Showing posts with label wrongful dismissal. Show all posts
Showing posts with label wrongful dismissal. Show all posts

Friday, August 31, 2012

Ontario Employment Law: Mitigating Damages By Staying With The Same Employer

In Ghanny v. 498326 Ontario Limited, the Ontario Superior Court of Justice was faced with a question that has become all too common in these difficult market conditions.

Must an employee whose job is being eliminated by its employer accept the same kind of position at a related company with the same pay in mitigation of his losses arising from a wrongful termination?

In the case, the Plaintiff, an 18 year employee was terminated with less than one month's notice. By any measure, this was highly inadequate and wrongful. The Plaintiff's job as Service Manager at Downtown Toyota had been eliminated by the company. But as it happened, his employer offered him immediate re-employment at the same job at the same salary at Downtown Suzuki, a recently obtained and related dealership, just a few blocks away.  The Defendant made the same offer again months later, after receiving a letter from the Plaintiff's lawyer stating that the Plaintiff had been wrongfully dismissed and was seeking compensation for same.

The Plaintiff turned down both offers of re-employment for two reasons:
  1. He thought that his 18 years of service at Downtown Toyota would not be recognized if he joined Downtown Suzuki; and
  2. He was concerned that the future of this dealership in spite of having received assurances to the contrary from his employer.  
The Plaintiff argued that he was under no obligation to accept the offer of employment; the Defendant argued the contrary. In the end, the Plaintiff obtained a job in mitigation of his losses. However, it had taken him several months to secure and his salary at the new job was considerably lower than at his old job.

The Court, in deciding that the Plaintiff should have accepted the offer that had been advanced by his employer, considered the leading Supreme Court case on the subject Evans v. Teamsers Local 31, [2008] 1 S.C.R. 661, wherein it is stated:
[I]n some circumstances it will be necessary for a dismissed employee to mitigate his or her damages by returning to work for the same employer ... requiring an employee to mitigate by taking temporary work with the dismissing employer is consistent with the notion that damages are meant to compensate for lack of notice, and not to penalize the employer for the dismissal itself. The notice period is meant to provide employees with sufficient opportunity to seek new employment and arrange their personal affairs, and employers who provide sufficient working notice are not required to pay an employee just because they have chosen to terminate the contract. Where notice is not given, the employer is required to pay damages in lieu of notice, but that requirement is subject to the employee making a reasonable effort to mitigate the damages by seeking an alternate source of income.

The Court held that a reasonable person, in the position of the Plaintiff, would have accepted the offer that had been advanced. The salary offered was the same; there were no changes in working conditions; and the personal relationships involved had not become acrimonious.

In so holding the Court had regard for the following statement of law from Evans:
The critical element is that an employee not [be] obliged to mitigate by working in an atmosphere of hostility, embarrassment or humiliation … and it is that factor which must be at the forefront of the inquiry into what is reasonable. Thus, although an objective standard must be used to evaluate whether a reasonable person in the employee's position would have accepted the employer's offer … it is extremely important that the non-tangible elements of the situation -- including work atmosphere, stigma and loss of dignity, as well as nature and conditions of employment, the tangible elements -- be included in the evaluation.
The Court found that the Plaintiff, despite his statements to the contrary, had received assurances of job security from the Defendant  that his belief, that his 18 years of service would not be recognized, was not reasonable in all the circumstances. In any event, not enough reason him to refuse the position like he did.

This decision illustrates that  in certain circumstances, a wrongfully terminated employee may have to accept an offer of re-employment from its terminating employer.
- Robert Tanha, Toronto

Wednesday, November 16, 2011

Ontario Employment Law: Prejudgment Interest On Wrongful Dismissal Damages

In Chandran v. National Bank, Pollak J. in his endorsement on costs dated July 21, 2011, neatly summarizes how prejudgment interest is calculated in a wrongful dismissal action as follows:
... [T]he prejudgment interest on the damage award is calculated as follows: - first, the interest owed from the beginning of the notice period to the end must be calculated monthly on the basis of what was owed at that time; - second, the interest on the total amount of the award outstanding at the end of the notice period must be calculated from the end of the notice period to the date of judgment.
Two calculations essentially need to perform to arrive at a figure for prejudgment interest. In the case, prejudgment interest was determined to be $15,931.93 for an employee with an annual salary of $98,824.00 and an entitlement to 14 months of pay in lieu of reasonable notice.
Pollick J. neatly set out his calculation of prejudgment interest, as follows:
This Court’s calculation of appropriate prejudgment interest on a monthly basis prior to the expiry of the notice period in this case as follows:
(i) Annual Salary of $98,824.00/ 12= $8235.33 a month
Interest Calculated Monthly:
Month 1
$8235.33 x 4.5% per annum for 14 months
$432.32
Month 2
$8235.33 x 4.5% per annum for 13 months
$401.44
Month 3
$8235.33 x 4.5% per annum for 12 months
$370.56
Month 4
$8235.33 x 4.5% per annum for 11 months
$339.68
Month 5
$8235.33 x 4.5% per annum for 10 months
$308.80
Month 6
$8235.33 x 4.5% per annum for 9 months
$277.92
Month 7
$8235.33 x 4.5% per annum for 8 months
$247.04
Month 8
$8235.33 x 4.5% per annum for 7 months
$216.16
Month 9
$8235.33 x 4.5% per annum for 6 months
$185.28
Month 10
$8235.33 x 4.5% per annum for 5 months
$154.40
Month 11
$8235.33 x 4.5% per annum for 4 months
$123.52
Month 12
$8235.33 x 4.5% per annum for 3 months
$92.64
Month 13
$8235.33 x 4.5% per annum for 2 months
$61.76
Month 14
$8235.33 x 4.5% per annum for 1 month
$30.8
Total
$3242.40
(ii) Lump-sum prejudgment interest on the damage award from the end of the notice period to the date of the decision:
• the notice period ended mid November 2008. The award was made on April 26, 2011. The Plaintiff calculated the exact number of days in this period as being 893.
• the total damage award was $115,294.66 x 4.5% a year= $5,188.26 a year
• $5,188.26/365 days in a year= $14.21 interest a day
• $14.21 x 893 days= $12, 689.53 (total lump sum prejudgment interest owed)
On the basis of these calculations a total of $15,931.93 prejudgment interest is owed on the damage award.

This case demonstrates that  the method of calculation for prejudgment interest in a wrongful dismissal action is not something that can be ignored or taken lightly - it can amount to a significant add-on to the damage award.

- Robert Tanha, Toronto

Visit our Toronto Law Firm website: www.wiselaw.net

Thursday, October 20, 2011

Ontario Employment Law: Summary Judgment In Wrongful Dismissal Actions

In Thorne v. The Hudson Bay Company, a case decided September 21, 2011, the Plaintiff, a 37.5 year employee who had been dismissed without just cause sued for wrongful dismissal after receiving a bare-bones severance package that was limited to her Employment Standard Act minimums.

The Plaintiff, an Allocation Associate,  moved for summary judgment, arguing that since there were few factual issues which were contentious between the parties, the judge could rule on the period of reasonable notice she was owed "without the need for the forensic machinery of a trial".

Based on consideration of the legally relevant factors, the Defendant employer took the position that she was owed 12-16 months of pay in lieu of notice. Considering the same factors, the Plaintiff employee took the position she was owed 24-30 months, a very divergent position indeed.

Under Rule 20.04 of the Ontario Rules of Civil Procedure, summary judgment motions are appropriate where the court is satisfied that there is "no genuine issue requiring a trial."

In the affidavits filed by the parties upon the motion, they took starkly contrasting views on the character of the Plaintiff's employment. While she did not have a supervisory function, the Plaintiff claimed that her job was far from entry-level and clerical. She, for example, provided operational support to the high volume merchandise industry which required a solid grasp of the employer's business. The Defendant argued that the Plaintiff's job was clerical, and stated she merely produced purchase orders.

Campbell J. held that a trial would be required to resolve the disagreement:
Having carefully examined the evidence that has been provided by the parties on this issue, it is apparent that they view the nature of the plaintiff’s job very differently. Their disagreement on this issue is not just a matter of the appropriate legal characterization of the job, but rather extends to the nature and details of the responsibilities performed by the plaintiff. The evidence filed by the parties on this motion, none of which has yet been subjected to cross-examination, is in stark conflict. In my opinion, it is simply not possible to fairly and appropriately resolve this important issue without the machinery of a trial. 
Faced with this fundamentally conflicting evidentiary record it is simply not possible to resolve this important factual dispute without the forensic machinery of a trial. Without hearing viva voce testimony from these witnesses as to their understanding of the specific details of the plaintiff’s job responsibilities, and being able to assess their credibility and the reliability of their evidence, and seeing the impact of cross-examination, there is simply no fair and accurate way of resolving the dispute between the parties on this important issue.
Hence, Justice Campbell concluded that in all the circumstances there was a genuine issue for trial given that character of employment remains a relevant factor in the determination of reasonable notice:
I appreciate that the court is entitled to assume that the parties have put forward their best evidence on the summary judgment motion and that, if the case were to go to trial, no additional evidence would be presented. See: Rogers Cable TV Ltd v. 373041 Ontario Ltd., 1994 CanLII 7367 (ON SC), (1994), 22 O.R. (3d) 25 (Gen.Div) at para. 4; Bluestone v. Enroute Restaurants 1994 CanLII 814 (ON CA), (1994), 18 O.R. (3d) 481 (C.A.) at para. 30; Dawson v. Rexcraft Storage & Warehouse Inc. 1998 CanLII 4831 (ON CA), (1998), 164 D.L.R. (4th) 257 (Ont.C.A.) at para. 17. But in some cases, like the present one, that assumption is of little assistance in actually resolving the factual dispute between the parties, as the court is limited to paper review of the evidence provided by the parties, without greater explanation, and wholly untested by cross-examination.
As an aside, for those judges and academic who have doubted the importance of character of employment in the determination of reasonable notice, Justice Campbell had this to say:
. . . it cannot be said that the resolution of this factual issue is of no importance to the outcome of this case. There are authorities which suggest that the character of the employee’s employment may be “a factor of declining relative importance” in the overall analysis of all of the Bardal factors. See: Di Tomaso v. Crown Metal Packaging Canada LP, 2011 ONCA 469 (CanLII), 2011 ONCA 469, at para.22-29; Medis Health and Pharmaceutical Services Inc. v. Bramble 1999 CanLII 13124 (NB CA), (1999), 175 D.L.R. (4th) 385 (N.B.C.A.) at para. 64; Vibert v. Paulin 2008 NBCA 23 (CanLII), (2008), 291 D.L.R. (4th) 302 (N.B.C.A.). Nevertheless, unless and until the governing legal standard for determining “reasonable notice” is changed in a more fundamental way, the character of the employment of the employee will properly remain a factor that must be taken into account in an appropriately “holistic review” of all of the Bardal factors. The fact that the parties in this case have devoted so much energy to producing evidence on this issue demonstrates their own appreciation of this legal reality.
When it comes to what he himself refers to as the "controversial scope of summary judgment motions", there is no doubt that Justice Campbell's reasons for decision raise as many questions as they do answers.
- Robert Tanha, Toronto

Visit our Toronto Law Firm website: www.wiselaw.net

Thursday, July 21, 2011

Ontario Court of Appeal: No Hard Cap on Notice Entitlement of Non-Managerial or Unskilled Employees

In Di Tomaso v. Crown Metal Packaging Canada LP, 2011 ONCA 469, a decision of the Ontario Court of Appeal released June 22, 2011, the appellant, Crown Metal Packaging ("CMP") appealed from an October, 2010 decision of the Superior Court Judge, Justice Beth A. Allen, granting the respondent, Mr. Di Tomaso summary judgement in a wrongful dismissal action under rule 20.

Background:

Mr. Di Tomaso was an employee of CMP for over 33 years as a mechanic and press maintainer. On September 23 2009, Mr. Di Tomaso was informed that his services were no longer required at CMP. However, just before Mr. Di Tomaso had left, he was notified that his employment would be extended by several weeks. In fact, CMP in total issued 5 different termination dates, which in effect extended Mr. Di Tomaso's employment just before each previous termination date. Extension letters were delivered by CMP, as follows:
  • 1. September 9, 2009, with a termination date of November 6, 2009;
  • 2. November 4, 2009, with a termination date of December 18, 2009;
  • 3. December 15, 2009, with a termination date of February 19, 2010;
  • 4. February 18, 2010, with a termination date of February 26, 2010; and
  • 5. February 24, 2010, confirming the termination date of February 26, 2010
Claims by Mr. Di Tomaso:

Mr. Di Tomaso's action claimed that CMP failed to provide reasonable notice or termination pay as required by the Employment Standards Act, 2000 ("ESA"). He also sought common law damages for wrongful dismissal equivalent to 24 months pay.

CMP's Position:

The employer claimed that its first notice of termination (September 9, 2009) was valid, and alleged that Mr. Di Tomaso's subsequent employment constituted "working notice".

Concerning the Plaintiff's common law claim, CMP's position was that at most, Mr. Di Tomaso was entitled to 12 months notice, based on the character of his employment. CMP emphasized that Mr. Di Tomaso was an "unskilled" and "low level worker".

Motion Judge's Reasoning:

On the issue of working notice, the motion judge reviewed the ESA regulation that authorizes an employer to count a period of work commenced after the termination is served but before the termination date (temporary employment)- compared to an employee's statutory notice of entitlement: Termination and Severance of Employment, O. Reg. 288/01, s. 6 ("Regulation"). For instance, the Regulation states:

6. (1) An employer who has given an employee notice of termination in accordance with the Act and the regulations may provide temporary work to the employee without providing a further notice of termination in respect of the day on which the employee’s employment is finally terminated if that day occurs not later than 13 weeks after the termination date specified in the original notice.

(2) The provision of temporary work to an employee in the circumstances described in subsection (1) does not affect the termination date as specified in the notice of the employee's period of employment.
CMP was of the view that all of its extensions was valid, as each was for a period of less than 13 weeks. Therefore, it claimed, Mr. Di Tomaso was provided with working notice up until the last notice of termination dated February 24, 2010. Mr. Di Tomaso argued to the contrary, stating that various period of extensions should be viewed cumulatively which would exceed the 13 week period set out in s. 6(1) of the Regulation.

In agreeing with Mr. Di Tomaso's position, the motion judge stated:
... The legislation clearly allows for notices temporarily extending termination if the final date of termination in respect of the extension is not more than 13 weeks after the date of the initial termination notice. That interpretation makes practical sense since there would be no certainty for an employee as to when his employment would finally end if the employer was not limited in the length of extensions of employment. (para 19).
Furthermore, the motion judge stated that there is a requirement that the notice of termination be "clear and unequivocal".

The motion judge also rejected CMP's position that Mr. Di Tomaso's entitlement to notice was capped at 12 months due to the non-managerial and unskilled nature of his position.. The motion judge referred to factors in Bardal v. Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.J.) ("Bardal"), to determine the appropriate notice period. The Bardal factors include: the character of the employment, the employee's length of service, the employee's age, and the availability of comparable employment in the market.

In order to support its position concerning a capped limit of entitlement to notice at 12 months, CMP relied on the court's ruling in Cronk v. Canadian General Insurance Co. 1995 CanLii 814 (ON CAN), (1995), 128 D.L.R. (4th) 147 (“Cronk”). The employer contended that the Cronk ruling establishes a capped limit of 12 months notice for clerical and unskilled workers.

Mr. Di Tomaso relied on the more recent case of Minott v. O’Shanter Development Company Ltd. 1999 CanLII 3836 (ON CA), (1999), 168 D.L.R. (4th) 270 (“Minott”) to counter the argument that there is a cap of 12 months. Specifically, Laskin J.A. stated in Minott:
I do not regard this court's decision in Cronk as establishing an upper limit of 12 months notice for all non- managerial or non-supervisory employees. At most it deals with one occupational category, clerical employees. Moreover, the imposition of an arbitrary 12 months ceiling for all non-managerial employees detracts from the flexibility of the Bardal test and restricts the ability of courts to take account of all factors relevant to each case and of changing social and economic conditions.
Motion Judge's Findings on Notice:

The motion judge agreed that there is not a hard cap of 12 months notice. Additionally, after considering the Bardal factors, the judge held that Mr. Di Tomaso was entitled to 22 months of notice.

Mr. Di Tomaso was 62 years old on the date of his termination and had served 33 years with CMP. He also made efforts to mitigate his damages by looking for other employment in the work force.

Issues on Appeal:

The employer argued on appeal that the motion judge erred in finding that Mr. Di Tomaso did not have clear and unequivocal notice of termination until February 24, 2010; and that Mr. Di Tomaso received reasonable working notice of termination in light of his status as a non-managerial employee.

MacPherson J.A. did not accept either argument for the following reasons:

Termination Date

MacPherson J.A agreed with the motion judge that the Regulation takes into account a single period of temporary work that cannot exceed 13 weeks.

In addition, he added that "clear and unambiguous" notice of termination must incorporate the final termination date. The first four termination dates came and passed. It was not until the final termination notice on February 24, 2010 that Mr. Di Tomaso's termination was carried out as stated in the letter.

Bardal Factors

MacPherson J.A. agreed that there is not a hard cap of 12 months notice for unskilled low level workers. He also agreed with the motion judge's application of the Bardal factors to the instant case.

The appeal judge also stated that giving more weight to the particular factor of character of employment was unwarranted. MacPherson cited Bastarache J in the Supreme Court decision of Honda Canada Inc. v. Keays, 2008 SCC 39 (CanLII), [2008] 2 S.C.R. 362, where he asserted that "no one Bardal factor should be given disproportionate weight".

MacPherson J.A. noted that the proposition that junior lower skilled workers deserve less notice because they have an easier time finding employment has not been empirically proven.

Disposition:

The appeal was dismissed with costs to the employee/Respondent..

- Alim Ramji, Toronto
Visit our Toronto Law Firm website: www.wiselaw.net

Tuesday, July 5, 2011

This Week at the Ontario Court of Appeal: 11-06-24

Each week Wise Law Blog reviews recent decisions from the Ontario Court of Appeal.

Di Tomaso v. Crown Metal Packaging Canada LP. An appeal in a wrongful termination case. Mr. Di Tomaso was employed by Crown Metal for over 33 years as a mechanic, and informed him on September 9, 2009 that he would be terminated on the following November 6. On November 4, he was informed that his termination date would now be December 18. Crown Metal changed his termination date two more times subsequent to this, finally terminating him on February 26, 2010. Each letter that he received characterized his employment as having been temporarily extended. Upon his termination Crown Metal paid Mr. Di Tomaso severance pay and accrued vacation pay and benefits.

Mr. Di Tomaso then sued Crown Metal for failure to provide proper notice and wrongful dismissal. Crown Metal characterized the period after the initial termination notice as a period of "working notice," and suggested that in regards to the wrongful dismissal claim Mr. Di Tomaso was at most limited to 12 months' notice as he was an unskilled low-level worker. Mr. Di Tomaso argued that each subsequent notice was a new notice and therefore only the final notice (on February 24) should count as clear, unequivocal notice of termination.

The action proceeded by way of a motion for summary judgement. The motion judge agreed with Mr. Di Tomaso's arguments, pointing out that the existing authorities (such as Minott) did not limit a worker's wrongful dismissal damages based on the type of work they were performing. She found Crown Metal liable for 22 months' worth of notice to Mr. Di Tomaso. Crown Metal appealed.

The Court of Appeal dismissed both appeals. A termination extension, according to the Termination and Severance of Employment Regulations, can last up to thirteen weeks; if it exceeds that period (as it did here) then fresh notice is required. The Court stated that to find otherwise would allow employers to effectively extend termination indefinitely and be contrary to the intent of the legislation. The Court also stated that in these instances, "clear and unambiguous" notice of termination must include the final termination date, which meant that Mr. Di Tomaso had received only two days' notice before his termination.

The Court also agreed that in Minott it had previously rejected the notion that an unskilled employee's wrongful dismissal damages could be capped at 12 months and did not see the purpose of overruling that decision. The Court considered the appropriate period of notice in Mr. Di Tomaso's case, and agreed with the motion judge's decision that 22 months was appropriate notice for him. In doing so, the Court once again underlined that "character of employment" is but one of the many Bardal factors considered in determining duration of notice. Read-the-whole-case rating: 4.5 for employment law aficionados; 2.5 for everyone else.

Cunningham v. Moran. Following a separation resolved through mediation/arbitration where the parties maintained joint custody of their child, the father, Mr. Cunningham, launched a claim against his former common-law partner claiming that Ms. Moran had fraudulently induced him to pay more child support than he should have, and fraudulently concealed her ability to pay child support to him. Ms. Moran moved to strike the claim on the grounds that it was outside the court's jurisdiction by virtue of the mediation/arbitration agreement, that the claim amounted to a collateral attack on the existing orders, and that Mr. Cunningham's claims were res judicata, frivolous, vexatious and an abuse of process. Mr. Cunningham cross-moved for summary judgement in response. The motion judge agreed with Ms. Moran and struck the claim without leave to amend on the grounds that it was vexatious and frivolous, and that res judicata barred the claim. Mr. Cunningham appealed.

The Court of Appeal dismissed the appeal. The Court found that Mr. Cunningham's claim for damages was, in essence, a claim for repayment of child support payments he felt he either overpaid or should not have made at all, and payments from the respondent he felt he should have properly received. Other than his claim for general and punitive damages arising from the claimed wrongful conduct of Ms. Moran, these were not a true claim of damages but rather an attempt to attack agreements and awards made in a family law action. They also pointed out that to move for an adjustment to support orders, the proper action would have been to apply for a remedy under the Family Law Act or Child Support Guidelines. Allowing this action to proceed would therefore be endorsing an abuse of process.

The Court also noted that Mr. Cunningham should have raised the issue of deficiencies in Ms. Moran's financial statement when he first became aware of them, and that there was ample evidence that he had been aware that her finances were not fully documented and that he had raised the issues in his action during mediation. Therefore he was, at all material times, aware of the problems with Ms. Moran's disclosure and still consented to a mediation/arbitration agreement in spite of that knowledge. Under these circumstances, even if his motion had not been abusive and frivolous, the action would still fail. Read-the-whole-case rating: 3.

R. v. Nguyen. A Crown appeal from the acquittal of two property owners whose property contained a marijuana grow-op. An anonymous tip indicated that the Nguyens' house had been used as a grow-op location and that the appearance and character of the property was currently similar to that of a grow-op (windows and doors covered with blinds and sheets to prevent viewing into the house). A thermal flyover test demonstrated an unusual amount of heat emanating from the building, and there was visible moisture damage to the roof of the house unlike any other in the neighborhood (associated with grow-ops where moisture was not properly vented).

However, hydro consumption showed less power use, which was inconsistent with most grow-ops. On further investigation, it was found that the building was directly across the street from a hydro box, a location grow-operators often use so they can monitor the hydro box in case police visibly surveil it. The investigator also noted light timers by the exterior patio door, which are often used by grow-operators to simulate a lived-in residence. Finally, it was noted that in winter, when other homes were covered with snow, the property was emanating so much heat that its roof was bare due to melt-off. A search warrant was issued and the owners of the property arrested for cultivating mass quantities of marijuana (as they in fact were).

At trial, the judge concluded that the search warrant was improperly issued. She stated that the Information to Obtain the warrant was "carelessly drafted, materially misleading and factually incomplete." She emphasized that five statements in the ITO were misleading. The Court of Appeal disagreed with all of these: the Court felt that although the investigating officer had no formal training in recognizing grow-ops, his practical on-the-job knowledge meant that he could reasonably state that he was "trained," that an instance of referring to a wrong address was a typo rather than an attempt to mislead, that his testimony regarding the state of the lawn differing from his notes was not evidence to mislead, that he had in fact made no claim that he was an expert in thermal detection, and that his statement regarding potential electricity diversion could either be construed as belief or as a collection of facts which could contribute to that belief.

The trial judge was also critical of the investigator's use of anonymous sources, but the Court of Appeal did not see this as reason to invalidate the warrant either, pointing out that the anonymous sources had only prompted an initial informal investigation and that the cause for the ITO was the collected evidence rather than the source's tip.

Finally, the trial judge complained that the ITO did not expressly mention eleven specifically negative facts about the case: that there was no smell of marijuana, that they had not yet found grow-op equipment, that there was no hard evidence of electricity theft and that no suspicious activity had been observed. The Court of Appeal pointed out, however, that these were not facts but rather things that were not known, and that in most cases the absence of a reference to something not observed will "lead to the sensible inference that whatever it is was not seen, not heard or not done." The Court further stated that requiring a warrant applicant to anticipate and explain away in advance every possible aspect of a crime would be overly burdensome.

The Court also pointed out that in the investigator's testimony, he had explained that in his experience with investigating grow-ops, many of the negative factors that he had not included in the ITO were not present at other grow-ops: only rarely, for example, would you smell marijuana outside of the house or hear the whine of fans or blowers inside it from outside. Therefore the Court felt that there was little to nothing on the record to indicate that the "omissions" that the trial judge disliked would necessarily indicate the presence of a grow-op inside the residence. For all of these reasons, the Court of Appeal allowed the Crown's appeal, set aside the order quashing the warrant, and ordered a new trial. Read-the-whole-case rating: 3.
- Christopher Bird, Toronto
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Sunday, June 19, 2011

Ontario Employment Law: Disability and Frustration of An Employment Contract

Frustration of an employment contract occurs when, through no fault of either party, an event occurs that makes the contract impossible to perform.

Under Ontario law, where an employee is suffering from a permanent disability with no reasonable prospect of returning to work in the reasonably foreseeable future, frustration may arise. Where frustration occurs, both the employee and the employer are relieved of their obligations, the employment contract has come to a lawful, albeit unfortunate, end and no damages may be awarded for wrongful dismissal.

If an employer can demonstrate that such disability has created a frustration of the employment contract, the employer may lawfully terminate the employment, simply by providing the employee with the required severance entitlements as spelled out in the Ontario Employment Standards Act.

But, unsurprisingly, it's not quite that simple. A number of factors will be canvassed by a court that is considering whether the doctrine of frustration applies.

Is a Disability Permanent ? - Employers' Due Diligence Obligation

In Naccarto v. Costco, decided June 15, 2010, the defendant employer, Costco, sought to rely on the doctrine of frustration in defending against a wrongful dismissal claim launched by a thirty-seven year (37) old Return-to-Vendor Clerk who had been terminated from his employment after seventeen (17) years of service.

In the case, the Plaintiff, Mr. Naccarto, commenced a medical leave arising from clinical depression. At the time of termination, Mr. Naccarto had been on a medical leave for over five years.

The Defendant employer relied on the following, in support of its decision that the employment contract had been frustrated, giving it the right to terminate the Plaintiff's employment:
  1. The Plaintiff's long and continuing absence from work, which equated to a period of five years;

  2. The Plaintiff had been in receipt of long-term benefits which require a finding of "total disability"; and

  3. The statements of one of the Plaintiff's doctor that he did not know when the Plaintiff's medical condition would improve and did not know when he would be able to return to work
According to the Defendant, this demonstrated that the Plaintiff was "permanently disabled" and could not fulfill the basic obligations he owed as employee for the foreseeable future, justifying its decision to terminate him.

The Court underlined that the "burden" is squarely on the employer to prove frustration of contract, turning immediately to the medical evidence:

The law with respect to the burden of proof on an employer to establish a frustration of contract has been very well set out by Justice Perell in the case of Dragone v. Riva Plumbing Limited, 2007 CanLII 40543 (ON S.C.), 2007 CanLII 40543 (ON. S.C.). In that case, the employee had been absence from work due to illness for a period of approximately fourteen months. The evidence was that the employee did not know when she would get better, but that based on the evidence there was at least hope that she would eventually be able to return to work. The Court found that a permanent incapacity to return to work had not been proven. Justice Perell found that the onus was on the employer to prove that the contract had become frustrated and that it was not the employee’s onus to provide medical evidence with respect to her ultimate prognosis.

In this case, although the duration of the illness is significant, a period of five years, the medical evidence does not support a finding that there is no reasonable likelihood of the employee returning to work in reasonably foreseeable future. Rather, the evidence is that the employee is still being treated by his doctor as a new psychiatrist is being sought.

Costco could have followed up with the doctor to ask further questions with respect to the likelihood of a return to work in the foreseeable future, but it did not do so. Costco has not, in my opinion, provided this Court with the necessary medical evidence to support a finding that it is unlikely that Mr. Naccarato will be unable to work in the reasonably foreseeable future.

In other words, an employer has a "due diligence obligation." It must satisfy itself on a reasonable basis as at the time of termination that the medical documentation supports a finding that "there is no reasonable likelihood of the employee returning to work in the reasonably foreseeable future."

If the medical evidence is negative or equivocal on this crucial point - as in the case under discussion - then frustration may not have been proven by an employer.

The fact that the plaintiff employee was on long-term disability benefits which required "total disability" did not necessarily mean he was "permanently disabled" as defined by the common law, for the purpose of applying the doctrine of frustration.

Is the Absence Disruptive to the Employer's Operation?

Turning to another frustration of the employment case, Dragone v. Riva Plumbing Ltd. [1999] O.J. No. 1543 (Gen. Div.), Pollack J. considered another factor, namely whether the nature of the services performed by the plaintiff employee in the case were integral to the organization, straining against a very long-term of absence being required for a finding of frustration:
. . . To determine if a contract has been frustrated, regard must be had to the relationship of the term of the incapacity or absence from work to the duration of the contract, and to the nature of the services to be performed.
In this case, the plaintiff employee's minor role in the organization meant that his long absence had not been a disruption to the Defendant Costco's business. He was easily replaced in his period of absence and no direct or substantial losses accrued to the corporate Defendant as a result of such absence.

Given the two above factors, Justice Pollock found that "frustration" had not been established in the case. Nevertheless, the court considered a further argument put forward by the Plaintiff:

Mr. Naccarato further argues that there is a trend of our courts to refuse to apply the doctrine of frustration of contract in situations where the employee is entitled to receive short-term and long-term disability benefits due to illness. The submission is made that as such benefits are provided by the employer, it cannot be said that the event of the employee’s illness is something that was not reasonably contemplated by the parties. The frustration of contract must be delayed until the expiration of the period during which the benefits are provided for by the employer. Costco’s response to this argument is that what is not within the contemplation of the parties is the duration of the employee’s illness and not the fact that the employee may get ill.

Justice Perell, in the Dragone case, considers the effect of the presence of the long-term sick leave and disability benefits:

The presence of long-term sick leave and disability benefits indicates a greater tolerance for the duration of an employee’s absence before frustration occurs. Indeed, it has been suggested that contracting for these benefits may postpone the time of frustration because it may be inferred that the contracting parties anticipated that the employee might take leave for illness. See: Antonacci v. Great Atlantic & Pacific Co. of Canada, [1998] O.J. No. 876 (Gen. Div.), aff’d. In part [2000] O.J. No. 280 (C.A.); E.E. Mole and M.J. Stendon, Wrongful Dismissal Handbook (3rd ed.) (Markham: LexisNexis Canada Ltd., 2004), chapter B-4.”

An Open Question: Implications of An Employer's Provision of Disability Coverage

Justice Pollock's reasons leave open the question (raised in the Plaintiff's submissions) of whether or not a Defendant employer who offers an employee both long-term and short-term disability is barred from relying on frustration of the employment contract, for reason that it has contemplated the possibility of the Plaintiff's illness leading to a long leave of absence and essentially has contracted for it. He also leaves the question (also raised in the Plaintiff's submissions) of whether frustration of contract can only arise at the end of the period of benefit receipt by a Plaintiff employee, like Mr. Naccarato, for another day.

As a result of his rejection of the employer's defence of frustration, Justice Pollock finds that Mr. Naccarato was wrongfully dismissed, awarding him ten (10) months of pay in lieu of reasonable notice in view of his relatively young age of thirty-seven.
If you believe you have been wrongfully dismissed, please contact a lawyer who can advise as to your rights and entitlements both under the Ontario Employment Standards Act and at common law.
- Robert Tanha, Toronto

Wednesday, May 25, 2011

Ontario Employment Law: Reprisal For Asserting Rights Pursuant To An Employment Contract Amounts To Wrongful Dismissal

In Brown v. 1714717 Ontario Inc., decided April 26, 2011, the Ontario Labour Relations Board found that an employer had wrongfully terminated the applicant employee when it dismissed her without cause, and in reprisal for requesting and taking time off for a vacation.

Because the employee in the case had completed less than twelve months of employment at the time she asked for time-off, she was not entitled to take a vacation or receive vacation pay under Part XI of the Ontario Employment Standards Act. Therefore, she could not insist on these entitlements as a matter of law.

Nonetheless, the employer acceded to her vacation request for time off. It also paid the applicant her accrued vacation pay. In so doing, the employer had conferred on to the applicant a greater right or benefit than the "minimum standard" provided for under the Act.

Subsection 5(2) of the Act reads as follows:
(2) If one or more provisions in an employment contract or in another act that directly relate to the same subject matter as an employment standard provide a greater benefit to an employee than the employment standard, the provision or provisions of the contract or Act apply and the employment standard does not apply.
Having given the applicant employee a "greater right" in permitting her take the requested time off, the employer could not then reprise against her for exercising the right merely because it was one that flowed from the employment agreement, as opposed to from the Act. This was equally a violation of section 74 of the Ontario Employment Standards Act, which, in part, reads as follows:
(1) No employer or person acting on behalf of an employer shall intimidate, dismiss or otherwise penalize an employee or threaten to do so,

(a) because the employee

(iv) exercises or attempts to exercise a right under this Act
Because the responding party employer did not participate in the hearing, leaving the applicant's testimony uncontradicted and fully intact, the employer could not discharge its burden to demonstrate that it had not contravened the Act by dismissing the employee for requesting and taking a vacation from work (see subsection 74(2) of the Act).

Thus, the board found that the applicant had been wrongfully dismissed. In addition to termination pay, which she had already received from the respondent employer, the board awarded her $500.00 in damages for the employer's violation of the reprisal provisions of the Act.
- Robert Tanha, Toronto

Visit our Toronto Law Firm website: www.wiselaw.net

Wednesday, May 4, 2011

Altman v. Steve's Music: Moral and Punitive Damages Awarded in Ontario Wrongful Dismissal Action

A leading Canadian musical instrument retailer, Steve’s Music, has been ordered by the Ontario Superior Court to to pay more than $200,000.00 in damages, including $55,000 in moral and punitive damages, to a wrongfully terminated 59 year-old store manager with more than thirty years of service.

In Altman v. Steve's Music, a March 8, 2011 ruling by Madame Justice Katherine J. Corrick, Steve's was held liable for the wrongful dismissal of a long-term employee who had been diagnosed with lung cancer. In addition to the moral and punitive damages granted, the Plaintiff was awarded twenty-two months' salary in lieu of notice and all amounts that were outstanding under the Employment Standards Act.

After being diagnosed with lung cancer, the Plaintiff, Ms. Altman, was required to reduce her hours and to take two significant medical leaves, totalling approximately six months. Ms. Altman was terminated without reasonable notice, some 16 months following her diagnosis.

The Plaintiff was devastated by the termination and suffered a major depressive episode. The employer contended that Ms. Altman's employment had been frustrated by her illness and that she accordingly had no legal entitlement to compensation upon the termination.

The manner of the termination.

The Court took considerable exception to the manner in which the termination was conducted.

The employer did not directly communicate with Ms. Altman - rather, it outsourced the termination to its lawyers, whose handling of the matter was anything but delicate. Justice Corrick referenced pertinent passages from two letters sent by the employer's law firm to the Plaintiff for this purpose:
First Letter
We are the attorneys representing the interests of your employer Steve's Music....According to the information provided by our client, it appears that you have been remiss in your duties and obligations towards Steve's Music in failing to work minimum number of hours required by your employer from Monday to Friday . ... In view of the foregoing, we have as instructions to advise you that unless you fulfill your obligations toward your employer in full by working regular work days [sic] as stipulated by your employer's directives, Steve's Music will have no alternative but to advise you that your employment will be terminated, without further notice or delay.
Second Letter
We have as instructions from our client to advise you that in light of our correspondence addressed to both you and your attorney since October 2008 to date, as well as your application for long term disability and the fact that your position with Steve's Music, has since been abolished, Steve's Music has no obligation to reinstate you. . . . Steve's Music was full entitled to offset and deduct from your renumeration or for that matter any other sums due and owing to you, for your absenteeism, late arrivals and departures.
The first letter had caused the medically frail Ms. Altman to return to work the day immediately following receipt, for fear that if she did otherwise she would be terminated.

That would be the last day Ms. Altman worked at Steve's. Her medical needs would require her to begin a three-month medical leave immediately thereafter, which was followed by a further three-month medical leave. These leaves, apparently, were the last straws for Steve's Music.

Madame Justice Corrick's ruling addresses five issues:
  1. Does Steve's owe Ms. Altman any outstanding compensation for severance, wages, vacation, commission, bonus and deferred profit sharing plan?

  2. Was Ms. Altman's employment contract frustrated?

  3. If Ms. Altman's employment contract was not frustrated, what is the appropriate period of notice?

  4. Are moral damages for mental distress appropriate, and if so, what is the quantum?

  5. Are punitive damages appropriate, and if so, what is the quantum?
Outstanding Compensation

The Defendant took the position that it was entitled to withhold outstanding salary and substantial accumulated vacation pay from the Plaintiff, claiming set-off for overpayment. It had continued to pay Ms. Altman's full salary while she was receiving treatment for cancer and absent. It claimed a credit for these "gratuitous" payments.

Corrick J. flatly rejected the employer's position in this regard. She noted that the situations in which an employer can withhold outstanding salary and vacation pay are very narrow, indeed, and held that if Steve's genuinely believed that Ms. Altman was in arrears on account of salary, it should have cross-claimed or brought an action to recover these amounts.

Moreover, Corrick J. noted that Steve's had voluntarily made the decision to continue to pay salary to the Plaintiff while she was working at less than full-capacity; such arrangement was not contingent on Ms. Altman surrendering her other employee entitlements.

Employer's Defence of Frustration

In considering the defence of frustration put forward by Steve's Music, Corrick J. made a number of important points, each of which is worthy of specific note:
  1. Since the employer lacked medical evidence that Ms. Altman's condition was a "permanent disability" as at the date of termination (the relevant time at which the Plaintiff's disability is to be assessed) such that she would no longer be able to perform her duties at work, it could not rely on the doctrine of frustration to relieve it from its legal obligation on termination. The medical reports the Defendant sought to rely on were written more than a year after Steve's terminated Ms. Altman's employment, after Ms. Altman's cancer had spread to her brain and bones.

  2. Ms. Altman's application for long term disability benefits was not an admission by her that she had a "permanent disability" at law for the purposes of applying the doctrine of frustration of contract, even if she had met the definition of "permanent disability" as provided for in the Defendant company's Group Insurance Policy.

  3. Ms. Altman's job involved considerable paperwork. It was not a physical job entailing heavy lifting. Thus, the standard that had to be met by Steve's Music to show that Ms. Altman was physically incapable of performing her job was a high one, which it simply could not meet on the facts of the case.

  4. Despite the Defendant employer's bald assertion to the contrary, there was no evidence whatsoever that Ms. Altman had been remiss in her duties at work or that anyone was dissatisfied with her work. The fact that her cancer medically required her to work reduced hours clearly did not constitute neglect of duty.
The Period of Reasonable Notice

To determine the period of reasonable notice owed to Ms. Altman, Corrick J. turned to the oft-cited Bardal factors finding that Ms. Altman was entitled to 22 months of notice. The Court underscored that Ms. Altman's vulnerable medical state and age meant that her chances for reemployment into a comparable position were very low, and justified an extended period of notice.

Further, the long-term disability payments received by Ms. Altman during the notice period were not deductible because she, not Steve's Music, had paid the premiums, and the insurance company, not her employer, had paid the benefits.

Mitigation

Corrick J. found that Ms. Altman's modest job search efforts were enough to meet her duty at common law, and that Steve's has not discharged its onus of proving a failure to mitigate.

Moral Damages

In deciding whether Ms. Altman should be awarded moral damages, Corrick J. focused on the manner of termination and the actual damage that had been caused to the Plaintiff by the Defendant's misconduct in this regard.

She accepted medical evidence which demonstrated that Ms. Altman had suffered psychological distress consisting of a major depressive episode of moderate severity. The extent of the trauma suffered by Ms. Altman is revealed in Justice Corrick's reviews of the expert medical evidence adduced by the Plaintiff:
Dr. Li met Ms. Alman after she had undergone surgery, chemotherapy and radiation therapy. Dr. Brade referred Ms. Altman to Dr. Li as Ms. Altman was suffering from psychological distress. Dr. Li diagnosed her as suffering from a major depressive episode of moderate severity. In Dr. Li's opinion, this illness was precipitated by Ms. Altman's receipt by bailiff of October 7, 2008 letter from Kaufman Laramee informing her that she will be terminated if she does not work full-time hours. Dr. Li testified that this letter was more traumatic for Ms. Altman than being diagnosed with cancer or being told that her cancer could not be cured.
Dr. Li testified that Ms. Altman's depression required treatment because the presence of depression in cancer patients is very strongly co-related with poor survival, poor response to treatment, and higher mortality. . . .
Although Ms. Altman's depression remitted, her psychological distress has not abated, according to Dr. Li. Ms. Alman continues to be distressed over the conflicts she has had with her employer, which is activating her hormonal stress system and putting her health at further risk.
In deciding whether moral damages were warranted in Ms. Altman's case, Corrick J. emphasized that the employer's actions had to be viewed in the context of the employee's age, length of service, state of health and relationship with Steve's Music. The Court noted the following, justifying a significant award of moral damages:
  1. The letters, in particular the second letter, were highly insensitive and inappropriate, and did not accord with the way the law requires employers to treat employees

  2. If the correspondence was issued in error, why hadn't anyone from Steve's music contacted the Plaintiff to rectify the error?

  3. The Defendant employer could not have issued two aberrant letters in error; this defied coincidence.

  4. Given the Plaintiff's length of service and dedication to her job, which she had performed without incident, management of Steve's Music should have spoken with the Plaintiff about her termination personally, not pawned this off on their lawyers to deal with in a cavalier manner.

  5. The letters were replete with mistruths from the Defendant employer's lawyers and signified that the Defendant employer was engaged in a campaign of deceit, which campaign attempted to conceal the true reasons for the Plaintiff's termination: the fact that her health problems had made her too much of burden and liability for Steve's to bear. Her job performance and competence were beyond reproach.
Corrick J. awarded $35,000.00 under this head of damages, holding as follows:

[117] The Supreme Court of Canada’s decision in Honda Canada Inc. v. Keays,[37] confirmed its earlier ruling in Wallace v. United Grain Growers Ltd.[38] that damages resulting from the manner of dismissal will be available if the employer engages in conduct during the course of dismissal that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive.”[39] The normal distress and hurt feelings resulting from dismissal from employment are not compensable.[40] The award of damages for mental distress caused by the manner of termination must reflect the actual damage caused and is meant to be compensatory in nature.

[118] In my view, Ms. Altman is entitled to moral damages...

[129] The manner of communicating termination has been held to justify damages for mental distress. In Bohemier v. Storwal International Inc. the Ontario Court of Appeal upheld an award of damages for mental distress in circumstances where an employee of 35 years was terminated by means of a cold and perfunctory letter delivered to his house by taxi on a Friday evening.

[130] Similarly, an employer’s harsh treatment of an employee known to be in difficult circumstances has been held to be the proper subject of damages for mental distress. In Rae v. Attrell Hyundai Subaru the employer sent notice of dismissal to an employee of four years by courier two weeks prior to the birth of her child. The Court of Appeal upheld the trial judge’s finding that this inexcusable conduct on the part of the employer merited a two-month increase in notice.

[131] Steve’s treatment of Ms. Altman was callous and insensitive. She was a 30-year employee who had been treated like family, and who worked for Steve’s as if she were a member of the family. She deserved to be treated better than twice having a bailiff deliver her a letter replete with mistruths from Steve’s lawyers – especially when Steve’s knew she was recovering from cancer treatment. No one in the management of Steve’s had the decency or courtesy to speak to her personally to express their dissatisfaction with the work arrangement to which they had previously agreed. I conclude that once Steve’s decided that Ms. Altman had become more of a liability than an asset to the organization because of her cancer, they abandoned her to be dealt with by their lawyers. These letters devastated Ms. Altman and caused her significant mental distress to the point of clinical depression. Ms. Altman’s mental distress has been long lasting and is ongoing.

[132] I award Ms. Altman damages in the amount of $35,000.00 as compensatory damages as a result of Steve’s breach of its duty to deal with Ms. Altman in good faith and with fairness in the manner in which they terminated her employment.

Punitive Damages

In finding that the Defendant's misconduct also called for punitive damages, Corrick J. noted the following:
  1. The employer had committed multiple violations of the Ontario Employment Standards Act, including withholding salary improperly and refusing to pay Ms. Altman's statutory minimum termination pay as set out in the Act. This constituted an independent, actionable wrong, a prerequisite for an award of punitive damages;

  2. The Defendant had roadblocked the Plaintiff's attempts to obtain long-term disability benefits long after her wrongful termination by failing to complete the Policyholder's Statement in the claim form, despite numerous attempts by Ms. Altman and others to get it to do so;

  3. The Plaintiff had to retain counsel to obtain her Record of Employment which would permit her to apply for and receive Employment Insurance Benefits; and

  4. The Defendant employer had chosen to fire Ms. Altman when her illness made her more of a liability to the business than an asset.
Corrick J. awarded $20,000.00 under this head of damages, citing the employer's "reprehensible and high-handed conduct:"
[139] Steve’s conduct must be viewed in the totality of Ms. Altman’s circumstances. In October 2008, Ms. Altman had just completed very intensive cancer treatment. Steve’s did not pay her during her medical leave, which began on October 17, 2008. In fact, Steve’s did not pay her for the hours she had worked that week. Ms. Altman had no source of income. Steve’s failure to honour its statutory obligations to pay her termination pay, to provide her with a Record of Employment to allow her to obtain Employment Insurance benefits, to comply with an order made by Conway J. to provide Ms. Altman with an accounting of her share of the deferred profit sharing plan, together with the other misconduct listed in paragraph 136 is reprehensible and high handed conduct that is deserving of this court’s denunciation.
Moral Damages: The New Wallace Damages?

This ruling follows closely on the heels of Brito v. Canac Kitchens, another recent Ontario wrongful termination decision in which punitive damages were awarded against an employer for its callous treatment of an employee. In the February 2011 Brito ruling, Mr. Justice Echlin similarly admonished an employer for its conduct upon termination:

[18] Having regard for Canac’s cavalier, harsh, malicious, reckless, outrageous and high-handed treatment of Mr. Luis Romero Olguin, I award a further $15,000.00 in damages relating to its “hardball approach”.

[19] Pursuant to the Supreme Court of Canada’s decision in Honda Canada Inc. v. Keays 2008 SCC 39 (CanLII), [2008] 2 S.C.R. 362, I might have considered awarding “moral damages”. However, as indicated in Natalie C. MacDonald, Extraordinary Damages In Canadian Employment Law, Toronto: Carswell, 2010 at pp. 33-168 and 812-815, the relatively new common law head of damages, in this post-Wallace world, requires considerable specificity in pleading and further evidence which was not presented at this trial.

While it may be premature to assert that these heads of damages will be awarded with increasing regularity by Ontario Courts, employers should take note that in genuine cases of misconduct in the course of termination, Ontario courts are not averse to awarding substantial damages, including significant amounts for moral and punitive damages.

Employers should proceed with caution, accordingly. Plaintiffs will certainly rely on these recent rulings to hold employers accountable for the consequences arising from bad faith in the conduct of termination.