Wednesday, September 4, 2013

Bernier v. Nygard supplement

I posted recently about the Bernier v. Nygard decision, involving a plaintiff who won a summary judgment motion, and was awarded 18 months' pay in lieu of notice, only 7 months into the notice period.

It looks like the parties had some difficulties agreeing on the calculations, and so had to seek the further assistance of the Court.  In particular, the employer argued that there should be a 'present value discount' applied to the amounts yet to be earned.  This is essentially the opposite of interest, and is commonly awarded in personal injury cases where the plaintiff can never work again and so is awarded significant income replacement benefits in a lump sum.

The plaintiff's lawyer (who, as I noted, is an experienced employment lawyer) argued that the damages flowing from a wrongful dismissal are not a 'future debt' in the same sense as a personal injury award; they are immediately owing by virtue of the breach of contract.  I see the logic to the argument - he pointed out that an order of wrongful dismissal damages is not an attempt to force compliance with the implied requirement to give reasonable notice; rather, it is an attempt to compensate for losses because of the breach.  Therefore, it is incorrect to perceive that damages as a 'future debt'.

That much is true.  (Though this is a little confusing, when you bear in mind that after-acquired mitigation earnings can affect the amount owing.)  But the attempt to compensate an employee for the breach means putting the employee into the same position she would have occupied but for the breach, and there's value in getting the money now instead of next year - the lump sum was calculated to account for her full compensation over 18 months, and so receiving money now instead of next year means that she gets to earn interest on the money...and that's a windfall.

Personally, I think there's a better reason why a discount was unnecessary in the circumstances:  Interest on wrongful dismissal awards is often calculated on the whole amount from halfway through the notice period - because the loss accrues incrementally, one would think that interest would start accruing on the first pay cheque as at the first pay day, and so on...but mathematically, because prejudgment interest doesn't compound, that works out the same way.

And this supplementary decision was released just before the halfway point of the notice period.  Granted that the calculations in this case would be a little bit muddier:  On the one hand, the statutory minimums (21.3 weeks salary and benefits) were paid at the outset; on the other hand, the amount of the judgment is weighted toward the front end because no pay in lieu of bonus was included for the last 6 months.

The decisions don't provide quite enough information to run all the numbers, but one can estimate that, if a lump sum were paid today, and if you were to calculate interest on all the late payments and a present value discount on all the early payments, the overall effect on the number would be very small - i.e. a difference of a few hundred dollars, on an award into the hundreds of thousands.

The judge accepted the plaintiff's position and decided against applying a discount.


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.

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