Monday, January 23, 2012

Olivares v. Canac Kitchens

Justice Lederman recently released his decision in what he calls "yet another in a long list of wrongful dismissal actions...arising from the cessation of Canac's manufacturing operations in 2008."

It's a pretty standard wrongful dismissal case in many respects.  A 48-year-old shipping supervisor with 24 years of service sought pay in lieu of notice.  Some other interesting factors:  The plaintiff started working at Canac immediately after moving to Canada from Chile at age 24, and was able to function there speaking mainly Spanish.  Result:  Limited English skills, limited education, limited Canadian re-employability.

The Canac Kitchens cases seem to generally have fairly generous notice periods, by contrast to other jurisprudence.  Still, at this stage of the game the Canac cases are becoming a jurisprudential force all their own:    The plaintiff in this case was able to point to other generous awards Courts have made to his co-workers, in support of his own claim for significant pay in lieu of notice.  Successfully so:  He was awarded a notice period of 20 months.

There are a couple of curious features to this case, though.

Cancellation of Benefits

It's trite law that an employee is entitled to the full benefits to which they would have been entitled throughout the notice period.  Accordingly, when an employee is terminated without notice, and their health benefits are cancelled, they should get some compensation.

Traditionally, there have been decent employer arguments that the employee should only be compensated for out-of-pocket expenses actually incurred, and that if the employee really wants insurance coverage for significant expenses they should pay for coverage (which then becomes a recoverable out-of-pocket expense).  This argument does seem to ignore the reality that displaced employees are ill-positioned to invest in insurance, and will tend to just avoid health-related expenses they can't afford.  That doesn't mean they haven't suffered any loss.

In Brito v. Canac Kitchens, however, Justice Echlin rejected the argument that failing to purchase replacement benefits was a failure to mitigate, awarding the employee damages in respect of lost LTD coverage.

In this case, Justice Lederman took it a step further towards employee-friendly.  Mr. Olivares had waived dental and medical coverage, instead taking the coverage available through his wife's employment.  In other words, Canac wasn't paying for dental and medical coverage for him.  Nonetheless, Justice Lederman concluded that there was value added in the peace of mind of having those benefits available to be opted into in the event that his wife lost her job, and therefore he awarded damages on the same scale as other employees had received who had relied on those benefits.

Mitigation and Estoppel

It is also trite law that mitigation earnings should be deducted from an award of damages in respect of pay in lieu of notice, at common law, but that the statutory minimum notice and severance payments are not subject to mitigation.

Thus, if I get a job with equal pay the day after being fired, I'm still entitled to my statutory minimum notice and severance if applicable.  But likely nothing beyond that.

In this case, the plaintiff had a statutory notice period of 8 weeks, and statutory severance pay of another 24 weeks.  During his first 32 weeks after being fired, he did some work as a drywaller earning $26,600.  The question becomes whether that is mitigation income which should be deducted from his common law entitlements, or whether the common law analysis of mitigation doesn't even begin until after statutory minimum pay runs its course.

As it turns out, there's conflicting law on the subject...both in Canac Kitchens cases.

In Yanez v. Canac Kitchens in 2004, Justice Echlin deducted an employee's mitigation earnings from his common law entitlements, notwithstanding that part of those earnings were covered by the statutory notice period.  By this logic, Canac should get credit for Olivares' $26,600 earned during the stat notice period.

In Moldovanyi v. Canac Kitchens, on the other hand, Justice Brown held otherwise, relying on a subsequent decision by the Divisional Court.

Quite frankly, I think that Justice Echlin's approach is much easier to reconcile with the first principles of employment law.  Justice Brown's approach requires one to perceive the common law notice period as something that doesn't even begin until the statutory notice period runs out...particularly when we're dealing with statutory severance as well, which cannot be paid via pay continuance, that is a difficult concept to justify.

Nonetheless, Justice Lederman's approach is even more curious.  In the Olivares case, Canac is arguing that Justice Brown was wrong.  Justice Lederman's response:  Why didn't you appeal, then?  He finds that it would be an abuse of process to allow Canac to re-litigate the same issue again.  So they're stuck with Justice Brown's approach.

This is akin to, but not quite, issue estoppel.  In the ordinary course, if you and I have litigated an issue before and received a final decision, that decision is binding and immune to subsequent litigation as between us.  However, as between you and a third party...not so much.  Nothing usually stops you, strictly speaking, from litigating the same question against others, even though you may have lost against me.

Thus, where we're talking about a different employee with different mitigation income, it would be unusual and incorrect to apply the doctrine of issue estoppel, despite it being a similar question of statutory interpretation.

The consequences?  Well, if an organization is stuck with any unfavourable legal conclusion that may be raised by others in subsequent proceedings, we would see much more value added in appeals, and significant difficulty in settling appeals.  Every Court loss a company suffers will go from being an unfavourable persuasive case to a binding precedent.  The same, of course, cannot be said of wins.


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

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