Monday, August 24, 2015

Which Doctrine to Apply: Common Employer or Successor Employer?

A recent case out of the Superior Court of Justice, Dear v. Glamour Designs Ltd., highlights an interesting nuance in the law surrounding transitions between employers.

The defendant in this case was one corporation within a family-owned group of businesses:  Special Occasional Sales Ltd., Glamour Designs Limited, and International Fashion Group, all of which were operated by members of the Maccarone family:  Vince Maccarone is president of IFG; his daughter Michelle is president of GDL, and there's a Katherine Maccarone listed as president of SOS.

Mr. Dear began working for SOS as a sales representative in March 2005.  There were a number of temporary layoffs in the tail-end of his employment period - one wonders whether or not these may, in and of themselves, constituted a constructive dismissal - and he was finally dismissed effective December 2014.

The hitch here is that SOS itself discontinued its operations in August 2013, and his employment thereafter was with GDL.  Dear claimed that they constitute 'common employers', and therefore that GDL is liable for employment-related liabilities of SOS.

Dear claimed that Vince told the employees in or around August 2013 that they would continue in their jobs but be compensated by GDL.  The defendant denied that, claiming that SOS had actually terminated the employment relationship by way of a notice given in March 2013 (which they could not produce).  GDL argued that, after the employment relationship between SOS and Dear was terminated, GDL stepped in and hired Dear.

Common Employers

At common law, the concept of 'employer' is a little bit flexible.  You're not strictly limited to claiming against the corporation that signs your payroll cheques; the case law has looked at a lot of different scenarios where a single business might have its affairs ordered into various corporations (for legitimate reasons, no less), but there are compelling public policy reasons not to arbitrarily limit the employees from being able to claim against any of those corporations.  As the Court of Appeal found in 2001 (citing a British Columbia decision):
As long as there exists a sufficient degree of relationship between the different legal entities who apparently compete for the role of employer, there is no reason in law or in equity why they ought not all to be regarded as one for the purpose of determining liability for obligations owed to those employees who, in effect, have served all without regard for any precise notion of to whom they were bound in contract. What will constitute a sufficient degree of relationship will depend, in each case, on the details of such relationship, including such factors as individual shareholdings, corporate shareholdings, and interlocking directorships. The essence of that relationship will be the element of common control.
On the other hand, there are plenty of scenarios where one person might have a substantial ownership stake in multiple discrete businesses, and there are good reasons why an employee of one such business should not be able to claim across the corporate veil in such cases.

So there's a fairly significant amount of case law now looking at the factors to earmark common employers, including the degree of integration of the businesses and the common control of the corporations.

The judge accepted Dear's position that GDL and SOS were common employers.  It's a little thin on some of the facts:  I don't know what SOS' business was, nor what GDL's business was.  It would be surprising if a new business could pick up a dissolving business' sales staff seamlessly if there wasn't some degree of integration between the businesses, or if NewCo wasn't actually absorbing OldCo's business line, but the bottom line for us is that we're looking at a fairly finite selection of facts in the decision:

  1. That the companies were all owned by relatives of each other;
  2. That the companies had adjacent offices;
  3. That Vince, at least at times, controlled or was at least involved in both corporations, issuing Records of Employment for both.
The judge then finds that the corporations "could easily have operated as one", and therefore was a single business.  That is, essentially, the test, but without knowing the business models of the different businesses, it's hard to know if there are additional facts underpinning this conclusion.  And that uncertainty is concerning:  On a face value read of the decision, it appears to be a precedent supporting a notion that businesses owned by close relatives will generally be responsible for each other's employment liabilities.  A difficult proposition to justify.

The important result of the finding, of course, is that Dear's employment was nearly a decade (as opposed to a little over a year) which has dramatic effect on his notice entitlements.  Accordingly, the judge awarded him judgment on the basis of nearly a decade of service.

Commentary

It's not clear to whether or not the 'common employer' finding was truly warranted.  It seems plausible, but I'm not sure what other facts were on the record.

However, on my read of the decision, I can't help but question if a 'common employer' analysis was even necessary.  It seems to me that the issue could likely been resolved on the basis of a 'successor employer' analysis.

It appears to be common ground that the transition from SOS to GDL occurred in or around August 2013 - presumably, Dear was on SOS' payroll one day, then GDL's the next.  (Not only did none of his layoffs cover that period, but it actually wouldn't matter to the successor employer doctrine if one of them had.)  If his duties didn't change significantly in that transition, then the only cogent explanation for the transition would be that, for employment relations purposes, GDL had acquired at least part of SOS' business.

This isn't a high standard - it doesn't require a formal purchase and sale of a business.  Transfers - even informal transfers - of office equipment, inventory, leases, good will, or other parts of the business - will often meet this test.  As I pointed out in another borderline common employer case, I have very seldom seen true 'successions of convenience' where one business winds up its business, and then a second and totally unrelated one opens up a similar business in the same location, without any dealings between the two.

Indeed, the very question of 'common employers' seems likely to be the wrong one in the context.  There's no question that GDL employed Dear, nor that GDL dismissed Dear.  We're not trying to pierce the corporate veil at all here, which is what the 'common employer' doctrine is typically about.  Rather, we're trying to determine whether or not Dear's notice period from GDL should bear in mind his prior years of service with a different organization.

If GDL's and SOS' businesses were closely related enough to possibly warrant a common employer finding, it seems essentially impossible that GDL could not have been a successor employer.

*****

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.

Thursday, August 20, 2015

Where Can A Landlord Recover Unpaid Utilities?

Deputy Judge Winny recently decided a Small Claims Court case dealing with a residential tenancy matter, which he said highlights the "imperfect intersection" between the jurisdictions of the Small Claims Court and the Landlord Tenant Board.

The Landlord had gone to the LTB to seek arrears of rent, including several hundred dollars for unpaid utility bills.  The adjudicator orally stated that the utilities were outside the Board's jurisdiction, and declined to award such damages, instead just awarding the 'rent' component of the arrears.

The Board's formal order made no reference to utilities.

Deputy Judge Winny disagreed with the adjudicator, finding, "In my view the board had jurisdiction over the claim for unpaid utilities."  Because the Board had jurisdiction, the Small Claims Court didn't.

This is immensely frustrating for a litigant, where you have a claim, but every venue to pursue it tells you, "This isn't our department."  The legal system can sound a bit like a telecom company, passing you from department to department.  (Kind of reminds me of the Mehedi case, where Mehedi kept getting bounced between the Court of Appeal and the Superior Court for a motion to set aside a judgment.  The difference is that, notwithstanding ridiculous delays, Mehedi probably will eventually have his case heard.)

Deputy Judge Winny expressed concern that the Board hadn't referenced the utilities in its formal order, but essentially suggested that the Landlord should have appealed the order under the Act, instead of pursuing the claim at Small Claims Court.

Commentary

For the most part, I agree with Deputy Judge Winny's analysis:  Utilities are within the jurisdiction of the Landlord Tenant Board, and the LTB was probably wrong to find otherwise, and the ideal avenue for the Landlord would have been to seek reconsideration or to appeal the decision.

However, I don't agree that the Deputy Judge should have embarked upon an analysis of the Board's jurisdiction in the first place.

Here's the thing:  The Board's process is quite informal.  In an ideal world, we'd see written reasons as to why the Board dismissed the claim for utilities, but ultimately, oral reasons (even without a transcript) are probably going to end up being sufficient, within the context of the Board's process.

On the facts of this case, the Deputy Judge had a formal order from the Board that did not dispose of the utility claim, but an uncontested accounting of oral reasons that the claim was dismissed for jurisdictional reasons.

If the Deputy Judge was able to regard the Board as having dismissed the claim as being outside of the Board's jurisdiction, and I would argue that the basis was there to so conclude, then this would most likely result in what we call "issue estoppel", or "res judicata".  The Board, being a body of competent jurisdiction, had decided finally and specifically the question of the Board's own jurisdiction over utility claims, in a proceeding between the same parties.  Simply, it is not open to the Small Claims Court to re-open the question, even if it disagrees with the answer the Board gave.

By treating the question as being subject to res judicata, the Deputy Judge could have proceeded to consider the merits of the claim and award damages if appropriate, without even opining about the jurisdictional question (or perhaps expressing his doubts about it in obiter), and without creating a precedent as to the Small Claims Court's jurisdiction.  A messy solution in certain conceptual ways, but it would have gotten at the justice of the case.

*****

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.

Thursday, August 6, 2015

For Democracy in Canada, Harper's Era Must End

There are many issues to consider in the upcoming Federal election, but there is one singular reason that Stephen Harper's government must be defeated:  There are elements within the Conservative Party of Canada which actively engaged in widespread criminal misconduct intended to thwart the exercise of democratic rights of Canadians, and as the governing party of Canada the party has permitted, condoned, and run interference for these criminal activities.

The Harper Government:  Lots to Dislike

Full disclosure:  While I certainly don't consider myself a partisan of any stripe, I've never been particularly fond of Stephen Harper.  In his early days as leader of the Alliance Party, his far right politics, his regionalism, and his advocacy of joining the "Coalition of the Willing" in Iraq turned me off of him.  He significantly moderated his policy positions in order to secure and hold power, but there have always been a lot of things about his politics and - perhaps more significantly - his style of governance that I found unappealing.

And there are a lot of reasons to oppose the Harper government.  The repeated attempts at unconstitutional legislation; the suppression of Parliamentary discussion and debate; the attacks on independent watchdogs, whistleblowers, and judicial officeholders; the now countless-scandals...the list goes on, without even going into controversial substantive policy issues.

My Member of Parliament, sadly, is Paul Calandra, one of Harper's Parliamentary Secretaries, who in the middle of his tearful apology for inappropriate non-sequitur responses in Question Period, acknowledged that it probably wasn't the last time he'd answer questions in a way that "doesn't effectively respond".  A Globe column rightly observed that "To call Mr. Calandra a clown is to do a disservice to the ancient profession of painted-face buffoonery."  The worst part of the whole Calandra affair, I would argue, is that Calandra wasn't acting of his own initiative, and indeed his conduct isn't unusual in the Harper government:  Most of the answers given by the Harper government are delivered by appointed mouthpieces directed to espouse certain talking points, regardless of the questions actually asked.  The Harper Government would regularly fail the Turing Test.

But set all that aside.  Whether or not the Harper government, originally elected on promises of transparency and accountability, is fit to govern...is now something of a secondary question, rendered relatively unimportant by issues of corruption, such that any Canadian who cares for the integrity of our democratic process simply cannot stand for the continuation of this government.

A Criminal Governing Party

There are elements within the Conservative Party of Canada which are criminally corrupt, and the Harper government has not only failed to take any effort to root out these elements, but has taken active steps to protect them, including obfuscating criminal investigations, attempting to block civil proceedings in response to these criminal acts, and enacting legislation which effectively protects the Party and its members from criminal investigation.

No, I'm not talking about the "in and out" election financing scandal, the 2006 issue where the Conservatives pled guilty (six years later) to exceeding spending limits and submitting fraudulent election returns, explaining it away as being a 'difference in interpretation' of the rules.  Nor am I talking about the recent criminal conviction of Harper's former Parliamentary Secretary, nor about the ongoing prosecution of Mike Duffy in connection with, among other things, allegedly receiving a bribe from Harper's Chief of Staff.  (Though, at a certain point, a trend does start to emerge.)

I'm talking primarily about the so-called 'robocall' scandals, and the Harper government's response to them.

Factual Background:  What We Know

During the May 2011 election, many eligible voters received misleading automated calls purporting to be from Elections Canada, telling them that their polling location had changed - usually directing them to a distant and inconvenient (not to mention incorrect) location.  The scandal is best known in Guelph, but it was quite widespread, with Elections Canada receiving complaints from 247 of the 308 ridings, and there are judicial findings of such calls being made in no fewer than seven contested ridings across the country:  Guelph, Elmwood-Transcona, Nipissing-Timiskaming, Saskatoon-Rosetown-Biggar, Vancouver Island North, Winnipeg South Centre, and Yukon.

Criminal proceedings have occurred in connection with the Guelph events, resulting in the conviction of a junior campaign staffer alone (though it's widely believed - including by the court - that he did not act alone).  Civil proceedings were initiated in respect of the other six ridings to attempt to reverse the election results.

While there were scattered reports of such calls around the time of the election, it became a major story in February 2012, at which point the Prime Minister's response was categorical:  "The Conservative Party can say absolutely, definitively, it has no role in any of this."

The Guelph Investigation and Sona Trial

Most of the scandal has focused on what took place in Guelph.  This was where the calls were best documented, and possibly widest in scope, with over 7000 such calls being made.

Estimates are that up to 200 people showed up at the fake polling location, and media reports indicated that several had torn up their voter ID cards in anger, after Elections Canada (or so they thought) sent them so far out of their way and then didn't even show up.

In the course of Elections Canada's investigation, they determined that the calls originated with an Alberta-based automated call provider called RackNine, which was widely used by Conservative candidates pursuant to an exclusive contract preventing RackNine from working for other parties.

The RackNine account set up using a prepaid cell phone registered to "Pierre Poutine", and the calls were made at a cost of a mere $162.10.

Elections Canada's investigation moved slowly, obtaining production order after production order, for records from RackNine, records from Rogers to establish the IP address from which the RackNine account was accessed (which was from the Guelph Conservative campaign headquarters), and the trail eventually brought them to the door of the Conservative headquarters, because it was apparent that the calls were made to non-Conservative supporters, using information obtained from the CPC's CIMS database.

However, the investigation had challenges with uncooperative witnesses - people scheduling interviews and indicating a willingness to cooperate, then cancelling the appointment at the last minute, and refusing to talk with Elections Canada, including multiple Tory campaign workers from Guelph.  The Party's lawyer took three months to respond to queries from Elections Canada after the election.

Unlike many regulatory bodies, Elections Canada has no mechanism to compel witnesses to cooperate.  Likewise, its investigative mandate is seriously hampered by its inability to compel productions without court orders (unlike, for example, CRTC).

The challenge for Elections Canada was that pinning it down to which computer, or which IP address, or which cell phone, was used to handle the calls wasn't enough to obtain a criminal conviction - it needed to identify the flesh-and-blood person behind the calls in order to lay charges.  Nearly a year after the election, as the investigation closed in on the Conservatives and its CIMS database, Conservative Party lawyer Arthur Hamilton paraded a half dozen witnesses into the investigator's office to say that a junior campaign staffer, Michael Sona, had told them about the robocall plot.

Arthur Hamilton, though not actually the lawyer for these witnesses, accompanied all of them into the meetings.  That's irregular.  He coached them during the meetings, and even provided answers for them.  That is not merely irregular, but inappropriate.  Elections Canada should have objected to the manner of these meetings being carried out, but didn't - this may have a lot to do with the fact that they were reliant on the witnesses cooperating voluntarily, so the witnesses get to call the shots.

In August 2014, Michael Sona was convicted.  (He is appealing.)

There's one huge problem with the CPC throwing Sona under the bus, however:  Only five people in the Guelph office had access to CIMS, and Sona wasn't one of them.  Justice Hearn concluded that Sona was guilty, but very likely did not act alone.  Others were involved, who have still not been identified or apprehended.

We can say with confidence that at least one other person in the Guelph campaign office was involved, and while the party on the whole would have us believe that it was a small-scale conspiracy at the riding level, there's something that doesn't mesh:  Assuming that these witnesses were telling the truth at all about Sona, it was a poorly kept secret.  Yet it takes almost a year before anyone implicates Sona to the Elections Canada investigators; Conservative witnesses engaged in a pattern of non-cooperation with the investigation; one of the senior Conservatives insists on an immunity deal in order to testify; and still nobody knows who the other conspirators are?

Not to mention that the nationwide usage of similar tactics makes it inherently unlikely that the malfeasance was limited to a riding-level miscreant.

The Six Ridings:  Civil Proceedings

In McEwing v. Canada, Justice Mosley considered an application to reverse the election results in the six ridings.

He denied the application, not being satisfied on the applicable burden that the fraudulent calls actually affected the election results.  As well, there was no direct evidence to implicate the successful MPs or their agents.

However, Justice Mosley was satisfied that the fraudulent calls took place, and that the Conservative voter database was used by the perpetrators:  "there was an orchestrated effort to suppress votes during the 2011 election campaign by a person or persons with access to the CIMS database."
I am satisfied, however, that the most likely source of the information used to make the misleading calls was the CIMS database maintained and controlled by the CPC, accessed for that purpose by a person or persons currently unknown to this Court.
While no finding was made against the particular candidates or the CPC as a body, Justice Mosley was highly critical of how they carried out the litigation, saying that the Conservatives "engaged in trench warfare in an effort to prevent this case from coming to a hearing on the merits."
Despite the obvious public interest in getting to the bottom of the allegations, the CPC made little effort to assist with the investigation at the outset despite early requests. I note that counsel for the CPC was informed while the election was taking place that the calls about polling station changes were improper. While it was begrudgingly conceded during oral argument that what occurred was “absolutely outrageous”, the record indicates that the stance taken by the respondent MPs from the outset was to block these proceedings by any means.
Sounds familiar.

The Conservative Response

Perhaps there are a small number of rogues within the party.  One might reasonably infer, from how widespread the calls were, that there was some complicity or encouragement, if not active participation and coordination, from one or more persons involved in the campaign at a national level, but we don't know that for certain.  We don't know that Stephen Harper himself, or any MPs or members of the party brass, were in on the conspiracy.

Nonetheless, the party's response to the scandal warrants scathing criticism, if not an adverse inference on the innocence of the senior party members.

One would think that the tough-on-crime Conservatives would have been eager to see justice done.  The Liberals and NDP were quick to provide Elections Canada with all the information they had.  Yet, when the NDP asked the Tories to do the same in Parliament, Pierre Poilievre stood up and delivered a flippant deflection:
Mr. Speaker, the hon. member is talking about robocalls and is making robo-accusations without any evidence. I say to him: if he has any evidence, he should press 1; if not, he should press 2 to apologize. If he has the wrong number, he should hang up and try again.
Dean Del Mastro (now a convict in his own right) tried to portray the whole thing as a misunderstanding, of calls presumably made in good faith because "at least 127 polling locations were changed", or deflected that the Liberals also hired robo-diallers.  Other talking points included that they were an 'isolated incident', or observations that they didn't change the outcome of the election or that there's no proof that any individual was *actually* prevented from voting.

Consider, for a moment, the implications of those responses:  That attempts at voter suppression and electoral fraud are not particularly concerning unless they were effective, and provably so.

In other quarters, including by neutral parties such as Elections Canada officials, the robocalls were strongly condemned as "absolutely outrageous".  The thrust of the Conservative response was to the effect of 'It wasn't us', coupled with lukewarm criticisms that the conduct is "unacceptable" and an overall strategy of trying to portray the scandal as "totally overblown" (to quote the late Senator Doug Finley, a senior official in the Conservative national campaign, and husband of cabinet minister Diane Finley).

Even before the evidence was clear that the perpetrators were Conservative insiders, I considered this approach to be utterly outrageous - a tacit approval by the governing party of criminal misconduct that was clearly intended for their benefit.

Protesters and opposition parties called for a full public inquiry, and an Ipsos-Reid poll found that 75% of respondents agreed that an inquiry should be established.  No such inquiry, which would have had the power to compel witness testimony, was ever established.

Ultimately, the question of whether or not senior Conservatives were in on the conspiracy is secondary in nature.  What's critical for the future of Canadian democracy, when we come across an incident of this nature, is that we respond fully and unreservedly:  That we condemn the acts in the strongest possible terms, that we leave no stone unturned in pursuing the perpetrators and bringing them to justice, and that we provide our elections watchdog with the appropriate tools to respond to similar misconduct moving forward.

A lack of response by the governing party amounts to an invitation to its supporters to continue to engage in such actions.

So the fact that the Conservatives attempted to minimize the scandal is concerning; the fact that they did not fully cooperate with the investigation is alarming; but what is most infuriating is the so-called Fair Elections Act.

The Fair Elections Act

The Conservatives enacted election reform legislation after the last election, but without any consultation with Canada's Chief Electoral Officer.

The reforms address non-issues like vouching - notwithstanding the Conservatives' alarmist rhetoric about vouching facilitating electoral fraud, there's actually no reason that such fraud is actually occurring on any scale.  Conversely, vouching facilitates over a hundred thousand legitimate ballots in each election.  And, in what may come as a surprise to many Canadians at the ballot box, voter information cards are no longer acceptable as ID.

So a lot of legitimate voters are likely to be turned away.  And with Elections Canada now being prohibited from trying to encourage people to vote (which seems like a strange limitation), it appears that the Tories now regards voter turnout as a partisan issue, and seem to take the view that a lower general voter turnout will be to their advantage.  And they're probably right, when it comes down to it.  But I daresay that most citizens in most democracies intuitively think that a lower voter turnout is bad, the sign of a weaker democracy, and that increasing voter turnout is intrinsically good for democracy, and that efforts to make it harder to vote are inherently undemocratic.

In terms of Elections Canada's investigative powers, and the obligations of parties to maintain records, where the robocall investigation revealed serious shortcomings, the changes were marginal and unhelpful, failing altogether to expand Elections Canada's investigative functions and powers, failing to impose obligations on parties to maintain records of calls made to voters.

Instead, the reforms strip the independent Chief Electoral Officer of his investigative mandate, moving the investigative arm of Elections Canada to the purview of the Director of Public Prosecutions, and completely severing the CEO's relationship to the role.

Investigations are carried out by the Commissioner of Canada Elections, and historically this was done on the direction of the Chief Electoral Officer - basically, the Commissioner was appointed by and reported to the CEO.  Over the course of the last several years, this has brought the CPC into conflict with CEO Marc Mayrand on several occasions - such as the "in and out" scandal (including an RCMP raid on Tory headquarters in 2008), the charges against Dean Del Mastro, etc.)

The CEO's appointment was a life term, until age 65, unless removed for cause following a majority vote of both the House of Commons and Senate.  (The Fair Elections Act changed that, too, limiting the CEO to a single term of 10 years.)

Now, the Commissioner's role is expanded, to be essentially self-directing, with the Commissioner being appointed for a 7 year term by the Director of Public Prosecutions (subject to removal for cause by the DPP), with an express prohibition on any consultation with the CEO prior to the appointment.  For reference, the DPP is appointed by the Minister of Justice for a seven year term, and can be removed for cause by majority vote of the House of Commons.

A Breakdown
  • Voter suppression calls were made to non-Conservative supporters, using the CIMS database, in no fewer than 7 (and possibly many more) ridings;
  • Multiple Conservative staffers knew the particulars of some of these calls, but the party closely controlled the flow of information to Elections Canada;
  • The CPC actively attempted to prevent the civil litigation from coming to a hearing on the merits, and failed to assist the criminal investigation from an early stage;
  • Multiple Conservative partisans declined to cooperate with Elections Canada's investigation;
  • Eventually, the Conservatives served up a junior staffer on a silver platter, but this staffer did not act alone, and likely was connected to only one of the multiple ridings in which the calls were made;
  • On the whole, the Conservatives made every effort to minimize the fraud, and offered nothing more than lukewarm criticisms of the criminal misconduct;
  • Elections Canada ran into multiple walls in the course of its investigation, many of which were put up by the CPC in the first place, and the government has failed and refused to empower Elections Canada to overcome such obstructions; and
  • The Government, displeased with the Chief Electoral Officer's criticisms of the Conservative non-cooperation in the investigation, severed his relationship to the investigative branch of Elections Canada.
Some would argue that the Government's conduct reeks of guilt, that their tactics and conduct show that they have something to hide.

That may or may not be the case, but even if the Government itself is innocent of wrongdoing, the undeniable reality is that their response to the robocalls is one of, at minimum, tacit condonation.  Minimizing the scandal and stonewalling the investigation sends a clear message to the perpetrators:  We've got your back.

For any Canadian now, failing to oppose the current Conservative government would mean accepting both the criminally corrupt elements within the party and the party's overt non-chalance about those criminal elements, and I fail to see how any other political issue can take voting precedence over one that goes to the very heart of our democracy itself.

I haven't yet decided which way I'm voting.  But I know that I'm not voting Conservative.

And in case any of you are tempted to not vote, or to decline or spoil your ballot out of a dislike for all the options (though that would seem to be exactly what the Tories want you to do), here's some further reading.

Thursday, July 9, 2015

ODSP Overpayments: Update

About 15 months ago, I made an entry about an Ontario Court of Appeal decision, Surdivall, reinstating a decision by the Social Benefits Tribunal to 'forgive' half of an ODSP overpayment.

The Supreme Court subsequently denied leave to appeal, and therefore the Ontario Court of Appeal's decision was final on the point.

I made the following observation in my previous entry:
It may well be that, in cases where the recipient can show good faith, partial forgiveness will become the norm, not the exception.
It appears that I was wrong.  Sort of.  The Social Benefits Tribunal has considered the impact of the Surdivall case on dozens of occasions since then, and in most of those cases has completely forgiven the overpayment, including requiring the Director to refund recovered portions of the overpayment.  It isn't universal, of course.  In some cases, we see partial forgiveness.  In others, no forgiveness, but a significant reduction in the rate of recovery of the debt.  On one occasion, the Tribunal didn't have the evidence to be able to make a ruling on the point, but 'encouraged' the Director to exercise such discretion.

And there are a few cases where recovery was ordered.

There are a few trends here.  In many of the cases considered, the overpayment resulted from administrative errors - not failures to report by the recipient.  In those cases, combined with adequate evidence of hardship, the trend tends to be toward full forgiveness of the overpayment.

Where the overpayment resulted from an innocent mistake by the recipient, with adequate evidence of hardship, the trend is toward partial forgiveness of the overpayment, or alternatively to limiting the rate at which the Director can recover the overpayment.

However, where the evidence of hardship was inadequate, or where the overpayment was created by deliberately misleading conduct by the recipient, the full overpayment is recoverable.

In this entry, I'll survey a few cases of note, to draw out some contrasts.

Honesty Versus Dishonesty

There are a couple of big dollar-value cases.  In 1306-05671 (let's call it "671"), an overpayment of $102,024.01, over the course of 11 years, was found to result from a recipient's failure to declare child support payments and other factors relating to her dependants.

In 1405-06001, an overpayment of $87,001.75 resulted, over the course of several years, from a failure to report increases in the amount of other (Federal) income support payments.

In both cases, the overpayment is large.  In both cases, it's the result of the recipient's failure to provide necessary information to the Ministry.  In both cases, recovery of the overpayment would lead to hardship.

But there's one critical distinguishing factor:  In 671, the Tribunal concluded that the recipient was intentionally dishonest:
[137] Further, the Appellant has proven that she is willing to provide false information in order to increase her access to funds. She stated that she provided false information about her living situation with V.S. to the courts in order to increase the amount that he would have to pay her. She also testified that she avoided advising OW of the fact that she had pursued support, and received it, because she was concerned that this would impact her eligibility for income assistance.
[138] The Tribunal found that the Appellant was well aware of what was required of her and that she purposely avoided providing same in order to benefit her financial situation.
In 001, by contrast, the recipient's non-disclosure was inadvertent, premised on an assumption that the Ministry would be aware of the changes to their other income supports.
I accept the Respondent’s argument that the Appellant was under a duty to advise the Director of any changes in his income. He signed an agreement to this effect. I further accept that the Appellant did not satisfy his obligations in this regard. His failure to do so was not as a result of any type of dishonesty or an attempt to deceive the Director. The failure of the Appellant to advise the Director of the increases in his federal benefits was as a result of a mistaken belief on the part of his spouse that the Director would be aware of any changes in the benefits which had already been disclosed. In fact, it was the Director who insisted that the Appellant apply for these benefits so it is somewhat understandable that the Appellant would assume that the Director remained aware of any increases. In other words, the overpayment is the result of the Appellant’s mistaken belief that the Director was aware of this income.
The result?  The recipient in 671 has to repay the whole amount; the recipient in 001 had most of the overpayment forgiven, with only $5000 still recoverable.

The "Insufficient Evidence" Cases

In a few cases, the Tribunal concluded that the evidence did not establish significant hardship that would result from recovery of the overpayment.

Of course, people who are on ODSP are, by definition, of limited means, so financial hardship will very often be present.

To some extent, this appears to be a 'luck of the draw' analysis in terms of which Member hears the case.  Only a small number of cases go that way, and two of them were decided by the same Member, Margaret Reynolds, who expressly rejected the notion that being on ODSP is, in and of itself, evidence of hardship that would result from recovery of an overpayment:
No evidence of any substance was given as to hardship at the hearing. This Member is not prepared, in the absence of such evidence, to assume that to be in receipt of Ontario Disability Support amounts is to be in financial hardship.
In one such case, the overpayment resulted from an administrative error failing to flag that her child turned 18, which changed her entitlements, and the overpayment was assessed at $5,600.  The other case involved a Danish immigrant - he came to Canada in 1989, and started receiving ODSP benefits in February 2011, and ODSP provided him with hearing aids and a CPAP machine.  At the time, he was up front that he was applying for a Danish pension fund, and was told, basically, "Let us know when you start getting those funds."

In October 2011, he started receiving the Danish pension (of about $1100 Canadian per month), which rendered him ineligible for ODSP benefits, and he also received a retroactive payment to July 2010, which made all the benefits he'd received up to that time an overpayment.  Including the receipt of the hearing aid and CPAP machine.  (He says that he never would have gotten them if he'd known he'd have to pay for them, and that his caseworker believed that he would remain eligible for these benefits.)  The overall ODSP overpayment was $6,587.81.

Ms. Reynolds focuses on the fact that these recipients received the benefit of the overpayment, and therefore in the absence of evidence of hardship should have to pay for the windfall, even where the overpayment resulted from circumstances totally outside of their control.

It's not a bad analysis, but one might wonder about the hearing aids and CPAP machine:  There's a bit of an integral unfairness in the regime, that disabled people need to meet some pretty narrow financial eligibility criteria before they become eligible for ODSP assistance which includes medical treatments.  (I once dealt with a fellow with a debilitating medical condition that could be totally controlled with expensive medication - he'd never make enough money working to be able to pay for it, but with ODSP paying for the medication, he actually could have worked and not needed income support.  Except that then he'd be ineligible for ODSP support, and they'd stop paying for his meds, so he'd no longer be able to work.)  In this instance, the Danish pension was fairly comparable to his ODSP benefits, in financial terms.  Repaying the actual financial support out of the overpayment, under the circumstances, makes sense, but saying "By the way, you also need to pay us for the non-financial help we gave you" strikes me as a tad heavy-handed.

What is Required?

In the cases where the overpayment is partially or totally forgiven, there's a broad range of evidence in terms of financial hardship.  In some of the cases, the decision doesn't reference financial hardship at all, or finds "financial duress" without explaining why.  (These decisions might be susceptible to review by the Divisional Court.)  In some of them, it appears that significant income and expense information was provided to the Tribunal (though in at least one case the Tribunal expressed some scepticism about the budget, because it generates a shortfall, and the absence of any assets or credit on which to draw imply that they aren't actually paying that much).  In one case, the fact that the applicant was on social assistance in the first place, combined with his use of a food bank, satisfied the Tribunal as to hardship.

In another case, the recipient explained where her money goes, and the Tribunal was satisfied that there were no "frivolous" expenditures, and that any reduction would come primarily out of her family's food budget, since most other expenses were fixed expenses.

In another case, the evidence of hardship was limited to the statement that the recipient had "no assets and no money."

There's little doubt in my mind that some evidence of hardship is (or should be) necessary, but precisely what constitutes proof of hardship may be a bit of a moving target.  Ms. Reynolds might look for more significant evidence of hardship than certain other members.

Still, it strikes me as a technical requirement which will likely be possible to satisfy in most cases.  I suspect that, if I were still working in this area of law, my default approach would probably be to lead evidence as to the limited assets and financial resources of the recipient, to lead evidence as to the fixed expenses, and then end up demonstrating how much is left in the family's budget for food and other non-fixed costs, to illustrate its inadequacy.  (If the person's going to a food bank, or there's evidence of bills going unpaid or services being cut off, that's probably going to factor strongly into my argument.)

But with technical evidentiary requirements, it's really easy for self-reps to miss these sorts of things.  For any readers who have been assessed an ODSP overpayment, for no fault of their own or through an innocent mistake, I would suggest promptly contacting your local community legal aid clinic to seek their assistance.

*****

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.

Wednesday, July 1, 2015

Duty to Mitigate and Summary Judgment: Trust Approach or Partial Summary Judgment Approach?

With the recent expansion of Ontario's summary judgment rule, it has been rightly anticipated that many wrongful dismissal cases will be decided by way of summary judgment.

When dealing with lengthy notice periods, this runs into a question which - while not entirely new - takes on a new importance:  What do you do if the notice period hasn't yet run its course when the matter comes to court?

I posted about this issue two years ago, in context of the Bernier v. Nygard decision, where Justice Morgan awarded Bernier damages based on an 18-month notice period, merely 7 months into that notice period, with the proviso that the award was 'impressed with a trust', obliging Bernier to account for mitigation earnings.  I referred to it as "an imperfect solution to a difficult problem."  The Court of Appeal upheld the finding as being within the discretion of the Motion Judge.

However, it's far from clear that this is a 'one-size-fits-all' solution, and there's a growing schism in the case law.

Justice Pollak Applies the "Partial Summary Judgment" Approach:  Markoulakis


In April, Justice Pollak was faced with a similar question in the case of Markoulakis v. SNC-Lavalin, dealing with an employee entitled to 27 months of notice, a mere 9 months after the dismissal.

Justice Pollak reviewed the options thusly:  The Trust Approach, as applied in Bernier; the Contingency Approach (reducing damages arbitrarily based on the possibility that mitigation earnings might arise); or the Partial Summary Judgment Approach, fixing the notice period but not awarding damages in respect of portions of the notice period not yet elapsed.

SNC-Lavalin argued that the Trust Approach was incompatible with the Supreme Court of Canada's decision in Hryniak, and Justice Pollak appears to have accepted that argument, applying the Partial Summary Judgment approach.

Sean Bawden, on his Labour Pains blog, has an interesting commentary about that case.  In the comments, I argued that the fundamental principles underlying the Partial Summary Judgment approach are wrong as a matter of law.

Justice Perell Applies the Trust and Accounting Approach:  Paquette v. Terago

This week, Justice Perell released a decision in the case of Paquette v. TeraGo Networks Inc (not to be confused with the Paquette c. Quadraspec case, another case about which I've commented before, with a costs decision released this week).

Mr. Paquette was entitled to 17 months' notice, and the motion for summary judgment was heard and decided some 7 months after the dismissal.  Justice Perell reviewed the options as had Justice Pollak, but determined that it was appropriate to follow the Trust and Accounting approach, noting that the trust applied not to the damages themselves, but tather that it is the "mitigatory earnings...upon which there is a court imposed constructive trust in favour of TeraGo."  This is an important distinction, a reminder that the entitlement to damages presumptively follows from the employer's breach of contract, prior to any mitigation analysis.  (This is essentially why I argue that the "Partial Summary Judgment Approach" is wrong, as a matter of law.)

In light of the Court of Appeal's deference to Justice Morgan's discretion in Bernier, it would have been easy for Justice Perell to say that, in the circumstances of the case, it was more just to apply the Trust and Accounting approach.  But he went a step further, outright rejecting the Partial Summary Judgment Approach in some pretty harsh terms:
I reject the Partial Summary Judgment Approach as cynical, patronizing, unfair, impractical, and expensive.
Not much more to be said about that, I think.

Commentary

Justice Perell's word isn't necessarily final on the subject, but he's very well respected - one of the best commercial law judges in the Province.  It's surprising to see him use such language to describe a doctrine so recently applied by a fellow Superior Court judge, and in the absence of direct appellate intervention on the point, I expect that his reasoning will be widely regarded as persuasive.

It helps that the criticism makes a lot of sense.

As I've noted before, the trust approach isn't without its own problems, but in the overall scheme of things, it's probably the lesser evil in most cases.

*****

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.

Tuesday, June 23, 2015

Residential Tenancies: Common Misconceptions

I've dealt with Residential Tenancies Act matters from time to time, and there are a number of common practices which are not entirely compliant with Ontario law.

Most (though not quite all) residential tenancies in Ontario are covered by the RTA, which sets out a large number of obligations for landlords and tenants, which they cannot contract out of.  As a result, it's not uncommon to be able to look through a residential lease and list off a whole pile of clauses that can't be enforced.  Note, however, that there are exceptions - tenancies to which parts or all of the RTA do not apply, and therefore legal advice should be sought in respect of particular circumstances.

Security of Tenure

There are certain reasons that a tenant can be required to leave the rental unit.  There are quite a number of circumstances, but an important note is that the expiration of the lease is not one of them.  When you sign a 12-month term lease, then the default is that it will convert to a month-to-month lease at the end of the 12 months and continue until and unless somebody terminates it in accordance with the RTA.

A landlord can pursue an order evicting a tenant at any time on a 'for cause' basis, such as non-payment of rent, undue damage to the rental unit, interfering with the reasonable enjoyment of the rental complex by others, or illegal acts in the rental unit.  (This is not an exhaustive list.)  Even if you're on a year-long lease, you can be evicted at any time even before the end of the lease on such bases.  (This makes sense:  Fail to pay your rent; get kicked out.  The idea is that you have violated the terms of the lease by engaging in such conduct, such that your landlord might be relieved of its obligations.)

There is another set of reasons permitting the landlord to obtain an order evicting the tenant at the end of the term.  (So, if you're on a 12-month term lease, these can't be triggered during the running of the term...if you're month-to-month, they just have to give you a certain number of months of notice.)  These reasons include that the landlord (or a purchaser of the property) personally requires the unit (for himself or members of his family), among others.  But in the absence of such a reason, the lease continues.

The tenant, on the other hand, can terminate the lease at the end of the term at will - but on appropriate notice.  (Tenants usually do have to give notice.  Just walking away at the end of the 12 month term could result in you being on the hook for additional rent.)

Alternatively, the landlord and tenant can agree at any time to end the tenancy.  However, the RTA expressly provides that such an agreement entered into at the start of the tenancy is not enforceable.  (In other words, if you're renting a place from me, and when signing the lease I require you to sign off on an agreement to terminate the tenancy at the end of 12 months...tough for me, I can't enforce it.)

Most of Ontario's residential tenancy legal regime is built around meaningful protection for security of tenure - protecting tenants against being forced out by the landlord.

Leases Do Not Expire

This is kind of a re-statement of the above, but it is really important for tenants to know.  It seems pretty natural to expect that, when your 12-month lease is up, you either need to agree to re-rent, or just move out.  I only signed a 12-month commitment, and the lease says nothing about continuing beyond the 12 months; why should I need to notify the landlord that it won't continue?  This is not correct.

If you fail to give appropriate notice of termination, then the law deems the tenancy to continue, and you can be on the hook for additional rent.  It does happen.

"No Pets" Clauses

A landlord is entitled to advertise for "no pets", and generally to vet (no pun intended) prospective tenants to rule out pet ownership.  There's not even anything strictly wrong with including a "no pets" clause in the lease...except that it can't be enforced.

There are a handful of circumstances in which a tenant can be evicted due to pet ownership - namely, if the pet is causing problems (damage, allergic reactions, noise, etc.) or if the animal is inherently dangerous.  Aside from that, a tenant can't be evicted on the basis of pet ownership.

There's a bit of a complication with condominiums, however:  Condo corporations often have by-laws regarding pet ownership, and tenants can (and should) be bound to the condo by-laws.  The "No Pets" clause in the lease may be void, but the requirement to abide by condo by-laws may be enforceable, as may be the 'no pets' language sometimes contained in those by-laws.

Damage Deposits

Another common practice, particularly when dealing with pets, is to require tenants to provide a damage deposit up front.  Landlords are entitled to require a deposit, but it's limited to 'last month's rent', so to speak.  (Even less, in rare cases.)  And it does have to be applied against the last month's rent, which makes it pretty useless as a damage deposit.

It's actually an offence for a landlord to collect an additional deposit.  The maximum penalties are pretty steep - up to $25,000 for an individual, or up to $100,000 for a corporation.

Post-Dated Cheques

A tenant can't be required to provide post-dated cheques.  It shouldn't be in the tenancy agreement at all.  (In practice, there's not a lot a tenant can do to protest this sort of thing before taking possession.  However, it does put the tenant in a pretty good position to resist providing additional groups of cheques.)

On the other hand, post-dated cheques are relatively convenient for all involved.  There's nothing actually wrong with providing post-dated cheques; it just can't be required.

Rent Increases

There are a lot of restrictions on rent increases.  And exceptions.  It's a nuanced area.  The general rule, however, is that a rent increase requires at least 3 clear months' notice, can't be made more than once every twelve months, and can't be in an amount greater than the 'guideline' - basically an inflationary figure published by the government each year.  By way of example, the 2015 Guideline is 1.6%.

You can charge a new tenant whatever you can get someone to pay.  (Usually.  There are exceptions.)  But once they're in, you can only raise rent in accordance with the guideline.  Practically speaking, it's an effective protection of security of tenure:  You can't raise rent to a level that the tenant can't afford to get them out.

And there's a logic to it, as well:  Let's say I'm looking for a place to rent, and I'm pretty cost-sensitive.  Your place is $1400 a month; all the equivalent places are $1500 a month, so I pick yours.  After the year lease is up, the 'market' rate increases by 5% (so other places now cost $1575 per month), but you raise my rent by $300 per month, to $1700 - well above market rate.  I can leave, sure, but that means finding a new place, paying first and last again, paying to move, probably moving my kids to a different school...  There's 'value added' in having already made a place a 'home', and it doesn't make economic sense to allow landlords to capitalize on that value added.  Most Provinces have some sort of control in place, with the exception of Alberta...which may well change in the near future.

On the other hand, with the housing market appreciating at a much higher rate, landlords run into problems with long-term tenants paying well below market rates:  As the cost of housing has tended to increase at a faster rate than the guideline, the gap between the rent you can charge and the actual market rate grows over time.  (This leads to landlords trying all sorts of shenanigans to try to get long-tenure tenants out, when they can re-rent at much higher rates.)

As well, landlords argue that their costs increase at a rate not necessarily reflected by the Consumer Price Index - from which the guidelines are taken.

Breaking the Lease

Fixed term leases are regarded as providing protection to landlords.  You rent out for a period of a year, and that means that you don't have to re-rent for another year, right?  So a lot of landlords want to sign year-long leases annually.

Not only is a landlord, as noted above, not entitled to insist on signing a new lease, but it's probably not that helpful to a landlord.

If a tenant 'breaks' a term lease (or walks away without appropriate notice), the landlord is entitled to damages...but that's not necessarily going to be the full outstanding balance of the lease.  The landlord has the obligation to 'mitigate' his loss by seeking a new tenant.  In practical terms, it's rare to see a landlord get much more than a month or two of lost rental income.

So getting a couple months' notice of termination, as under a month-to-month lease, is probably just as good.

That said, there may be a 'moral' strength to a term lease.  A good tenant is a lot less likely to break the lease than to give two months' notice on a month-to-month tenancy.

It might also be noted that, in Ontario, there is such a thing as a 'yearly' tenancy - i.e. one which can only be terminated on the anniversary of its start date.  I've never seen a properly-drafted yearly lease, and I've never seen the LTB deal with situations where a yearly tenancy was terminated other than on its anniversary.

Suffice it to say that they're rare, and I think the down sides outweigh the up sides, for all involved.  For a landlord, terminating a tenancy can be tricky.  If you don't know what you're doing, if you don't cross all the t's and dot all the i's, if you don't properly serve a notice, if you miss the timeframe by a day, the notice is likely to be regarded as void.  On a month-to-month tenancy, that means that, if you mess up the termination application, you start fresh, for a later month.  For a yearly tenancy, you'd be stuck for another full year.  Not to mention that many end-of-term terminations require at least three months' notice.  If you decide, a little over 9 months into your yearly tenancy, that you want to move into the rental unit yourself, you need to wait until the end of Year 2 to do it.

It very much ties the hands of the landlord, and at the same time doesn't help the landlord much at all.

Repair Responsibilities

The responsibilities on the parties in terms of repair obligations are set out pretty straightforwardly in the RTA itself.

Section 34:  "The tenant is responsible for the repair of undue damage to the rental unit or residential complex caused by the wilful or negligent conduct of the tenant, another occupant of the rental unit or a person permitted in the residential complex by the tenant."

Outside of that, under s.20, the landlord is responsible for, among other things, maintaining the rental unit "in a good state of repair".

You can't contract out of that.  You can't enter into an "as is" lease - the landlord doesn't get relieved of that responsibility just because the tenant knew about the issues before moving in.

I've seen a lot of residential leases, and one of the more creative ways of dealing with repair issues involved something akin to a deductible:  The tenant pays the first $50 to the cost of each repair call.  (The person who drafted the lease argued that it's a 'standard term'.  It really isn't.)

The trouble with such a clause is two-fold:  Firstly, it probably isn't enforceable, because the Act is pretty straightforward on these responsibilities.  Secondly, it is a really bad idea.

The logic is that you don't want the tenant calling the landlord over 'every little thing'.  If it'll cost $50 for me to fix, as a tenant, then firstly I need to evaluate whether or not I really want it fixed, and secondly I need to figure out if it's something I might as well just get done myself.

On a practical level, I'm a big fan of tenants taking some responsibility for their own homes:  If the drain is clogged, forget getting the landlord to call in a plumber; just walk down to Canadian Tire and pick up a bottle of drain cleaner.

On a legal level, however, I'd never actually recommend tenants take a DIY approach for things within the landlord's purview of responsibility:  If you do it wrong, you're on the hook for the resulting damages.

But if I, as a tenant, am assessing what's worth my money to fix, when it isn't my property, then I'm operating on a different set of priorities than the landlord.  The faucet drips.  Whether I want that fixed will obviously depend on whether or not I'm paying for my own water bill.  The dishwasher has a leak underneath.  Well, it isn't *my* stuff getting damaged by the accumulating water - why should I pay to get it fixed?

The house, and every part of it, is a capital asset of the landlord.  There's no cogent reason why the tenant should have to contribute to repairs to that capital asset (at least, unless the tenant caused the damage), and most tenants...simply won't.  With the result that, when it comes time to re-rent, the landlord is going to find that maintenance issues have accumulated, and sometimes been exacerbated by the delay.

Other Frequent Errors

By Landlords:

Increasingly, the rental market is dominated by small-scale landlords who own an investment property or two, perhaps condos.  Without a great deal of professional experience as landlords, they often don't realize that there are formal requirements for giving notices (including notices of rent increases), or various technical requirements at the outset of the lease.

One of the most common mistakes I've seen is that landlords frequently fail to provide the Landlord Tenant Board's mandatory "Information for New Tenants" brochure, which s.11 of the RTA requires Landlords to provide to tenants on or before the date the tenancy begins.  The consequences of failing to do so are questionable.  The Board has found on at least one occasion that there's no remedy available against the landlord for that failure.  (Furthermore, by definition, the LTB will never see a Tenant Application by a tenant who is not already aware of his or her rights, so the prejudice to the tenants who actually go before the LTB will naturally be non-existent.  It's the tenants who *don't* know their rights and remedies who are prejudiced by the failure to provide the information.  As it stands, therefore, it's pretty much a totally toothless provision in the RTA.)  That being said, when it's coupled with other failures of the landlord, it might be a moral factor in pressing the Board to assess a higher rent abatement.

Regardless, it's pretty handy information for the landlord to have.  Many of the smaller-scale landlords will find the brochure informative for their own reference.

Likewise, I have seen it happen that landlords will fail to provide their address to the tenant, which is one of the very few circumstances in which a tenant is justified in withholding rent.  (That said, once it's remedied, the landlord is entitled to recover the withheld rent.)

And finally, Notice of Entry:  Most people are under the impression that entry by the landlord always requires 24 hours' notice.  Most folks, if they thought about it, would probably expect exceptions for emergencies, and consent entries, as well.

But there's a much bigger exception, which many people don't realize:  24 hours' notice is not required to show a unit to prospective tenants, once one side has given notice of termination.  Instead, the landlord's notice obligations are more limited:  Before entering, he or she must inform, or make a reasonable effort to inform, the tenant of the intention to enter.  (In other words, showing up unannounced is still probably not okay.  But 24 hours' written notice?  Not required.)  However, I've seen landlords integrate the right of entry into language in the lease, stating that 24 hours' notice of entry is required.  If the lease says so, it's quite possible that the landlord would be bound to that expectation.

When starting out as a landlord, it's worth getting professional advice to understand your obligations, and to get help drafting your lease.  While outside of my primary area of practice, I am nonetheless able to assist in this area.  Some residential leases that you can find or buy online are better than others, but even the relatively good ones have problems - for instance, trying unsuccessfully to create a yearly lease, or tying the landlord to more onerous obligations than they should.  (One of the best leases I've seen was simply out-of-date, including a term that the landlord had to pay interest on the last month's rent deposit at a rate of 6%.  That was required under the applicable statute until January 2007, but since then the rate of interest has been tied to the guideline, which probably averages around 1.5-2%.)

I can't say it enough:  Have a lawyer review your lease.  Even if you're using a realtor for the transaction, that's no substitute for having legal advice on contract terms.  Indeed, some of the absolute worst residential leases I've ever seen have been realtor-drafted.  You think you're paying them for their transactional expertise, but the truth is that you're lucky if your realtor knows more about the RTA than you do.  Even in Agreements of Purchase and Sale, which realtors are certainly more experienced with, I urge people to get legal advice before signing, particularly if there are substantive terms in Schedule "A" outside of the 'usual' conditions [like financing and home inspections].  However, I've seen entire leases built into the Schedule "A" of OREA's Form 400 (Agreement to Lease), with nobody getting legal advice.  Formula for a lot of unpleasant surprises.

By Tenants:

It's very common for tenants to express their dissatisfaction with landlords, say, for failing to properly repair the property, etc., by withholding their own rent.  There's a certain logic to it:  You're not fulfilling your end of the lease agreement, so we're going to hold back on our end.

That doesn't go over well.  There are only a handful of situations where the tenant is entitled to withhold rent, and those are very limited rights.

You're better off bringing a Tenant's Application to the LTB - do it yourself, or get a qualified lawyer or paralegal to assist you with it.  Because the alternative of withholding rent will merely put you on the defensive at the LTB, facing an eviction application for non-payment of rent.  And no, "He didn't fix the broken electrical fixture" is not a defence; you'll still need to bring your own Tenant's Application if you want an order to get that fixed.

*****

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 Finds Duty to be Cowed

There are a couple of new decisions out of the Woodstock Small Claims Court, in the case of Caskanette v. Bong-Keun Choi Dentistry Professional Corporation.

The plaintiff, Tammy Caskanette, was self-represented.  The employer was represented by Pamela Krauss, an employment lawyer in KW whose cases have featured favourably in this blog before.

In many ways, the fact pattern is dime-a-dozen:  In January 2013, the employer acquired the business, with its existing employees.  Ms. Caskanette was a relatively short-service worker (fortunately for the employer), and conflicts developed between her and the new ownership.

At trial, the Deputy Judge found that the facts were essentially uncontradicted:

In May of 2013, the Office Manager met with Caskanette.
From Caskanette's perspective a woman she had rarely seen was upbraiding her with a series of complaints which had more to do with other staff than with Caskanette...The issues on Choi's list for discussion had little, if anything, to do with Caskanette, directly.  Caskanette felt trapped in a tiny room with a closed door.  Before the meeting agenda was complete, from Choi Dentistry's perspective, Caskanette exploded and in a fit of rage broke a door handle in her rush to escape the tiny room.  I do not fault Caskanette because a door handle broke.
The Choi's never seemed to understand why Caskanette became so upset during the meeting on May 24th.  The Choi's were justified in feeling, however, that this extreme reaction to the meeting was disrespectful and rude.  Caskanette at no time apologized for the behaviour.
Subsequently, the employer sought the assistance of an HR advisor to try to help alleviate growing workplace tensions, without success.

No warnings were issued at any time for any alleged misconduct of Caskanette.

But the termination came following the events of June 28th, 2013:  Caskanette's long-standing practice, with previous management, was to take off the Fridays before long weekends.  The employer acknowledges that it never expressly told Caskanette to cease that practice, but the employer distrusted her because of her claims that this was her long-standing practice (which was confirmed by other evidence).

June 28th was a Friday before a long weekend.  In advance, the employer staged a 'secret shopper' style call to Caskanette to schedule an appointment for the Friday morning, so she did so, attended the office (the decision's a little vague on the exact events), and then left.

The office manager called Caskanette and left a scripted message on her answering machine instructing her to return to work.  She did not do so until after the long weekend, at which point she was dismissed.

The employer took the position that it had just cause.

And was successful.

The employer obtained a substantial costs award:  The plaintiff had claimed $25,000, leading to a presumptive cap of $3750 for legal fees - the Deputy Judge found that the employer was entitled to that full amount, at least in part because Caskanette had raised several complicated issues, plus an additional $1250 for each of two personal defendants (represented by the same counsel as the employer, and who shouldn't have been named as parties).

Apparently the employer had made an offer to settle (for an amount not mentioned in the decision), which the Deputy Judge found made a doubling possible, but declined to fully double the costs award because of the fact that he did not consider the breakdown of the relationship to be entirely Caskanette's fault.  However, he did increase the employer's costs award to $5500, plus a modest award for disbursements, for a total costs award against Caskanette of nearly $9500.

Commentary

I've noted before that self-reps are very frequently unsuccessful, but it's hard to say how much of that is because they pursue 'loser' cases (without recognizing their weaknesses), and how much of that is because a lawyer would have added value to them in the process.

This case, in my view, falls cleanly within the latter.

The Deputy Judge's decision on just cause is surprising to me, given his other findings.  Troubling.  Perhaps to the point of calling for appellate review, but the higher courts have tended to give a high degree of deference to trial judges on the point, finding that the "determination of just cause is essentially factual".  (I have my disagreements with that approach, as I've noted before.)

In light of the finding that Ms. Caskanette reasonably felt "trapped" in a "tiny room" while being "upbraided" for issues that had little, if anything, to do with her, his conclusion that the employer was justified in feeling that her furious departure from the room was "disrespectful and rude" is frankly shocking.  That's the sort of meeting conduct that used to lead to Wallace damages as a matter of course.  It was deeply inappropriate treatment by the employer, inconsistent with the employer's own implied obligations under the contract of employment, yet the implications of the Deputy Judge's conclusion is that she was obligated, as part of her employment contract, to just sit there and take it.

The Deputy Judge agreed that the employer at least shared in the creation of a hostile work environment, had failed to properly correct conduct, had not warned her.  The Deputy Judge felt that there were cultural issues in play - that the cultural background of the new ownership found it "unthinkable" to be treated by his employee in such a manner, and didn't know how to respond.

Yet, despite the fact that the employer at no time took issue with her conduct, and had itself acted in a manner which was deeply inappropriate, the Deputy Judge nonetheless found that "she should have recognized the effect of her behaviour on the others in the office and she should have apologised to Dr. Choi."

It appears to me that the Deputy Judge found that this sequence, even without the subsequent events of June 28, justified a termination for cause.

This "failure to apologize" is something we've seen once before, and something I took issue with in the past as well.

It's appropriate to look at apologies, or failures to apologize, in the face of a confrontation about the misconduct.  If my employee acts in a manner which I find inappropriate, and I bring that employee in for a meeting to discuss the issue and express my concerns about the conduct, then the failure of the employee to take responsibility is relevant to a subsequent decision to terminate.

However, I cannot just sit back and wait for an apology, and then fire because none came.

As for the 'insubordination' in not returning to work on June 28, it doesn't appear to me that she had been told, prior to June 28, that she would be required to attend.  As far as she was concerned, that was a day off for her.  It always had been.  She attended in the morning because a (fake) client had insisted upon it, but then regarded herself as able to leave.

It's likely that the employer was entitled to require her to change that practice.  But it had to communicate that change to her.  And not on the morning of.  In context, it's roughly akin to a Monday-to-Friday worker being called on Saturday and told to come in right away, and then getting fired because he or she refused to do so.

The Deputy Judge appears to have regarded the failure to attend at work, in the face of a clear direction to come in, as a clear repudiation of the employment contract.

It's an absurd handling of affairs by the employer, and reeks of a 'gotcha' tactic.  You have a strained relationship with this employee already, but you haven't disciplined her for anything.  You know she takes the Friday off before the long weekend, so rather than tell her beforehand, "Don't", you stage a secret shopper appointment and script a voice message to leave for her that day?  It's deeply incompatible with the employer's duty of good faith and fair dealing.

To get around the usual 'duty to warn', the Deputy Judge referenced a 2012 case from the Ontario Court of Appeal, in which a Manager outright refused (in writing) to deal with the president of the company.  The Ontario Court of Appeal found that, in that case, working with the president was an essential part of the job, so by refusing to do it, the employee was repudiating the employment agreement, without the need for warnings.  Made sense.

The comparison here is to the June 28 refusal to return to work.  Yet it's not the same - refusing to work on the Friday before a long weekend was not an 'essential part of the job'; she'd never done it before.  It's a very poor comparison.

It's a rare case where an employee can be dismissed without prior progressive discipline.  These facts shouldn't have gotten there.

Objective Versus Subjective Tests

The Deputy Judge uses a great deal of subjective language through the decision.  Which is quite appropriate - it looks like he's stepping into the shoes of both sides to understand their viewpoints of events.

But it's not entirely clear to me that he stepped *out* of the employer's shoes when rendering his decision.

He uses the word 'justified' several times when discussing the employer's perspective:  "The Choi's were justified in feeling, however, that this extreme reaction to the meeting was disrespectful and rude."

Here's an interesting question:  Is that a statement that they were right, and that the conduct was disrespectful and rude?  Or merely that it's understandable that they felt that way?  The reference to 'feelings' suggests that there's a subjective element there.

Likewise, when the Deputy Judge concluded that they were "justified" in determining that her actions had destroyed the relationship - a critical point in the finding of just cause - is he talking about justification in the sense of being correct, or in the sense of being understandable?

Because if it's the former, it's directly at odds with his other conclusions, throughout both decisions, that the employer shared the fault.  It's not the case that her actions alone destroyed the employment relationship.  And if it's the latter...well, that's not the test for cause.  But it's perhaps the most common error made in finding cause, asking whether or not it was reasonable for the employer to end the relationship.

Yes, by the time the termination occurred, it appears that the employment relationship was doomed, and it was probably very prudent for the employer to terminate it.  That doesn't mean that the employer had just cause.  In the absence of progressive discipline, and given that the employer had done its own part in alienating the employee, the fact that the relationship was beyond repair can hardly be said to flow from her misconduct.  It flows from a combination of the employer's actions, perhaps her own actions, and also from the employer's failure to respond appropriately to any misconduct she engaged in.

And that's not a formula for just cause, in the absence of a trail of appropriate progressive discipline.

She Who Acts As Her Own Lawyer...

The Deputy Judge said that she presented her case well.  However, he also described her as "brash, aggressive, and inclined to 'talk over' others".  In other words, exactly how a lot of people expect lawyers to act.

Some lawyers do act that way.  The virtues of the approach...well, let's just say there are different philosophies on the point.  But to some extent, it's okay for the lawyer to be the bad guy - the lawyer isn't the one standing for judgment at the end of the day, and it isn't the lawyer's character in an employment relationship that's on trial.  When a self-represented litigant stands up and argues aggressively, the way she thinks a lawyer is supposed to, there's a risk that the Deputy Judge will come to believe that this is the same manner she exhibited in the employment relationship itself.

Had she been represented by counsel, the only opportunity the Deputy Judge would have had to assess her character would have been her own examination-in-chief and cross-examination, controlled and prepped by counsel.  If properly prepped, the Deputy Judge would never have seen her argue, would never have seen her 'talk over' others, because all argumentation, objections, etc., would have been carried out by her lawyer on her behalf.

As well, she certainly pursued issues not worth pursuing, and overvalued her claim:  Personal liability should never have been sought; aggravated and punitive damages...maybe, maybe not - they're tough to get, but I can't necessarily fault her for trying; but ultimately the claim was not even worth 5 digits.

Costs

It's a pretty generous costs award to the defendants, for Small Claims Court.  We've seen the kinds of costs awards other Deputy Judges make - for instance, Kitchener's Deputy Judge Winny never doubles the award for a totally successful defendant (an approach that is legally arguable), and is usually pretty constrained in fixing the 'reasonable' fees in the first place.

But at the end of the day, it really highlights the risk of proceeding self-represented, even at the Small Claims Court.  She went self-represented because she didn't want to have to pay a lawyer, and ends up having to pay over $9000.

Final Note on Counsel

My criticisms of the decision, my doubts as to its correctness, should in no way be seen as a criticism of counsel.  The defendants' lawyer did her job, and clearly did it well.  However, it goes to highlight concerns I've expressed before about the nature of Small Claims Court and wrongful dismissal files.

*****

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.