Tag: wrongful dismissal

Categories
Wrongful Dismissal/Termination

Court of Appeal Rules That One Illegal Part of a Termination Clause Renders Its Entirety Unenforceable

In a recent case, the Ontario Court of Appeal found that the fact that one part of a termination provision violated employment standards legislation meant that all parts of the termination provision were unenforceable.

What Happened?

The employee began working for the employer on January 8, 2018 as its director of sales. His base salary was $135,000 per year plus expenses and the possibility of an annual bonus, which brought his overall annual salary close to $200,000. 

The employee was terminated without cause on October 18, 2018 and the employer paid the employee two weeks’ pay in lieu of notice.

The employee sued the employer for damages for wrongful dismissal, claiming six months’ pay in lieu of notice for his eight months of employment with the employer. 

The Employment Agreement

The employment agreement between the parties contained a termination without cause clause, which entitled the employee to one week notice or pay in lieu of such notice in addition to the minimum notice or pay in lieu of such notice and statutory severance pay as may be required under the Employment Standards Act, 2000 (the “ESA”). 

The employment agreement also contained a termination for cause provision. 

The employee submitted that the termination for cause provision breached the terms of the ESA and was therefore void and unenforceable. 

The employer conceded that the termination for cause provision violated the ESA and was unenforceable, but argued that it was irrelevant because the employee was not terminated for cause.

Finally, the agreement contained a severability clause, which stated that if any provision was found to be invalid or illegal, all remaining terms in the agreement would remain in full force and effect. 

Parties’ Positions

The employee argued that the unenforceability of the termination for cause provision impacted the agreement beyond that one clause. The employee submitted that the defective clause rendered the entire agreement – or, at the very least, both termination provisions in the agreement – void and unenforceable. 

The employer submitted that where there were two discrete termination provisions that applied to different situations, the court must consider whether one provision impacted upon the other and whether the provisions were “entangled” in any way. If they were not, then there was no reason why the invalidity of one should impact on the enforceability of the other. 

Issue

The issue was whether the illegality of the termination for cause provision rendered the termination of employment without cause provision unenforceable.

Lower Court Decision

The motion judge dismissed the employee’s action, and awarded the employer $16,000 for costs. He concluded that the termination of employment without cause provision was a stand-alone, unambiguous, and enforceable clause.

Court of Appeal Decision

The court explained that an employment agreement must be interpreted as a whole and that the correct analytical approach was to determine whether the termination provisions in an employment agreement read as a whole violated the ESA. The court then stated: 

“In conducting this analysis, it is irrelevant whether the termination provisions are found in one place in the agreement or separated, or whether the provisions are by their terms otherwise linked.”

As a result, the court found that the motion judge had erred because he failed to read the termination provisions as a whole and instead applied a piecemeal approach without regard to their combined effect.

Additionally, the court rejected the employer’s argument that it did not rely on the illegal termination for cause clause because a court must determine the enforceability of the termination provisions at the time the agreement was executed; therefore, non-reliance on the illegal provision was irrelevant. The court explained this is because where an employer does not rely on an illegal termination clause, it may nonetheless gain the benefit of the illegal clause. 

Finally, the court declined to apply the severability clause to the termination provisions, explaining that a severability clause cannot have any effect on clauses of a contract that have been made void by statute. Because the court had already concluded that the two termination provisions must be read together, the severability clause could not apply to sever the offending portion of the termination provisions.  

As a result, the court set aside themotion judge’s order.

Because the only defence the employer had to the action was its reliance on the termination without cause provision, the court ordered that the matter be remitted to the motion judge to determine the quantum of the employee’s damages and the costs of the action. 

Get Advice

At Bader Law, our Mississauga employment lawyers have been representing non-unionized employees in workplace disputes since 1999. We know that such disputes can be very stressful and can get emotional quickly. We seek to simplify the law so that you understand your options and make informed decisions. We leverage our extensive experience advising employers to provide insightful guidance to employees who are facing challenging circumstances at work. We work hard to protect you.

If you have questions about unfair practices in the workplace, wrongful dismissal, or any other employment matter, contact the Mississauga employment lawyers at Bader Law. Our knowledgeable employment lawyers can counsel you on your rights, advise you on your options, and help you create a plan for moving forward. We represent employees in Mississauga and areas west of Toronto. Contact us online or at (289) 652-9092 to learn how we can help.

Categories
Wrongful Dismissal/Termination

Can a Terminated Employee Sue for Damages If They Find a Higher-Paying Job?

A recent Ontario appeal addressed the issue of whether a terminated employee can sue their former employer if they mitigated their damages by finding a higher-paying job?

What Happened?

The employee worked for the employer as a delivery driver from June 2006 to May 30, 2014. His hourly rate was $12. He worked 37.5 hours per week, resulting in weekly remuneration of $450. He did not work overtime for the employer.

On February 21, 2014, the employer gave the employee notice that his employment would terminate effective May 30, 2014; he was given three months’ working notice. The employee was 65 years old at the time of termination. He was terminated without cause.

Two weeks after the end of the working notice, the employee found replacement employment. In this new employment, the employee worked as a driver, with similar responsibilities to those in his former employment.

At his new job, the employee was paid $11 per hour. He also worked some overtime in his new employment, for which he was paid time-and-a-half ($16.50 per hour).

As a result, the employee earned more at his new employment than he had with the employer: in 2014, he earned one to two thousand dollars more and in 2015, he earned more than $3,000 in excess of what he would have made with his former employer.  

The employee filed an action with Small Claims Court for damages for the two weeks of his unemployment between jobs.

Small Claims Court Decision

The trial judge found that the employee was unemployed for two weeks before starting his new job and the employee’s new job was comparable to and replaced his job with the employer. The judge awarded damages for wrongful dismissal for two weeks’ lost wages ($900) for this period of unemployment. 

The employee argued that his overtime wages should not be included in the calculation of his new income, which the trial judge accepted.As a result, the trial judge also made an award of damages of $742 for the reduction of $1 per hour in the employee’s base rate of pay.

The trial judge also found that the employee was required to retire because he reached the age of 65. The trial judge found that this forced retirement was discrimination on the basis of age within the meaning of the Ontario Human Rights Code and awarded general damages for this discrimination fixed at $8,000.  

The employer appealed.

Appeal Decision

The court found that there was no reason to exclude the overtime earnings from the mitigation income; the employee’s opportunity to work the overtime hours arose because of his new employment.

The court explained that it is a general principle that all earnings from replacement employment apply as mitigation of loss of employment earnings from wrongful dismissal. As a result, the court found that the trial judge’s conclusion was an error in principle that fell outside the general principles of mitigation. The court allowed this aspect of the appeal and set aside the trial judge’s award of damages of $742 for the reduction of $1 per hour in the employee’s base rate of pay.

The court then set out the remaining issue as follows: 

“The issue is thus: a wrongfully dismissed employee is out of work for a period of time and then finds replacement employment from which he earns more than he had been earning at his former employment. Do the surplus earnings from the new employment serve to reduce the damages for the period of unemployment?”

Although the court reviewed one case that found that an employee is entitled to no damages if they find a better paying job, it disagreed with this position. Instead, the court explained that where an employer gave adequate working notice for the entire notice period, the worker would have been paid while he continued work up until commencing new employment, with no duty to account back to his old employer for his increased wages. 

As a result,  the appeal was only allowed in part, to reverse the trial judge’s award of damages of $742 for the reduction of $1.00 per hour in the employee’s new employment. The balance of the Small Claims judgment was upheld in the amount of $8,900. Additionally, the employee was awarded $5,000 in costs for the appeal.

Get Advice

At Bader Law, our Mississauga employment lawyers have been representing non-unionized employees in workplace disputes since 1999. We know that such disputes can be very stressful and can get emotional quickly. We seek to simplify the law so that you understand your options and make informed decisions. We leverage our extensive experience advising employers to provide insightful guidance to employees who are facing challenging circumstances at work. We work hard to protect you.

If you have questions about unfair practices in the workplace, wrongful dismissal, or any other employment matter, contact the Mississauga employment lawyers at Bader Law. Our knowledgeable employment lawyers can counsel you on your rights, advise you on your options, and help you create a plan for moving forward. We represent employees in Mississauga and areas west of Toronto. Contact us online or at (289) 652-9092 to learn how we can help.

Categories
Wrongful Dismissal/Termination

Are Wrongfully Dismissed Employees Entitled to Exercise Stock Options and Receive Bonuses?

The Ontario Court of Appeal recently issued a decision concerning an issue that is being litigated with increasing frequency: the entitlement of a wrongfully dismissed employee to exercise stock options, receive bonuses, or take advantage of other aspects of his or her compensation package during the reasonable notice period.

What Happened?

The employee had been employed for 22 years with the employer when he was dismissed from an executive position on January 4, 2016. The termination was to be effective March 31, 2016.

The employee’s compensation package included a base salary, commissions, group benefits, and participation in both a long term incentive plan, which included both restricted share units(“RSUs”) and stock options, and a stock option plan (collectively, the “awards”). 

After unsuccessful attempts to negotiate a severance package, the employer extended the effective termination date from March 31, 2016 to July 8, 2016. It advised the employee that any awards that had already vested could be exercised for up to 30 days after the latter date. Any awards that had not vested as of that date would be “cancelled and forfeited without any consideration.”

The employee brought an action for wrongful dismissal. 

Lower Court Decision

The motion judge found that the employee was entitled to damages, calculated on the basis of 24 months’ reasonable notice, together with all commissions outstanding at the date of termination. The judge also determined the employee’s damages for wrongful dismissal, including the damages for lost opportunity to earn commissions on sales during the reasonable notice period, the pension contributions that would have been made during that period, and the value of benefits lost during the notice period.

Additionally, the motion judge concluded that the employee’s damages for the loss of the awards should be calculated on the basis of what would have probably happened had he remained employed until the end of the notice period. He noted that the employee had exercised his options in the past and that he therefore would likely have done so in this case, had his employment not been terminated.

The motion judge found that the language of the relevant awards was not sufficient to cancel the employee’s entitlement to exercise the awards or to remove his entitlement to damages for their loss. He was therefore entitled to damages for the loss of the right to exercise the RSUs and stock options that would have vested during the reasonable notice period.

The motion judge accepted the employee’s evidence that he would have exercised the options at the “earliest possible opportunity” and calculated damages on the basis that the employee would have sold the shares that vested during the reasonable notice period five months after their vesting date.

The employer appealed.

Court of Appeal Decision

The court stated that the motion judge correctly found as a fact that the awards were an integral part of the employee’s employment, that they would have vested had his employment not been wrongfully terminated, and that he would have exercised the awards, as he had done in the past. 

Ultimately, the court found that the motion judge applied the correct legal principles and arrived at the correct conclusion, stating: 

“[I]n the absence of unambiguous contractual language […], the awards continued to vest during the reasonable notice period. The [employee] was entitled to damages for the loss of his entitlement to exercise his rights.”

As a result, the court dismissed the employer’s appeal.

Get Advice

At Bader Law, our Mississauga employment lawyers have been representing non-unionized employees in workplace disputes since 1999. We know that such disputes can be very stressful and can get emotional quickly. We seek to simplify the law so that you understand your options and make informed decisions. We leverage our extensive experience advising employers to provide insightful guidance to employees who are facing challenging circumstances at work. We work hard to protect you.

If you have questions about unfair practices in the workplace, wrongful dismissal, or any other employment matter, contact the Mississauga employment lawyers at Bader Law. Our knowledgeable employment lawyers can counsel you on your rights, advise you on your options, and help you create a plan for moving forward. We represent employees in Mississauga and areas west of Toronto. Contact us online or at (289) 652-9092 to learn how we can help.

Categories
Wrongful Dismissal/Termination

Employer’s Sole Director Found Personally Liable to Employee for $75,000 in Aggravated Damages for Wrongful Dismissal

In a recent Ontario case, an employer’s sole director was found personally liable for $75,000 in aggravated damages for the manner in which he treated and dismissed an employee under the oppression remedy.

What Happened?

The employee was employed by the employer corporation (the “employer”) from July 2009 until her termination on March 12, 2016. She earned a salary of $90,000 until her salary was reduced to $60,000 in 2015 as a temporary measure to help the employer through the off-season.

The employer was a company that specialized in conducting vehicle and heavy equipment auction sales. The employer corporation had one sole director (the “director”), who also acted as its president. 

From 2009 until November 26, 2015, the employee and the director were in a common law relationship and have three children together. 

The employee alleged that on March 9, 2016, the director wrongfully terminated her employment and withheld her wages. She claimed that the termination was unrelated to her work, but directly related to their separation. The employee alleged that she was not paid the wages owing to her and, as a result, she became a creditor of the employer. 

The employer ceased operation in 2017, and all of its assets were transferred to a related company. 

The employee brought a motion for an order of default judgment and an order imposing personal liability against the director as an oppression remedy pursuant to s. 248 of the Ontario Business Corporations Act(the “OBCA”). Her statement of claim asked for $256,355 for unpaid wages, unpaid vacation pay, damages for wrongful dismissal and aggravated and punitive damages. 

The Decision

After reviewing the relevant legal principles, the court found that it was appropriate to pierce the corporate veil under s. 248 of the OBCA and impose personal liability on the director. 

It found that the employee became a creditor of the employer in March 2016 when the director withheld her wages from the employer’s payroll. The employee brought an action to recover this debt, and the director caused the employer to cease operations and transfer all of its assets to a related company in order to leave it without assets to respond to a possible judgment in this action. The court found that these actions qualified as oppressive conduct under s. 248 of the OBCA.

The court stated that, as the sole director of the employer, the director can be held personally liable for oppressive action. It found that the facts demonstrated that the director acted for reasons of personal animus against the employee and that the reasons were unrelated to her employment or to her entitlement to wages and benefits. 

Ultimately, the court found that the director acted in bad faith, using his control of the employer corporation to advance his personal financial interest, and to punish the employee and gain leverage in their family law dispute. It found such conduct directly attributable to the director and, as the sole director, it found him personally liable.

Damages

At the outset, the court found that the employee was owed basic wages, statutory holiday pay, vacation pay and pay in lieu of notice. It awarded her $2,582 for unpaid past wages, $13,776 for accrued vacation benefits and $90,000 for pay in lieu of reasonable notice.

The court then turned to the employee’s claim for $75,000 for aggravated damages for the manner in which the director terminated her employment.

The court found that the director’s handling of the employee’s termination was unfair and in bad faith. The director had made a false allegation that the employee was “considered having quit” to avoid having to pay her severance for dismissing her without reasonable notice. The court described the director’s conduct as unfair and appeared to be retaliation for the issues raised in the family law dispute. 

The court concluded that it was a proper case for aggravated damages and made an order for $75,000 for aggravated damages against the director.

The court dismissed the employee’s claim for punitive damages, finding that the imposition of personal liability on the director was a sufficient penalty for the oppressive conduct complained of. 

Get Advice

At Campbell Bader LLP, our Mississauga employment lawyers have been representing non-unionized employees in workplace disputes since 1999. We know that such disputes can be very stressful and can get emotional quickly. We seek to simplify the law so that you understand your options and make informed decisions. We leverage our extensive experience advising employers to provide insightful guidance to employees who are facing challenging circumstances at work. We work hard to protect you.

If you have questions about unfair practices in the workplace, wrongful dismissal, or any other employment matter, contact the Mississauga employment lawyers at Campbell Bader LLP. Our knowledgeable employment lawyers can counsel you on your rights, advise you on your options, and help you create a plan for moving forward. We represent employees in Mississauga and areas west of Toronto. Contact us online or at 905-828-2247 to learn how we can help.

Categories
Shareholder Agreements & Disputes

Employee Entitlements under a Shareholders’ Agreement after Termination

A recent Ontario Court of Appeal decision determined that the terms of a shareholders’ agreement apply as written, regardless of whether an employee was terminated with or without cause.

What Happened?

The employer is an employee-owned engineering firm that provides engineering and construction consulting services. 

The employee was employed by the employer for 31 years, most recently in the position of Director, Business Development. On October 26, 2017, the employee was notified in writing that his employment was being terminated without cause, effective immediately.

The employee commenced an action for wrongful dismissal. In granting partial summary judgment, the motion judge awarded the employee damages for wrongful dismissal based on a notice period of 26 months. That determination was not appealed.

The motion judge also made a determination regarding the value that the employee was entitled to be paid for the shares that he held in the employer’s parent corporation, along with his entitlement to a share bonus. Those determinations were the subject of the appeal.

Shareholders’ Agreement

The employee was one of a select group of employees who were eligible to purchase shares of the employer’s parent corporation. 

Those shares were governed by the terms and conditions of a shareholders’ agreement. At the time that his employment was terminated, the employee owned a total of 5,108 shares.

Under the terms of the shareholders’ agreement, the employee and other shareholders were eligible to receive annual “share bonuses”. The share bonus payable in respect of each share was determined by an objective calculation based on the company’s financial results. As a result, the total share bonus payable to each shareholder depended on the total number of shares that the shareholder had previously decided to purchase. The share bonus was not related to the shareholder’s contributions as an employee; it was, in effect, a dividend. 

With respect to the employee’s shareholdings, the motion judge determined that he was entitled to: 

  • hold the shares until the end of the reasonable notice period (i.e. 26 months after he was notified of his termination and his association with the employer had ceased); and 
  • receive damages for the loss of the share bonus that would have been payable during such 26 month period.

Article 3 of the shareholders’ agreement dealt with “Automatic Transfer Notices”, and applied in situations where, among other things, a shareholder resigns, is terminated, becomes bankrupt, or dies. Article 3.2 applied in cases of termination, and stated:

“A Shareholder whose association with the Corporation and its Affiliates ceases by reason of termination by the Corporation of his/her employment with the Corporation and its Affiliates shall, immediately after such termination, be deemed to have given a Transfer Notice covering all of the Shares held by him/her on a date which is 30 days from the date he/she is notified of such termination by the Corporation.”

The shareholders’ agreement proceeded to specify that a shareholder who was deemed to have given a Transfer Notice under Article 3 was entitled to the “fair value” of his or her shares. 

The employer took the position that the employee’s association with it had ceased by reason of the termination of his employment on October 26, 2017, which became the “trigger” date for purposes of the shareholders’ agreement. 

In accordance with that position, the employer paid the employee the sum of $999,431 (representing the “fair value” of his shares on November 25, 2017, which was 30 days from October 26, 2017, the date of his termination).

The motion judge disagreed with the employer’s position. He concluded that the employee was entitled to receive payment for his shares with the value calculated at the end of the reasonable notice period. The motion judge also concluded that the employee was entitled to the share bonus that would have accrued during the notice period. The motion judge reached this conclusion based on his view that the “basic principle to be applied is to put the person in the same position they would have been in if lawfully terminated”. 

Court of Appeal Decision

At the outset, the court stated that the motion judge had erred in concluding that the employee was entitled to compensation in respect of his shares calculated at the end of the notice period. 

The court found that the motion judge improperly conflated the employee’s entitlement to compensation arising from the breach of his contract of employment with his contractual entitlements respecting his shares. 

The court stated that it was the terms of the shareholders’ agreement that determined the employee’s rights with respect to those shares and that the common law relating to compensation for breaches of a contract of employment did not apply to the employee’s entitlements regarding his shares, stating:

“[The employee’s] entitlements relating to his shares are separate and apart from the relief to which he is entitled arising from his contract of employment. His entitlements relating to his shares fall to be determined by the terms of the Shareholders’ Agreement. […]

None of this turns on whether the employee has been terminated with or without cause.”

The court found that the shareholders’ agreement expressly provided that the corporation became entitled to repurchase the shares 30 days from the date the shareholder was “notified of such termination”. It further found that this conclusion also dealt with the share bonus issue; once it was concluded that the shares had to be transferred resulting from the employee’s termination, he ceased to have any entitlement to any bonus arising from the shares that he no longer owned.

As a result, the appeal was allowed, as the court determined that the employee had already received what he was contractually entitled to when he was paid for his shares.

Get Advice

At Campbell Bader LLP, we have been helping businesses and business owners with matters related to shareholder agreements since 1999. We are proud of the strong client relationships we have built since then. We take the time to understand your business before deciding on a course of action, keep you well informed throughout the process and ensure you make the best strategic decisions at every stage. 

If you have questions about unfair practices in the workplace, wrongful dismissal, or any other employment matter, contact the Mississauga employment lawyers at Campbell Bader LLP. We regularly advise both employers and employees on a wide range of issues that arise at work. Contact us online or by phone at 905-828-2247 to schedule a consultation.

Categories
Wrongful Dismissal/Termination

Employer Loses Human Rights Tribunal Case For Failing to Accommodate an Employee’s Childcare Needs

The Ontario Human Rights Tribunal recently decided a case in which the employee alleged that the employer had failed to accommodate her special needs related to childcare and her termination was discrimination based on her family status.

What Happened?

The employee worked as a personal support worker for the employer from at least 2013 until the date of her termination, May 23, 2017. The employee was married with two children. At the time of the termination, the children were two and five years old. The eldest has autism. It was essential that a caregiver meet the eldest at the employee’s home where the school bus delivered him each weekday. Because her other family members were unavailable, the employee wasthe only one in a position to meet the eldest child’s bus at her home, because her shift at work ended at 3:00 p.m. 

At all relevant times, the employer was aware of the employee’s children and her child’s special needs.

In March 2017, the administration began discussing moving the employee from her usual 7:00 a.m. – 3:00 p.m. day shift to the later afternoon shift: 3:00 p.m. – 11:00 p.m. The employee informed them that she was unable to work the later shift because of her children’s schedule and problems she was having finding more flexible daycare. The employer initially offered her a midnight shift to accommodate her childcare needs.

However, in May 2017, the employer told the employee that it could not longer offer her the midnight shift because she had called in sick the month before without giving adequate notice. The employee then informed the employer she could not work the later afternoon shift because of her childcare needs.

Two days later, the employer informed the employee she had been terminated. The termination letter stated that the reasons for the termination were because of: attendance, failure to follow instructions, conduct, creating disturbance, performance and work quality.

The Issues

The employee alleged that the employer failed to accommodate her special needs related to childcare, and terminated her employment, at least in part, because she was unable to work more flexible hours given her duties as a mother. When it was filed, the application alleged discrimination with respect to employment because of family status and also reprisal contrary to the Human Rights Code (the “Code”).

The Law

The tribunal stated that the following Code provisions were relevant to the case:

5(1)Every person has a right to equal treatment with respect to employment without discrimination because of ….family status.

11(1)A right of a person under Part I is infringed where a requirement, qualification or factor exists that is not discrimination on a prohibited ground but that results in the exclusion, restriction or preference of a group of persons who are identified by a prohibited ground of discrimination and of whom the member is a member, except where,

(a)  the requirement, qualification or factor is reasonable and bona fide in the circumstances; or

(b)  it is declared in this Act, other than in section 17, that to discriminate because of such ground is not an infringement of a right.

(2)The Tribunal or a court shall not find that a requirement, qualification or factor is reasonable and bona fide in the circumstances unless it is satisfied that the needs of the group of which the person is a member cannot be accommodated without undue hardship on the person responsible for accommodating those needs, considering the cost, outside sources of funding, if any, and health and safety requirements, if any.

Additionally,in s. 10(1) of the Code, “family status” is defined as “the status of being in a parent and child relationship”.

The Human Rights Tribunal Decision

The tribunal began by setting out the test for establishing family status discrimination in the context of childcare, stating that a claimant must prove:

a.  The child is under his or her care and supervision;

b.  The childcare obligation at issue engages the individual’s legal responsibility for that child, as opposed to personal choice;

c.  The individual has made reasonable efforts to meet those childcare obligations through reasonable alternative solutions, and that no such alternative solution is reasonably accessible; and

d.  The impugned workplace rule interferes in a manner that is more than trivial or insubstantial with the fulfillment of the childcare obligation.

Applying the law and legal test to the facts of the case, the tribunal concluded:

“I find that the [employer]’s stated reasons for the termination were not based in fact. The [employee]’s performance was fine. The [employer]’s reasons were pretextual, and by inference, I find that at least one of the real reasons for the termination, if not the only reason, was the [employee]’s unavailability for certain shifts caused by her need to provide care to her children. Her request regarding her shifts was the only issue that arose during the time immediately prior to the termination, and the issue was unresolved between the [employer] and the [employee] at the time of the termination. 

I also find that the [employer] could easily have given the [employee] the midnight shift to accommodate her childcare schedule. The [employer]’s decision not to give the [employee] the midnight shift was based upon an unreasonable expectation that she should have provided 48 hours of notice that she would be ill, or that she should have found a replacement for herself even though she became ill the night before a morning shift. The withdrawal of its offer to provide the [employee] with the midnight shift was arbitrary, unreasonable and unfair. In conclusion, the [employer] made no allowance for the [employee]’s childcare responsibilities in their determination that her scheduling requirements justified termination.”

As a result, the tribunal awarded the employee $30,000 in compensation for injury to dignity, feelings and self-respect.

Get Advice

If you have questions about unfair practices in the workplace, wrongful dismissal, or any other employment matter, contact the Mississauga employment lawyersat Campbell Bader LLP. We regularly advise both employers and employees on a wide range of issues that arise at work. Contact us online or by phone at 905-828-2247 to schedule a consultation.

Categories
Wrongful Dismissal/Termination

Employer Loses Appeal After Court Finds Its Counter-Claim Was Intended to Intimidate Employee

A recent Ontario Court of Appeal upheld a wrongful dismissal claim in which the trial judge had awarded the employee punitive and moral damages and costs after the finding that the employer had counter-claimed in an attempt to intimidate the employee.

What Happened?

The employee was terminated from his employment in June 2015. At that time, the employee was 54 years old. He had been hired as a sales representative by the employer in 2004 and was promoted over time, eventually becoming president and division manager.

At the time of his termination, he was told that he was being terminated for cause and that he had committed fraud, but no specifics were given.

When he indicated that he would be hiring a lawyer, the employer told him that if he did, it would counter-claim and that it would be very expensive.

About a month later, the employee filed a statement of claim seeking damages for wrongful dismissal. The employer responded with a statement of defence and counter-claim which alleged cause and claimed damages of $1.7 million for unjust enrichment, breach of fiduciary duty and fraud, as well as $50,000 in punitive damages.

Lower Court Decision

After an 11 day trial, the trial judge found that the employer had failed to prove cause against the employee and had failed to prove any of its allegations against him.

The trial judge also found that the employer’s counter-claim for damages in the amount of $1.7 million had been a tactic to intimidate the employee and that it had breached its obligation of good faith and fair dealing in the manner of his dismissal.

As a result, the judge dismissed the employer’s counterclaim in its entirety and awarded the employee significant damages, including: damages in lieu of reasonable notice based on a 19 month notice period, including bonus and benefits; punitive damages in the amount of $100,000; and moral damages in the amount of $25,000.

In total, the employee’s award amounted to $604,627. In addition, the trial judge ordered costs against the employer in the amount of $546,684 to indemnify the employee for his costs in the action.

The employer appealed the trial judge’s trial awards, alleging reversible errors in law.

The Appeal Decision

The Court of Appeal rejected the employer’s arguments regarding the 19 month notice period award and the bonus award. On both issues, the court found that the trial judge had considered the evidence and the awards were appropriate.

The court also rejected the employer’s submission that the trial judge erred in awarding aggravated and moral damages because the evidentiary record provided ample support for the trial judge’s finding that the manner of dismissal warranted an award of aggravated damages. The trial judge had found that the employer’s conduct in threatening the employee to not make a claim was calculated to cause the employee stress. The manner of dismissal was devastating and had caused him stress. The court therefore found no error of law or principle or palpable or overriding error of fact that would justify interfering with the trial judge’s award of $25,000 for aggravated damages.

The court then addressed the employer’s submission that the trial judge erred in making a punitive damages award against it in the amount of $100,000. The employer argued that the judge erred in failing to consider the punitive aspects of a substantial costs award and compensatory damages, and in awarding an amount exceeding what is rationally required to punish the misconduct and to achieve the accepted purposes of a punitive damages award.

The court rejected the employer’s argument. It found that the trial judge had carefully reviewed all of the appropriate factors, including the fact that a court “must consider the overall damages award when selecting an appropriate punitive quantum” and that it must be careful to avoid double compensation or double punishment.

The court stated that, in reaching her conclusion, the trial judge had referred to the threat by the employer during the termination meeting that if the employee sued, the employer would counter-claim – a threat which it carried out with its counter-claim alleging fraud. The trial judge had also referenced the fact that the employer had, on the seventh day of trial, reduced its damages claim from $1.7 million to $1 dollar, which led the trial judge to conclude that “it did not appear as though the [employer] had any intention of proving damages but rather was using the claim of $1,700,000 strategically to intimidate [the employee]”. These facts supported her finding of misconduct justifying a punitive damages award.

The court concluded by stating:

“There can be no question that the employer’s conduct […] rose to the level of conduct deserving of denunciation for all the reasons cited by the trial judge. The trial judge was alive to the concerns about double compensation, and to the need to consider the entire compensatory package as a whole.”

As a result, the court found that the employer has not shown any basis for this court to interfere with the punitive damages award.

Finally, the court rejected the employer’s leave to appeal the costs award of $546,684, which it argued was unfair and unreasonable. While the court recognized that the costs award was unusually high, it was not satisfied that it was unfair or unreasonable in the circumstances of this case.

The appeal was dismissed and the court awarded the employee costs of the appeal in the amount of $35,000.

Get Advice

If you have questions about unfair practices in the workplace, wrongful dismissal, or any other employment matter, contact the Mississauga employment lawyers at Campbell Bader LLP. We regularly advise both employers and employees on a wide range of issues that arise at work. Contact us online or by phone at 905-828-2247 to schedule a consultation.

 

Categories
Wrongful Dismissal/Termination

Distinguishing Employment Status: Employee, Independent Contractor or Dependent Contractor?

A recent Ontario case set out the relevant criteria in determining a worker’s employment status in a wrongful dismissal case. While the worker claimed 23 years of employment, the employer argued that she had spent the first 10 years as an independent contractor and was only an employee for 13 years.

What Happened?

The employee was dismissed without cause and claimed over $136,000 in damages for wrongful dismissal. The claim was based on an almost 23-year workplace relationship and she submitted that she was entitled to 24 months of pay and benefits in lieu of reasonable notice.

The employer argued that she was not entitled to any damages for wrongful dismissal. It submitted that she had not been an employee for 23 years. It stated that she had worked as an independent contractor for the first 10 years and that she had only been an employee for 13 years. The employer relied on the termination clauses in the employee’s employment contracts as rebuttals to the common law presumption that she was entitled to pay in lieu of notice. In the alternative, the employer submitted that if she was entitled to pay in lieu of reasonable notice, the appropriate notice period should be 12 months, not 24 months.

Determining Employment Status

The court began by setting out the three types or classes of workplace relationships:

(1) employer-employee (master-servant);

(2) contractor-independent contractor, and

(3) contractor-dependent contractor, which is an intermediate classification where the relationship of master and servant does not exist but where an agreement to terminate the arrangement upon reasonable notice may be implied.

The court stated that the first step in the analysis must be to determine whether or not the worker is an employee or a contractor in accordance with the established methodology and criteria for differentiating an employee from an independent contractor. While there is no specific formula for making this determination, the court should consider:

(a) the intentions of the parties;

(b) how the parties themselves regarded the relationships;

(c) the behaviour of the parties toward each other; and

(d) the manner of conducting their business with one another.

Additional considerations include control of the work, ownership of tools, chance of profit, and risk of loss.

After it has been determined that the worker is a contractor, the court may use a variety of factors to differentiate dependent and independent contractors including:

(1) the extent to which the worker was economically dependent on the particular working relationship;

(2) the permanency of the working relationship;

(3) the exclusivity or high level of exclusivity of the worker’s relationship with the enterprise.

The Decision

After reviewing all the relevant factors to the case, the court concluded:

“While as the above account of the facts reveals, there are some indicia of a genuine independent contractor relationship, the issuance of invoices being one such indicia, and while it is arguable that during the very early years of the relationship there was more independence, nevertheless, within two years, if not earlier, [the employee] was a dependent contractor. She worked exclusively for [the employer] and, practically speaking, it was her boss. In the immediate case, having regard to the nature of her work as a Wardrobe Stylist the indicia of independence or dependency such as tools and control are not very helpful in defining the relationship, and it appears that not much changed in how she carried on work before or after June 3, 2004, when she changed from a Freelance Wardrobe Stylist to a Wardrobe Stylist under an employment contract. In other words, there is little to distinguish between her years as a dependent contractor and her years as an employee. What stands out is that [the employee] had a twenty-three [year] solid workplace relationship with [the employer].”

In essence, the court found that the employee had been a dependent contractor for the period prior to becoming an employee and was therefore entitled to severance based on 23 years of working for the employer, not just the 13 years she worked as an employee. Additionally, the court stated that it would have given the employee the same amount of severance had it found that she had worked as an independent contractor for the first 10 years.

As a result, the court awarded the employee over $112,000 in damages based on a reasonable notice period of twenty-one months.

Get Advice

If you have questions about unfair practices in the workplace, wrongful dismissal, or any other employment matter, contact the Mississauga employment lawyers at Campbell Bader LLP. We regularly advise both employers and employees on a wide range of issues that arise at work. Contact us online or by phone at 905 828 2247 to schedule a consultation.

 

 

Categories
Wrongful Dismissal/Termination

Court Decides that Working Notice Does Not Apply to Employees on Medical Leave

Generally, an employer who dismisses an employee without cause will give them pay in lieu of notice of termination. However, some employers may choose to provide what is called “working notice”, which means that the employee will continue to work until their date of termination.

However, a recent Ontario appeal decision demonstrates that the working notice option is not available to employers in all circumstances. It confirmed a lower court’s determination that working notice does not apply to an employee who is on leave for medical reasons.

The Facts

The employee worked as a driver/mover for the employer for approximately 17 years. The employee suffered a non-work related injury in a motor vehicle accident in September 2015. As a result of his injuries, he went on an unpaid leave of absence. He provided the employer with a medical certificate to this effect.

On January 31, 2016, the employer provided six months’ notice to all of its employees that it would be ceasing operations on July 31, 2016. The employer stated in its letter to the employee on medical leave that it considered the six month period to be “working notice”, despite the employee not being able to work. After receiving the notice, the employee continued to be on unpaid medical leave, but was able to return to work for a few hours at the end of July, 2016, just before the employer ceased operations.

The employee started an action for wrongful dismissal. The motion judge found that the employee was entitled to 12 months’ pay in lieu of reasonable notice of termination. He awarded nine months’ salary and benefits, subject to deduction for amounts already paid, as the employee had commenced work with another employer on October 31, 2016.

The employer appealed to the Divisional Court.

The Issues

The employer argued that the motion judge erred in two ways:

1) First, he erred in failing to draw an adverse inference from the employee’s failure to provide adequate medical evidence to establish that the employee could not reasonably mitigate his damages due to his medical condition.

2) Second, the motion judge erred by applying an incorrect legal standard on the employer with respect to establishing that the employee failed to take reasonable steps to mitigate.

The Decision

The appeal was rejected on both grounds.

First, the court found that the motion judge had made no error when he found that the employee’s medical condition was such that he could not be expected to undertake a serious job search until he was able to return to work on July 27, 2016. There was considerable medical evidence to support this finding and evidence setting out the nature of the employee’s medical condition and the further treatment needed. The medical documents specifically stated that he was unable to work until he received more treatment.

Further, the court agreed with the motion judge’s finding that the employee was on an agreed medical leave of absence and his finding that:

“When asked for more medical information, [the employee] provided it. The information must have satisfied [the employer] each time it was provided because [the employer] chose not to terminate [the employee] for cause.”

The court also rejected the second ground of appeal, finding that the motion judge made no error in finding that the employee had met his duty to mitigate based on the evidence.

Further Implications

By rejecting the appeal, the court is confirming the motion judge’s determination that a “working notice” does not apply to an employee who is unable to work while on medical leave or disability. The purpose of notice is to provide employees time to find new employment while receiving a salary or pay in lieu of notice. Therefore, this case demonstrates that a court will not consider that the period during which an employee is unable to work for medical reasons counts towards “working notice”; if an employee is unable to work, they are also unable to look for other employment.

Get Advice

If you have questions about unfair practices in the workplace, wrongful dismissal, or any other employment matter, contact the Mississauga employment lawyers at Campbell Bader LLP. We regularly advise both employers and employees on a wide range of issues that arise at work. Contact us online or by phone at 905 828 2247 to schedule a consultation.

Categories
Employment Law Wrongful Dismissal/Termination

Intervener Status Granted in Wrongful Dismissal Trial of Harasser

In what appears to be a first in Canada, a female employee who was allegedly sexually harassed by a co-worker (who was terminated as a result of her allegations and who then filed a wrongful dismissal claim) was granted intervener status in the upcoming trial in the matter.

What Happened?

The terminated employee worked for employer, an elevator company, for more than 30 years until he was terminated for cause in March 2014.

The employer claimed that the termination was a result of the employee’s actions towards a female co-worker, who had told the employer that the employee had slapped her buttocks and “placed his face in the areas of [her] breasts and pretended to nuzzle into them.”

The employee admitted that the alleged incident took place while he and the female co-worker were “bantering” but argued that when he “went to swipe her on her right hip” to “please get going” she turned without warning and while he was swinging his arm he accidentally hit her in the buttock.

Following the female co-worker’s complaint, the employer launched a full investigation into the incident and determined that the employee’s conduct warranted a just cause termination.

After the termination, the employee filed a wrongful dismissal claim.

Request for Intervener Status

The female co-worker continued to work for the employer after the employee was fired. After the employee filed his wrongful dismissal claim, she filed a motion seeking an order granting her intervener status on the basis that she had an interest in the proceedings and could be adversely affected by the outcome. The employer supported the female co-worker’s position.

The Law on Requesting Intervener Status

Rule 13.01(1) of the Rules of Civil Procedure provides that:

13.01(1) A person who is not a party to a proceeding may move for leave to intervene as an added party if the person claims,

(a) an interest in the subject matter of the proceeding;

(b)that the person may be adversely affected by a judgment in the proceeding; or

(c) that there exists between the person and one or more of the parties to the proceeding a question of law or fact in common with one or more of the questions in issue in the proceeding.

(2) On the motion, the court shall consider whether the intervention will unduly delay or prejudice the determination of the rights of the parties to the proceeding and the court may add the person as a party to the proceeding and may make such order as is just.

Courts have interpreted rule 13.01(1) in the past, noting, among other things that:

Although much has been written as to the proper matters to be considered in determining whether an application for intervention should be granted, in the end, in my opinion, the matters to be considered are the nature of the case, the issues which arise and the likelihood of the applicant being able to make a useful contribution to the resolution of the appeal without causing injustice to the immediate parties.

Courts have also warned that this is an area into which it is best to tread lightly:

In contrast [to constitutional cases], Ontario courts have interpreted Rule 13 more narrowly in conventional, non-constitutional litigation. …Intervention of third parties into essentially private disputes should be carefully considered as any intervention can add to the costs and complexity of litigation, regardless of an agreement to restrict submissions.

Many appeals will fall somewhere in between the constitutional and strictly private litigation continuum, depending on the nature of the case and the issues to be adjudicated.  In my view, the burden on the moving party should be a heavier one in cases that are closer to the “private dispute” end of the spectrum.

Issues the Court Considered

In making its decision as to whether or not to grant intervener status, the court considered:

  1. Whether the female co-worker met at least one of the threshold criteria in rule 13.01(1);
  2. If the female co-worker did meet the threshold for bringing her motion, would an order allowing her to intervene unduly delay or prejudice the determination of rights of the parties?
  3. If a leave to intervene would not unduly delay or prejudice the determination of rights of the parties, should the court exercise its discretion to grant leave to intervene, considering all relevant factors including the nature of the case, the issues in the action, the fact that the proceeding is a private dispute, and the likelihood of the female co-worker making “a useful contribution to the resolution of the proceeding” without causing injustice to the parties.

The Decision

Were the threshold criteria met?

The court noted that in its view, a consideration of whether someone meets the criteria in rule 13.01(1) should include a consideration of the person’s integrity.

In this case, the female co-worker had filed an affidavit in support of her position, stating, among other things, that she had been deeply humiliated and degraded by the incident, and that she feared that a decision in favour of the employee in the wrongful dismissal case would result in her feeling fear in the workplace since “there are many long-service male employees who would be aware that non-consensual sexual contact with me would not constitute just cause for dismissal”. She further noted that she wanted to protect her reputation and tell her side of the story. She repeated this in cross-examination at discovery.

The court concluded that the female co-worker did have an interest in the subject matter of the proceeding, noting:

I accept that [the female co-worker’s] affidavit and cross-examination evidence supports her contention that her moral integrity will be in issue at trial and that, in the context of her ongoing employment with [the employer], both her moral and possibly physical integrity could be affected by the outcome of the trial.  The substance of plaintiff’s counsel’s cross-examination of [the female co-worker] on her affidavit reinforces my view in this regard.  Based on [the female co-worker’s] interest in protecting her moral and physical integrity, she clearly has an interest in the subject matter of the proceeding.

The court went on to further say that there was a common question of fact among the female co-worker and both the employee and the employer as to what exactly had transpired during the incident. The female co-worker also has an interest in the legal issue of whether the employee’s alleged conduct was sufficient to warrant the termination of his employment for cause.

The court concluded, on the basis of the above, that the female co-worker had met the threshold criteria in rules 13.01(1)(a) and (c).

Would intervention unduly delay or prejudice the determination of rights of the parties?

The female co-worker sought an order that would allow her to participate in the trial on a limited basis. She proposed that her lawyer have a limited right to cross-examine the employee about issues concerning the female co-worker. She also proposed that her lawyer be permitted a brief opening statement, have the right to object to questions during her cross-examination, and the right to advance her position during closing arguments.

Her lawyer argued that his participation would not lengthen the trial significantly.

The court noted that the true issue here was whether the female co-worker’s intervention on the limited basis proposed would delay the resolution of the action as a whole.

The court concluded that the involvement of the female co-worker and her lawyer would not lengthen the trial by more than half a day, and this additional time did not constitute an undue delay in the determination of rights of the parties.

Other relevant factors

The court noted that the fact that this action is a private dispute between an employee and an employer placed a higher burden on the female co-worker, but did not preclude the granting of intervenor status.

The court found it necessary to go beyond the character of the dispute and to consider whether allowing the female co-worker her own lawyer at trial was a reasonable measure to enable her to protect her integrity in the context of her continued employment with the employer.

The fact that the dispute was a private one did not diminish the importance of the female co-worker’s need or ability to do so.

Likelihood of intervener’s useful contribution to the resolution of the proceeding

The court noted that this is generally a relevant question on most motions to intervene because the proposed intervener typically would not otherwise be involved in the trial. In this case, however, the female co-worker would be a witness whether or not she was granted intervener status.

Since her evidence is essential to the determination of the main issue at trial, and the legal and factual issues of what happened during the incident, the court found that it was “obvious that her contribution will not merely be useful but will be critical to the just resolution of the action.”

Intervener Status Granted, With a Caution

The court granted the female co-worker her requested intervenor status, but was careful to caution that:

This decision to allow [the female co-worker] to intervene in the action is intended to enable her to protect her integrity primarily in the context of her continued employment at [the employer].  My decision is therefore not to be interpreted as providing trial witnesses generally with the right to intervene and have their own counsel at trial.  If [the female co-worker] did not still work for [the employer], where she is required to continue to interact with the [employee’s] former colleagues on a daily basis, I would not have ruled that her integrity was under sufficient threat to warrant her having her own counsel at trial.

If you have questions about harassment in the workplace, wrongful dismissal, or any other employment matter, contact the Mississauga employment lawyers at Campbell Bader LLP. We regularly advise both employers and employees on a wide range of issues that arise at work. Contact us online  or  by  phone  at  905  828  2247  to  schedule  a  consultation.