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.

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.

Wins Wrongful Dismissal: But Fails to Mitigate

In another blow to dismissed employees. a B.C. court has reduced the wrongful dismissal damages that would have been owing to an employee after the employee failed to return to work when “recalled.”  This follows a number of decisions across Canada including cases in Ontario, B.C. and even at the Supreme Court.  It has become quite clear that if an employee refuses to return to work when asked to return, even after being wrongfully dismissed, it may be very risky for the employee to refuse.

In the case of Hooge v. Gillwood Remanufacturing Inc., the plaintiff was a 36 year employee, working as a production supervisor at the time of dismissal.  He was put on a “lay off” by his employer without any advance notice or pay.  The defendant company claimed that it had the right to “lay off” the employee under the B.C. Employment Standards Act.  The plaintiff alleged that he had been dismissed and sued for wrongful dismissal.  One week after he filed his lawsuit, the employer purported to “recall” him back to work.

At trial, the B.C. Supreme Court held that the employee had in fact been constructively dismissed. The plaintiff had not had a written employment contract in place.  When he was put on a lay off, he was told that it was “indefinite” and that there were no plans to recall him.  He was given an ROE that said “shortage of work.”  The B.C. court agreed with the plaintiff that there was no term of his employment that would have permitted a “lay off” without pay after all of these years of employment.  He was, in fact, constructively dismissed and was entitled to eighteen months’ compensation.

However, the Court proceeded to look at the issue of mitigation.  “The law is clear that in certain circumstances an employee who declines an offer of re-employment from the same employer after having been dismissed, whether actually or constructively, may be found to failed to mitigate his damages, and have any award reduced on account of such failure to mitigate.”  As long as it would have been “reasonable” in all of the circumstances for the plaintiff to return to work, he or she may be obligated to do so.  The court discussed Evans. v. Teamsters Local Union No. 31  as well as other B.C. cases including Davies v. Fraser Collection Services Ltd. 2008 B.C.S.C. 942 and Besse v. Dr. A.S. Machner Inc. 2009 BCSC 1216.

Ultimately, the court concluded that the evidence did not establish acrimony, mistreatment, belittling, embarrassing actions or undermining of authority in the workplace.  The court concluded that the plaintiff should have returned to the same position, on the same terms and conditions, at the same rate of pay.  Here is the court’s reasoning:

“It seems to me that an employer who has laid-off an employee, or wrongfully terminated an employee without due notice, may very well come to the conclusion, particularly with the benefit of legal advice that its actions constituted a wrongful dismissal and may seek to mitigate its own exposure to the payment of damages by offering to re-hire the employee.”

Here, the court held that the plaintiff should have returned to work.

Fortunately, in this case, all was not lost for the plaintiff.  The defendant locked out its unionized employees and ceased operations approximately seven months after purporting to recall the plaintiff.  The court held that the plaintiff would not have been paid during the lock-out, so he would not have been able to mitigate his damages during that time period.  Nevertheless, he was docked 7 1/2 months’ pay for the time period during which he would have been able to work if he had returned to work when recalled.

This case, from a B.C. perspective, reinforces the interpretation of Evans that has become the law across Canada.  Employees who are fired, laid-off or otherwise dismissed – and then offered a return to work – even after they file a lawsuit, must be very careful in deciding how to answer the employer’s offer.  Refusing to return to work and then continuing a lawsuit can be very costly.

There is something to be said for the notion that employers might have made a mistake and should be entitled to reverse a decision and have an employee come back to work.  After all, in the unionized context, an employee can be reinstated.

However, more often than not, this type of case will simply be used by a range of employers looking to play games.  Employers can try to “lay off” employees without offering anything.  Then, if the employee sues, they can “recall” the employee.  This gives employers a way to try firing someone while minimizing the risk of owing any severance.  It seems to open up the door to all kinds of abuses by the types of employers that might choose to act unethically.  Certainly, there are situations in which employers may have a good faith “change of heart” or are otherwise justified in changing their minds and reversing a decision to dismiss an employee.

But that does not necessarily seem to be the case in many of the situations I see.  This line of case law creates uncertainty, economic and emotional stress for employees, and also makes it difficult to settle some cases reasonably, both from an employee and employer perspective.  Nevertheless, employees who ignore these decisions may be making a very costly mistake.

 

 

Deficient Notice Clause Upheld by Ontario CA in Dismissal Case

A recent decision of the Ontario Court of Appeal, involving a deficient notice clause, illustrates the perils of attempting self-representation in a wrongful dismissal case.  In the case of Musoni v. Logitek Technology Ltd., the case appears to have been decided without some of the key arguments relating to the validity of employment contracts even being raised.

The plaintiff worked as a customer support agent from October 2005 to March 6, 2008, a total of about 2 1/2 years.  Six months after the plaintiff began his employment, he signed an employment agreement.  The agreement included a clause which provided for fifteen days’ notice in the event of dismissal.

The plantiff was dismissed and was provided with two weeks’ severance.  He did not accept this amount and sued for $70,000 in wrongful dismissal damages.

At trial, the plaintiff noted that he had not obtained legal advice at the time he signed the contract.  However, he apparently agreed at trial that the agreement was “valid and in force.”  (This is really a legal conclusion rather than a factual matter).   Instead of arguing that he was owed more notice – and that the employment agreement was not valid, the plaintiff alleged the defendant had dismissed him for improper reasons, relating to his record of offences.

The trial judge concluded that since the plaintiff was dismissed on a “without cause” basis, he was only entitled to the minimum amount provided for in the employment agreement.  The reason for his dismissal was held to be irrelevant.  The lawsuit was dismissed and the plaintiff was ordered to pay the defendant’s costs in the sum of $5,012.

The plaintiff appealed to the Court of Appeal and represented himself once again.  The Court of Appeal upheld the employment contract and dismissed the case, ordering the plaintiff to pay another $3,500.

The striking aspect of this case is the arguments that do not appear to have been put before the trial judge or the Court of Appeal or considered by one of the two levels of court.

Firstly, the employment agreement  that the defendant relied upon was provided to the plaintiff six months after he commenced employment.  There is no suggestion in the trial decision that any new consideration was provided to the plaintiff.  Based on a number of cases that have previously been decided by the Ontario Court of Appeal, the employment agreement should have been thrown out for lack of consideration (See for example Hobbs v. TDI Canada Ltd.) Interestingly, one of the Court of Appeal judges who sat on the panel that decided Hobbs v. TDI Canada Ltd., Justice MacPherson, was on the panel in this case of Musoni v. Logitek Technology Ltd.  Yet there is no mention of any consideration argument.

Secondly, even if the employment agreement had been provided to the plaintiff in exchange for some new consideration, it contained a clause that provided for only 15 days notice.  If the plaintiff had been working for the defendant for three years, this 15 days would have been less than the minimum notice required under the Ontario Employment Standards Act, 2000 (21 days rather than 15).  At four years, it would have been significantly less, no matter what type of calculation is used.  These types of clauses that will eventually amount to less than the minimum amount required by statutory provision have been held to be void by Canadian courts.  (See, for example Shore v. Ladner Downs, a decision of the B.C. Court of Appeal).

It seems likely that if this case had been argued properly, the plaintiff should have been entitled to between 3 and 6 months’ notice, based on his annual income of $47,000.  Instead, he wound up with 15 days’ notice and a bill for the defendant’s costs of more than $8,500.  The case is an illustration of a situation in which the courts will not come up with the proper arguments for the unrepresented plaintiff.  So the plaintiff is ultimately left with a brutal result and only himself to sue for professional negligence – for not having raised some key legal arguments that any competent employment lawyer would have put forward.

A final note: Given that the case was probably only worth three or four months’ compensation, the proper place for this case would have been Ontario Small Claims Court, which has a monetary limit of $25,000, rather than the Ontario Superior Court.  Ouch!

 

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