Another Wrongful Dismissal Claim at Small Claims Court

I recently posted about the difficulties of litigating employment law claims at the Small Claims Court.

There is an interesting recent decision, Pascua v. Khul-Schachter, decided by Deputy Judge Prattas of the Small Claims Court.  It's a pretty good decision, all in all, where the employer was represented by a lawyer and the employee by a paralegal.

The Facts

Pascua was a full-time nanny and live-in caregiver for the employer's two children.  She started August 20, 2009, initially on a three-year term contract, but on November 30, 2010 the parties signed an indefinite term contract (which appears to have been necessary to obtain a renewal of the employee's work visa to stay in Canada).  She was dismissed without notice on September 30, 2011, allegedly for cause, without a reference letter.

The employer took the position that there was just cause, based on two incidents:  On one occasion, the "elevator incident", one of the children got into the building's elevator alone and took it to the ground floor.  Pascua admitted that this happened, and took the position that it happened in late May or June 2011.  The building's security guard testified that it happened after 5:30pm on July 29, 2011.  However, in a previous statement, he had given the time as 4:15pm.  Likely nothing turns on a difference of 75 minutes, but it hurts a witness' credibility to confidently give conflicting evidence.  Added to the fact that Pascua's passport indicated that she was out of the country on July 29, 2011, the Deputy Judge accepted her evidence on the point.

The second incident, the "hallway incident", involved an allegation, which Pascua denied, that on September 30 2011 the employer's husband had come home to find the children unsupervised and crying in the hallway outside the apartment.

Pascua argued that she was terminated because she had become pregnant.

The questions for the Court were these:
(1)  Did the employer have just cause to terminate Pascua's employment?
(2)  If not, what are the appropriate damages?

The Decision - Just Cause

The Deputy Judge doesn't appear to have reached a finding as to whether or not the Hallway Incident occurred, instead content to conclude that the test for just cause wouldn't be made out even if it did.

His reasoning is very much in line with the established case law on the point.

A central concern is the adequacy of the warning after the Elevator Incident.  There was no written warning, and while there was some evidence about a 'discussion' of the incident, the evidence fell short of establishing the clear and unequivocal warning that recurrence would jeopardize continued employment:

31.              I would accept that the elevator incident was serious, but the defendant had to be unambiguous about her intentions. It was not clear from the evidence whether she informed the plaintiff that the incident was unacceptable; or whether she simply expressed her concern to the plaintiff; or whether she delivered any stern warning that if a similar incident were to happen again that the plaintiff would be fired.

32.              In fact, from their conduct the defendant and her husband may have “forgiven” the plaintiff. The defendant testified that she “discussed” this incident with the plaintiff and emphasized to her that the children’s safety was the number one priority. Something which the plaintiff accepted. In his cross–examination the husband testified that he did not investigate the elevator incident and did not inquire as to how it happened or how his child got into the elevator.

33.              In my view, the defendant should have given the plaintiff a clear-cut warning – with no ambiguity – that if a similar incident of concern were to happen again that she would be fired on the spot. The warning has to be actually conveyed to the employee, and the employer cannot simply rely on an impression that the employee may have received it.

Paragraph 33 is a completely accurate statement of the relevant law.  Many employers, especially in smaller or informal environments, hesitate to expressly threaten termination - it seems heavy-handed and likely to exacerbate existing conflicts - but the reality is that in all but the most egregious misconduct the threat needs to be there before you can fire for cause.

The Deputy Judge took the analysis a step further, finding that "real and escalating warnings" were particularly necessary in light of the "special relationship" that forms between a nanny and family living under the same roof.

The Hallway Incident, if it happened, was serious, but as a standalone incident in a long-standing employment relationship, did not constitute cause.  Even together, the two incidents were "not enough to constitute a shattering of the confidence to the parents so as to constitute just cause."

Side Note:  The Practicalities of Warning Live-In Nannies

A family hiring a live-in nanny really needs to have a great deal of trust in the employee, and keeping a disgruntled employee around while building a case for cause is simply not a realistic option in general.  They usually have unrestricted access to the household and many of the valuables in the household, and while I would not suggest that all employees will start plundering when they see the end coming, the truth is that some employees will act badly when the relationship sours, and that isn't a chance that employers should want to take.

However, this is fundamentally about an abundance of caution - firing somebody because they could, or might, act dishonestly, and not because there's any cogent reason to believe that this particular individual would.  With misconduct that isn't inherently dishonest, that general concern will not justify a termination for cause.  If the relationship is souring due to doubts as to the competence or capability of the nanny, but where the nanny hasn't demonstrated any reason to expect dishonesty, then a prudent employer will terminate the employee with pay in lieu of notice.

Damages - Common Law Notice?

As those familiar with my blog or employment law in general will know, there is a presumption of "reasonable notice of termination" at common law, which can be rebutted by clear contractual language, provided that the contractual language complies with applicable employment standards legislation.

The contract included the following language:

The EMPLOYER must give written notice before terminating the contract of the EMPLOYEE. This notice shall be given at least two weeks in advance. The parties agree to abide by provincial/labour/employment standards regarding written notice of termination of employment.

While the Courts aren't entirely consistent with interpreting this kind of language, I largely agree with the Deputy Judge's treatment of it:  The language is ambiguous and shouldn't be enforced.  I might go a step further, though.

When the contract was executed, more than a year into the employment relationship, two weeks was the statutory minimum.  However, being an indefinite term contract, language which purported to limit notice entitlements to two weeks would not be enforceable, because it would be an attempt to contract out of the ESA...though that isn't what this language does.  This language says "at least two weeks" which basically tracks the language of the ESA itself, and doesn't displace the common law.  The second sentence, likewise, is simply an affirmation of employment standards.  The ESA does not displace the presumption of reasonable notice, and so language which simply affirms the ESA will not do so either.  Contract language needs something more:  If, as here, it's framed in terms of the employer's obligations, there needs to be an exclusion of further obligations beyond the ESA.

It's kind of like the 'warning' issue.  As an employer, you can argue until you're blue that it was 'understood' to have the effect you were going for, but unless you've put it down there expressly, it won't fly.

So I agree with the Deputy Judge's decision to award damages based on common law reasonable notice...however, I should highlight a problem with an alternative finding of his:

53.              More importantly, since the defendant in this case served no notice and relied on just cause which I have rejected, this provision is ineffective and cannot be interpreted so as to cap the damages to the detriment of the plaintiff.

Simply put, that is not an accurate statement of the law.  It may be persuasive, given the imbalance of power, that an employer seeking to rely upon a contract should have to show compliance with the contract, but in this context it ignores the first principles of contract law.  The key question is this:  What position would the employee have been put into had the employer complied with its obligations under the contract?  The fact that an employer does not comply with the terms of an otherwise-enforceable written contract does not somehow operate to nullify the written contract and substitute other terms.  In a case of an otherwise enforceable written contract, the contract would be breached, not voided.  And therefore the employee's damages would be calculated on the basis of where they would be had the contract not been breached - i.e. had contractual notice been provided.

However, that's an alternative point made by the Deputy Judge, and in my humble opinion he was nonetheless correct to award common law damages.

He awarded four months pay in lieu of notice, which seems about right to me, but there's a really interesting aspect to the analysis:  The employee had a hard time finding replacement employment, particularly so without a reference letter.

60.              In my view the attempts by the plaintiff to find another job were seriously impeded because of the way her termination of employment was handled by the defendant.

61.              Even though her employment period was just over two years, in my view it would be inadequate to simply give the plaintiff 2.5 months based on the length of service as suggested in the submissions of defendant’s counsel. This approach would unduly emphasize the length of service and under emphasize the availability of similar employment.

62.              Had the defendant given the plaintiff a reference letter and had she terminated the contract without cause, for example, the suggested 2.5 months – or even 3 months – may have been appropriate.

The appellate Courts have sometimes frowned on breaking down the value of certain factors.  Calculation of reasonable notice is really a global assessment, and so it would be incorrect to take from this a valuation of the failure to give a reference letter as 4-6 weeks.  But I think it's an important observation here, because while there's no formal obligation to give a reference letter, it highlights that it is an important step for an employer to take in helping the employee obtain new employment.

Where the Case Starts to Go Wrong

There are a couple of potential problems, however.

Human Rights?

Firstly, while the Deputy Judge notes that the employee claimed to have been dismissed due to pregnancy, he did not dispose of that argument in any way.  The allegation may or may not have been substantiated; the problem is that the Deputy Judge did not accept or reject it.  And that's important, because dismissing an employee due to pregnancy can lead to other damages under the Employment Standards Act or Human Rights Code.

"Wrongful dismissal", in the usual sense, is about breach of contract.  It means that an employer, when lawfully terminating the employment relationship, failed to provide notice required by contract.  And most terminations are lawful:  In a non-union environment, an employer is entitled to terminate an employee for almost any reason, or no reason at all.  As an employer, I can wake up on the wrong side of the bed one morning, decide "I feel like firing someone", and have my employees draw straws to figure out who is going.  It would be bad business, but there's nothing illegal about it, and the employee would be entitled only to notice of termination.

However, there's a reason that I say "almost any reason, or no reason at all".  There are a few reasons for which an employer cannot lawfully terminate an employment relationship, under the Labour Relations Act, the Occupational Health and Safety Act, the Employment Standards Act, and the Human Rights Code.  (Not a comprehensive list, but in the Provincial sphere, that pretty much captures the main ones.)  Firing somebody because they're pregnant would violate both the ESA and the Code.

Either way, the illegality of the termination can give rise to additional damages - it is no longer simply the case that the employer should have given notice; rather, it is the case that the employer should not have terminated the contract at all, and so rather than an estimation of "reasonable notice", it is more appropriate to look at de facto losses.  (My reasonable notice period may have only been 4 months, but if I was actually unemployed for a full year, then I might be able to argue for the full year when the termination itself was unlawful.)

As well, under the Human Rights Code, additional damages are available for injury to feelings, dignity, and self-respect.  The Courts are now empowered by the Code to award these damages.  (Until a few years ago, this was not the case.)

In other words, if there was anything to her allegations that the termination was a result of her pregnancy, the plaintiff may have been seriously shortchanged in terms of damages.

Value of a Month

Secondly, I'm concerned about the calculation of damages.  Pay in lieu of notice is not limited to salary, and it appears that the Deputy Judge took a salary-only approach to damages:

64.              According to the Second Contract the weekly salary of the plaintiff was $410. The amount for the 4 months reasonable notice period would therefore be $6,888 calculated: 410 x 4.2 weeks = 1722 per month x 4 months = 6888.

A domestic worker like Pascua probably isn't getting group health insurance benefits, a company car, pension plan, significant performance bonuses, etc., which is what I'm usually looking for beyond base salary...but likely is getting room and board, and it isn't entirely clear if that value is included in the salary figure.  The Employment Standards Act deems room and board for domestic workers to be worth $85.25 per week, for the purpose of minimum wage calculations.  I might make an argument based on actual damages - if I have to go out and rent a new place at market-value rent for my four month notice period, I'd be arguing for that plus food in terms of common law damages, and on the right facts it would be a pretty sound argument - but at least those deemed wages would be included in wages owing over the notional notice period.

Notice that $410 is $10.25 (the minimum wage) times 40 (the usual hours for a full time contract).  So it may well be that the $410 includes the deemed wages...but even then, there are special rules relating to the wages of residential workers, which aren't discussed at all in the decision, so I can't help but wonder if they were given due consideration and argument.

And finally, I have no idea where the "4.2 weeks" per month comes from.  On average, a month is 4.33 weeks.  The four months following September 30 are closer to 4.4 weeks, on average.  Small difference, though - it only makes a difference of a couple hundred dollars.

Another Interesting Observation:  Conventions of Domestic Servants

In 1931, in a decision in the case of Peidl v. Bonas, the Courts in Saskatchewan upheld a 'common law rule', referencing the 1864 English case of Nicholl v. Greaves, that a dismissed domestic servant is entitled to one month pay in lieu of notice.

Though the 'rule' has occasionally been referred to in other contexts, there is relatively little recent case law actually considering its merits or applicability in 21st-century Canada.

In 2001, the Nova Scotia Court of Appeal summarized the doctrine in Burton v. Howlett, and while they didn't expressly reject it altogether, they expressed serious scepticism about the merits of this 'common law rule'.

Personally, I am unaware of any case law of contemporary relevance which either accepts or expressly rejects the doctrine from Nicholl v. Greaves.  It was not mentioned in the Pascua decision, even though - if it is good law - this probably would have been a case for its application.

That being said, I doubt whether or not it could be held to be enforceable today, and one might reasonably argue that it is, in fact, incompatible with our current employment standards framework.

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This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.