Costs at the Small Claims Court

Deputy Judge Cleghorn recently released a costs decision in the case of Pilling v. Lowerys Limited, a wrongful dismissal case in Thunder Bay.

The decision on the merits doesn't appear to have been published - I would be interested in seeing a copy if any readers happen to have one - but the claim was for $22,744, and the judgment was for $1,724.65.  (I can glean from the costs decision that the defendant had alleged cause, an allegation the Deputy Judge considered not only to be unsubstantiated but actually "inappropriate".)  The Plaintiff had offered to settle on the basis of payment of $22,500 - not a huge discount from the amount claimed, but it would have been inclusive of costs and interest.  The Defendant, by contrast, had offered $2,500, all-inclusive, a week before trial.

Rule 14

The importance of offers to settle is this:  Rule 14 of the Small Claims Court Rules provides for 'double costs' to a party who made an offer, and then beat their offer at trial, under certain circumstances.  Obviously, the plaintiff didn't beat his offer to settle, but an effective defendant's offer could reverse the costs entirely - i.e. if Rule 14 doesn't apply to the defendant's offer, the plaintiff can get a contribution to his costs; if it does apply, the plaintiff has to pay the defendant an elevated costs award.

Fortunately for the plaintiff, the defendant's offer was too late to trigger Rule 14 - it has to be made at least 10 days before trial, and that offer wasn't.

But what's far more interesting is the Deputy Judge's analysis of whether or not the defendant beat their offer anyways:  He builds the costs presumption into the analysis, concluding that $2,500 isn't more than what the plaintiff ostensibly obtained, being $1,724.65 plus costs.

Rule 14 Commentary

That strikes me as an awkward analysis in the context of the Small Claims Court:  The entitlement to a representation fee, at Small Claims Court, is prompted by representation at a hearing.  If the matter hasn't gone to trial with a licensed representative, there's no ostensible entitlement to a representation fee.

To require an offer, prior to the trial, to account for trial costs would be strange, because the effect is that such a settlement would effectively compensate the plaintiff for costs not yet incurred.  The very point of an offer to settle is to avoid the costs associated with a trial.

By contrast, consider offers in the Superior Court context, where compensable costs accrue through the litigation:  As a defendant, I would make an offer that includes costs up to the date of the offer, but which thereafter either provides for no costs, or else provides for me to be compensated for my own costs.

In the Small Claims Court context, one might easily think that eligible disbursements up to the date of the offer should count, but those will typically be relatively modest.

Assessment of Costs

It appears that the Deputy Judge was looking for more details and argumentation:  The plaintiff sought a representation fee of $3,411.60, but with no breakdown of hours, hourly rates, or the experience level of counsel.

(Consider, by contrast, Deputy Judge Branoff's commentary in Fournier v. Cartier a little over a year ago:  "The Small Claims Court is therefore not as concerned with the number of hours spent and the hourly rate charged by the representative based on the years of experience.")

The Deputy Judge tried to evaluate, in a manner he considered 'arbitrary', the "acceptable amount to be paid to a lawyer to prosecute a Small Claims Court wrongful dismissal matter to the conclusion of a one-day trial."  He appears to have accepted the Defendant's figure of $2000 for this, and then reduced that on the basis of his discretion in light of the offers to settle.

He also declined to award travel costs - the plaintiff had retained Sean Bawden of Kelly Santini in Ottawa, who had to travel to Thunder Bay for the trial - on the basis that there was no explanation put forward for the necessity of retaining a lawyer from out of town.

Commentary

Some (not all) Deputy Judges are very restrained in their costs award.  Even operating within the 15% cap, the assessment of a 'reasonable' representation fee often seems pretty low-ball.

Mr. Bawden may not have told the Deputy Judge that he is specifically an employment lawyer with 6 years at bar, but surely the Deputy Judge would have been able to ascertain with reasonable certainty that he was not a new call.

It's generally accepted that a day of trial requires 1.5 to 2 days of preparation - it's a rule of thumb that's 'close enough' to be of some use in evaluating such things.  You expect an element of proportionality, of course - you wouldn't usually want a high-priced Bay Street lawyer spending 20 hours preparing for a trial on a $2,000 claim - but on a claim over $20,000, it's reasonable to expect a lawyer to do his due diligence.  In that light, even if one assumes that time prior to trial prep (i.e. productions, settlement conference, etc.) does not fall within the purview of the reasonable representation fee, I would still argue that the amount sought by the plaintiff for costs - while, yes, some detail wouldn't have hurt - would be inherently reasonable.  (Even at a low-end billing rate, it's certainly in the ballpark.)

As for travel expenses, it's actually quite common for employment lawyers to have to travel.  I have a number of files from various different parts of the Province.  The more remote the community, the less likely you are to find experienced employment lawyers.  I've talked before about the importance of hiring an experienced employment lawyer - it's a niche area of law, and there's a lot of value in having a lawyer who is familiar with all the core concepts, and up-to-date with the most recent developments in the law.

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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.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.

Employer who ransacked employee's home tries and fails to adduce new evidence

There's a new chapter in the ongoing dispute of Irving Shipbuilding Inc. v. Schmidt.  Recall, back in March, I posted this entry about the plaintiff ("ISI") obtaining an Anton Pillar Order ("APO") permitting them to search a former employee's home, but failing to justify the need for it when it came back on for a full hearing.

ISI initially sought leave to appeal, but then decided to take a different tack - so to speak - by bringing a motion to introduce fresh evidence.

ISI contended that the original decision turned on a finding that ISI and Schmidt's new employer (Davie) operated in different sectors of the industry, and thus were not direct competitors.  However, Davie had published documents indicating an intention to move into the sector in which ISI operated, potentially leading to more significant future competition, and in fact in March of this year ISI lost a bid to a company which was subcontracting its work to Davie.

Therefore, ISI argued, the finding that ISI and Davie are not competitors should be revisited.  The Court disagreed.

There were a lot of problems with ISI's position on this motion.  Firstly, much of the 'fresh' evidence would have been available at the time of the original hearing - part of the test for leading fresh evidence is that it could not have been available at the time of the earlier hearing.  (For an excellent example of this, consider the Mehedi case about which I recently posted.)

Secondly, the judge had found that ISI had failed, in originally obtaining the ex parte APO, to provide "full and frank disclosure".  The new evidence had absolutely no bearing on this failure, which in and of itself was fatal.

Thirdly, the judge had dealt with the prospect of future competition in his decision:  These 'new facts' fell squarely into considerations he had already determined did not change the assessment of the facts.  (Incidentally, the reason ISI lost the bid in question was because of the unavailability of its docks at a time required for the contract.  While ISI contended that Schmidt's knowledge put it at a competitive disadvantage, the reality is that, but for the unavailability of its docks, its bid was the most competitive.)

On a more fundamental level, though, it boils down to a misunderstanding by ISI as to the purpose of an Anton Pillar Order:  It is not to prevent future misconduct; it is not to build a case; it is simply to prevent the destruction of evidence.  ISI still had all the records it alleged Schmidt had copied - there was no risk of destruction, which is of primary concern for an APO.  (Yes, but you might say that he would have destroyed the evidence of his possession of such documents.  That's beside the point:  The purpose of the APO is to make sure the smoking gun isn't destroyed, not to be able to catch the defendant red-handed holding the smoking gun.)

In cases such as these, there are two possible types of past misconduct that could justify the issuance of an APO. The actual removal of evidence, often in documentary form and the misuse of that evidence.  In this case, we are dealing in a world of electronic documents.  When Schmidt left his employment with ISI, he removed and retained a number of documents and preserved them on USB sticks or other portable storage devices. Because of its data loss prevention system, ISI had a complete record of everything Schmidt had in his possession.  None of its documents were destroyed.  ISI was in a position to prove exactly what documents Schmidt had allegedly misappropriated. 

(Of course, while arguably irrelevant to the issue of whether or not the APO was improper in the first place, ISI really isn't very sympathetic, when the audit of the materials seized from Schmidt resulted in a fairly clear conclusion that he did not in fact misappropriate documents as ISI alleged.)

A motion to introduce fresh evidence is fairly exceptional, and it simply doesn't seem that there was any basis for it here - it's not clear why ISI wouldn't have led additional evidence of Davie's competitive plans in the earlier hearing, but more importantly there were deep and totally fatal problems with the APO that simply weren't even close to being addressed by the new evidence.

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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.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.

Admitting Fresh Evidence After Losing an Appeal

The Court of Appeal just released a decision in Mehedi v. 2052761 Ontario Inc., where the plaintiff sought to admit fresh evidence even after the Court of Appeal dismissed his appeal on the merits.

Mr. Mehedi sued the defendant, which carried on business as "Job Success", and individuals associated with the company, alleging that they defrauded him:  Allegedly, they promised him a job as project manager with a $70,000 salary, and in exchange for their services he paid $3,742 - he sought the return of that money, and punitive damages.

In 2011, the matter went to trial, and the trial judge concluded that there was never actually a promise to find him a particular job within a particular salary range.  On January 23, 2012, the Court of Appeal dismissed Mehedi's appeal, deferring to the trial judge's findings of fact.

Then, less than a month after the appeal was dismissed, CBC's Marketplace aired a piece on a related company to Job Success (full episode here), including a videotaped interview with one of the personal defendants Mehedi had sued, Lacombe:  When asked if they were 'guaranteeing' an undercover reporter a job, the defendant responded confidently, "Absolutely, and we're very good at it."

"Guarantee" is a strong word.  "Absolutely" is another strong word.  The company line, from company president Dale Smith, is that they don't promise or guarantee anyone a job, and having already been sued by people accusing them of doing so, one would expect them to be careful about disclaiming any such guarantees.  Even if they have a particularly solid candidate in front of them, if Dale Smith were to be believed, the right answer would be "No, we can't make guarantees, but..."

The fact that Lacombe did make promises completely undermines the contention - presumably what they advanced successfully at the original trial - that they don't make promises.

And she didn't just ask it once.

CBC:  "This is going to work?  Is this going to get me a job, guaranteed?"
Lacombe:  "Yep, um, we guarantee what we do here.  You're asking the typical two questions that everybody asks me.  Does this really work?  Am I going to get help?  Yes, and yes."

Another undercover job-seeker caught a salesperson advertising that there's "no risk" because the job-seeker will make his money back on the first pay cheque in his new job.

For Mr. Mehedi, this is really vindicating:  It really strengthens his claims that he was promised a job.  But the timing was awful, coming weeks after his appeal was dismissed.  So, for the two and a half years since then, he's been trying to reopen the case, and has been caught up in a bureaucratic nightmare.

First, he brought a motion for judgment, but the motions judge advised him to retain a lawyer, and told him that he first had to set aside the trial judgment.  So he tried to get dates for a motion before the trial judge - the appropriate step to take - and court services said that they aren't privy to specific judge's calendars, so the judge's office should be contacted directly.  Upon doing so, the judge's office advised that he was in criminal court for the foreseeable future.  So he brought a motion for directions from the Superior Court, but - after more than a year's worth of adjournments - the Superior Court concluded that, because it had gone to the Court of Appeal, the motion should properly be brought there.

The Court of Appeal disagreed, concluding that the motion to introduce new evidence should be brought at the Superior Court in the ordinary way - go back down to the court below that already sent you back up to us.  Almost like one of those big companies' customer service call centres, just transfering you from department to department because nobody quite knows how to handle your call.

Caution about Job Scams

There are services to help improve your resume and interview skills.  Some of these are free, offered through government agencies; others will charge.  If you want to pay someone to help you with your resume, that's fine - just keep in mind that that's what you're paying for.

There are a great many placement agencies - headhunters and other companies who attempt to match qualified candidates with available positions.  In my experience, these agencies are paid by the employer.  It's an outsourcing of HR recruitment functions:  Find me a candidate, and I'll pay you a commission.  These agencies, therefore, will advertise the positions or headhunt individuals themselves, and will attempt to draw in a maximal number of candidates, so that they can vet the candidates and send the best onto the employer, to maximize the chances that one of their referrals will be hired, thus entitling them to their commission.  They do not require money from the job candidate; they get paid by the companies doing the hiring.  That's how that particular market typically works.

I find it difficult to believe that any credible company would charge job-seekers to connect them with jobs, but it that's what someone is promising you, tread carefully.  If it were me, I'd probably offer a contingency-based fee:  Okay, you're that confident that you can connect me with a job in a given timeframe - if I obtain a job through your connections, I'll give you x% of my wages for the first y months.  (If I'm right to be sceptical about such a 'service', then they'll refuse to consider such an arrangement.  If there's a legit service of such a nature, however, they'd almost have to consider such an arrangement.)

Also, carefully read the contract, and make sure that what you're signing for is actually what you understand you're buying.  A promise not written into the contract will often not be enforceable, so if you're signing in reliance on some promise that the company made, then insist that the promise be put on the face of the contract.  Again, if they're not prepared to do that, then their promise isn't really a promise.

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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.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.

Small Claims Court Declines to Follow Trites v. Renin Corp

The Small Claims Court recently released a decision in the case of Wiens v. Davert Tools Inc., a constructive dismissal case.

While there are issues of inappropriate treatment of the plaintiff, the case largely deals with the issue of 'temporary layoffs':  The question of whether or not a temporary layoff, in the absence of an express or implied contractual term authorizing such, constitutes a constructive dismissal.

By way of background, let me say that the answer used to be clear:  A categorical yes, affirmed by the Court of Appeal on numerous occasions.  However, last year, Justice Moore released a decision in Trites v. Renin Corp stating that "there is no room remaining at law for a common law claim for a finding of constructive dismissal in circumstances where a temporary layoff has been rolled out in accordance with the terms of the ESA".  For simplicity, let's call that the "Trites proposition".

The employment law bar did a collective double-take at the Trites proposition.  Half of us said "This is a big change in the law."  The other half of us said "This is wrong."  I argued in this blog at the time that the Trites proposition would not be largely followed, and would not be upheld by the higher courts.  Firstly, I argued, the Trites proposition was obiter.  Secondly, it was highly inconsistent (and seemingly obliviously so) with well-established case law.  Thirdly, it was wrong, on a close reading of the Employment Standards Act, 2000.

To the best of my knowledge, Trites has not been appealed.  (I did hear from Ms. Trites' counsel, shortly after the decision, that the employer was considering an appeal...but Ms. Trites had no reason to appeal absent an employer appeal:  Justice Moore proceeded to conclude that the layoff had not been ESA-compliant, and accordingly Ms. Trites was constructively dismissed, and obtained judgment.)

Wiens is the first reported decision, to my knowledge, which considers the impact of Trites.  And Deputy Judge Hagan rejected the Trites proposition:  "The plaintiff argues that this statement of Justice Moore is obiter and the existing case law. [sic]  In my view the statement is obiter and not consistent with the higher courts."

(Presumably, the first sentence there omitted words to the effect of "not consistent with".  A shame - makes it slightly less quotable.)

Commentary

It's interesting and unusual for the Small Claims Court to disregard a Superior Court decision:  The doctrine of stare decisis usually binds the Small Claims Court to follow decisions of higher courts.  However, where there are conflicting decisions of higher courts...well, there's a debate as to whether or not the judge may pick whichever seems best, or must follow the most recent one.  (There is, fittingly, conflicting authority on the point.)  Moreover, obiter is never binding.  So while the argument that the Trites proposition was obiter wouldn't be important at the Superior Court level, it gives the Small Claims Court the unfettered discretion to evaluate the merits of the Trites proposition.

Naturally, Wiens isn't binding on anyone - it's a Small Claims Court decision, and is at best persuasive.

Indeed, Wiens too may arguably be obiter.  Deputy Judge Hagan went on to find that there was an implied contractual term authorizing temporary layoffs - this is unusual, but basically turns on industry standards.  (It's rooted in the "custom and usage" doctrine, though not so framed by the Deputy Judge.)  However, on the facts, the Court concluded that the layoff was 'indefinite', and that the implied term authorizing temporary layoffs did not extend that far.

Nonetheless, it sends a clear message to employers, as I argued immediately following Trites, to approach that proposition with caution:  Trites may not be the watershed moment that others argued it to be.

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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.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.

The Intermediate Category: Dependent Contractors

There's a recent case out of the Superior Court of Justice in Wyman v. Kadlec, dealing with the termination of a contract for services.

The Facts

The parties met in 2001 - Mr. Wyman lived in Thunder Bay, and Mr. Kadlec operated the Raven Lake Resort.  Mr. Wyman was permitted to stay at the resort in exchange for his assistance, helping at the resort.  Shortly thereafter, they entered into an agreement by which Mr. Wyman would manage the resort, in exchange for a share of revenues.  Kadlec lived in the United States, and expected Wyman to be running the resort from May until the end of hunting season.

Both of them were new to the business - Mr. Wyman had never managed a resort before, and was 'semi-retired', having worked in a small machine shop with his son.  In 2004, he transitioned over to a different resort operated by Kadlec at Bush Lake.  Then, in September 2008, Kadlec terminated the relationship.

The termination was not exactly amicable - the mode of dismissal was a heavy-handed lawyer's letter, complete with a Notice of Trespass, emailed to Mr. Wyman.  The letter cited 'business reasons' as the reason (though apparently a 'just cause' pitch was made at trial), and demanded the return of various equipment and items "at your own expense"; as well, a second letter, alleging that he was 'illegally withholding revenue', and demanding the return of all records, etc., no later than 1pm the next business day.  The email was sent after 5pm on Friday afternoon, and proposed that, in order to recover his personal property still at the resort, he could send a friend in a one-hour window the next day.

There were a couple of motors the corporation had purchased, which Wyman took the position belonged to him...but aside from that Mr. Wyman gave the corporation everything it asked for, including depositing the cheques in his possession - assuming, wrongly, that he would be paid the commissions he was owed out of those cheques.  The OPP subsequently seized the motors and - upon being pressured by the corporation- charged Wyman, though the charges were dropped for having no reasonable prospect of conviction.

Wyman was not an employee.  They characterized the relationship as a 'contractor' relationship, which characterization Wyman did not challenge in this litigation.  However, one of the core questions was whether he was an independent contractor, or a dependent contractor entitled to reasonable notice of dismissal.

The Decision

On the issue of whether or not Wyman was a 'dependent' contractor, the analysis is fairly brief.  Wyman testified that he could have managed other resorts, but didn't.  However, he was semi-retired, with his income supplemented by WSIB benefits.  The judge determined that this independent source of income, and the fact that Wyman was not "in a position of economic vulnerability", had the result that Wyman was an independent contractor, not a dependent one.

The motors were awarded to the corporation, but conversely Wyman also won an unjust enrichment argument for compensation for work he did outside the scope of his resort management duties.

As well, Wyman was awarded damages for 'conversion', for furnishings Wyman was never able to retrieve from his cabin at the resort.

Commentary

There are a few interesting observations to make about this case.  The most important analysis, I think, is that of the dependent contractor issue, yet it has some irregularities in it.

Dependent Contractors

What's relatively unusual about this case is that the only distinction to be made is between independent and dependent contractors - that the 'employee' option was not on the table.  That's not really an analytical problem at all, though, because as the Court of Appeal held in McKee:

the proper initial step is to determine whether a worker is a contractor or an employee, for which the Sagaz/Belton analysis, described in the next section, controls.  Under that analysis, the exclusivity of the worker is listed as a factor weighing in favour of the employee category (Belton’s first principle).  The next step, required only if the first step results in a contractor conclusion, determines whether the contractor is independent or dependent, for which a worker’s exclusivity is determinative, as it demonstrates economic dependence.

The court in Wyman rightly referred to McKee's discussion of the importance of exclusivity, but went on to strangely cite Charbonneau v. A.O. Shingler & Co for the test analyzing "whether an employer-employee relationship exists", which included "the intentions of the parties".  This factor appears to have strongly influenced the trial judge:

For the reasons that follow, I conclude that the plaintiff functioned as an independent contractor, and that the parties regarded their relationship as being characterized by its independence.

If the argument were whether an employer-employee relationship exists, then that would indeed be a factor...but to import the intention of the parties that the relationship be 'characterized by its independence' conflates the two tests, and would amount to an error of law.

There's also an interesting discussion to be had regarding exclusivity:  It's not clear to me just how viable it would have been for Wyman to concurrently manage multiple resorts.  That might have been relevant to the question of exclusivity - whether or not it was realistically available to him to do so.  However, it's almost certainly relevant that he didn't do so.  His entire business revolved around a singular client, and the client clearly knew from the outset that it was (and was likely going to be) Wyman's sole client.  On the face of that fact alone, exclusivity is likely made out.

But then we come to the yet more-interesting question of the "Workers Compensation pension":  Does income entirely unrelated to the business carried on by the contractor affect the analysis?  If I'm independently wealthy or living off a trust fund, or receiving government pensions, and doing the job for something to do, is that different from a scenario where I'm doing the job to be able to feed my kids?  I have my doubts about that.  If you're looking at exclusivity, it seems to me that the question is the extent to which the business whose services are being retained provides remunerative services to others (or, perhaps, ought reasonably to be expected to provide services to others).

Conversion and Unjust Enrichment

I find the disposition of both the 'motors' issue and the 'unjust enrichment' issue to be a little surprising.  The analysis on the motors turns on the fact that there was no evidence that the corporation intended to 'gift' the motors to Wyman.  That's sound, most likely.  Nonetheless, it's quite normal for there to be informal quid pro quos involving employees and contractors, and particularly where there's essentially an exclusive relationship, it wouldn't be at all surprising for the corporation to say "You've done a good job, and we don't need this equipment, so just take it."  It's not precisely a gift...more of a bonus.  And that's normal, and it seems odd to be litigating over whether or not a conveyance from years ago, in context of an ongoing contractual relationship, conveyed ownership of the chattel.

But, conversely, it's not particularly unusual for contractors to go out of their way and do additional work for a client beyond that which they're retained to do.  It's about client service, about securing the account by showing that you'll go above and beyond.  So it seems equally odd for a contractor to sue his client for those 'extras' after the relationship breaks down.

And therein lies a distinct fairness to the decision:  The judge basically disregarded the informal quid pro quo which frequently marks such relationships, and instead regarded the contractual relationship as being simply 'commissions in exchange for management services', and to the extent that either side did something else for the other, the judge made both sides account for such things.

I would seriously doubt that the same could happen in an employment relationship, though.

Punitive Damages

There's no question that punitive damages is a high threshold, but likewise the corporation did some pretty heavy-handed things.

In particular, pressuring the police to lay charges, especially after they've declined on the basis that it's a civil dispute, was "foolish", to use the judge's term.  Employers will generally be well-advised to act very cautiously when seeking to have criminal charges brought against an employee.

I might use stronger language than 'foolish' to describe it:  Using criminal charges to leverage a civil advantage is highly improper, even when justified.  I'm surprised that there wasn't actually a 'malicious prosecution' tort pursued here.  (Not to say it necessarily would have succeeded, but the elements would probably have been pretty close.)

The judge declined to award punitive damages on the basis that "Wyman has not proven ownership of the motors".  Not an irrelevant consideration - if they'd seized motors which actually belonged to Wyman, it would have been objectively worse.  But the police were right in the first place, and the Crown was right to drop the charges:  It was a civil dispute, and Wyman - even failing to prove ownership - would likely have had a very solid "colour of right" defence in the circumstances.

Ultimately, Wyman's recovery was quite limited.  He obtained judgment for a few things, and barely got beyond the monetary jurisdiction of the Small Claims Court.  There could be serious cost consequences to him for failing to recover more.  Nonetheless, while the judge didn't award punitive damages, it is likely that the defendant's conduct will factor into a costs decision:  The judge figured that a trial would not likely have been necessary had the commissions been paid promptly, and moreover that the pressure to lay criminal charges "exacerbated the case, removing any possibility that the parties might resolve their differences short of trial."

*****

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.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.

"Waiving" the Notice Period: The Supreme Court Weighs In

There are some interesting questions surrounding 'waived' notice of resignation, mostly theoretical, but sometimes of great import to an employee's entitlements.  If I give notice of resignation, what impact does it have if my employer sends me home right away?

It's a very common practice, sending home employees with pay, and the theoretical implications are seldom explored, but there's a recent case from the Supreme Court of Canada involving a Quebec employer sending home a resigning employee without pay.

The Facts and Judicial History

Daniel Guay worked for Asphalte Desjardins since 1994, and on Friday February 15, 2008, he gave notice that he would resign effective March 7, 2008, explaining that a competitor had offered him a position at a higher salary.

On the following Monday, February 18, 2008, Asphalte Desjardins attempted to persuade Guay to stay, but were unsuccessful, so they terminated his employment effective February 19, 2008.

The Commission des normes du travail (roughly the Quebec equivalent of the Director of Employment Standards) sought three weeks' pay for Mr. Guay.

Understand that Quebec has a different legal framework from the rest of the country - whereas an Ontario employee's obligation to give notice of termination is a function of contract (and often of common law), Quebec has a more-or-less comprehensive civil code.  There is no 'common law' in Quebec, and the employee's obligation to give notice is a function of statute.  Mr. Guay's notice of resignation, accordingly, was in compliance with a statutory obligation intended for the employer's protection.

The employer argued that it was entitled to waive that protection - i.e. that by not holding Mr. Guay to the three weeks' notice of resignation, it was relieving Mr. Guay of that obligation.  The trial judge found that Mr. Guay was entitled to choose the end date of the relationship, and the employer wasn't entitled to waive it.

The Quebec Court of Appeal disagreed, allowing the appeal, and concluding that the notice of resignation cannot result "in a synallagmatic obligation that would be binding on the party who receives it".  (Synallagmatic is basically a fancy way of saying 'mutual', in Quebec legalese.)  In other words, giving a notice of resignation doesn't force the employer to continue to employ you.

The decision turns in many ways on statutory interpretation unique to Quebec, but there are clear problems with it, largely illustrated by the dissent at the QCCA and by the decision of the SCC.

The Supreme Court's Decision

In its recent reasons found here, the SCC restored the trial judge's decision.

It's fairly dense, but the SCC essentially agreed with the dissent from the QCCA, concluding that the effect of the notice of resignation is to terminate the relationship as at the effective date of the notice, and that a termination earlier must either be (a) a unilateral act by the employer, triggering obligations to provide notice, or (b) by agreement.

Since there was no agreement, the termination was unilateral, and the employer was obligated to provide pay in lieu of notice.

However, the SCC speculated that the Commission might have been wrong to limit its claim to only the three weeks' of notice the employee had given - there may have been an argument (foreclosed by the pleadings) that the termination entitled the employee to full pay in lieu of notice.

Commentary

This is an important decision for employment law and statutory interpretation in Quebec.  Its impact in Ontario may be less direct.  The substantive law in issue is different, the language is different, the concepts are different, the underlying theory is different...but ultimately, there are a number of parallels, and it seems very likely that, given the same question arising from a common law jurisdiction, the Supreme Court would come down the same way.

There is room for exceptional fact-patterns, but in general, the waiver of a period of notice of resignation must be characterized along the lines of a paid leave - basically, the individual continues to be an employee, and continues to be paid in full, until the notice of resignation expires, but is working out the notice period at home.  Otherwise, if the employer takes unilateral actions which might be characterized as terminating the employment contract (i.e. refusing to continue paying the individual), then it will probably be on liable to the employee for wrongful dismissal.

Indeed, the theoretical debate about whether or not the Commission should have claimed more than 3 weeks?  Probably less arguable in Ontario.  To the extent of common law or contractual entitlements, it's almost certain that the fact that an employee had given notice of resignation will bar a claim for common law damages.  However, the statutory termination pay and severance would very likely be payable in full, regardless.

One might also imagine a scenario where an employee was sent home with pay, but still argued that this constituted a constructive dismissal, potentially leading to a claim exceeding the value of salary over the resignation notice period.  While there is case law recognizing an employer's legitimate interests in protecting its data from departing employees, 'removal of responsibilities' is typically a strong candidate for constructive dismissal.  Particularly in cases where there are performance-related components of a variable compensation package, an employer would likely have to pay on the basis of a fair evaluation of what the employee would have earned if he continued working.  Even then, if I'm a senior manager, and my contract requires me to give 3 months' notice of resignation, I might have legitimate objections to losing out on three months of performing my job functions.

On the flip side, it's also extremely clear that unreasonably long notices of resignation don't have to be respected by the employer.  Suppose my contract entitles my employer to dismiss me on 12 weeks' notice, and I give something ridiculous like 18 months' notice of resignation.  My employer is free to accept that, and keep me on for 18 months.  On the other hand, my employer also remains free to trigger its own termination entitlements, and dismiss me on 12 weeks' notice or pay in lieu thereof.

At the end of the day, this SCC decision is probably right, and even in common law jurisdictions accords with the wide consensus of the appropriate approach:  There`s really no such thing, at law, as 'waiving notice of resignation'.  But there are possible nuances to be argued about in the future.

And fundamentally, the result in this case just seems right.  For an individual employee, uninterrupted earning can be very important:  The safe way to transition to a new job is always to line up the new job first, if possible, get the start date ironed out and the contract finalized, and then to give the appropriate notice to your old employer - to expire the day before your new job starts.  Sometimes the new employer might be flexible on the start date, but you can't be sure of that.  And if you're living paycheque-to-paycheque, and the old employer cuts off your income through the notice period, that can be very harmful to your financial health.

I've actually seen written contracts drafted with such an effect: You have to give us x notice of resignation, and once you've given us such notice we can send you home at any time without any further obligations to you.

I have serious misgivings about the enforceability of such language, and the SCC's decision merely reinforces those misgivings, but it's an issue I've never seen litigated.

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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.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.

Employer fails to established just cause for disobedience; should have given "cooling off" period

Another just cause case was recently decided by Deputy Judge Prattas - he's deciding a lot of these, it seems - in Borges v. Midland Food Products Inc.  The employer alleged just cause, in the form of disobedience in a meeting the day prior to dismissal, and secondly alleged 'cumulative cause' on the basis of a series of incidents.

Summary

Borges worked for Midland for about 10 years as a salesperson, until he was dismissed in March 2011.

In a nutshell, his sales numbers had been struggling a little bit.  It doesn't sound like the problem was particularly significant - he had exceeded his 2009 and 2010 targets, but the year-over-year numbers had declined in the previous six months.  It also bears noting that he hadn't historically met his targets before those two years (though much of his employment had been in a different division at the time).  It also bears noting that there was no evidence as to how realistic the quotas were.

Most of Borges' work was out of the office, which is not at all uncommon in a sales role.  However, when you're starting to question the performance of someone outside of the office, many employers will start to ask the question "What's he doing when he isn't here?"

In March 2011, Borges' boss called a meeting with him to discuss the decreasing sales.  By all accounts, it became a heated discussion (Borges alleged that there were 'slurs' against himself and his family), and the major problem was a note presented to Borges requiring him to be in the office until 5pm three days per week (and until 1pm on the other days), and to advise his boss in advance of any meetings.

Borges' exact response to this was also in dispute.  The employer took the position that he refused the direction.  It appears that Borges' position is that he said that it didn't make sense - most successful salespeople don't sell from behind a desk, and the employer was basically looking to chain Borges to his desk and micromanage his work.

The Deputy Judge appears not to have been satisfied that there was any actual refusal, but in any event felt that any refusal would have been "in the heat of the moment".  The requirement was a "significant change", and he "should have had time to absorb the shock and even if he failed to comply he should have been given a proper warning about it."

Common sense would dictate that there should have been a cooling off period following the heated discussion - for both parties - and the plaintiff allowed some reasonable time to comply.

The Deputy Judge highlighted that the appropriate next step would have been to continue to require Borges to comply with the direction, and expressly warn him that his continued employment was in jeopardy if he failed to do so.

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. The March Note did not contain any such warning or any consequences for failure to comply and no such warning was evident from Provost.

In addition, the employer took a 'kitchen sink' approach, alleging all sorts of other problems - an issue about whether or not the quota policy had been given to the plaintiff; an issue where the employer over-ordered tillapia allegedly because of assurances from Borges that he could sell that much (Borges had a different factual take on this); an issue regarding completion of call sheets and punching in and out; not using current prices; declining sales; and singing in the office.

Yes, you read that right:  Singing in the office was alleged to contribute to a just cause argument.  I'm pretty sure that is the metaphorical kitchen sink in employment law.  As Prattas DJ put it, "One would have to stretch things a long way to show that this constituted a ground for dismissing him without notice."

Ultimately, the court felt that these were not misconduct, were condoned, or otherwise didn't rise to the level of just cause.  (For instance, while the Deputy Judge didn't expressly decide which side he believed regarding the tillapia incident, aside from a general statement that he preferred Borges' evidence, it's clear that he felt that the employer was the author of its own misfortune on the point.)

The court found that Borges was entitled to a reasonable notice period of 10 months, but reduced it by 25% because of a failure to mitigate - that is, Borges failed to produce records of his mitigation efforts (because he changed email providers) in the six months following dismissal, and because, though minimal efforts in the 2-3 months immediately following termination are understandable, Borges "may not have been as diligent as he ought to have been prior to September 2011".

Commentary

It's an interesting thought, and not entirely unprecedented, that an employee shouldn't be held to things said in the heat of the moment, but should be entitled to a 'cooling off' period.  It is also very practical for employers to take such a cooling off period in any event...and then seek legal advice.

Deputy Judge Prattas' analysis on just cause is sound.  He wasn't satisfied that Borges actually refused, and that factual finding is pretty fatal to the just cause claim, but in any event he's also quite right that the correct approach would have required an express warning that failure to comply would lead to dismissal - followed by an opportunity to comply.

I'm not sure that would have been enough, though, because it's not entirely clear that the employer was entitled to unilaterally change the terms and conditions of employment so significantly:  Recall my discussion about an employee's options in the face of constructive dismissal?  Had Borges refused, that might be characterized as a 'third option' case, with Borges rejecting the change and putting it the employer:  Either leave my employment as is or fire me.

It's not entirely clear if the change would rise to the level of constructive dismissal, but there would be a pitch:  Being tied to his desk, being micromanaged, these are pretty significant changes...but add to that a reasonable expectation that it will impair his sales performance, when his compensation package is at least partly based on commission...well, as I said, there would likely be an argument.

However, I'm less certain about the Deputy Judge's treatment of the mitigation issue.

Mitigation is a high threshold:  The onus is upon the employer to lead evidence of a failure to mitigate, and to establish that proper mitigation efforts would have led to re-employment.  The Deputy Judge ultimately accepted Borges' evidence of, among other things, his mitigation efforts, but held it against him that he failed to produce records (which failure was explained).  Drawing an adverse inference on the facts from an unexplained failure to produce documents might be one thing, but that's not what's going on here.  Particularly in light of the onus, it's a rather strange thing to say "I believe you, but because you couldn't produce a paper trail, I'm going to reduce your damages."

Even more troubling is the language of "may not have been".  That may have been an intentional understatement, but the bottom line is that it is a misstatement of the test:  To reduce damages for failure to mitigate requires a finding, on a balance of probabilities, that he was not as diligent as he ought to have been.  (Nor is that the end of the analysis.)  The burden of proof being what it is, a wrongfully dismissed employee is presumed to have taken reasonable steps to mitigate, unless proven otherwise.

Even beyond that, while a lack of diligence in a job search frequently results in a reduction of the notice period (though 25% seems quite significant, under the circumstances), I would argue that the approach is wrong, for much the same reason the Supreme Court did away with Wallace damages:  The well-established test for mitigation requires an employer to show that, through reasonable efforts, the employee would have obtained replacement employment within the reasonable notice period.  There's no room for a presumption to that effect; there's an evidentiary burden on the employer, and to simply say "failure to take reasonable steps results in a reduction of x" is arbitrary and baseless.

*****

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.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.