Just Cause: Employer Fails to Prove Allegations of Anti-Semitic Remarks

How difficult is it for employers to prove just cause for dismissal in Ontario?  The recent decision of the Ontario Superior Court in Ludchen v. Stelcrete Industries Ltd. demonstrates, yet again, that the bar is set very high.

Richard Ludchen was a plant superintendent working for the defendant Stelcrete Industries, which is a precast concrete company.  Ludchen had worked for the defendant for 11 years and was earning an annual income of $61,000 at the time of dismissal.  He had a clean disciplinary record.

In 2008, the company made a decision not to recognize Ontario “Family Day” as a day off but to pay employees for an extra day of holiday time in December instead.  In reaction to this announcement, the plaintiff allegedly made some very offensive anti-Semitic remarks about the owners of the company who were Jewish.  The company investigated, determined that the remarks had been made and fired Ludchen for cause.  Ludchen sued for wronful dismissal.

At trial, the judge accepted that, if the company could prove that the remarks had been made, this would have constituted just cause for dismissal.  The court also found that the credibility of the plaintiff was questionable and did not ring true.  However, the court was even more dismissive of the evidence presented by the primary company witness, which it rejected completely.  The company relied on the evidence of its investigator and did not call to the witness stand anyone who actually heard the offensive remarks being made.

Accordingly, the court concluded that the company had failed to prove that the remarks had actually been made.  The court held that Ludchen had been wrongfully dismissed and awarded him 12 months of wrongful dismissal damages, together with compensation for the loss of benefits and his average annual bonus.  The court rejected Ludchen’s request for any kind of additional punitive, aggravated or other damages.

The Ludchen v. Stelcrete Industries decision shows that the onus is squarely on the employers to prove all of the aspects of a just cause case.  Even if the alleged misconduct is very serious and the employee’s denial or explanation does not ring true, the employer must still prove its case clearly.

For dismissed employees, the case is further assurance to plaintiffs and their legal counsel that serious cause allegations do not always hold up in court, even where it appears likely that the misconduct may have occurred.




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!


Former Manager Awarded $100,000 in Constructive Dismissal Suit

Constructive dismissal lawsuits can be very challenging.  Many judges seem to feel that employees should continue to work for their empl0yers even if significant employment terms have been changed.  Nevertheless, where an employee is faced with a significant reduction in compensation or a clear demotion, a constructive dismissal suit may be appropriate and successful.

In a recent Ontario Superior Court decision, Jodoin v. Nissan Canada Inc. a former employee of Nissan Canada was awarded more than $100,000 in wrongful dismissal damages as a result of a successful claim for constructive dismissal.

Harry Jodoin had been working for Nissan for more than 10 years.  Just before his demotion, he was a Senior Manager in charge of retail sales and sponsorships.  He controlled a budget of more than $30 Million.

In December 2010, Mr. Jodoin was told that he was being moved into the role of Senior Manager of Vehicle Preparation Programme.  There was no job description for this position.  No employees would report to Mr. Jodoin.  There was no private office, no budget and no long term goals in place.  In fact, Mr. Jodoin was initially moved from an office into a cubicle in a high traffic area with little privacy.

The court accepted all of this evidence and concluded that Mr. Jodoin had been constructively dismissed by Nissan.  In coming to this conclusion, the court held that since Mr. Jodoin had been demoted, he was not required to continue to remain in the position (as a way of “mitigating his damages.”).  The court noted that Mr. Jodoin continued to work for about a month and a half before taking the position that he had been constructively dismissed.  However, the court concluded that this was a reasonable time period.

The court awarded Mr. Jodoin damages for the full time that he was out of work, which in this case amounted to approximately 9 months.  The damages included compensation for base salary, benefits, the company vehicle, the incentive plan and the RRSP plan.  This all added up to more than $100,000 plus interest and legal costs.

This case demonstrates that constructive dismissal law suits are still alive and well in Ontario.  However, an employee bringing this type of claim will need to demonstrate an objectively clear demotion or a significant reduction in pay.  Job changes that do not amount to a demotion may not be sufficient.  Fortunately for Mr. Jodoin, he was able to convince the court that a reasonable, objective person would agree that he had been demoted.  Many employees who allege constructive dismissal are not as fortunate.

Bringing this type of lawsuit in the wrong circumstances can be a very costly mistake.  It can be come even less worthwhile if the dismissed employee is able to find new employment quickly.  Nevertheless, employees who are out of work for some significant time period may find it quite worthwhile to proceed with this type of claim.


Does State Immunity trump Wrongful Dismissal claims?

When does state immunity apply in an employment law context?  Can a Canadian worker at a foreign embassy or consulate, located in Canada, bring a claim for wrongful dismissal?  Or will this type of claim be thrown out by Canadian courts under the State Immunity Act?  From a review of a number of different decisions, there is no clear answer to that question.

There is a general rule, under the State Immunity Act, that foreign states are immune from the jurisdiction of the Canadian courts.  However, there is an exception for proceedings that “relate to commercial activity.”  In cases that have involved employee claims for wrongful dismissal or other employment related claims, the focus of the litigation has been whether the employee’s activity should be considered “commercial activity” and therefore exempt from the State Immunity Act protection.  Some of these cases are quite interesting.

On July 17, 2013, the Ontario Superior Court released a decision in Roy v. South Africa.  This case involved a long service employee who had been working as a consular clerk for the South African High Commission.  After being dismissed, Ms Roy brought a wrongful dismissal claim against the South African High Commission.  One of the issues to be decided in the motion was whether the wrongful dismissal suit should be thrown out due to lack of jurisdiction.  The court rejected the submissions made by South Africa and accepted the plaintiff’s argument that her employment was “commercial activity.”  South Africa was therefore not immune from a wrongful dismissal lawsuit and the case was permitted to proceed.  This case was not a final determination of this issue.  It was only a preliminary motion to assess whether the case might have a chance of succeeding.  Nevertheless, the plaintiff was successful and the case was able to continue winding its way through the court system.

In 2012, in Zakhary v. United States of America, a Canada Labour Code adjudicator also held that employment was covered by the commercial activity exemption.  This decision involved a consular clerk at the U.S. consulate.  Ms Zakhary had more than 20 years of service with the United States.  After being dismissed, she filed a complaint with the Canadian Ministry of Labour and asked for reinstatement.  The United States submitted a letter but did not attend at the hearing.  After reviewing the case law, the adjudicator held that the Canada Labour Code applied to the proceeding, as opposed to provincial legislation.  The adjudicator also determined that Ms Zakhary’s work a the U.S. consulate had nothing to do with security.  There would be no interference in U.S. sovereignty if the adjudicator were to rule that this matter was covered by Canada Labour Code jurisdiction.   The adjudicator went on to find that Ms Zakhary had been unjustly dismissed.  She was reinstated to her position and awarded close to 1 1/2 years’ back pay plus $5,000 towards legal fees.

At least one Ontario Human Rights Tribunal decision has reached a different result.  In Bentley v. Barbados, a 2010 decision, an adjudicator held that type of inquiry that would be necessary to decide the case would “constitute an unacceptable interference with the sovereign right of the defendant state to control and regulate its own workforce.”   The case involved an employee who was dismissed after she indicated her intention to take maternity leave.  She filed a complaint with the Ontario Human Rights Tribunal alleging a violation of the Ontario Human Rights Code.  The adjudicator held that employment at a consulate was not  commercial activity and related more to the sovereign acts of the foreign state of Barbados.  Barbados was held to be immune from the Ontario Human Rights Tribunal’s jurisdiction.

In Morocco v. El Ansari, the Quebec Court of Appeal considered the case of an employee who had been working for the Government of Morocco for more than twenty years as a civil servant before being dismissed.  The Court of Appeal was asked to decide whether that State Immunity Act would immunize Morocco from a wrongful dismissal suit.  The Court of Appeal held that employment relationship was not “commercial activity” and was immune from the jurisdiction of the Quebec Courts.  In coming to that conclusion, it cited a number of key points:  the employee was treated as a civil servant by Moroccan law by Morocco; She had started working for Morocco in Morocco and had signed her employment contract there initially; She could not show that she had paid any taxes in Canada; and Morocco did not deducted or remit CPP or EI.  In these circumstances, Ms El Ansari could not be seen as simply carrying on “commerical activity.”  The Supreme Court of Canada refused to grant leave to hear this case.

Most of these state immunity decisions in the employment law context have referenced a 1992 case of the Canadian Supreme Court in Re: Canada Labour Code in which the Court held that the United States was immune from the “jurisdiction of any domestic labour tribunal” in respect of labour relations at a U.S. military base located in Canada  However, even in that decision, the Supreme Court of Canada had pointed out that “a bare contract for employment services…is in and of itself, generally a commercial activity” and that Canadian employees of foreign sovereign states should be able to turn to Canadian courts for enforcement of employment contract terms.

Looking at all of these decisions together, the picture is somewhat unclear.  Employees who are dismissed by foreign consulates or embassies may be able to commence wrongful dismissal lawsuits or file Canada Labour Code complaints.  They may face preliminary arguments that their case should be thrown out because of state immunity.  The determination will likely depend on the nature of the position, the nature of the employee’s relationship with the foreign government and the type of claim being made.  The court or tribunal hearing the case will need to determine whether the employment shall fall under the “commercial activity” exception to state immunity.  Based on the variety of cases decided to date, it is far from clear that foreign states will always be able to rely on immunity arguments.  But since the results can be unpredictable, these claims are likely to involve costly motions early in the proceedings.  Successful plaintiffs are likely to recover at least some of these costs if they can get past the state immunity arguments.

Dismissed Employees Must Return To Work if Recalled

Last year, the Ontario Superior Court held that a wrongfully dismissed employee may be required to go back to work if recalled by his or her employer.  I discussed that case here.

This past week, the Ontario Court of Appeal upheld the trial court decision and dismissed the appeal in Chevalier v. Active Tire & Auto Centre.

The Ontario Court of Appeal acknowledged that the plaintiff had been wrongfully dismissed when he was improperly put on a “lay-off.”  The  lay off came about after the employer tried to performance manage the employee before it put him on lay-off.

The plaintiff sued right away for constructive dismissal after being put on lay off.   Right after he began his lawsuit, the employer recalled him to work.  He refused to return and took the case to trial, arguing that the workplace had become “poisoned.”

However, at trial, the Ontario Superior Court held that there was no “demeaning, objectionable or retributory conduct” by the employer and that the constructively dismissed employee should have returned to work.

The Ontario Court of Appeal has upheld this decision.  In doing so, it has reinforced the idea that when an employer tries to implement a performance improvement plan, this will not necessarily create a poisoned work atmosphere.  But more importantly, the Court of Appeal has reinforced the Supreme Court of Canada jurisprudence in Evans v. Teamsters Local Union 31 which states that wrongfully dismissed employees may be required to return to work if recalled by their employers.  This can apply even after the employee files a lawsuit.  Failing to return to work can lead to a finding of “failure to mitigate damages.”  The dismissed employee can lose the case completely in these circumstances.

Dismissed employees who are recalled to work will need to consider the recall notice very carefully.  Continuing on with a lawsuit after an employer purports to call the employee back to work can be risky and ultimately, very costly.



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