Bill Bishop Disbarred (Further Updated After Appeal)

Not a workplace law post, but I'm really struck by this decision of the Law Society Hearing Panel released last month, revoking William John Franklin Bishop's license to practice law.

Bill Bishop has been a lawyer in Kingston for 40 years.  He's an icon, and I've had the pleasure of meeting him on a couple of occasions.  I began my own career in Kingston, and he was the 'go-to' person for solicitor-side practice issues in the firm with which I practiced at the time.  His office was in North Kingston, in an area where there are a lot of people without much money, and his career consisted largely of helping folks who couldn't afford to pay him, but he had a thriving real estate practice which appears to have paid the bills.

A little over a year ago, he was found to have engaged in professional misconduct "by participating in or knowingly assisting in dishonest and fraudulent conduct by his vendor/purchaser clients and others in obtaining mortgage funds under false pretences in connection with Transactions."

This is typically a capital offence for a lawyer.  But there's a reason for that.  Real estate fraud is generally really serious:  There are a number of different kinds of fraud, but they usually entail a rogue third party tricking the bank into lending the homeowner a lot more money than the house is worth, taking a large cut, then leaving the bank to try to collect against an impecunious homeowner who can't pay the mortgage.  There are a lot of variations, but the usual feature is that the bank is left out in the cold without sufficient security and without recourse against the person who actually took the money.

And there are a lot of red flags as to such fraud, which lawyers are supposed to watch out for, so as to avoid being dupes of fraudsters.  It's easy for a lawyer to fall into the "I'll do whatever my client instructs", without stepping back and asking "Why does my client require this?"

So a lot of lawyers have been disbarred for participating in real estate fraud or allowing themselves to be duped by fraudsters.

But Bill's case is different.

The Scheme

Bill's misconduct dealt with 14 transactions from 2002 to 2005, during which time he closed thousands of real estate deals.  The gist of the 14 transactions in question is that they involved a scheme to avoid the down payment requirements of CMHC insurance that existed at the time.

You get a bona fide purchaser, who can't put down enough money to qualify for a mortgage, looking to buy a home.  In steps an 'investor', who purchases the home outright, then turns around and 'flips' it, the same day or shortly thereafter, to the purchaser for a purchase price of 20-30% more, leaving room for (a) transaction fees, (b) a phantom down payment, and (c) profit for the investor.  Bill acted for the 'investor'.

Flips are supposed to set off alarm bells.  They aren't inherently improper, but one should always question why, in a short period of time, one person is willing to buy for that much more than another was willing to sell.  It's not part of the lawyer's job to provide an opinion as to the value of the property, and certainly not the seller's lawyer on the mortgage transaction.  In the ordinary course, the purchaser's lawyer will also act for the lender, and so owes obligations to the banks to disclose flags of fraud.  The ultimate purchaser's lawyer in these transactions, Sutherland, was disbarred two years ago.

What's Wrong With This Picture?

There may have been some mischief in the transaction that Bill Bishop should have been or was aware of, and he was required to tinker with the Statement of Adjustments to make the numbers jive with the mortgage advance.  The fact that there was no down payment means that there were probably laws broken...

...but it's not entirely clear that there was actual fraud, in the sense of material misrepresentations being made.  The claim is that the original purchases were of houses being sold below fair market value, and that the subsequent markup put them up to fair market value, as appraised by a realtor, and therefore the banks do have adequate security.

The hearing panel was sceptical of the appraisal, and felt that the 'fair market value' was more accurately determined with reference to the purchase price agreed upon between arms' length parties in the initial transaction.  Not an unreasonable approach...I mean, if the original purchaser had to lower the price to that level, why wouldn't the banks have to as well?

But wait...why are we arguing about fair market value in a real estate fraud case?  If the purchasers defaulted and the banks had to realize on their security, shouldn't we just be able to point to the bank's shortfall?

The Absence of Loss

And here's the rub:  The purchasers didn't default.  They made their mortgage payments.  Some sold the properties later and discharged the mortgages fully out of the proceeds of the sale.  Some still live in the properties and have not only renewed their original mortgages, but they refinanced their mortgages to higher amounts.  In other words, the banks aren't too upset about this whole ordeal.

Bill pulled out the big guns in his defence.  As an expert witness, he called Sidney Troister.  To put this in perspective, when I was learning the ropes of real estate law a few years back, the real estate lawyer in my firm at the time handed me a textbook that Troister had written decades earlier and told me to read it for a good foundation.  My understanding is that Troister is the authority on real estate law in Ontario.

Troister's evidence included the following:

Usually invariably, in my experience, mortgage fraud meant mortgage theft, meant money stolen that is unrecoverable.  With lenders, as the Law Society program said, the lender is left holding the bag.  In my experience on all of the mortgage fraud cases that I saw– and I have seen many – typically, the mortgages go into default within six months because what happens is that the crooks take out the new mortgage.  They put enough money in a bank account to cover post‑dated cheques for six months.  The money dries up, and by then the crooks are gone.  The mortgagee, then, is selling the property and typically selling the property under value for less than they lent.

He goes on to highlight that this is not what happened in this case.

The Hearing Panel noted that, nonetheless, there was elevated risk to the banks...and yes, this may well be true, but to the extent that it may be, that really is Sutherland's fault, being the lawyer tasked with protecting their interests.  The banks have their own means of valuing properties, and it really is not the job of the vendor's lawyer to help do so.  Imagine that I'm selling my house, and I find a foolish purchaser willing to pay 50% more than the value my appraiser gave me...am I under some obligation to tell the purchaser's lender about the lower appraisal value?  Absolutely not.  Would my lawyer be?  Quite the opposite, my lawyer would be prohibited from disclosing it.

The risk in terms of value of security is not, in and of itself, the vendor's problem.  The fictional down payment, however, involves misrepresentations by the parties, which Bill likely ought to have been alive to, and does indeed suggest a lack of equity, which means that there's no cushion for the lender...if the property decreases in value, it's underwater.

So yeah, I'm not trying to say that Bill's hands are clean...he didn't do everything he probably should have, and his omissions could hypothetically have contributed to a risk of loss to the banks (or CMHC, as the case may be)...

...but there's an added twist:  The entire scheme was designed to facilitate zero-down mortgages, which were illegal at the time.  The risk to the bank by reason of Bill's conduct is probably a function of the zero-down nature of the transactions.

And shortly after the transactions at issue, the Federal government loosened regulations on mortgage eligibility, and the banks uniformly leapt to lend money to people who couldn't afford to make a down payment.  Good policy?  Absolutely not.  But the politicians were saying the exact same thing that Bill Bishop said:  Helping people of modest means to purchase houses is the right thing to do.  And the banks, too, were thrilled to lend to such people.  So the trouble with the transactions isn't that the banks wouldn't have lent the money had they known everything, it's simply that they couldn't have lent the money at the time due to regulations which have been changed various times.

Penalty

I would lean towards concluding that the hearing panel was right to find that Bill engaged in professional misconduct.

But disbarment?

After the finding of professional conduct in 2012, I was exchanging emails with a friend of mine who had been a client of Bill's, and who was planning to move, and I inquired if she was planning to use him again or looking for a different lawyer - I know a few - and I remarked of Bill's situation that "It's a case of relatively marginal misconduct in the first place, which will mitigate the penalty...but given that the *usual* penalty for complicity in RE fraud is disbarment, I'm thinking suspension may be on the table despite the fact that nobody suffered a loss."

I'm shocked by the outcome here.

And even more shocked in light of the fact that he really pulled out all the stops in the penalty phase.  It looks like the most senior judges in the Kingston area, and a whole line-up of senior Kingston lawyers, testified on his behalf at the penalty hearing.  Justice Belch spoke of Bill not having a dishonest bone in his body.  Other judges spoke of how important his practice has been for the disadvantaged in north Kingston, and how harmful it would be to the community to shut him down, noting that this was an isolated mistake which was unlikely to recur.  Although of limited evidentiary value, there was also a 'resolution' entered into evidence supporting him signed by around a hundred Kingston-area lawyers...and in the Kingston area, that's a lot of lawyers.

The trouble for Bill is that he was up against a legal test that has been established by scores of unscrupulous lawyers who compromised the integrity of their practice in the interests of making a quick buck, causing losses of hundreds of thousands of dollars to innocent third parties.  As a result, there's a strong presumption of disbarment for these cases.  The majority of the hearing panel concluded that there weren't the 'exceptional circumstances' needed to relieve against that penalty.  There was, however, a strong dissent.

In the absence of an exculpatory medical condition, it's hard to imagine a clearer case for relieving against disbarment.  Hard to imagine a lawyer with a longer record of spotless service to the community, hard to imagine more compelling evidence of good character, hard to imagine a case where the consequences of the misconduct are less severe, hard to imagine conduct that is less egregious while still constituting the misconduct found.

The message this sends to real estate lawyers is less firm than it is frightening, that there is no room for restraint in penalizing those involved in fraudulent mortgage transactions.

I don't know if Bill's planning to appeal, or will instead decide that it's time to retire.  Either way, I wish him the best.

Edited August 7, 2013:

Bill contacted me and advised me that he is planning to appeal, and has obtained permission to practice pending the outcome of the appeal.

Edited May 27, 2014:

The Appeal Panel's decision was released earlier this month.  Unfortunately, they dismissed the appeal, and upheld the license revocation.  (Which is not effective immediately, and Bill may yet seek recourse at the Divisional Court.)

Edited August 20, 2014:

It appears, from a recent interlocutory decision of the Divisional Court, that Bill appealed, and that the appeal is slated to be heard tomorrow, August 21, 2014.  Best of luck, Bill.

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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. 

"Canadian Experience" and Human Rights

The Star is running a story today about the Ontario Human Rights Commission's new policy directive, which asserts that demanding "Canadian experience" for job candidates is unlawful discrimination.

By way of background, let me say first that the OHRC's policies are considered to be persuasive interpretations of human rights legislation, and they give "guidance" to adjudicators, but they do not, in and of themselves, have the force of law.  Since Ontario's human rights system was revamped several years ago, the OHRC has a very limited mandate - in general, it no longer investigates or adjudicates human rights claims.

That being said, it's clearly correct here, at least on the broad principle.  Insisting on "Canadian experience" will have the effect of excluding recent immigrants, which is discriminatory on the basis of place of origin.  In order to justify it, one needs to have a bona fide occupational requirement.

Nonetheless, I think there may be a distinction to be drawn, in many cases, between requiring Canadian experience and preferring Canadian experience, and I believe the OHRC's policy may be overbroad in a couple of ways, and in particular where it argues that that employers - writ large - should not assign less weight for foreign work experience or ask questions that may indirectly indicate where their work experience was obtained.

What's the Concern?

The primary concern expressed by the OHRC appears to be that employers may be looking for Canadian experience as an indicator of assimilation, of understanding how Canadians interact with each other, and of 'fitting in'.  Offshoots of this debate have included the 'smelly food' argument:  Some cultures eat foods with very pungent aromas, and so when you prepare them in the lunchroom, others can be irritated.  (This issue has come up in HRTO litigation, and 'smelly food in the law library' was also the subject of a lengthy and passionate email listserv debate in law school.)

This is absolutely right:  With very narrow exceptions, it is wholly inappropriate to refuse someone employment simply because they don't get Canadian culture.

It's easy to say as a general proposition, but when you start talking about customer service roles, people might reasonably argue that if you don't know how to deal with the public, you're not suitable to the position.  And the argument gets really tricky when you start looking at cultural differences as to respect for diversity, because, let's face it, not every country bothers with this debate at all.  In Canada we aim to be inclusive, and this is the point, but many cultural groups have not developed this appreciation for diversity, and some groups are even downright misogynistic, and hiring a customer service representative who hasn't yet come to recognize the inappropriateness of certain conduct...risks inviting Human Rights Applications against the employer based on his or her conduct.

(For example, I recently heard a complaint from a close friend of mine that, when inviting a quotation on a particular service, the service provider suggested that it might be better if he spoke with her husband about it, assuming without justification that she was married [she isn't], and expecting that her husband would have the final say in the matter.  Not to say that the person is necessarily a recent immigrant, or that everyone born in Canada is tolerant and inclusive, but this is the kind of issue about which an employer might reasonably worry when hiring recent immigrants from jurisdictions without human rights protections or multiculturalism.)

Still, at the end of the day, it's a problem that an employer can - and should - address through clear policies, training, supervision, and discipline where necessary.  Quite frankly, employers who assume that Canadians by birth or naturalization will not act offensively are probably running a greater risk of liability than employers who hire recent immigrants and provide clear training and guidelines as to what kind of conduct is acceptable or unacceptable.

The Need for Transitional Experience

In certain professions, it may well be justifiable to prefer Canadian experience.  Law is an easy example, where there are differences across jurisdictions in both substantive law and legal practice:  Hiring an experienced New York lawyer to practice Ontario law would be kind of like hiring a very experienced auto mechanic to fix refrigerators:  The skill set may be similar, but the experience doesn't entirely carry over.  If I'm looking for a competent lawyer who can just pick up files and run with them, right away, then I need to hire someone with experience in the Canadian legal system (and moreover in the specific Province), and no amount of American experience - despite the many similarities in laws and legal systems - will fully equip somebody to do that as well as an experienced Canadian lawyer.  (That being said, it's probably also true that it doesn't take much Canadian experience to bring such a lawyer up to a similar level as Canadian peers.)

Indeed, there are some fairly significant mobility constraints across the country, and even within Provinces.  The Court system in Toronto, for example, operates somewhat differently from other areas in the Province.  That's not a big hurdle to jump (speaking from experience), but it goes to show how easy geographical obstacles can arise.

However, if the New York lawyer has obtained his license to practice Ontario law, then there is no basis whatsoever for excluding him altogether from consideration.  He may need to stand beside more junior lawyers when competing for work, but he should still be able to compete - even for lawyers, with vast jurisdictional differences, it would be difficult for a firm to justify a policy of not hiring people without Canadian practice experience.  To a large extent, the governing bodies of the professions are responsible for assessing the competency of foreign-trained professionals (which obviously raises its own difficulties)...but the standard is going to be similar to that for entry-level Canadian professionals, which means that while an employer can be satisfied that a foreign-trained Canadian-licensed professional meets the basic competencies...the simple fact remains that the Canadian experience often will be more valuable, if not essential, to the position.

A similar logic probably applies in a lot of industries, and for similar reasons, too:  Everyone operates within some sort of regulatory regime, and unless the regulatory regime adheres to an international standard, such standards will often differ from country to country.  That's not to say that Canadian standards are 'higher' or 'better' than everyone else's, in all cases, but they are different, so for high-level positions where an individual with limited oversight has to adhere to the Canadian regulatory regime, it simply makes sense that such an individual needs Canadian experience.  Which, again, may simply need to be a more junior position.

Imagine hiring an experienced American Human Resources Manager - requirements for paid vacation?  Why can't we fire at will?  What's CPP?  (Indeed, some of these problems do routinely arise when American companies expand into Canada and maintain a centralized American human resources department.  Simply put:  You need people with experience in the Canadian system.)  Or an American tax accountant.  Those are the easy ones, but local laws touch on all sorts of industries in different and unique ways.  And the more that legal compliance factors into a person's job, the more difficult it will be to do the job without Canadian experience.

The reason I'm using American examples, too, is because they're about as similar to us as anyone, and yet there are still pronounced differences.  Go a little bit further and take a Mexican lawyer, and suddenly the differences in legal regimes are much more significant to English Canada.

As well, there are practical differences to many professions in Canada as opposed to elsewhere.  The differences in our climate, our population density, our geography, our economy, and our demography, among others, make for substantively different skill sets that get developed here as opposed to elsewhere, in some professions.

The simple reality is that, in many cases, Canadian experience is simply more applicable than foreign experience, and therefore, for a Canadian employer, is actually, objectively, more valuable, with measurable differences in impacts on competencies.  Or at least that there's real value in having a threshold amount of Canadian experience.  So for the OHRC to argue that employers, in general, should not value foreign experience less...in some cases, that will be true, but in many cases, that will simply be a commercially absurd position to take.

What Should Employers Be Required To Do?

I would argue that refusing outright to consider non-Canadian experience is probably a violation of the Code in most cases, but that requiring employers to consider all experience to be equal would be unreasonable.

Fortunately, there's a middle ground:  I think that the reasonable approach to take to this issue, in general, would be to require employers to undertake a bona fide assessment of the applicability of a candidate's foreign experience to the job, without simply jumping to conclusions based on stereotypes.  Let's suppose that I'm offering a job which requires somebody to have experience developing products capable of dealing with extreme winter weather.  Canadians are more likely than many others to have that experience, but they aren't the only ones.  Lots of other countries get winter weather, and perhaps more importantly many companies would work on products which need to function in such countries.  So prioritizing "Canadian experience" would have the result that I would prefer a Canadian who has never done this kind of work, over a Norwegian who has, or over a Floridian who has worked on products with significant distribution in northern climes.  That is a problem, but simply requiring applicable experience, even if people from certain areas are more or less likely to have that experience, is - to my mind - quite reasonable.

If a candidate isn't licensed to do the job in Canada, that's simple.  But if they are, it's prudent to seriously address the question:  What am I really looking for in this position, and does this person's experience satisfy my needs?  And I think that asking that question in good faith, without tainting the analysis using stereotypes or prejudgment, probably ought to keep an employer on the right path in terms of human rights.

While the OHRC policy does suggest taking a flexible and individualized approach, it isn't clear to me whether or not they would take the position that, hypothetically, a company like Blue Mountain Resort requiring or preferring "ski industry" experience would constitute prima facie discrimination.

The Difficulty of Obtaining Transitional Experience

The OHRC policy highlights that newcomers are in a difficult position because they "can’t get a job without Canadian experience and they can’t get Canadian experience without a job."

Interestingly, if you remove "Canadian" from that quotation, then you end up with exactly the same complaint made by all new entrants to the workforce in recent decades.  To quote Great Big Sea:  "You can't make nothing out of nothing.  Everybody needs a start."

Despite my contention that the policy may be overbroad, I agree that it is an important issue...but I think that the challenges facing recent immigrants in terms of entry to the labour market is similar to the challenges facing many Canadian young people or other Canadians seeking to re-enter the market after a lengthy absence:  Too many employers do not want to incur the cost of training people in essential skills and competencies.  It's understandable.  For the boomer generation, many people stayed with one employer for their entire careers, meaning that the employer really got value for the training they provided at the outset.  But that is no longer true, and employers struggle with the idea of paying to train a junior employee and then watching their investment walk away and join the competition.

And with unpaid internships becoming something of a hot-button issue these days - and legitimately so - this issue is only going to become worse unless we develop meaningful policy initiatives to address the whole issue.  And not just pigeon-hole elements of it.

Comments on "Fit"

The OHRC has recommended that employers not base hiring decisions on subjective factors such as "fit".

While I understand that 'fit' can be code for "We want to hire people more similar to the existing demographics of the workplace", I think it's unrealistic to discount it entirely, and incorrect to think that it's always discriminatory.  For example, different companies have different 'corporate cultures', and a small office with a hands-on owner might legitimately be concerned about hiring someone from a large corporate environment where the individual would have performed similar duties but with limited oversight.  Perfectly legitimate, perfectly reasonable, completely subjective.

Digression about Interview Questions and s.23 of the Code

I feel obligated to make an additional remark about questions that 'indirectly' identify candidates by prohibited grounds of discrimination:  Such questions are prohibited by s.23 of the Code, but exactly what that means is unclear.  Some, such as Professor Doorey, and the OHRC itself, have argued for a broad interpretation of this prohibition, that asking a candidate where they went to school, for example, is improper, because it may reveal information about place of origin, religion, etc.  The principle appears to be that the prohibition extends to any question which may call for an answer that could be used to draw inferences about prohibited grounds of discrimination.

I argue that this is absurd:  Just about any question has the potential to reveal such information.  For example, asking for an individual's name is actually quite likely to provide information from which conclusions might be drawn about race, ancestry, colour, ethnic origin, sex, place of origin, and/or creed.  Asking for somebody's job history is likewise likely to provide information from which one might make inferences about age, place of origin, and various other prohibited grounds.  The trouble is that if these inquiries are interpreted as being prima facie discriminatory, there's no defence at all for them on a written job application, and very limited defences in an interview setting.

If you're actually using the questions as proxies to gather information about prohibited grounds, then that violates s.23...but if you aren't, then I don't have a problem with it.

So, you might ask me:  What does this prohibition actually do?  Section 5 of the Code actually prohibits discrimination, so if I'm arguing that there has to be some kind of intention to elicit information on the basis of which one might unlawfully discriminate, doesn't that imply that there would be actual discrimination going on, and therefore, wouldn't the prohibition itself be moot?

Simply put, no.  Section 23 of the Code is a practical provision, prohibiting questions which directly or indirectly identify a candidate by a prohibited ground.  It makes the question "Do you have kids" illegal not because it's an inherently offensive question (indeed, it's common small talk), but rather because the answer might be used for discriminatory purposes which would be extremely difficult to prove.  So it provides a meaningful protection to job candidates by making the question itself illegal.  If an interviewer asks me if I have kids, and then doesn't hire me, I might not be able to prove that the hiring decision was based on my answer...so the Legislature has stepped in and said "You can't ask the question at all."

The provision, altogether, is about information gathering, and not use.  It functions in the reality where we know that we can't get inside the employer's head as to why they rejected a candidate, and acknowledges that the fact that an employer may have had information about prohibited grounds will not be enough to prove that the hiring decision was based on information about prohibited grounds.

Therefore, establishing that a question was intended to gather information about prohibited grounds - while less likely to be innocuous - still likely doesn't get you to the point of being able to prove a discriminatory hiring decision.  That's where the 'indirectly' portion of s.23 comes in.  If I ask you for your high school transcripts because I want to know how you did in high school, then at no point am I gathering information about your place of origin, creed, etc., any more than asking you for an interview is gathering information about your sex, colour, etc.  On the other hand, if I'm asking for high school transcripts because I want to know where you grew up, that violates s.23, regardless of whether or not that factors into my hiring decision.

And here's where the evidentiary threshold becomes important:  Particularly in a scenario where the question seems unusual or unnecessary (let's say I'm asking an experienced lawyer for high school transcripts), and the question is capable of standing as a proxy for a prohibited ground, an inference might be drawn that such was the intention, and I might therefore be called upon to explain why I asked the question.

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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. 

Small Claims Court Decision Shows Challenges of Low-Value Wrongful Dismissal Claims

CanLII has recently started maintaining a database of Ontario Small Claims Court decisions.  There aren't too many judgments going in - most of the decisions being reported are by Deputy Judge Richard Campbell so far - but I think it's a positive step in making Small Claims Court more accessible, to give people a better sense of what to expect.

At the same time, while a great many wrongful dismissal cases will realistically fall within the Small Claims Court's $25,000 monetary jurisdiction, I've long been of the view that the Small Claims Court is not well-equipped to deal with these claims.

In Small Claims Court, the 'judge' is usually a senior lawyer, who sits in the Small Claims Court a couple days per month or so.  So they don't hear cases of all shapes and sizes, like many Superior Court judges do, and they often have their own specific area of practice.

Employment law is a pretty niche area of law.  Those of us who regularly practice in it, know it well.  Yet other senior litigators may not even know the first thing about wrongful dismissal claims.  I have known senior litigators and deputy judges who were unfamiliar with the term "Bardal factors" - literally, employment law 101.  This doesn't reflect on the skill, experience, or knowledge of deputy judges; rather, it reflects the specialized reality of senior litigators.

Worse, in Small Claims Court, you very often get self-represented litigants on one or both sides.  So you get a niche employment dispute with specialized legal considerations, argued by two non-lawyers, and presided over by a lawyer who may not know anything about the area of law.  Not exactly ideal.

But even when lawyers enter the picture, that doesn't necessarily solve the problem.

Consider the recent case of Nelson v. 977372 Ontario Inc., involving a general labourer with five years of service, making $17/hour, 40 hours per week.  His wife had been employed with the same company, but after she quit, there was a dispute, and the employer claims that the employee quit, but the employee alleges that the employer kicked him out, effectively firing him.  (There was also an allegation of just cause:  The wife was paid on a piecework basis, and the husband, being paid hourly, often helped her with her work.  This was alleged to be 'double-dipping'.)

Allow me to say firstly that I've met both the lawyers on this file, and they're both experienced and skilled.

On the findings of fact, the deputy judge is perfectly well-equipped to make such findings.  He found that the employee had been fired.  For all intents and purposes, that's pretty well written in stone now - it's very hard to appeal a finding of fact.

Just Cause

The findings on the law are a little more varied, however.  Let's start with one that the Deputy Judge definitely got right:  Just cause.  He concluded that, while there may have been double-dipping going on, the employer was always aware of it, and condoned it.  Accordingly, the employer can't rely on it as just cause.  That's correct, and straightforwardly so.

Reasonable Notice

Next, there's the question of reasonable notice, which is kind of iffy.  The defence was arguing for 10 weeks; the plaintiff was arguing for 5 months.  Without knowing the employee's age, I can't say where I think it should be, but for the length of service and character of employment, I'd say that both pitches seem a bit ambitious.  You very seldom see notice periods less than 3 months, even with short-service employees (and five years isn't really a short-service employee anymore).  However, the Deputy Judge accepted the defence submissions on the point, and awarded damages based on a notional notice period of 10 weeks.  So, a pretty skinny award, on its face, but what concerns me more is the way they got there:

"Mr. Embree argued that Mr. Nelson should be awarded one month notice for every year of employment – five months notice....

 Mr. Tousenard suggested that an appropriate notice calculation would be 2 weeks per year, for a total of 10 weeks.

...I agree with Mr. Tousenard that two weeks per year is an appropriate award of pay in lieu of notice, and I assess Mr. Nelson’s damages, notionally, at ten weeks...."

Calculating notice periods by looking at x per year of service isn't an uncommon way of regarding them informally, but it is not correct at law.  This is very similar to the 'rule of thumb' approach which the Court of Appeal expressly rejected in Minott v. O'Shanter in 1999.  It puts too much importance on one factor, to the detriment of the others.  (NB:  Employment contracts still often base a formula wholly on length of service, and certain administrative tribunals have adopted 'rule of thumb' type practices nonetheless for income replacement in certain contexts, but when looking at common law reasonable notice, it's settled law that it is wrong.)

This is why short-service cases are so difficult:  Length of service is important for mid-to-long service employees, and the 'rule of thumb' approach actually presents some guidance at those levels, in a nuanced way, but it is less significant for short-service employees.  (If you put it in those terms, there have been cases where employees have gotten over twelve months per year of service...which just seems absurd when cast in that light.)

Mitigation

Then the judge concluded that there should be a discount for failure to mitigate:  "The evidence of efforts to find work is skimpy at best, and Mr. Nelson was vague about what exactly he did."

Here's the problem:  The onus is not on the employee to prove mitigation.  Proving failure to mitigate is an obligation of the defendant.  In the absence of clear evidence one way or another, unless the employee was so unresponsive on cross-examination as to warrant an adverse inference, the default presumption is against the defendant.  This is why employers so seldom succeed when arguing failure to mitigate - and this should be even more true at Small Claims Court, with limited disclosure obligations.

I read the Deputy Judge as possibly having improperly reversed the onus, putting it on the employee to prove satisfactory mitigation efforts.

And here's the other quirk:  He cut the damages in half, to five weeks - for an employee with just under five years of service, four weeks would have been the statutory minimum, which isn't subject to mitigation anyways, which means that the reduction is almost as severe as it possibly could have been.

So the employee received $3400 in pay in lieu of notice, plus $1504 in outstanding wages and vacation pay, plus...

Punitive Damages

The appellate-level Courts have been extremely reluctant to award punitive damages.  There's been something of a move away from this in the lower Courts, as judges have looked to another mechanism to express displeasure with employer conduct now that Wallace damages are generally unavailable...but it's still hard to make out a claim for such.  In this case, based on the employer's failure to pay out the outstanding wages (and issue an ROE), the Deputy Judge awarded $3000 in punitive damages.

Costs

The judge tentatively fixed costs at $1500, all in, subject to an opportunity for counsel to make submissions.  That sounds about right, because, by default, legal fees are capped at 15% of the claim.  So where the plaintiff obtained a judgment for $7904, he's limited to $1185.60, plus certain disbursements.

However, there's a prospect of the defence asking for costs:  The defence was aiming for 10 weeks.  They couldn't have known that they would win on mitigation, and so if they anticipated a serious risk of losing on the factual disputes, they may well have made an offer equal to or greater than their '10 week' scenario.  Include the outstanding wages that they didn't seriously dispute were owing, and the offer may well have exceeded their ultimate liabilities, even including punitive damages.

Overall

The plaintiff's ultimate award, assuming costs don't change, is $9089.60.  I'd be surprised if he didn't incur more costs than that to bring it to trial...meaning that the win is actually a loss.

Yes, that's right, with his employer refusing to pay outstanding wages and vacation pay, and anything in respect of pay in lieu of notice, he would likely have been better off to do nothing than to sue in Small Claims Court.  This is the real tragedy of low-value claims.  He could have made an employment standards claim for outstanding wages and statutory minimum notice, instead, but in doing so he would have forfeit any entitlement to common law damages.  (In hindsight, that may have been best...but, well, hindsight is 20/20.)

Though that brings me back to the punitive damages:  It seems like a slap on the wrist to me.  If conduct meets the high threshold for punitive damages, then it should be a sufficiently significant sum to make employers think twice before doing it.  The message that this award sends, overall, is that it's not worth suing the employer in this kind of scenario.  And the corresponding message to employers is that they should continue to employ these kinds of tactics, because, even with the prospect of a modest punitive damage award, rational employees won't pursue such claims - or may pursue only ESA claims, protecting the employer from common law liabilities.

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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. 

Amodeo v. Craiglee Update

On October 5, 2012, I made yet another entry about Bill 168 reprisal cases at the OLRB, and noted a then-recent decision by Vice-Chair Kelly which dismissed an application based on a finding that the definition of harassment could not include the conduct complained of by Ms. Amodeo.

I expressed some doubts about this analysis:

However, this decision is...concerning.  The specifics of her email to management aren't clear (i.e. whether or not she was specifically alleging harassment or raising concerns simply about the instructions themselves), nor whether or not the employer has the required policy and program, nor whether or not this email complied with such a policy.  So it's hard to extrapolate much from the decision, but...

...let me say firstly that, if the email couldn't fairly be characterized as a complaint of harassment, that would be fatal to the Application.  I've made this distinction before in my earlier posts:  The OLRB's power under s.50 of the Act gives it power to hear complaints of reprisals to, among other things, exercises of rights under the Act.  Even under my interpretation of the Act that an employer has a substantive obligation to provide an environment free from harassment, simply saying to the Board "I was harassed" isn't enough to generate a remedy.  What generates the remedy - under my argument - is mistreatment by the employer after and because of a prior complaint of harassment.  So if there was no prior complaint, there's no reprisal protection, and no case - at least, not under s.50 of the Act. 

However, if one assumes that the email was a complaint of harassment, then to my mind this decision is simply wrong.  Under any anti-reprisal regime where you are protected for standing on your rights, including the Occupational Health and Safety Act, you need not prove that you were objectively correct in the first place.  If I genuinely and in good faith believe that a working condition is unsafe, then I can refuse the unsafe work.  Whether or not this refusal is protected by s.50 does not turn on whether or not the Ministry agrees with me that the conditions are unsafe.  It is not the case that, if the Ministry determines that the working conditions are acceptable, the employer is able to turn around and fire me for refusing what I had perceived as unsafe work.  The very point of these anti-reprisal provisions is that an employee can stand on his or her rights without being afraid that the employer will turn around and dismiss him or her. 

Similarly, whether or not a reprisal complaint for harassment can succeed can not turn on whether or not there was harassment in the first place; simply on whether or not there was a good faith complaint of harassment.

Ms. Amodeo then hired counsel, who sought reconsideration on a series of grounds.  (Hiring a lawyer is prudent, but hiring it after the decision has been made...kind of ties the lawyer's hands.)

The reconsideration request appears to have raised a similar concern to the one I raised, arguing that Vice-Chair Kelly improperly focused on whether or not harassment occurred, rather than whether or not there was reprisal to a complaint of harassment.  In fact, there's a reason that the decision was vague on the specifics of the email to management:  Neither party had provided it to the Board.  So the Vice-Chair, after receiving the reconsideration request, asked the parties for a copy.

In February 2013, Vice-Chair Kelly released a reconsideration decision, acknowledging the error I highlighted earlier, but, upon review of the correspondence argued to be a complaint, found that there was nothing in it to engage the anti-reprisal mechanism, nothing to put the employer on notice that rights under the Act might be engaged, nothing that could "reasonably be interpreted as having raised a complaint of harassment or any other health and safety concern."  Accordingly, the reconsideration request was dismissed.

It's a good analysis, and it could be very important if the OLRB eventually does decide that a complaint of harassment triggers the anti-reprisal provisions of the Act.  The statutory definition of harassment is incredibly broad, and so the subjectivity of traditional anti-reprisal analyses (i.e. that they're engaged if you stand on good faith, albeit incorrect, beliefs as to your rights) leaves a significant concern, that just about any complaint could retroactively be cast as being a complaint of 'unwelcome conduct or comment', and therefore trigger reprisal protection, even though nobody was really thinking 'harassment' at the time.  And that just can't be right.

No, the Vice-Chair has it right this time:  There needs to be something in the complaint itself that references the Act, or references harassment, or engages a reasonable understanding of harassment.

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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. 

Journalist Ordered to Repay Settlement Money

The vast majority of wrongful dismissals settle at some point, which means that the employee and employer agree on terms as to what the employer will pay.

As part of this, an employee is always required to execute a full and final release, promising among other things not to sue for anything else.  Another very common term is that an employee would be required not to disclose the terms of the settlement (with certain exceptions).  The importance of these clauses is to prevent employees from telling other employees what they received, because this hurts the employer's negotiating position dealing with these other employees.

And some settlements go a step further, saying that breach of the confidentiality clause will negate the employer's payment obligations, and require the employee to reimburse the employer.

However, employees will talk, and such clauses are difficult to enforce, mainly because of the difficulty of proof.  Most people know better than to talk openly about the terms of settlement, and proving what was said in a private conversation can be challenging.  (Besides, does a wink and a nudge and a lawyer's business card violate any confidence?  Probably not.)  Accordingly, I have never seen such a clause enforced.  Until now.

The Toronto Star reported last week that Arbitrator Louise Davie ordered journalist Jan Wong to repay the Globe & Mail the money she received under a settlement from a discharge grievance, because of a breach of confidentiality.  The issue of proof was less significant here:  Ms. Wong wrote a book which alluded in some fairly direct ways to the terms of settlement.

It's a big deal.  The Arbitrator thinks it seems fair that she be required to repay the money, because the money was the benefit for which the employer bargained in the settlement.  The rest of us, however, might look at it as being pretty heavy-handed, because the money was the whole benefit for which Wong bargained, whereas confidentiality was just a portion of the benefit the employer was supposed to receive, in a settlement that doubtless also included a dismissal of her discharge grievance, and a full and final release of her other claims.

One might reasonably question the enforceability of such a clause, on a couple of bases, and I look forward to seeing how the appellate courts look at the question, if they do, but here's the far more troubling aspect:  Jan Wong was not permitted to participate in the hearing.

This goes back to the whole 'you can't sue your employer' issue for unionized employees.  The employment relationship is one between the union and the employer, and the employee isn't a party.  Almost all issues in the employment relationship are to be determined as between the union and the employer.  And this settlement was part of the employment relationship, so came into the same framework.  The employer can grieve to the union, and the union has to represent the bargaining unit member.  Even though she's no longer a bargaining unit member.

Wong sought standing to participate in the hearing, was denied, and unsuccessfully applied for judicial review.

End result:  The employer is seeking financial recovery from Wong, but Wong relies on the union for representation (which is only obligated to defend her up to the limits of the duty of fair representation), notwithstanding that she's been out of the bargaining unit for five years.  In short, she isn't a party to the settlement, she isn't a party to the arbitration, but at the end of the day, it ultimately falls to her to pay the award.

That's pretty hard to accept.

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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.

Dismissed Employee Wins Summary Judgment, 7 months into 18 month notice period

There's an interesting new case just released yesterday from the Ontario Superior Court of Justice, involving a wrongful dismissal claim by a long-service manager, who brought a motion for summary judgment.  The case is Bernier v. Nygard International Partnership.

Diane Bernier was a manager for Nygard from August 1999 until her dismissal without notice on December 4, 2012.  In the last four years of her employment, her compensation package was worth approximately $190,000 per year, including salary, bonus, car allowance, benefits, etc.  She claimed (and was awarded) pay in lieu of 18 months' notice.

So it's a big claim.  And there were a few issues to be dealt with.  But what's most interesting about this case is the timeframe.  It's frankly impressive to have gotten into Court on a motion for summary judgment barely six months after the termination (the hearing was June 6, 2013), and it raises additional issues to deal with when you're looking at an 18 month notice period - namely, mitigation.

A dismissed employee generally has an obligation to mitigate, and to account for mitigation earnings during the notice period.  So if I'm dismissed and entitled to 18 months' notice, but I sit on my hands watching soap operas for the whole 18 months never looking for a job, I will likely have my entitlements significantly reduced for my failure to mitigate.  (Likewise if I receive a decent job offer but turn it down without reasonable justification.)  On the other hand, if I get a new job 12 months in, then my earnings in those last six months of the notice period will be discounted from the award of damages.

So when you get into Court before the end of the notional notice period looking for an award of damages in respect of income that you wouldn't even have earned yet and still have an obligation to try to mitigate, that creates an awkward result.

What I've seen argued occasionally is that there should be a 'discounting' for possible mitigation.  There's some authority for it, though I don't know of any employment cases where it has happened in Ontario.  Usually, you're not in Court so long before the end of the notice period that it's worth discounting - if there are only a couple of months left in the notice period, then the probability of mitigation having a significant impact on damages is pretty low.

But in this case, where they were in Court a year before the end of the notice period, with six digits worth of wages still subject to possible mitigation, that's an issue that simply can't be ignored.  The plaintiff's lawyer, however, had a very interesting solution, relying on a 30-year-old Ontario High Court precedent:  Impress an award of damages with a trust.  It's unusual language, but what it means is that it preserves a duty to account for any mitigation earnings, dollar for dollar.

It's an imperfect solution to a difficult problem.  Firstly, it still has the effect of absolving an employee of the duty to mitigate.  Suddenly, barring a successful appeal, there is no prospect of anyone being able to hold her feet to the fire in terms of her job search efforts.  If she ends up spending the next 11 months on the couch, or vacationing, or writing a novel, that's fine...and what's more, there is zero incentive for her to actually find a new job before the end of the notice period - she's getting her damage award anyways, so it's not like there's the usual hardship pending adjudication of the wrongful dismissal claim; she can't be threatened with reduced damages for failure to take reasonable steps; and every dollar she earns will be paid to her old employer.  (I also question whether or not there may be troubling tax implications of such a situation.)

Secondly, mitigation income isn't always straightforward, and there are always loopholes.  The wording of the endorsement deals only with employment income.  There are other types of income which are, or at least can be, properly characterized as mitigation earnings.  (Not to mention some employment income which may not be, but that's unlikely to be a concern here.)  The characteristic of mitigation earnings is that it is money that you would not have had the opportunity to earn if you had still been working your old job.  So, in general, you get fired from a full time job, you get a new full time job, that's mitigation.  (One can easily imagine a much more difficult scenario where you have a day job and an evening job, get fired from your day job, and manage to pick up some more late evening shifts to offset the lost income.)

People earning $190,000 per year often have skill sets to begin their own consulting businesses.  Would self-employment income be properly characterized as employment income?  While the answer may be yes in context, I would generally be inclined to answer that question in the negative.  So that could conceivably require further litigation.  Regardless, one could incorporate and pay the income by way of dividend instead, in which case it would be even harder to characterize as employment income, even though it still ought to be considered mitigation earnings.

But the point isn't that the terms of the trust are underinclusive - the point is that it's hard to capture potential mitigation earnings in a way which is both comprehensive and definitive, and with a trust it's important to have clarity.

Still, I think that, with increasing numbers of wrongful dismissal files being open to determination by summary judgment, this is an issue that will come up in the future, and while there may be arguments to be made against it in the right case, the Bernier approach to the problem is probably as good a solution as any.

It was probably a material fact, however, that she entered into evidence "a large mitigation brief demonstrating her very substantial job search".  Mitigation isn't a high threshold, and so that characterization suggests that she probably went above and beyond, looking for new work.  One might conclude (as was said in the 1983 precedent) that the person genuinely wants a new job and will keep looking anyways.  In a more borderline case, where an employee couldn't be said to have been unreasonable, but perhaps just scraped by the threshold, a Court might be more reluctant to use this solution.

The other issues in the case are interesting, as well, and bear some comment.

The Employment Contract

Before starting her employment in 1999, Bernier signed a contract which included a provision that she could be terminated at any time on 30 days' notice.  Put simply, that provision conflicts with the Employment Standards Act, which sets out a formula for notice which goes up to 8 weeks, and can't be contracted out of.  So the provision was void.  Pretty basic stuff.  The employer's lawyer agreed that this was void.

However, the employer took the position that this void provision created a "lack of clarity" which was remedied in February 2007 when they alleged that, at a meeting with the corporate president, Bernier agreed to amend the contract to accept the employment standards minimums on termination in exchange for an increase in salary and bonus.  The employer produced a letter to her dated February 12, 2007, which was not countersigned by her, but which the employer's General Counsel (who had not been present at the meeting) swore an affidavit on second-hand "information and belief" - without identifying the source, improperly - that the letter had been given to her.  No explanation was provided for why the corporate president didn't swear an affidavit to this effect.  (He is still alive and well, and involved with the company.)

On a motion for summary judgment, raising a significant factual issue can often be a defence - the argument goes that a trial is required to determine an issue.  Was there an agreement to amend the contract?  Bernier swore an affidavit that there wasn't, and that she never received the February 12 letter.  The employer argued that it was a factual issue calling for a trial.  The trouble for the employer is two-fold, however - firstly that, for no good reason, no firsthand evidence was led that Bernier was given the letter or agreed to the changes, leading to an adverse inference.  More importantly, the employer had not led any admissible affidavit evidence to rebut Bernier's evidence that she had never received the letter nor agreed to the changes.  As a result, Bernier's evidence stands uncontradicted, and there's no issue requiring a trial.

The Defendant's General Policy

The employer asserted that it has a policy of providing only the statutory minimum.  Written policies, done properly, may be effective in the right circumstances, but I consider it unwise to rely on such, and that doesn't appear to be what's going on here anyways.  The employer appears to be saying "We don't pay out common law notice.  We just don't.  And she knew it."

The reason Bernier might have known about such a policy is that she's a manager, and gave letters to her own subordinates restricting their notice entitlements.

This argument is beyond weak, as any employment lawyer could tell you at a glance.  Firstly, these documents are not her contract.  She didn't pay attention to the notice provisions - they came down from upstairs, she presented them to the employees for signatures, and sent them back upstairs.  Secondly, there is no reason to expect that the notice provisions governing her subordinates would also govern her.  In fact, the reasonable expectation would be the opposite - she's at a higher rung in the corporate ladder, she's receiving a much more generous compensation package...put simply, one expects her contract to be more attractive than theirs.

"But," the employer would argue, "she signed a contract saying she'd only get 30 days notice!  She knew she wouldn't get common law notice."

And there's the crux of the problem right there:  That is exactly the reasoning the Supreme Court of Canada has categorically rejected in finding such contractual provisions void.  They do not give rise to a presumption of an understanding that common law notice would not apply.

Bonus

Bonuses can be tricky.  There are a number of issues involving bonuses.  Are you entitled to a bonus for the time leading up to your termination?  Bonuses payable during the notice period?  Pro-rated bonuses for the stub portion of the notice period?

The analysis is grey, taking into account the provisions of bonus policies and contract language, the calculation of the bonus, and other common law principles as to whether or not the bonus has formed an integral part of the compensation package.

In this case, the employment agreement provided that she was entitled to an annual bonus provided that she was actively employed on November 30 of each year.  Bernier's lawyer argued that the ESA deficiency in the notice period was fatal to the bonus provision as well.  The judge disagreed, but concluded that because, had she been given reasonable notice, she would have been actively employed on November 30, 2013, and therefore is entitled to her 2013 bonus.

That's actually a much more difficult question than the treatment it receives in the decision.  I think it's probably right, but there's some authority for the proposition that the 'active employment' language can modify the employer's requirements through the reasonable notice period.  (What it boils down to for me is, as the judge dealt with it, simple causation:  Had she been given reasonable notice, she would have been actively employed on November 30th, 2013, and therefore she's either entitled to the bonus, or entitled to be compensated for the loss of entitlement to the bonus by reason of the breach of contract.  Six of one, half a dozen of the other, when you're talking about common law notice.  One can contract to provide notice or pay in lieu on some other basis than the default common law analysis, but that's what termination clauses are about.)

Choice of Lawyers

The employer used a lawyer who doesn't appear to practice much employment law.  They've used this lawyer before for commercial disputes, and he's quite experienced, having successfully argued a case recently at the Supreme Court of Canada.  So a solid litigator.  But not an employment lawyer.  And both of those facts come out in the arguments he raised, because they're creative, and they're the kind of arguments that might be successful in a less-developed area of law, or if neither the other lawyer nor the judge was well-versed in employment law.

By contrast, Bernier's lawyer is primarily an employment lawyer, and so knows the law well, and was able to easily show how the employment law framework left no room for the arguments made by the employer.

Just goes to show the value of expertise.

That being said, even with a high dollar value claim like this, it's hard to imagine why they would fight if they didn't believe they had a chance of success (they ended up having to pay their own legal fees, plus an additional $25,000 to the plaintiff for costs), and the only issue that wasn't trite law was the question of the 2007 agreement...and there's no question that the lawyer would have recognized the deficiencies in their affidavit evidence, meaning that the failure to lead affidavit evidence directly from the president was either because it couldn't say what they needed it to say (which raises the question of how the General Counsel could have sworn information and belief to that effect), or because for some other reason they didn't want to expose him to cross-examination...which is, in any event, a pretty good reason to want to not have to go to trial, and talk settlement before legal fees pile up.

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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.

Court of Appeal Interprets Employment Contract as ESA-Compliant

There's a short decision recently out of the Ontario Court of Appeal, Dimson v. KTI Kanatak Technologies Inc., dealing with poorly drafted language and questionable ESA compliance.

Dimson occupied a Vice President position with KTI, for just under six years, with an annual salary of $165,000, various benefits, and significant variable compensation components, until his employment was terminated without just cause.  If he was entitled to common law pay in lieu of notice, then he was likely looking at damages measured in six digits.

However, his employment agreement provided as follows:

18(c)   In addition, KANATEK may terminate this Agreement at its sole discretion for any reason, upon providing Employee all payments or entitlements in accordance with the standards set out in the Ontario Employment Standards Act, as may be amended from time to time.

(d)      If at any time KANATEK provides you with a bonus, it will not be included in the calculation of payment for the purpose of this Article or as otherwise agreed to or required by the Employment Standards Act.

Dimson took the position that 18(d) attempted to contract out of the Employment Standards Act, voiding the termination clause.  KTI argued otherwise, that the language in 2(d) preserved statutory entitlements.

On a motion for summary judgment, Justice Lederman found that the language complied with the ESA.  The Court of Appeal upheld the finding.

Before I get into the analysis, allow me to say that, though I've seen a few of them, I consider ESA-only termination provisions absurd for senior management.  At that level, a person should be consulting a lawyer before signing the contract, and in many cases should be getting advice to try to negotiate a better exit package.  I made some comments about this in an earlier entry.  ESA notice caps at 8 weeks, for an employee with over 8 years of service, whereas, to paraphrase Justice Sproat in a recent seminar, anyone with a 'real job' can reasonably expect it to take a minimum of 3 months to replace that job.  For long-service senior managers, that number generally goes up.  ESA minimums provide a person with essentially no job security, and leave the person at risk of a significant period of uncompensated unemployment.

It's irresponsible for a senior manager not to get legal advice on an employment contract, it's often unwise to accept such language , and frankly, I don't know why an employer would even want a senior manager who would accept such a clause.

The Meaning of "Or"

Obviously, the language of 18(d) is poorly drafted.  What do the "or"s mean?  That's really the question.  On the construction of the sentence, they don't appear to mean much.

When you use the word "or", you're often abbreviating a clause to avoid redundancy.  "I can walk or drive" means "I can walk or I can drive".  In a kind of mathematical distribution, the "I can" gets applied to both sides of the disjunction.  As in this case, when you're dealing with a negation, it's similar, except that when you extend it out, you have to reverse the disjunction to a conjunction:  "Do not jump or dive" becomes "Do not jump and do not dive."

So I'm looking at 18(d) and asking what's abbreviated, trying to construct the sentence otherwise.  And I really can't do it in a meaningful way - it's a really awkward construction.  I can see where the plaintiff gets his interpretation, being to the effect that a bonus will not be included in calculations under this article, and will not be included as otherwise agreed to, and will not be included as required under the ESA.  The trouble is that it is kind of absurd to say that something won't happen even if we agree otherwise that it will.  It doesn't really make sense.

Contracts tend to be interpreted to avoid absurd outcomes, and this is why the Court tended away from this interpretation.  (To me, the easiest way of making the provision make sense is by supposing that the first "or" was meant to be "unless".)

On the other hand, there were equal problems with the defendant's position, who argued that the provision in some way stood to affirm ESA rights:  Contracts also tend to be interpreted to give meaning to its terms - language is presumed to do something, and what does 18(d) actually do if it merely affirms the rights already asserted in 18(c)?

With 18(c) alone, one would conclude that, if a bonus isn't required to be paid under the ESA, then it wouldn't need to be paid under the contract.  And that if it is required to be paid under the ESA, then it would be paid.  So if you interpret 18(d) as saying "A bonus won't be paid unless the ESA requires it to be paid", then you're just restating a portion of 18(c).

The Value of Saving Language

What clinched it for the defence, however, is the fact that the language of 18(c) stood as a guarantee of compliance with the ESA, therefore the plaintiff's interpretation of the provision created an internal inconsistency in the language - which, again, is to be avoided - whereas the defendant's interpretation was harmonious on the face of the contract.

Ambiguity and Clarity

Justice Lederman and the Court of Appeal both concluded that the language is clear and unambiguous.  This is important, because ambiguity gives rise to certain presumptions - namely, that the ambiguity should be resolved adversely to the party who drafted it (generally the employer).

I have a lot of respect for Justice Lederman, and the panel on the Court of Appeal, and in general if they all unanimously say something, I'm reluctant to disagree.  However, I'm no lightweight when it comes to English grammar, and in this instance, I simply can't agree with them, as a result of my above analysis:  18(d), as constructed, does not make sense.  If you change the first "or" to "unless", it makes sense.  But in order to do that, you need to first conclude that there's ambiguity or an error in the language to be resolved.

Impact of this Decision

In my view, the most important aspect of this case is the treatment of the saving language, the inclination of the Court to read other provisions as being ESA compliant because of a blanket statement that ESA entitlements will be paid out.

Nonetheless, the treatment has to be more nuanced, because there absolutely are cases where language clearly contravenes the ESA, despite a blanket statement elsewhere that the ESA will be complied with.  These can be difficult cases.  The general rule is that the specific prevails over the general, when there are two seemingly-contradictory provisions.  For example, if one part of a contract says that no company equipment can be used for personal purposes, then another part of the contract allows for limited personal use of the company cell phone, then the likely interpretation will be that the latter creates an exception to the general proposition.

And that's what I see the plaintiff's argument as suggesting is the case here, that 18(d) qualifies that the payments in 18(c) will not include any calculations for bonuses.  And, in general, it's a bad idea to qualify ESA-minimum provisions, because at best the qualification is - as here - meaningless.  If you actually back anything out of the ESA minimum, you've rendered the provision void.

But this is something I see periodically:  Contractual language which sets out a formula for entitlements on termination, which seem to have some pretty clear ESA deficiencies, and then a saving clause that says something to the effect of "In no case will your payment be less than the ESA minimum."

As much as this decision may stand in support of this kind of language, I consider the language to be deeply problematic.  Let's imagine a clear-cut scenario, where the formula is inherently deficient:

(Disclaimer:  The following language is for the sake of argument only.  It is NOT sample contract language, and should not be used in contracts.)

1. We may terminate your employment at any time, without just cause, on provision of two weeks' notice or pay in lieu thereof, and no other notice or pay in lieu shall be owing.
2. In no case will your payment on termination be less than your minimum entitlement under the Employment Standards Act.

Clause 1, on its own, is generally unenforceable.  Pretty academic at this point.  Even if you're dismissed after 6 months of work, where your minimum entitlement is one week, the clause itself can't be enforced because the language itself stands in contradiction to the requirements of the ESA.

So what's the effect of clause 2?  Does it save the language in clause 1?  I don't think so.  The only way of reconciling the two clauses is by concluding that the contract asserts that one's minimum entitlements can never exceed two weeks, which is simply untrue.  The real litmus test, in my mind, is this:  What happens if an employee with over three years of service is dismissed?  Clause 1 says you get two weeks only, but that's not enough.  Clause 2 respects the fact that clause 1 doesn't give you enough, and so provides...what?  Does it create a 'bump-up' to the ESA minimums?  I don't think so.  That's exactly the kind of effect that the Supreme Court has said an employer can't expect.  So, in my mind, the language is clearly going to be void for an employee whose ESA minimums exceed two weeks, and will probably be similarly void in other cases too.

The impact of the Dimson decision, I expect, will be that Courts will use saving language to help interpret language which might arguably be construed as being non-compliant with the ESA.  However, a formula that is simply not ESA-compliant will not be rendered compliant, or interpreted as being compliant, or have language read into it to create compliance, simply because another provision guarantees compliance.

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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.