Ford Government: Ontario's 13-Week Layoff Limit Eliminated During COVID Emergency

The Ford Government has made a crucial, temporary change to Ontario's Employment Standards Act (ESA) that will impact countless employers and employees in the Province.

By operation of Ontario Regulation 228/20, published on May 29, 2020, the ordinary 13-week limit on the duration of workplace layoffs has effectively been suspended. This time-limit will not apply to employees who have been laid off due to COVID-related slowdowns and closures.

The Regulation will apply from March 1, 2020 until six-weeks after the Government ends its March 17 emergency COVID-19 declaration. It repesents a significant change that many employers have been clamouring for.

Ordinarily, where an employee is not recalled from a layoff within 13 weeks, the layoff is deemed to be a termination of employment by operation of section 56 (2)(a) of the ESA. 

There are certain exceptions in the Act to this deemed termination rule. These occur:

• Where the extended layoff is less than 35 weeks in any period of 52 consecutive weeks, and 
• The employee continues to receive substantial payments from the employer and
• The employer continues benefit payments for the employee.

Essentially, this Regulation means employers will no longer have a risk of liability for statutory notice or severance payments to employees who have been laid off for more than 13 weeks due to COVID-19, or to those whose hours or compensation are reduced during the COVID period.

In addition, the Regulation provides that no COVID-related reductions in employees' hours or compensation on or after March 1, 2020 will be treated as a constructive dismissal under the Act.

Many Ontario workplaces that are still closed due to COVID would have been approaching the statutory, 13-week layoff limit within the next week or two.

There was great concern among small employers and profesional practices, in particular, that they would face enormous, mandatory severance obligations to multiple employees at once at the end of the 13 week layoff period, even if they were still unable to open.

For some employers, such severance obligations could have become bankruptcy-triggering events.

As examples, most restaurants and mall-based retail outlets are not yet legally permitted to fully reopen, and after months of closure and partial-closures due the the Emergency Declaration, many could not possibly have withstood the costs of mandatory notice and severance obligations.

Similarly, many Ontario dentists - who until changes announced May 31 remained subject to significant regulatory restrictions that prevented them from providing non-urgent care, seeing recall patients or offering dental hygiene services - have simply been unable to re-open or to recall employees, given the potentially low demand for the few services they had been able to provide.

While some have argued that this Regulation represents a major blow for employees, I'm not pursuaded that there is much truth to that.

With the elimination of the 13-week layoff limit, employees ultimately get some degree of job protection. They will not automatically be deemed to be terminated. Many love their jobs and are chomping at their collective bits to get back to work, as soon as possible.  They are prepared to work collaboratively with their employers toward re-opening and do not want to be automatically dismissed by operation of the ESA.

For those that ultimately will not be returning, their entitlements to notice and severance have been delayed, not eliminated. Most are currently receiving EI or other government benefits, in the interim. That's not a perfect solution, of course, and the uncertainty about the future remains.

Without this Regulation, however, many workplaces faced a serious risk of insolvency and closure due to notice and other statutory obligations, alone.  This legislation temporarily removes that immediate risk, and gives employers additional time to get back on their financial feet so that jobs can be preserved.

Beyond that, this Regulation 228/20 gives employers and employees the flexibiity - with mitigated legal risk - to implement the gradual, staged approach to re-opending mandated by the Province and by public health authorities.

COVID closures were not the fault of employers or employees. This Regulation appears to be a fair effort to share the burden, balance the respective interests and at very least, to buy some much needed time.

As a final note, while the Regulation addresses the statutory standards set out in the ESA, it does not at first glance appear to impact or preclude Court-based claims for damages for wrongful dismissal or constructive dismissal. This is particularly important for those employees who did not expressly agree to their current layoffs and those who have not signed valid employment agreements that permit such layoffs.

It should also be noted that his new Regulation will not be applicable to those whose workplaces reduce hours or compensation for discriminatory or improper reasons that are unrelated to COVID, or to employers that otherwise go rogue. 

As always, there remains uncertainty as to how the Courts will ultimately address such claims.  Legal advice should be obtained by any employee with concerns related to COVID in the workpace.

To arrange a consultation with a Wise Law workplace and employment lawyer, click here.

- Garry J. Wise, Toronto

Visit our Toronto Law Office website: www.wiselaw.net

Ontario Employment Law: Summary Judgment In Wrongful Dismissal Actions

In Thorne v. The Hudson Bay Company, a case decided September 21, 2011, the Plaintiff, a 37.5 year employee who had been dismissed without just cause sued for wrongful dismissal after receiving a bare-bones severance package that was limited to her Employment Standard Act minimums.

The Plaintiff, an Allocation Associate,  moved for summary judgment, arguing that since there were few factual issues which were contentious between the parties, the judge could rule on the period of reasonable notice she was owed "without the need for the forensic machinery of a trial".

Based on consideration of the legally relevant factors, the Defendant employer took the position that she was owed 12-16 months of pay in lieu of notice. Considering the same factors, the Plaintiff employee took the position she was owed 24-30 months, a very divergent position indeed.

Under Rule 20.04 of the Ontario Rules of Civil Procedure, summary judgment motions are appropriate where the court is satisfied that there is "no genuine issue requiring a trial."

In the affidavits filed by the parties upon the motion, they took starkly contrasting views on the character of the Plaintiff's employment. While she did not have a supervisory function, the Plaintiff claimed that her job was far from entry-level and clerical. She, for example, provided operational support to the high volume merchandise industry which required a solid grasp of the employer's business. The Defendant argued that the Plaintiff's job was clerical, and stated she merely produced purchase orders.

Campbell J. held that a trial would be required to resolve the disagreement:

Having carefully examined the evidence that has been provided by the parties on this issue, it is apparent that they view the nature of the plaintiff’s job very differently. Their disagreement on this issue is not just a matter of the appropriate legal characterization of the job, but rather extends to the nature and details of the responsibilities performed by the plaintiff. The evidence filed by the parties on this motion, none of which has yet been subjected to cross-examination, is in stark conflict. In my opinion, it is simply not possible to fairly and appropriately resolve this important issue without the machinery of a trial. 

Faced with this fundamentally conflicting evidentiary record it is simply not possible to resolve this important factual dispute without the forensic machinery of a trial. Without hearing viva voce testimony from these witnesses as to their understanding of the specific details of the plaintiff’s job responsibilities, and being able to assess their credibility and the reliability of their evidence, and seeing the impact of cross-examination, there is simply no fair and accurate way of resolving the dispute between the parties on this important issue.

Hence, Justice Campbell concluded that in all the circumstances there was a genuine issue for trial given that character of employment remains a relevant factor in the determination of reasonable notice:

I appreciate that the court is entitled to assume that the parties have put forward their best evidence on the summary judgment motion and that, if the case were to go to trial, no additional evidence would be presented. See: Rogers Cable TV Ltd v. 373041 Ontario Ltd., 1994 CanLII 7367 (ON SC), (1994), 22 O.R. (3d) 25 (Gen.Div) at para. 4; Bluestone v. Enroute Restaurants 1994 CanLII 814 (ON CA), (1994), 18 O.R. (3d) 481 (C.A.) at para. 30; Dawson v. Rexcraft Storage & Warehouse Inc. 1998 CanLII 4831 (ON CA), (1998), 164 D.L.R. (4th) 257 (Ont.C.A.) at para. 17. But in some cases, like the present one, that assumption is of little assistance in actually resolving the factual dispute between the parties, as the court is limited to paper review of the evidence provided by the parties, without greater explanation, and wholly untested by cross-examination.

As an aside, for those judges and academic who have doubted the importance of character of employment in the determination of reasonable notice, Justice Campbell had this to say:

. . . it cannot be said that the resolution of this factual issue is of no importance to the outcome of this case. There are authorities which suggest that the character of the employee’s employment may be “a factor of declining relative importance” in the overall analysis of all of the Bardal factors. See: Di Tomaso v. Crown Metal Packaging Canada LP, 2011 ONCA 469 (CanLII), 2011 ONCA 469, at para.22-29; Medis Health and Pharmaceutical Services Inc. v. Bramble 1999 CanLII 13124 (NB CA), (1999), 175 D.L.R. (4th) 385 (N.B.C.A.) at para. 64; Vibert v. Paulin 2008 NBCA 23 (CanLII), (2008), 291 D.L.R. (4th) 302 (N.B.C.A.). Nevertheless, unless and until the governing legal standard for determining “reasonable notice” is changed in a more fundamental way, the character of the employment of the employee will properly remain a factor that must be taken into account in an appropriately “holistic review” of all of the Bardal factors. The fact that the parties in this case have devoted so much energy to producing evidence on this issue demonstrates their own appreciation of this legal reality.

When it comes to what he himself refers to as the "controversial scope of summary judgment motions", there is no doubt that Justice Campbell's reasons for decision raise as many questions as they do answers.

- Robert Tanha, Toronto

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Ontario Employment Law: Disability and Frustration of An Employment Contract

Frustration of an employment contract occurs when, through no fault of either party, an event occurs that makes the contract impossible to perform.

Under Ontario law, where an employee is suffering from a permanent disability with no reasonable prospect of returning to work in the reasonably foreseeable future, frustration may arise. Where frustration occurs, both the employee and the employer are relieved of their obligations, the employment contract has come to a lawful, albeit unfortunate, end and no damages may be awarded for wrongful dismissal.

If an employer can demonstrate that such disability has created a frustration of the employment contract, the employer may lawfully terminate the employment, simply by providing the employee with the required severance entitlements as spelled out in the Ontario Employment Standards Act.

But, unsurprisingly, it's not quite that simple. A number of factors will be canvassed by a court that is considering whether the doctrine of frustration applies.

Is a Disability Permanent ? - Employers' Due Diligence Obligation

In Naccarto v. Costco, decided June 15, 2010, the defendant employer, Costco, sought to rely on the doctrine of frustration in defending against a wrongful dismissal claim launched by a thirty-seven year (37) old Return-to-Vendor Clerk who had been terminated from his employment after seventeen (17) years of service.

In the case, the Plaintiff, Mr. Naccarto, commenced a medical leave arising from clinical depression. At the time of termination, Mr. Naccarto had been on a medical leave for over five years.

The Defendant employer relied on the following, in support of its decision that the employment contract had been frustrated, giving it the right to terminate the Plaintiff's employment:

1. The Plaintiff's long and continuing absence from work, which equated to a period of five years;


2. The Plaintiff had been in receipt of long-term benefits which require a finding of "total disability"; and


3. The statements of one of the Plaintiff's doctor that he did not know when the Plaintiff's medical condition would improve and did not know when he would be able to return to work

According to the Defendant, this demonstrated that the Plaintiff was "permanently disabled" and could not fulfill the basic obligations he owed as employee for the foreseeable future, justifying its decision to terminate him.

The Court underlined that the "burden" is squarely on the employer to prove frustration of contract, turning immediately to the medical evidence:

The law with respect to the burden of proof on an employer to establish a frustration of contract has been very well set out by Justice Perell in the case of Dragone v. Riva Plumbing Limited, 2007 CanLII 40543 (ON S.C.), 2007 CanLII 40543 (ON. S.C.). In that case, the employee had been absence from work due to illness for a period of approximately fourteen months. The evidence was that the employee did not know when she would get better, but that based on the evidence there was at least hope that she would eventually be able to return to work. The Court found that a permanent incapacity to return to work had not been proven. Justice Perell found that the onus was on the employer to prove that the contract had become frustrated and that it was not the employee’s onus to provide medical evidence with respect to her ultimate prognosis.

In this case, although the duration of the illness is significant, a period of five years, the medical evidence does not support a finding that there is no reasonable likelihood of the employee returning to work in reasonably foreseeable future. Rather, the evidence is that the employee is still being treated by his doctor as a new psychiatrist is being sought.

Costco could have followed up with the doctor to ask further questions with respect to the likelihood of a return to work in the foreseeable future, but it did not do so. Costco has not, in my opinion, provided this Court with the necessary medical evidence to support a finding that it is unlikely that Mr. Naccarato will be unable to work in the reasonably foreseeable future.

In other words, an employer has a "due diligence obligation." It must satisfy itself on a reasonable basis as at the time of termination that the medical documentation supports a finding that "there is no reasonable likelihood of the employee returning to work in the reasonably foreseeable future."

If the medical evidence is negative or equivocal on this crucial point - as in the case under discussion - then frustration may not have been proven by an employer.

The fact that the plaintiff employee was on long-term disability benefits which required "total disability" did not necessarily mean he was "permanently disabled" as defined by the common law, for the purpose of applying the doctrine of frustration.

Is the Absence Disruptive to the Employer's Operation?

Turning to another frustration of the employment case, Dragone v. Riva Plumbing Ltd. [1999] O.J. No. 1543 (Gen. Div.), Pollack J. considered another factor, namely whether the nature of the services performed by the plaintiff employee in the case were integral to the organization, straining against a very long-term of absence being required for a finding of frustration:

. . . To determine if a contract has been frustrated, regard must be had to the relationship of the term of the incapacity or absence from work to the duration of the contract, and to the nature of the services to be performed.

In this case, the plaintiff employee's minor role in the organization meant that his long absence had not been a disruption to the Defendant Costco's business. He was easily replaced in his period of absence and no direct or substantial losses accrued to the corporate Defendant as a result of such absence.

Given the two above factors, Justice Pollock found that "frustration" had not been established in the case. Nevertheless, the court considered a further argument put forward by the Plaintiff:

Mr. Naccarato further argues that there is a trend of our courts to refuse to apply the doctrine of frustration of contract in situations where the employee is entitled to receive short-term and long-term disability benefits due to illness. The submission is made that as such benefits are provided by the employer, it cannot be said that the event of the employee’s illness is something that was not reasonably contemplated by the parties. The frustration of contract must be delayed until the expiration of the period during which the benefits are provided for by the employer. Costco’s response to this argument is that what is not within the contemplation of the parties is the duration of the employee’s illness and not the fact that the employee may get ill.

Justice Perell, in the Dragone case, considers the effect of the presence of the long-term sick leave and disability benefits:

The presence of long-term sick leave and disability benefits indicates a greater tolerance for the duration of an employee’s absence before frustration occurs. Indeed, it has been suggested that contracting for these benefits may postpone the time of frustration because it may be inferred that the contracting parties anticipated that the employee might take leave for illness. See: Antonacci v. Great Atlantic & Pacific Co. of Canada, [1998] O.J. No. 876 (Gen. Div.), aff’d. In part [2000] O.J. No. 280 (C.A.); E.E. Mole and M.J. Stendon, Wrongful Dismissal Handbook (3^rd ed.) (Markham: LexisNexis Canada Ltd., 2004), chapter B-4.”

An Open Question: Implications of An Employer's Provision of Disability Coverage

Justice Pollock's reasons leave open the question (raised in the Plaintiff's submissions) of whether or not a Defendant employer who offers an employee both long-term and short-term disability is barred from relying on frustration of the employment contract, for reason that it has contemplated the possibility of the Plaintiff's illness leading to a long leave of absence and essentially has contracted for it. He also leaves the question (also raised in the Plaintiff's submissions) of whether frustration of contract can only arise at the end of the period of benefit receipt by a Plaintiff employee, like Mr. Naccarato, for another day.

As a result of his rejection of the employer's defence of frustration, Justice Pollock finds that Mr. Naccarato was wrongfully dismissed, awarding him ten (10) months of pay in lieu of reasonable notice in view of his relatively young age of thirty-seven.

If you believe you have been wrongfully dismissed, please contact a lawyer who can advise as to your rights and entitlements both under the Ontario Employment Standards Act and at common law.

- Robert Tanha, Toronto

Visit our Toronto Law Firm website: www.wiselaw.net

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Ontario Employment Law: Reprisal For Asserting Rights Pursuant To An Employment Contract Amounts To Wrongful Dismissal

In Brown v. 1714717 Ontario Inc., decided April 26, 2011, the Ontario Labour Relations Board found that an employer had wrongfully terminated the applicant employee when it dismissed her without cause, and in reprisal for requesting and taking time off for a vacation.

Because the employee in the case had completed less than twelve months of employment at the time she asked for time-off, she was not entitled to take a vacation or receive vacation pay under Part XI of the Ontario Employment Standards Act. Therefore, she could not insist on these entitlements as a matter of law.

Nonetheless, the employer acceded to her vacation request for time off. It also paid the applicant her accrued vacation pay. In so doing, the employer had conferred on to the applicant a greater right or benefit than the "minimum standard" provided for under the Act.

Subsection 5(2) of the Act reads as follows:

(2) If one or more provisions in an employment contract or in another act that directly relate to the same subject matter as an employment standard provide a greater benefit to an employee than the employment standard, the provision or provisions of the contract or Act apply and the employment standard does not apply.

Having given the applicant employee a "greater right" in permitting her take the requested time off, the employer could not then reprise against her for exercising the right merely because it was one that flowed from the employment agreement, as opposed to from the Act. This was equally a violation of section 74 of the Ontario Employment Standards Act, which, in part, reads as follows:

(1) No employer or person acting on behalf of an employer shall intimidate, dismiss or otherwise penalize an employee or threaten to do so,

(a) because the employee

(iv) exercises or attempts to exercise a right under this Act

Because the responding party employer did not participate in the hearing, leaving the applicant's testimony uncontradicted and fully intact, the employer could not discharge its burden to demonstrate that it had not contravened the Act by dismissing the employee for requesting and taking a vacation from work (see subsection 74(2) of the Act).

Thus, the board found that the applicant had been wrongfully dismissed. In addition to termination pay, which she had already received from the respondent employer, the board awarded her $500.00 in damages for the employer's violation of the reprisal provisions of the Act.

- Robert Tanha, Toronto

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Altman v. Steve's Music: Moral and Punitive Damages Awarded in Ontario Wrongful Dismissal Action

A leading Canadian musical instrument retailer, Steve’s Music, has been ordered by the Ontario Superior Court to to pay more than $200,000.00 in damages, including $55,000 in moral and punitive damages, to a wrongfully terminated 59 year-old store manager with more than thirty years of service.

In Altman v. Steve's Music, a March 8, 2011 ruling by Madame Justice Katherine J. Corrick, Steve's was held liable for the wrongful dismissal of a long-term employee who had been diagnosed with lung cancer. In addition to the moral and punitive damages granted, the Plaintiff was awarded twenty-two months' salary in lieu of notice and all amounts that were outstanding under the Employment Standards Act.

After being diagnosed with lung cancer, the Plaintiff, Ms. Altman, was required to reduce her hours and to take two significant medical leaves, totalling approximately six months. Ms. Altman was terminated without reasonable notice, some 16 months following her diagnosis.

The Plaintiff was devastated by the termination and suffered a major depressive episode. The employer contended that Ms. Altman's employment had been frustrated by her illness and that she accordingly had no legal entitlement to compensation upon the termination.

The manner of the termination.

The Court took considerable exception to the manner in which the termination was conducted.

The employer did not directly communicate with Ms. Altman - rather, it outsourced the termination to its lawyers, whose handling of the matter was anything but delicate. Justice Corrick referenced pertinent passages from two letters sent by the employer's law firm to the Plaintiff for this purpose:

First Letter

We are the attorneys representing the interests of your employer Steve's Music....According to the information provided by our client, it appears that you have been remiss in your duties and obligations towards Steve's Music in failing to work minimum number of hours required by your employer from Monday to Friday . ... In view of the foregoing, we have as instructions to advise you that unless you fulfill your obligations toward your employer in full by working regular work days [sic] as stipulated by your employer's directives, Steve's Music will have no alternative but to advise you that your employment will be terminated, without further notice or delay.

Second Letter

We have as instructions from our client to advise you that in light of our correspondence addressed to both you and your attorney since October 2008 to date, as well as your application for long term disability and the fact that your position with Steve's Music, has since been abolished, Steve's Music has no obligation to reinstate you. . . . Steve's Music was full entitled to offset and deduct from your renumeration or for that matter any other sums due and owing to you, for your absenteeism, late arrivals and departures.

The first letter had caused the medically frail Ms. Altman to return to work the day immediately following receipt, for fear that if she did otherwise she would be terminated.

That would be the last day Ms. Altman worked at Steve's. Her medical needs would require her to begin a three-month medical leave immediately thereafter, which was followed by a further three-month medical leave. These leaves, apparently, were the last straws for Steve's Music.

Madame Justice Corrick's ruling addresses five issues:

1. Does Steve's owe Ms. Altman any outstanding compensation for severance, wages, vacation, commission, bonus and deferred profit sharing plan?


2. Was Ms. Altman's employment contract frustrated?


3. If Ms. Altman's employment contract was not frustrated, what is the appropriate period of notice?


4. Are moral damages for mental distress appropriate, and if so, what is the quantum?


5. Are punitive damages appropriate, and if so, what is the quantum?

Outstanding Compensation

The Defendant took the position that it was entitled to withhold outstanding salary and substantial accumulated vacation pay from the Plaintiff, claiming set-off for overpayment. It had continued to pay Ms. Altman's full salary while she was receiving treatment for cancer and absent. It claimed a credit for these "gratuitous" payments.

Corrick J. flatly rejected the employer's position in this regard. She noted that the situations in which an employer can withhold outstanding salary and vacation pay are very narrow, indeed, and held that if Steve's genuinely believed that Ms. Altman was in arrears on account of salary, it should have cross-claimed or brought an action to recover these amounts.

Moreover, Corrick J. noted that Steve's had voluntarily made the decision to continue to pay salary to the Plaintiff while she was working at less than full-capacity; such arrangement was not contingent on Ms. Altman surrendering her other employee entitlements.

Employer's Defence of Frustration

In considering the defence of frustration put forward by Steve's Music, Corrick J. made a number of important points, each of which is worthy of specific note:

1. Since the employer lacked medical evidence that Ms. Altman's condition was a "permanent disability" as at the date of termination (the relevant time at which the Plaintiff's disability is to be assessed) such that she would no longer be able to perform her duties at work, it could not rely on the doctrine of frustration to relieve it from its legal obligation on termination. The medical reports the Defendant sought to rely on were written more than a year after Steve's terminated Ms. Altman's employment, after Ms. Altman's cancer had spread to her brain and bones.


2. Ms. Altman's application for long term disability benefits was not an admission by her that she had a "permanent disability" at law for the purposes of applying the doctrine of frustration of contract, even if she had met the definition of "permanent disability" as provided for in the Defendant company's Group Insurance Policy.


3. Ms. Altman's job involved considerable paperwork. It was not a physical job entailing heavy lifting. Thus, the standard that had to be met by Steve's Music to show that Ms. Altman was physically incapable of performing her job was a high one, which it simply could not meet on the facts of the case.


4. Despite the Defendant employer's bald assertion to the contrary, there was no evidence whatsoever that Ms. Altman had been remiss in her duties at work or that anyone was dissatisfied with her work. The fact that her cancer medically required her to work reduced hours clearly did not constitute neglect of duty.

The Period of Reasonable Notice

To determine the period of reasonable notice owed to Ms. Altman, Corrick J. turned to the oft-cited Bardal factors finding that Ms. Altman was entitled to 22 months of notice. The Court underscored that Ms. Altman's vulnerable medical state and age meant that her chances for reemployment into a comparable position were very low, and justified an extended period of notice.

Further, the long-term disability payments received by Ms. Altman during the notice period were not deductible because she, not Steve's Music, had paid the premiums, and the insurance company, not her employer, had paid the benefits.

Mitigation

Corrick J. found that Ms. Altman's modest job search efforts were enough to meet her duty at common law, and that Steve's has not discharged its onus of proving a failure to mitigate.

Moral Damages

In deciding whether Ms. Altman should be awarded moral damages, Corrick J. focused on the manner of termination and the actual damage that had been caused to the Plaintiff by the Defendant's misconduct in this regard.

She accepted medical evidence which demonstrated that Ms. Altman had suffered psychological distress consisting of a major depressive episode of moderate severity. The extent of the trauma suffered by Ms. Altman is revealed in Justice Corrick's reviews of the expert medical evidence adduced by the Plaintiff:

Dr. Li met Ms. Alman after she had undergone surgery, chemotherapy and radiation therapy. Dr. Brade referred Ms. Altman to Dr. Li as Ms. Altman was suffering from psychological distress. Dr. Li diagnosed her as suffering from a major depressive episode of moderate severity. In Dr. Li's opinion, this illness was precipitated by Ms. Altman's receipt by bailiff of October 7, 2008 letter from Kaufman Laramee informing her that she will be terminated if she does not work full-time hours. Dr. Li testified that this letter was more traumatic for Ms. Altman than being diagnosed with cancer or being told that her cancer could not be cured.

Dr. Li testified that Ms. Altman's depression required treatment because the presence of depression in cancer patients is very strongly co-related with poor survival, poor response to treatment, and higher mortality. . . .

Although Ms. Altman's depression remitted, her psychological distress has not abated, according to Dr. Li. Ms. Alman continues to be distressed over the conflicts she has had with her employer, which is activating her hormonal stress system and putting her health at further risk.

In deciding whether moral damages were warranted in Ms. Altman's case, Corrick J. emphasized that the employer's actions had to be viewed in the context of the employee's age, length of service, state of health and relationship with Steve's Music. The Court noted the following, justifying a significant award of moral damages:

1. The letters, in particular the second letter, were highly insensitive and inappropriate, and did not accord with the way the law requires employers to treat employees


2. If the correspondence was issued in error, why hadn't anyone from Steve's music contacted the Plaintiff to rectify the error?


3. The Defendant employer could not have issued two aberrant letters in error; this defied coincidence.


4. Given the Plaintiff's length of service and dedication to her job, which she had performed without incident, management of Steve's Music should have spoken with the Plaintiff about her termination personally, not pawned this off on their lawyers to deal with in a cavalier manner.


5. The letters were replete with mistruths from the Defendant employer's lawyers and signified that the Defendant employer was engaged in a campaign of deceit, which campaign attempted to conceal the true reasons for the Plaintiff's termination: the fact that her health problems had made her too much of burden and liability for Steve's to bear. Her job performance and competence were beyond reproach.

Corrick J. awarded $35,000.00 under this head of damages, holding as follows:

[117] The Supreme Court of Canada’s decision in Honda Canada Inc. v. Keays,[37] confirmed its earlier ruling in Wallace v. United Grain Growers Ltd.[38] that damages resulting from the manner of dismissal will be available if the employer engages in conduct during the course of dismissal that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive.”[39] The normal distress and hurt feelings resulting from dismissal from employment are not compensable.[40] The award of damages for mental distress caused by the manner of termination must reflect the actual damage caused and is meant to be compensatory in nature.

[118] In my view, Ms. Altman is entitled to moral damages...

[129] The manner of communicating termination has been held to justify damages for mental distress. In Bohemier v. Storwal International Inc. the Ontario Court of Appeal upheld an award of damages for mental distress in circumstances where an employee of 35 years was terminated by means of a cold and perfunctory letter delivered to his house by taxi on a Friday evening.

[130] Similarly, an employer’s harsh treatment of an employee known to be in difficult circumstances has been held to be the proper subject of damages for mental distress. In Rae v. Attrell Hyundai Subaru the employer sent notice of dismissal to an employee of four years by courier two weeks prior to the birth of her child. The Court of Appeal upheld the trial judge’s finding that this inexcusable conduct on the part of the employer merited a two-month increase in notice.

[131] Steve’s treatment of Ms. Altman was callous and insensitive. She was a 30-year employee who had been treated like family, and who worked for Steve’s as if she were a member of the family. She deserved to be treated better than twice having a bailiff deliver her a letter replete with mistruths from Steve’s lawyers – especially when Steve’s knew she was recovering from cancer treatment. No one in the management of Steve’s had the decency or courtesy to speak to her personally to express their dissatisfaction with the work arrangement to which they had previously agreed. I conclude that once Steve’s decided that Ms. Altman had become more of a liability than an asset to the organization because of her cancer, they abandoned her to be dealt with by their lawyers. These letters devastated Ms. Altman and caused her significant mental distress to the point of clinical depression. Ms. Altman’s mental distress has been long lasting and is ongoing.

[132] I award Ms. Altman damages in the amount of $35,000.00 as compensatory damages as a result of Steve’s breach of its duty to deal with Ms. Altman in good faith and with fairness in the manner in which they terminated her employment.

Punitive Damages

In finding that the Defendant's misconduct also called for punitive damages, Corrick J. noted the following:

1. The employer had committed multiple violations of the Ontario Employment Standards Act, including withholding salary improperly and refusing to pay Ms. Altman's statutory minimum termination pay as set out in the Act. This constituted an independent, actionable wrong, a prerequisite for an award of punitive damages;


2. The Defendant had roadblocked the Plaintiff's attempts to obtain long-term disability benefits long after her wrongful termination by failing to complete the Policyholder's Statement in the claim form, despite numerous attempts by Ms. Altman and others to get it to do so;


3. The Plaintiff had to retain counsel to obtain her Record of Employment which would permit her to apply for and receive Employment Insurance Benefits; and


4. The Defendant employer had chosen to fire Ms. Altman when her illness made her more of a liability to the business than an asset.

Corrick J. awarded $20,000.00 under this head of damages, citing the employer's "reprehensible and high-handed conduct:"

[139] Steve’s conduct must be viewed in the totality of Ms. Altman’s circumstances. In October 2008, Ms. Altman had just completed very intensive cancer treatment. Steve’s did not pay her during her medical leave, which began on October 17, 2008. In fact, Steve’s did not pay her for the hours she had worked that week. Ms. Altman had no source of income. Steve’s failure to honour its statutory obligations to pay her termination pay, to provide her with a Record of Employment to allow her to obtain Employment Insurance benefits, to comply with an order made by Conway J. to provide Ms. Altman with an accounting of her share of the deferred profit sharing plan, together with the other misconduct listed in paragraph 136 is reprehensible and high handed conduct that is deserving of this court’s denunciation.

Moral Damages: The New Wallace Damages?

This ruling follows closely on the heels of Brito v. Canac Kitchens, another recent Ontario wrongful termination decision in which punitive damages were awarded against an employer for its callous treatment of an employee. In the February 2011 Brito ruling, Mr. Justice Echlin similarly admonished an employer for its conduct upon termination:

[18] Having regard for Canac’s cavalier, harsh, malicious, reckless, outrageous and high-handed treatment of Mr. Luis Romero Olguin, I award a further $15,000.00 in damages relating to its “hardball approach”.

[19] Pursuant to the Supreme Court of Canada’s decision in Honda Canada Inc. v. Keays 2008 SCC 39 (CanLII), [2008] 2 S.C.R. 362, I might have considered awarding “moral damages”. However, as indicated in Natalie C. MacDonald, Extraordinary Damages In Canadian Employment Law, Toronto: Carswell, 2010 at pp. 33-168 and 812-815, the relatively new common law head of damages, in this post-Wallace world, requires considerable specificity in pleading and further evidence which was not presented at this trial.

While it may be premature to assert that these heads of damages will be awarded with increasing regularity by Ontario Courts, employers should take note that in genuine cases of misconduct in the course of termination, Ontario courts are not averse to awarding substantial damages, including significant amounts for moral and punitive damages.

Employers should proceed with caution, accordingly. Plaintiffs will certainly rely on these recent rulings to hold employers accountable for the consequences arising from bad faith in the conduct of termination.

- Robert Tanha and Garry J. Wise, Toronto

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Ontario Employment Law: Long-Term Disability Coverage During the Period of Reasonable Notice

In Brito et al v. Canac Kitchens, decided on February 18, 2011, Mr. Justice Randall Echlin of the Ontario Superior Court addressed the consequences of an employer's failure to provide adequate benefit coverages and reasonable pay in lieu of notice to its terminated employees.

In Brito, the defendant employer, Canac Kitchens (a division of Kohler Kitchens), had decided to restructure. It provide its employees who were terminated with only the bare statutory minimums in severance and benefit coverages.

Several employees commenced civil actions for damages for wrongful dismissal. One of the Plaintiffs, Mr. Olguin, was a a 22-year employee. While he was able to secure replacement employment within a month of his dismissal, it was at a substantially lesser rate of pay. Worse yet, fourteen months into his new job, he underwent surgery for laryngeal cancer, requiring him to take a disability leave. Canac Kitchens had not provided Mr. Olguin with long term disability coverage as part of his severance package. His new employer did not offer comparable coverage.

And so, Mr. Olguin was essentially left without any medical coverages or benefits during the applicable notice period.

Justice Echlin summarized the general applicable law, as follows:

. . . It may now be fairly and generally asserted that today, in the absence of voluntary resignation, or serious misconduct on the part of the employee, Canadian employers must dismiss their employees with proper notice or pay in lieu thereof. If the latter, they must "make the employee whole" for the common law period of reasonable notice.

In awarding Mr. Olguin's compensation for loss of disability insurance coverages for the entirety of the notice period, Justice Echlin rejected the employer's bald assertion that Mr. Olguin had failed to mitigate his potential damages by purchasing a replacement disability policy:

[12] How should the law deal with the events of the period of November 6, 2004 [the disability date] to May 15, 2005 [the end of the 22 month noticeperiod]? If it is to place Mr. Luis Romero Olguin into the position he would have been in had Canac provided him with working notice, he would have received his regular cash employment compensation, plus all benefit coverages for the entirety of his 22 month notice period at law.

[13] Canac consciously chose not to make alternative arrangements to provide its loyal, long-service employee with replacement disability coverage. Rather, it chose to go the “bare minimum” route. It provided only the statutory minimums in pay and benefits and then gambled that he would get another job and stay well. When it lost that gamble, it chose to litigate this matter for over five years. When confronted with its potential significant exposure, it raised the argument that Mr. Luis Romero Olguin failed to mitigate his potential damages by purchasing a replacement disability policy.

[14] I reject that argument. The onus is upon Canac to establish the Plaintiff’s failure to mitigate. Canac has failed to do so in this instance. Insufficient evidence was led to show that comparable coverage would have been available and would have provided Mr. Luis Romero Olguin with comparable coverage. While Mr. McKechnie conceded that in this setting, the law transforms the employee into a “notional employee”, he argued that Mr. Luis Romero Olguin failed to satisfy the “actively at work” requirement contained in the policy wording. I reject this argument and find it to be circular logic to argue that, if the Plaintiff was to be deemed a “notional employee”, then how can it be asserted that he was “not actively at work”?

Mr. Olguin was awarded 22 months pay in lieu of notice along with over $200,000.00 in further damages, representing the value of the lost long-term disability benefits to his age of retirement.

The Court further admonished the employer with a punitive damages award for its "cavalier" attitude upon termination:

[18] Having regard for Canac’s cavalier, harsh, malicious, reckless, outrageous and high-handed treatment of Mr. Luis Romero Olguin, I award a further $15,000.00 in damages relating to its “hardball approach”.

[19] Pursuant to the Supreme Court of Canada’s decision in Honda Canada Inc. v. Keays 2008 SCC 39 (CanLII), [2008] 2 S.C.R. 362, I might have considered awarding “moral damages”. However, as indicated in Natalie C. MacDonald, Extraordinary Damages In Canadian Employment Law, Toronto: Carswell, 2010 at pp. 33-168 and 812-815, the relatively new common law head of damages, in this post-Wallace world, requires considerable specificity in pleading and further evidence which was not presented at this trial.

In so doing, this ruling indeed did "make the Plaintiff whole."

For a less favourable assessment of this ruling, see Howard Levitt's Canada.com commentary: Be generous during life crises — the courts will: Employer to pay $1M for doing 'bare minimum'

If you have been wrongfully dismissed, contact a lawyer who can advise as to your rights and entitlements both at common law and under the Ontario Employment Standards Act.

- Robert Tanha and Garry J. Wise, Toronto

Update - April 9, 2011

Also see a more generous analysis of the ruling by Sun Media op-ed writer Alan Shanoff: Playing hardball with a fired employee an expensive error

- GJW

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Ontario Employment Law: Maximum Recovery of $10,000.00 under Employment Standards Act

The Ontario Employment Standards Act (ESA) provides many benefits to the Province's employees. It also lays a few traps for those who do not fully consider the Act's complexities and limits.

As discussed in previous posts, under the Act, when an employer dismisses an employee of more than three months' duration without cause, it is required to provide termination pay (or notice of termination) and in certain circumstances, severance pay to the departing employee.

Unfortunately, subsection 103(4) of the Act sets a maximum of $10,000.00 for recovery by a single employee. Consequently, where an employee's claims and entitlements exceed the statutory maximum, recovery under the Act is nonetheless limited to the global sum of $10,000.

See, for example, Frimpong v. Universal Break Parts Inc.

A court proceeding may not subsequently be initiated to recover any remainder owed, where recovery has been capped by the ESA's $10,000.00 statutory limit. In fact, sections 97 and 98 of the ESA provide that once an Employment Standards claim for termination pay or severance pay has been filed, no civil action whatsoever for wrongful dismissal may be brought by the dismissed employee, unless the ESA complaint has been withdrawn within two weeks of its filing.

In other words, you must pick your forum - the Courts or the ESA. You cannot proceed in both if you are wrongfully dismissed. Once you've chosen Employment Standards, there's no turning back (at least not after two weeks following the filing of your complaint).

The ESA's $10,000.00 limit, of course, does not apply in a court proceeding. Accordingly, a civil action for damages is often a preferable option for employees who have been terminated without cause or reasonable notice.

Great care should therefore be taken before filing any complaint under the ESA, if you have been wrongfully dismissed. In some circumstances, it could be a costly mistake.

Consult a lawyer to determine the best means and forum for pursuing your claims for compensation upon wrongful termination of employment.

- Robert Tanha and Garry J. Wise, Toronto

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Ontario Employment Law: Wrongful Dismissal and the Common Employer Doctrine

Under the Ontario Employment Standards Act, related or associated companies are deemed to be "one employer" for the purpose of protecting the benefits to which employees are entitled to under the Act.

In practical terms, this means that multiple companies can be jointly and severally liable for severance and termination payments upon a without-cause dismissal. In this way, the Act adopts and "statutizes" what in the common law context is known as the common employer doctrine.

In Ontario, the common law's common employer doctrine has been considered in several wrongful dismissal cases.

In Gray v. Standard Trustco (Trustee of) (1994), 8 C.C.E.L. (2d) 46 (Ont. Gen. Div.) Ground J. said:

... it seems clear that for purposes of a wrongful dismissal claim, an individual may be held to be an employee of more than one corporation in a related group of corporations. One must find evidence of an intention to create an employer/employee relationship between the individual and the respective corporations within the group.

To ensure recovery in a wrongful dismissal action, employees may have to go beyond suing only the "paymaster company," or the company whose name appears on their paycheques. An empolyee may need to consider adding related companies and in some cases, the main principals of related companies, as defendants.

In Downtown Eatery Ltd. v. Ontario, an employee sued his "paymaster company" for wrongful dismissal. Following a trial, he was awarded substantial damages. However, as it turned out, the defendant company had no assets. As a result, the employee had to take a subsequent action against all the related companies and the two main principals of all the companies in an effort to widen his net of potential sources of recovery.

If you have been wrongfully dismissed, you should consult a lawyer who can consider with you whether you were employed by more than one company for the purposes of determing the contractual and fiduciary obligations which are owed by the employer under both the Employment Standards Act and at common law.

These factors will guide determinations as to which related companies and controlling individuals should be named as defendants in a wrongful dismissal action.

- Robert Tanha, Toronto

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Ontario Employment Law: Appeal of an Employment Standards Officer's Decision

Under the Ontario Employment Standards Act, an employer or employee may apply to the Ontario Labour Relations Board for a review of an Employment Standards Officer’s decision made pursuant to that Act in respect of three types of decisions:

1. An Order (for example, an order to pay wages)
2. The refusal to make an Order
3. A Notice of Contravention

The Ontario Labour Relations Board is the body responsible for processing and determining these review applications.

An Applicant for review of an Employment Standards decision must bear the following requirements in mind:

1. The Application for Review must be received by the Board within 30 days after service of the Order, the letter advising the employee of the Order, the letter advising of the refusal to issue an Order, or the Notice of Contravention, as the case may be.

2. The Application must consist of:

a. a copy of Form A-103;

b. all supporting documents (including the officer’s order or notice or letter refusing to issue an order;

c. proof of payment into the Board of the disputed amount, if you are an employer facing an order to pay;

d. a copy of Ontario Labour Relations Board Information Bulletin 24

3. Before filing the Application with the Board, you must deliver it to the responding parties and any other party whom you identify as potentially impacted by the Application.

Once you have completed these steps, you will receive a letter from the Board confirming receipt of the Application.

A Mediation Meeting, which requires parties to bring all documents and materials they want the Board to consider, usually follows. The purpose of mediation is to help the parties reach an agreement to settle the Application and therefore avoid the need for a hearing. Of note, this meeting is held on a without prejudice basis.

Failing the parties settling the Application at the Mediation stage, a hearing will be held which will determine the parties’ rights and obligations under the Employment Standards Act.

There is no fee associated with making this type of application under the Act.

- Robert Tanha, Toronto

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Ontario Employment Law: Termination Pay and Severance Pay under the Employment Standards Act

Under the Ontario Employment Standards Act (ESA), an employer who dismisses an employee without cause must give him or her notice of termination or pay in lieu thereof calculated on the basis of years of service (see sections 54, 57, and 61). As a practical matter, most employers choose to give an employee "termination pay" as opposed to "notice of termination."

The maximum termination pay an employee is entitled to under the Act is 8 weeks, for 8 years or more of service.

In addition to termination pay, certain classes of employees are also entitled to severance pay, the other major entitlement given employees terminated without cause under the Act (see section 64). The maximum severance pay an employee is entitled to under the Act is 26 weeks, for 26 years or more of service.

In Suzanne Lebel v. Vanbots Construction Corporation and Director of Employment Standards, the Ontario Labour Relations Board makes plain that termination pay and severance pay are two completely separate entitlements:

Termination pay is different and distinct from severance pay and the fact that she received an additonal week of termination pay does not permit the employer to reduce her entitlement to six weeks severance pay.

What this means is that the maximum an employee can receive in severance pay and termination pay is 34 weeks of salary, which works out to be 8 weeks of termination pay and 26 weeks of severance pay.

The Act does not permit an employer to set-off or make deductions from "termination pay" or "severance pay," regardless of the circumstances, where an employee has been dismissed without cause.

In Suzanne Lebel, the employer mistakenly paid the employee it terminated without cause an extra week of "termination pay". While the Board ruled that this could not reduce the employee's severance entitlement, it did rule in favour of the employer that the fact that such over-payment was characterized as "termination pay" did not mean it could not qualify as part of the severance payment required to be made by it under the Act:

The fact that the employer referred to the extra week as “termination pay” does not, in all the circumstance The fact that the employer referred to the extra week as “termination pay” does not, in all the circumstances of this case, make the payment “termination pay” under section 61 of the Act. If that were the case, then it would mean that if a employer made a payment to a terminated employee but then failed to accurately or precisely identify the payment(s) as termination pay and/or severance pay under the Act the employer could be obligated to make an additional payment to satisfy its obligations under Part XV of the Act.

Accordingly, the fact that the employer refers to a payment as "severance pay" or "termination pay" may be inconsequential where the employer has made the payment in good faith and for the purpose of paying an employee his or her termination pay and severance pay entitlements.

Employees also have other specific statutory entitlements under the Act upon termination, including the right to payment of outstanding vacation pay and overtime pay.

Severance and termination pay reflect only the statutory minimum entitlements of employees who are dismissed without cause. Employees who are wrongfully dismissed may have additional entitlements at common law, over and above these ESA entitlements.

Entitlements in wrongful dismissal claims can be as much as one month's salary per year of service (generally, with a soft cap of 24 months), subject to credit to the employer for amounts already paid under Employment Standards legislation.

If you believe you have been terminated by your employer without cause, seek legal advice as to your specific entitlements and rights under the ESA and at common law.

- Robert Tanha, Toronto

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Ontario Employment Law: More on "Wilful Misconduct" under the Employment Standards Act

In a previous post, we discussed Section 54 of the Employment Standard Act, which prohibits an employer from terminating employment without cause unless the employer provides written notice of termination or alternatively, pays specified wages in lieu of such notice.

We also noted, however, that section 55 permits of some exceptions to this rule, one of which is where the employee is engaged in "wilful misconduct" that is not condoned by the employer.

In it ruling in Applicant v. Faduma Abdi and Director of Employment Standards, the Ontario Labour Relations Board makes it plain that a finding that an employee is guilty of "wilful misconduct" requires a solid evidentiary foundation and will never be made lightly.

In Abdi, there was a verbal dispute between an employee, Ms. Abdi, and her immediate supervisor, Mr. McCaw, as to whether he had given her prior approval to alter her regular work schedule on a certain day.

The employer did not thoroughly investigate the matter. Rather, it presumed the employee (who had a long disciplinary record, which included a final warning in relation to attendance and scheduling matters) was guilty of deception and immediately terminated her. The Board found this unacceptable:

The company conducted no investigation after Mr. McCaw’s revelation to Ms. Fleury. No one asked for Ms. Abdi’s side of the story before the decision to terminate her was taken and communicated to her. She was not even afforded an opportunity to speak prior to being told by Ms. Lalonde that she was dismissed. The termination letter’s message to Ms. Abdi is clear: She was not entitled to termination pay (or any other compensation) because, despite all previous discipline, she consciously decided to alter her work schedule without approval. The company arrived at its conclusion of deliberate misconduct based solely on Mr. McCaw’s assertion that Ms. Abdi swiped her card at 7:30 a.m. Ms. Abdi testified unequivocally that Ms. McCaw had given her permission to commence her shift early on the day in question. Mr. McCaw chose not to testify as to whether he had given Ms. Abdi the authorization to reschedule her shift.

As such, the employer could not avoid its obligation to pay Ms. Abdi the termination pay to which she was entitled under the Employment Standards Act. A company must fully investigate allegations of misconduct where it intends to rely on those allegations as grounds wiful misconduct justifying termination without notice.

- Robert Tanha, Toronto

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