than base pay alone, the notice period awarded to the plaintiff was probably low.

In another recent decision, one of the key issues was how the money should be paid.  In Markoukis v. SNC-Lavalin Inc. (2015) ONSC 1081, the dismissed employee had worked for the defendant for almost 41 years.  Eftihios Markoulakis was 65 at the time of dismissal and was a senior civil engineer.  He was paid out 34 weeks’ pay, based on the Ontario Employment Standards Act minimums for notice and severance pay.  He sued his employer and asked for 30 months’ notice.

The trial court judge agreed that there were exceptional factors here including the almost 41 years of service that the plaintiff had under his belt.  She ordered a notice period of 27 months.  However, the motion was heard only 31 weeks after the plaintiff was dismissed.  It would be unfair to order the defendant to pay the full 27 months’ compensation when the parties were only in month 8.  The defendant would be entitled to credit if the plaintiff were to earn any other money or find alternate employment.  The court held that the defendant would be required to pay the plaintiff monthly until the end of the 27 month notice period.  The court held that the defendant reserved the right, during the notice period, to bring a motion challenging the plaintiff’s mitigation efforts or dealing with other issues that might be arise.  While the plaintiff won an extraordinarily lengthy notice period, he will have to continue to report to the defendant about his mitigation efforts for the balance of the notice period.  So this was not a “no strings attached” victory.

Looking at all three cases together, it is quite evident that summary judgment motions are one of the most appropriate ways of dealing with wrongful dismissal cases, where no cause is alleged.  They are relatively inexpensive, relatively quick and quite difficult to defeat.

The best approach for employers defending these motions is to take a reasonable approach to damages.  Employers that show up in court and put forward extremely low suggested notice periods are likely to find that the plaintiff has won everything that he or she requested.  On the other hand, where the defendant puts forward a reasonable notice period, as in the Maxwell case, the court might be more inclined to view the employer more favourably.

For dismissed employees, as in all wrongful dismissal cases, it is very important to prepare a detailed and reasonable record of job search and other mitigation efforts.  Although the standard is not an extremely onerous one, employees must be able to show that they have made reasonable efforts to try and find alternate employment or an alternate comparable income source.  If the dismissal was “without cause” and the dismissed employee is making reasonable efforts to find new employment, the summary judgment process can be invaluable.

 

 

 

Use of Summary Judgment Motions in Dismissal Cases

What are summary judgment motions?  Are they effective in wrongful dismissal cases?  A recent decision of the Ontario Court of Appeal in Arnone v. Best Theratronics Ltd. has provided some helpful guidance for those who would like to use this process.

A summary judgment is a motion for judgment that bypasses the need for a trial.  It can be used where there is no “genuine issue” that requires a trial.  It can often allow parties to save time and legal costs and has been used quite often in Ontario more recently in non-cause wrongful dismissal cases.

The case involved a 53 year old employee who was dismissed without cause after 31 years.  After the parties could not come to a mutually agreeable severance arrangement, the employee sued for wrongful dismissal.  Rather than proceed to a trial, he brought a summary judgment motion in the Ontario Superior Court.  Although this process allows parties to bypass some of the more expensive procedures in other litigation cases, including extensive examinations for discovery, motions and a trial, it can still be a costly process.  Here there were cross examinations on affidavits filed in preparation for the summary judgment.

The motions judge hearing the case initially made a number of findings and awards that were challenged on appeal to the Court of Appeal.  For purposes of this note, I wanted to highlight some key findings of the Court of Appeal, which are relevant and helpful to future litigants.

1.  Summary Judgment is a Great Process for Without Cause Wrongful Dismissal Cases

The Court of Appeal had little trouble concluding that there were no “genuine issues requiring a trial.”  It noted that “a straight-forward claim for wrongful dismissal without cause, such as the present one, strikes me as the type of case usually amenable to a Rule 20 summary judgment motion.”  The defendant tried to resist the motion by arguing that it was unclear whether the plaintiff was a customer service specialist or a manager.  The defendant argued that this issue required a trial.  The Court of Appeal held that there was no issue requiring a trial.  It also noted that, in any event, “character of employment” is a “factor of declining importance.”  In other words, the factors that are far more important to consider include a dismissed employee’s age and length of service rather than the actual position that the person held.

2. Reasonable Notice

The motions judge awarded the plaintiff a notice period of 16.8 months since that was the amount of time that the plaintiff needed to bridge his pension.  The Court held that this was an incorrect approach.  However, the Court increased the notice period to 22 months, upholding the alternate finding that the motions judge had made.  The defendant argued at the Court of Appeal that the notice period should have been 14.4 weeks.  This position was roundly rejected and the Court of Appeal held that 22 months was “within the acceptable range of notice periods for employees in circumstances similar to the plaintiff.”

3.  What About Mitigation?

The Court of Appeal confirmed that any money earned by a dismissed employee during the applicable notice period is to be deducted from the amount that the employer is ordered to pay for the applicable notice period.  There is little new here as this is a statement of well settled law.   If the plaintiff starts earning a higher income during the applicable notice period, this decision suggests that the plaintiff could actually lose money by having a longer notice period.  However, the notice period in this case ensured a full pension for the plaintiff.

4.  Pension Benefits

Dismissed employees are entitled to the “present value of the loss of pension benefits during the notice period.”  This calculations should be performed by an actuary.  In this case, the assessment of $65,000 as the pension loss by an expert actuary was not challenged.

There were two other issues in this case that are less commonly contested.  The plaintiff was awarded a “retiring allowance of 30 weeks’ pay” based on a company policy that provided a retiring allowance of one week’s pay per year to retiring employees.  The court held that the “retiring allowance” policy did not clearly exempt dismissed employees from receiving the retiring allowance.  This allowance was payable in addition to the other wrongful dismissal damages.

It is also worth noting that the motions court made a cost award of $52,280 on this summary judgment motion.  The cost award was challenged by the plaintiff, who had apparently made an official “Offer to Settle” before the motion that was not seen by the motions court judge after the issue of liability was determined.  The plaintiff wanted to argue that he would be entitled to costs on a higher scale as a result of having submitted valid offers to settle before the motion.  Moreover, there would still be further costs to be awarded as a result of this appeal.  The Court of Appeal agreed that the issue of costs should be reexamined in light of the offers.

The end result is that this was certainly not an inexpensive summary judgment motion.  While it is true that the parties avoided many days of trial, there were still affidavits, cross examinations and submissions.  Nevertheless, the process seems to have worked out quite well for the plaintiff, on paper at least, who was ultimately awarded 22 months’ pay less any amounts earned during that period, a retiring allowance equal to 30 weeks’ pay, pension damages of $65,000 and a significant costs award.

Plaintiffs who have been dismissed without cause and provided with a low ball offer may be well advised to consider a summary judgment motion as the best way to advance a wrongful dismissal claim through the legal process.

 

 

Less Money for Dismissal in Tough Economic Times?

Should a dismissed employee be entitled to less severance when the employer is facing tough economic times?  This was the question facing an Ontario Superior Court judge recently in Gristey v. Emke Schaab Climatecare Inc, a case released on March 20, 2014.  According to the trial court judge, the answer was yes.

The plaintiff had worked in residential gas installation for 12 years for the defendant.  He was earning an income of approximately $55,000 annually, though it fluctuated depending on the availability of work.  He was dismissed after 12 years of service on a “without cause” basis.  A number of other employees were also dismissed at the time.

At the time of dismissal, the defendant offered to pay the plaintiff a total of 8 weeks’ pay, which was the minimum that would have been owed under the Ontario Employment Standards Act.  It asked for a signed release.  The plaintiff refused and brought a claim for wrongful dismissal.  The defendant paid out the 8 weeks’ pay.

At trial, the defendant argued that business was slow.  It took the position that the plaintiff would have have worked a very small number of hours if he had not been dismissed and that his damages would have been reduced to a very nominal amount.  The trial judge rejected the argument that there was sufficient evidence to draw this conclusion.  In other words, the court concluded that the plaintiff still would have earned an income if he had not been dismissed.

However, the trial judge expressly accounted for tough economic times in assessing the notice period.  First, the judge concluded that the appropriate notice period should have been 12 months.  This is probably a reasonable conclusion, based on all of the common law factors.  The plaintiff was 52 when he was dismissed.  Looking at all of the common law factors, including length of service, position, age, availability of comparable work and other relevant factors, a 12 month award would have made sense.

Justice Conlan then proceeded to reduce the plaintiff’s award by four months’ pay because of the “market and economic health of the [defendant]” at the time of dismissal.  In doing so, the court relied on the decision of Bohemier v. Storwal International, (1982) CanLii 1764 (Ont S.C.J.), a decision that had been affirmed by the Ontario Court of Appeal in 1983.

The Bohemier decision held that a notice period should be fair to both the employee and the employer.  However, as it has been interpreted subsequently by other court decisions, it did not say that the plaintiff’s notice period should be eviscerated because the employer is facing tough economic times.  In fact, if times are really tough, the dismissed employee will have a more difficult time finding alternate employment and could require a longer notice period.

It may be that Justice Conlan was swayed in this particular case by the fact that the plaintiff’s hours fluctuated and there might have been less work over the notice period.  Or perhaps the court was not fully convinced of the plaintiff’s mitigation efforts, even though the court expressly concluded that the plaintiff had mitigated his damages satisfactorily.  In any case, the court concluded that 12 months’ severance was too much for the plaintiff and reduced it to 8 months, expressly relying on the fact that the defendant was facing difficult economic times.

It remains to be seen whether the plaintiff will appeal this decision.  the amount at stake would be approximately $20,000.  There could also be significant legal costs at stake, depending on what types of offers to settle, if any, were exchanged between the parties before the trial.  The Ontario Court of Appeal does not like to “tinker” with notice periods if they are in a “reasonable range.”  However, the plaintiff could try arguing that the court made an error in principle by placing an overly significant emphasis on the economic challenges facing the defendant.

If this decision stands, it would be a very helpful piece of ammunition for defendants facing tough times.  Defendants can use this argument to limit severance liability in tough economic times.

For plaintiffs, it can be a real double whammy.  The employee is let go in difficult economic times, where it may well take longer to find work. Then the plaintiff faces a reduced notice period because of those same difficult economic times.  There seems to be a problem with this logic…

We will watch to see what happens with this case and how (if at all) it is applied.

Constructively Dismissed Employee Not Required to Return to Work

Is a constructively dismissed employee required to return to work to “mitigate damages?”  This issue has attracted a great deal of judicial attention across Canada.  Since the Supreme Court of Canada decision in Evans v. Teamsters Local Union No. 31, courts across the country have held that employees can be required to return to work after being dismissed, if asked to do so by their former employers, as a way of mitigating damages.  If they refuse to do so, they risk losing all of their wrongful dismissal damages.

In a recent Ontario decision, the Court of Appeal weighed in on this issue with a decision that is quite helpful for constructively dismissed employees – finally.  In Farwell v. Citair Inc., a decision released on March 7, 2014, the Court of Appeal upheld a trial court decision that the plaintiff was not required to return to work after being constructively dismissed in order to mitigate his damages.

The plaintiff, Ken Farwell, had worked for the defendant for 38 years.  He was 58 years of age and was working as the Vice President of Operations.  The defendant restructured and transferred the plaintiff to the role of Purchasing Manager.  The plaintiff took the position that he had been constructively dismissed.  He resigned and brought a lawsuit.

The trial court judge held that the plaintiff had been constructively dismissed.    The new position would have involved a significant demotion and loss of prestige and status.  Monetarily, it would have left the plaintiff with a lower bonus even though other component of his compensation would have remained the same.  Overall, the demotion from VP Operations to Purchasing Manager was held to have been a constructive dismissal.

The defendant argued that the plaintiff failed to mitigate his damages by refusing to work out the notice period in the new position after having been constructively dismissed.  The trial court judge rejected this argument.  Morissette J. held that an employee is not required to work in “an atmosphere of hostility, embarrassment or humiliation.”  The court considered factors including “work atmosphere, stigma and loss of dignity.”  It concluded that it would have been objectively humiliating for the plaintiff to have returned to work.

On appeal, the defendant challenged several rulings of the trial court judge.

The Ontario Court of Appeal had little difficulty in concluding that the plaintiff had been constructively dismissed when he was demoted.  It also upheld the 24 month notice period quite summarily.

The real issue for the Court of Appeal was whether the plaintiff should have been required to return to work to mitigate his damages after having been constructively dismissed.  If the Court of Appeal had agreed with the defendant, it would have become virtually impossible to bring a constructive dismissal lawsuit successfully.

The Court of Appeal begins its discussion with a favourable interpretation of the Evans decision as one which promotes the efficient breach of contract.  The Court of Appeal lauds the effects of this decision, in general.

However, the Court then declines to overturn the trial court ruling on mitigation.  It grudgingly accepts that the plaintiff was not required to work in a lesser role after having been constructively dismissed since the trial court judge had held that this would have been “objectively humiliating.”

The crux of the matter, however, according to the Court of Appeal, is that the plaintiff was not asked to return and work out the notice period after having been constructively dismissed.  If the employer had asked him to return to the same position he had held, for the balance of the notice period, he would have been required to do so.  Here, the Court of Appeal held that there was no evidence of an appropriate return to work offer, after the plaintiff had been constructively dismissed.

This is quite a helpful case for constructively dismissed employees after a string of stinging defeats in courts across Canada. The decision suggests that if there is a constructive dismissal of the type that involves a significant demotion, the employee will not be required to mitigate damages by working out the notice period in the lesser role.  This contrasts with cases like Evans where the employee is asked to return to work in the same position – after being dismissed – actually or constructively.

The Farwell decision means that constructive dismissal lawsuits are still alive in Ontario.  If there is a provable case of demotion, loss of status, loss of prestige and perhaps, embarassment, the employee will not be required to return to work.  That being said, this may not be the last word on this line of cases.  Stay tuned and tread carefully.

 

 

 

Failure to Mitigate Defeats Dismissal Claim

In yet another reported wrongful dismissal case, a B.C. Court has minimized the damages of a dismissed employee because of a failure to mitigate.  She refused to return to work when asked to do so by her former employer.  The case is a further example of the increasingly common jurisprudence, across Canada, where courts have heavily penalized dismissed employees for failure to mitigate when they refuse to return to work, even after they file a wrongful dismissal lawsuit.

In this case, Fredrickson v. Newtech Dental Laboratory Inc. the plaintiff had worked as a registered dental assistant for more than 8 1/2years.  After what appears to have been an office dispute with her boss, the plaintiff went off on a medical leave.  During the leave, she provided minimalist medical notes.  In response to her leave, her boss demanded that she return to work and threatened to fire her without notice or compensation.  Nevertheless, she remained off on a medical leave.

A few months later, the plaintiff provided a note indicating that she was fit to return to work.  She showed up for work at her usual time and was promptly told that she was being put on a lay-off due to lack of work.  Two months after that, she retained a lawyer who sent a demand letter.  In response, the defendant told her that she was being recalled and  should return to work.  The plaintiff did not return to work but commenced a claim for wrongful dismissal instead.   The defendant subsequently offered to pay for the time that she had been out of work as part of the return to work proposal and made a similar offer after litigation was commenced.

The plaintiff sued for wrongful dismissal.  At trial, the defendant admitted that the plaintiff had been wrongfully dismissed but took the position that she had failed to mitigate her damages by returning to work.  The trial court judge agreed.

The court applied the Supreme Court of Canada decision of Evans v. Teamsters Local Union No. 31 and ultimately concluded that it was objectively reasonable for the plaintiff to have been required to return to work.  According the trial court, there had been a failure to mitigate.

In coming to this conclusion, the trial judge:

-ignored or disregarded the fact that plaintiff was put on a lay-off right when she returned from a medical leave and that she had been threatened while on leave with termination;

-disregarded or minimized the fact that the employer provided an unprofessional reference letter and a botched ROE;

-overlooked the fact that the employer did not offer to compensate the plaintiff for the time lost until after the plaintiff filed the lawsuit

-minimized the notion that the plaintiff had been subject to embarrassing and humiliating treatment.

The court concluded that the employer had not had a “sinister motive” when he put the plaintiff on lay-off and that would have been able to return to the work that she had performed for more than 8 years.  Accordingly the plaintiff was only entitled to damages from the date of the lay-off until the date she was recalled to work.  Ouch!

You can find a discussion of some other similar cases here.

The bottom line is this:

If an employer wrongfully dismisses an employee and then decides to recall the employee back to work – even after the employee commences a lawsuit, there are many court decisions from across Canada that support the position the employee must return to work.

If the employee is “recalled” to work, even after filing a wrongful dismissal lawsuit, but refuses to return, the damages awarded by a court may be minimal.

 

 

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