Monday, January 20, 2014

Plumber Wins Wrongful Dismissal Action at Small Claims Court

Here's another recent case out of the Kitchener Small Claims Court, decided by Deputy Judge Sebastian Winny.  I've posted about a number of his cases before, largely because he is one of a handful of Deputy Judges whose decisions are regularly published.  (See my commentaries on Dechene v. Dr Khurrum Ashraf Dentistry, Mitchell v. 2156625 Ontario Inc. [appeal here], and Patterson v. Hanson Hardscape Products Inc.)

This decision is a delightful read for an employment lawyer.  Might be a bit arcane for others, but it's a really well-thought-out decision on a matter with some very interesting and unusual legal issues.  I don't always agree with Deputy Judge Winny, but he might yet prove me wrong about whether or not employment law matters belong at the Small Claims Court.  Though, to be fair, there were lawyers on both sides in this case.

The case is Kuntz v. Dordan Mechanical Inc., involving a non-unionized plumber who worked for the defendant for just over five years.  He started as an apprentice, and had a series of 'layoffs' while he attended school to work towards his licence qualifications, which he finally obtained in March 2012.  There was one other short layoff in early 2012, for one week, with a fixed return date.

The biggest challenge for Mr. Kuntz to overcome is a rather dated legal doctrine called "custom and usage", and in particular its application by the Ontario Court of Appeal in 1999 in the case of Scapillati v. Potvin Construction Ltd.

Custom And Usage

Let's step back for a moment and ask:  How does a term become part of a contract?

There are fundamentally two kinds of contractual terms - express and implied.  Express terms are obvious -they're the terms that you've discussed and agreed to.  However, quite often, the express terms of a contract don't cover every contingency; they leave certain rights unspoken, and in that case the law leaves open the possibility of "implied" terms, so long as they don't contradict express terms.  Some implied terms arise by operation of law, such as the requirement to give reasonable notice of termination of employment.  Other implied terms are rooted in doctrines of common intention, as to what the contracting parties would have expected when entering into the contract.

One of these doctrines is 'custom and usage', and in essence it means that there is a practice so widespread in the trade or industry that everyone can be assumed to know of it and expect that it will be followed.

The Scapillati case was a wrongful dismissal case dealing with a carpenter in the construction industry.  He worked for Potvin on and off for a lengthy period of time; when there was work, they would call him in.  When there wasn't, sometimes for months at a time, they wouldn't.  Occasionally, he would call them up when he was looking for work, and they would bring him in.  After a particularly lengthy layoff - about two years - he ran into the old employer and was invited back to work.  He continued for about 8 months before being laid off again - he was told that he would be recalled, but he never was, and he sued in wrongful dismissal.

Scapillati was treated as a short-service employee, having only been there a few months since a lengthy layoff, and the courts concluded that there was a custom in the on-site construction industry to dismiss or lay workers off without notice or pay in lieu.  The Court of Appeal's analysis was slightly more nuanced, noting that custom was a factor in the analysis, but in that case, for an otherwise short-service employee, the reasonable notice period was nil.  As well, they considered it relevant that Mr. Scapillati was able to foresee the layoff before it happened.

However, this doctrine is very seldom applied, presumably because relatively few on-site construction workers are non-union.  (In unions, these matters are determined with reference to collective agreements.)  I have come across Scapillati before, and seen employers try to use 'custom'-based arguments to justify their actions, but it's a difficult thing to do outside of some fairly narrow circumstances.

Yet, within the construction industry, as Mr. Kuntz was, Scapillati seems more applicable.  The employer took the position that, following Scapillati, Mr. Kuntz was not entitled to any notice of termination.

However, Deputy Judge Winny distinguished this case from Scapillati, on the basis that he did not consider most of Kuntz's layoffs to be true layoffs, and the other was simply a one-off with a fixed return date.  He noted that the custom was merely one factor to be weighed against the Bardal factors, and awarded five months' pay in lieu of notice.

The Analysis

What's really interesting about this case is Deputy Judge Winny's analysis of Scapillati in light of some of the other principles of wrongful dismissal.

Tension #1:  Availability of Replacement Employment versus Layoffs Without Notice

The Bardal factors look at, among other things, the availability of replacement employment when assessing the reasonable notice period.  If there isn't other work available, you're entitled to more notice.  That's the theory, at least.

Yet Scapillati seems to endorse a notion that, when the work dries up, the employer should be able to send away employees more cheaply.

It's not a direct conflict, of course.  The theory is that the workers follow the work - that when one employer's work dries up, it's because somebody else has the contract, and now that other company is looking for labour.  However, that's not always the case.  Many non-union construction workers work solely or mostly for one employer, and if that employer can't keep them working, things become difficult.  If you don't know where the work has gone, or if the economy is struggling on a larger scale, you're looking for work for a longer time, and without the safety net that pay in lieu of notice usually offers.

Philosophically, it definitely seems that Scapillati favours a more employer-friendly view of the law than does most employment law in this sense.

Tension #2:  Foreseeability of Termination

In the Scapillati case, the Court of Appeal considered the foreseeability of layoff to negate any obligation to give advance notice.  If you can see it coming, why do you need the employer to tell you?

This was based in something of a void of relevant jurisprudence; now, however, there is plenty of case law on the point, and most of it goes the other way.  Deputy Judge Winny referred to more recent cases from the Ontario Court of Appeal finding that a notice of termination has to be 'clear and unambiguous' - i.e. telling somebody "You might be laid off soon" isn't good enough; if you want to give working notice, you need to tell them in writing that "Your employment will end on this particular date."

Tension #3:  Letting Collective Bargaining Practices Drive Non-Union Common Law?

Deputy Judge Winny expressed some dissatisfaction with the decision in Scapillati altogether, questioning whether common law governing non-union workplaces should be "affected by customs which result from collective bargaining".

I'm not sure that this is a fair characterization of how on-site construction industry employment practices arose - I suspect that the labour mobility that's characteristic of on-site construction practices is the cause, and not the effect, of the rather unusual treatment of the construction industry in labour relations regimes (not to mention in employment standards legislation as well).

The problem is that not all employment relationships in the construction industry work that way, so the legal regimes tend to be over-inclusive, and often preclude parties from structuring their relationships in otherwise-legitimate fashions.  But I digress.

Deputy Judge Winny also referenced the Elsegood v. Cambridge Spring case (my commentary here), which he litigated at the Court of Appeal, as authority that "At common law, an employer has no right to lay off an employee".  It's a phrase right out of the Elsegood decision, but it misses a crucial point here.  The line immediate after that was "Absent an agreement to the contrary, a unilateral layoff by an employer is a substantial change in the employee's employment, and would be a constructive dismissal."  Which, notwithstanding the bizarre recent case of Trites v. Renin Corp., has been a fairly widely accepted proposition of law.  But it could be otherwise stated, "Absent an express or implied contractual term..."

Custom and usage theoretically allows one, in the right circumstances (though the on-site construction industry is probably it for 'the right circumstances') to find an implied term allowing unilateral layoffs by the employer.  In which case the Stolze doctrine, which says that you need a contractual term in order to implement unilateral layoffs, is satisfied.

I'm not sure if Deputy Judge Winny referenced that proposition to suggest that the custom and usage in the construction industry is contrary to the common law on the point - which would be wrong - or merely to illustrate that it yields a very different result from other employment relationships.  But at the end of the day, while I'm not sure I share his way of getting there, I have some similar concerns to him with Scapillati - the implication that there's an entire class of employees who, by virtue of the nature of their work, have zero job security regardless of tenure or level of responsibility, seems very much out of step with the rest of employment law.

However, this decision, in and of itself, goes a long way to alleviating those concerns, reinforcing the contextual analysis to be applied in a common law analysis of employee rights.  There will be employees like Mr. Scapillati who have no entitlement to notice of termination, but that doesn't mean that employees like Mr. Kuntz, working for a single employer for five years, must be treated the same way.


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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