Friday, August 22, 2014

Admitting Fresh Evidence After Losing an Appeal

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

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

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

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

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

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

And she didn't just ask it once.

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

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

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

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

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

Caution about Job Scams

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

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

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

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

*****

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, August 20, 2014

Small Claims Court Declines to Follow Trites v. Renin Corp

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

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

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

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

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

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

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

Commentary

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

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

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

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

*****

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.

Friday, August 15, 2014

The Intermediate Category: Dependent Contractors

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

The Facts

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

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

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

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

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

The Decision

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

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

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

Commentary

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

Dependent Contractors

What's relatively unusual about this case is that the only distinction to be made is between independent and dependent contractors - that the 'employee' option was not on the table.  That's not really an analytical problem at all, though, because as the Court of Appeal held in McKee:
the proper initial step is to determine whether a worker is a contractor or an employee, for which the Sagaz/Belton analysis, described in the next section, controls.  Under that analysis, the exclusivity of the worker is listed as a factor weighing in favour of the employee category (Belton’s first principle).  The next step, required only if the first step results in a contractor conclusion, determines whether the contractor is independent or dependent, for which a worker’s exclusivity is determinative, as it demonstrates economic dependence.
The court in Wyman rightly referred to McKee's discussion of the importance of exclusivity, but went on to strangely cite Charbonneau v. A.O. Shingler & Co for the test analyzing "whether an employer-employee relationship exists", which included "the intentions of the parties".  This factor appears to have strongly influenced the trial judge:
For the reasons that follow, I conclude that the plaintiff functioned as an independent contractor, and that the parties regarded their relationship as being characterized by its independence.
If the argument were whether an employer-employee relationship exists, then that would indeed be a factor...but to import the intention of the parties that the relationship be 'characterized by its independence' conflates the two tests, and would amount to an error of law.

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

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

Conversion and Unjust Enrichment

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

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

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

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

Punitive Damages

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

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

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

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

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

*****

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

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

Tuesday, August 5, 2014

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

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

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

The Facts and Judicial History

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

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

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

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

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

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

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

The Supreme Court's Decision

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

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

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

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

Commentary

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

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

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

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

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

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

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

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

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

*****

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 30, 2014

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

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

Summary

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

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

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

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

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

The Deputy Judge appears not to have been satisfied that there was any actual refusal, but in any event felt that any refusal would have been "in the heat of the moment".  The requirement was a "significant change", and he "should have had time to absorb the shock and even if he failed to comply he should have been given a proper warning about it."
Common sense would dictate that there should have been a cooling off period following the heated discussion - for both parties - and the plaintiff allowed some reasonable time to comply.
The Deputy Judge highlighted that the appropriate next step would have been to continue to require Borges to comply with the direction, and expressly warn him that his continued employment was in jeopardy if he failed to do so.
The warning has to be actually conveyed to the employee, and the employer cannot simply rely on an impression that the employee may have received it. The March Note did not contain any such warning or any consequences for failure to comply and no such warning was evident from Provost.
In addition, the employer took a 'kitchen sink' approach, alleging all sorts of other problems - an issue about whether or not the quota policy had been given to the plaintiff; an issue where the employer over-ordered tillapia allegedly because of assurances from Borges that he could sell that much (Borges had a different factual take on this); an issue regarding completion of call sheets and punching in and out; not using current prices; declining sales; and singing in the office.

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

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

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

Commentary

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

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

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

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

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

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

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

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

*****

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

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

Monday, July 28, 2014

Law Clerk Dismissed For Cause After Starting Competing Business

Vardalas v. 1455358 Ontario Limited is a recent and interesting Small Claims Court case involving a law clerk suing his former employer, Bougadis Chang LLP, in wrongful dismissal.

The Court found that the employer had just cause to dismiss Vardalas, and dismissed the claim.

The Facts

Mr. Vardalas worked for BC for a little under five years as a law clerk, from July 2006 to June 22, 2011.  BC practices in the areas of insurance lawsuits, personal injury, disability claims, medical malpractice, and "commercial/contractual actions", primarily catering to the Greek, Chinese, and South Asian communities in the GTA.

In March 2011, Vardalas registered a sole proprietorship called "Nomos Consulting Services" - 'nomos' being the Greek word for 'law'.  It officially opened in early June, 2011, and shortly thereafter BC was told about it by the President of the Greek Community of Toronto.  George Bougadis asked Vardalas about it, and Vardalas explained that Nomos was his wife's business, and simply assisted people in filling out forms for citizenship, passport, and pension applications, and that Vardalas himself had nothing to do with it.  Basically, it was a translation service, to hear Vardalas tell it.

Bougadis was satisfied by the explanation, even offering to refer clients to Nomos in appropriate circumstances.  (I'm surprised by this, actually - neither Vardalas nor his spouse were licensed by the Law Society, and carrying on a business under that name would send up alarm bells about what exactly they're holding themselves out as.)

However, the next day, the President of the Greek Community sent an email to Bougadis, enclosing Nomos' "Grand Opening Flyer" - indicating that Nomos assisted with completing forms for a large variety of proceedings, completing 'appeal letters', and provided representation at tribunal hearings - suggesting that Nomos was acting in direct competition with BC in a number of ways.  Furthermore, Bougadis received Vardalas' business card from Nomos, identifying Vardalas as a Nomos 'Consultant'.

Bougadis then confronted Vardalas again, and Vardalas continued to deny involvement in the business.  (It didn't help that Nomos was registered in his own name, either...)  Vardalas was dismissed for cause.

The Issues

The primary issue was 'just cause'.  However, just cause being a high threshold, there were a lot of more technical issues to fight about along the way.  There was a contract executed nearly four months after Vardalas started, imposing restrictions on outside work Vardalas could perform.  Did the contract have 'fresh consideration'?  The Deputy Judge found that it did.  Were the restrictive covenant provisions enforceable?  The Deputy Judge found that they were...but ultimately, it didn't matter, because even without an express written contract, an employee impliedly owes a duty of fidelity:
  • Serve the employer faithfully
  • Not to compete with the employer
  • Not to reveal confidential information
  • Not to conceal from the employer facts which ought to be revealed
  • To provide full time service to the employer
So, contract or not, Vardalas engaged in misconduct by starting up a competing business.  (Had it been a non-competing business, that would have had different considerations...it might still have violated the terms of the employment contract, but would not so obviously have jeopardized legitimate interests of the employer.)

Worse, when confronted about Nanos, Vardalas lied about it.

The real problem for Vardalas arises because he was often the first point of contact with new clients - he was responsible for client intakes and initial client screenings and pre-interviews.  This required a high degree of trust, and afforded Vardalas an opportunity to steer away clients from BC to Nomos.

Thus, the Deputy Judge was satisfied that Vardalas' conduct was incompatible with his employment obligations, and found that Vardalas had just cause.  (The Deputy Judge went on to assess damages, finding a reasonable notice period of 5 months, but after mitigation income and a 'gratuitous payment' by the defendants of $4,000, the damages only would have been less than $2,700.)

Commentary

I don't really take issue with any of the Deputy Judge's findings - the specifics of the 'fresh consideration' aren't really set out in much detail in the decision, but from his description, it certainly sounds like that finding was available.  It doesn't surprise me that he concluded that there was just cause, and the reasonable notice period and treatment of mitigation earnings seem perfectly appropriate.  (It appears that the defence actually called the mitigation employer to the stand to give evidence of mitigation earnings.  This is very unusual...but recall my remarks recently about how the onus of proving mitigation earnings is on the defendant?  There you go.)

However, there are two issues I would highlight:  Firstly, the treatment of additional misconduct - while obiter - is troubling, and secondly, there's a potential condonation argument that doesn't really seem to have been addressed.

Additional Misconduct

The employer took a little bit of a 'kitchen sink' approach, raising prior issues of insubordination and absenteeism by Vardalas to bolster its case for cause.  Following one incident, the decision notes that Vardalas "refused to meet with the defendants' Office Manager to discuss this incident and also questioned the Office Manager's authority to deal with the issue".

However, there is absolutely no indication on the face of the decision that any discipline ever occurred for any of these incidents.

The Deputy Judge noted that the 'Nomos' issue was enough to constitute just cause, but even if it wasn't, he would have cumulatively considered its effect with the prior insubordination issues.  And, unless there was discipline for such events, it would have been questionable to do so.  He cited authority for the proposition that prior misconduct can be weighed as well, but such accumulation typically requires a disciplinary record for that misconduct.

Condonation is said to be subject to an implied condition of 'future good behaviour', and there's a line of cases suggesting that 'condoned' behaviour can be used cumulatively with new misconduct to warrant summary dismissal for cause.  However, the language in that line of cases is a little dated, and the word 'condoned' is being used there in the sense of 'forbearance from dismissal at the time', whereas nowadays condonation also may refer to conduct which has tacitly been accepted by the employer.  (For example, if my employee shows up half an hour late to work every day, and I don't object, then the employee comes to believe that I'm okay with it.  My condonation of him showing up late every day last month isn't subject to an implied term that he will show up on time tomorrow...unless I've disciplined him and made it clear that I expect him to show up on time moving forward.)  To borrow an uncited passage from Lancaster House's eText on dismissal, "An employer cannot treat matters of which it was previously aware, but which it never brought to the employee's attention, as cumulativecause for dismissal."

From a policy perspective, that's the preferable analysis, too:  It would be troubling to allow an employer to take the "kitchen sink" approach to just cause, piling onto a new allegation of misconduct every gripe the employer had throughout the employment relationship, but for which discipline was never issued - employees with no disciplinary record, no awareness that they failed to meet the employer's expectations in any way, would suddenly be faced with a mountain of previously unknown complaints.  Not only would it lead to just cause positions being taken against a lot of employees who had no reason to believe their employment was ever in jeopardy, but it would also be a huge burden on the court system and on the parties in terms of complexity and cost of proceedings - suddenly, you have to litigate about a dozen customer complaints received over the last decade, and about a handful of allegedly unjustified absences over the same period, and about that one time in 2007 when the employee allegedly swore at a co-worker...  Discipline not only makes the litigation much cleaner, but it's much healthier in terms of employee relations.

Condonation

There was a brief reference to a "gratuitous payment" made by the employer, and no indication as to exactly how that came about.

There's conflicting jurisprudence on how that might play out:  There's a 1964 case from the Ontario High Court of Justice, affirmed by the Court of Appeal, called Tracey v. Swansea Construction Co. Ltd., often cited as an authority on condonation, but also interesting for a more narrow proposition regarding the form of termination of the contract:
The simple position appears to me to be this. The defendant desired to dismiss the plaintiff. If there was misconduct or default sufficient to justify discharge it had one of two courses open to it. It could have summarily dismissed for cause or it could have decided to overlook, waive or condone the misconduct and terminate upon notice, or payment in lieu of notice, in accordance with the provision of the contract for termination implied by law. It could not do both, for one would operate as a repudiation of the contract for a breach thereof, and the other, conversely, would operate as an affirmation of the contract and the adoption of its provisions for termination. The fact that the defendant was in error as to the length of, or sufficiency of, the notice given could in no way alter the effect of its intention as expressed by its conduct.
Legal language is often inaccessible, and the older the language, the more foreign it tends to appear.  In a nutshell, what that says is this:  If you fire on a not-for-cause basis, then when the employee insists on more notice than you anticipated, you may be precluded from asserting cause afterward.  From a policy perspective, it makes sense:  Just cause is a very heavy hammer, and shouldn't be used as a matter of course to try to intimidate employees into accepting less than their entitlements.  There's also a sound legal logic underlying it.

However, it's not a hard-and-fast rule.  After-acquired cause is an easy exception - we fired you on a not-for-cause basis, but that was before we discovered that you had been embezzling large sums of money.  Following Tracey, courts have also found that intention is of great importance, and so there have been cases where an employer was permitted to renege on a 'not-for-case' dismissal and plead cause where the intention was something other than condonation (say, to spare the employee's feelings).

So, when I see a reference to a 'gratuitious payment' which would ostensibly satisfy an employee's ESA minimums, that raises a red flag for me as to whether or not a just cause defence is still available.  But, as I said, the facts surrounding the payment aren't clear here.

*****

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, July 22, 2014

It's in the paper; it must be true!

There's a piece in the Toronto Star today about wrongful dismissals and summary judgment motions.  This is a topic I've written about on a number of occasions, including recently following the decision in Beatty v. Best Theratronics.

The Star piece, by Toronto lawyer Sheryl Smolkin, is entitled "Court opens way to faster settlements of wrongful dismissal cases" - a deceptive headline, in my view, but in my media experience, the headlines are typically drafted by the editors.  In law, when we talk about "settlement", we're talking about a resolution reached through the agreement of the parties.  ("Settle" can have other meanings, and you might say that courts 'settle' disputes, but it's confusing at minimum to say that a 'settlement' is reached through a court order.)

What the piece is getting at, ultimately, is the impact of the Hryniak decision from the Supreme Court earlier this year on wrongful dismissal cases.  Recall my commentary back in January:
Civil trials are relatively rare already.  And while the Hryniak case remains an example of a rare case requiring a trial, the framework laid out in this decision will send very large numbers of other cases to summary judgment motions - probably including most wrongful dismissal actions.

I've posted about several other wrongful dismissal actions decided on summary judgment in the past; it can be a very expeditious way of dealing with a matter.  The case of Pegus v. Ecorite Distributors Ltd. comes to mind as a decision very reflective of the 'proportionality' concerns raised by the SCC in Hryniak.  (In that case, there was a motion for summary judgment based on 'deemed admissions' by the employer in a low-dollar-value case which had been pending for three years.  The employer sought to withdraw the deemed admissions, and Justice Gray permitted said withdrawal, but proceeded to decide the issues in dispute anyways and grant summary judgment.)

I suspect that we'll be seeing a lot more summary judgment motions in the days to come.
Basically, Ms. Smolkin is saying something similar, that Hryniak has the result that a lot of wrongful dismissal matters will be resolved by way of summary judgment motion.  The article covers a lot of territory, in terms of civil litigation process, and is remarkably short for doing so, with the result that it oversimplifies a lot of what it discusses, and also with the result of overstating the article's own thesis:  The reality is that "straightforward wrongful dismissal cases" were always amenable to summary judgment motion, where the basic facts were undisputed.  The impact of Hryniak is that the scope of wrongful dismissal case amenable to summary judgment motion is even wider than ever.  It's no longer the case that a dispute as to the character of employment will necessary recall a trial, for example.  After Hryniak, the fact that certain facts are disputed will not be fatal to a summary judgment motion.

But what's particularly troubling is the blanket statement that a summary judgment motion "is not a good idea if you are also asking for punitive or aggravated damages or damages for mental stress.  In these situations the issues are sufficiently complex that a full trial is required".

Incorrect on both counts, as evidenced by the Beatty case.  The takeaway from Beatty was this:  You can still bring a motion for summary judgment even if you're seeking punitive and aggravated damages - you might not get those damages on summary judgment if the issues require a trial, but even then the judge may order a "summary trial" just of those issues, granting judgment on the rest.  So that can still be a "good idea", and doesn't require the matter to go to a "full trial".  Beatty will still be an immensely more affordable process than the conventional full trial it would have required pre-Hryniak.

Here's the rub, though:  Ms. Smolkin knows that.  When Stuart Rudner pointed it out on Twitter, she responded, "Thanks Stuart.  I wrote about that decision but parts of the article got cut."

You see, Ms. Smolkin is a lawyer who routinely writes about employment law matters.  She knows the area of law quite well, and is a very credible source, being published out of a major news outlet.  But, in the print media, the editor has the final say in what gets printed, and that may or may not omit crucial information or context.

Brevity is extremely important in journalism.  Lawyers tend to be on the other extreme - I'll be the first to admit it, but the first of a very long line.  Part of that is because context is so very important in all things legal.  So lawyers make things longer to avoid over-generalizing or to make sure they're not omitting important details, and that can be a problem...but what happened to Ms. Smolkin's piece is arguably worse, because the cuts ended up leaving an overall impression which is demonstrably untrue.

This is one of several reasons to always remain sceptical of what you read in the newspaper.  Even if it's a credible newspaper, written by a sophisticated journalist who knows the topic, that doesn't necessarily make it true.

And to a lesser extent, even when you're reading unedited materials directly from a credible source (such as this blog), you should still remain a bit sceptical, because context is everything, and there's absolutely no substitute for getting legal advice dealing specifically with your legal issue directly from a lawyer.

*****

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.