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Giza v. Sechelt School Bus Service Ltd. (2012 BCCA 18)
Written by Dan GleadleFacts:
Mr. Giza worked for 5 years as a school bus driver until, after a rough patch with his employer (not alleged to be just cause) the employer served 5 weeks' working notice in purported compliance with the BC Employment Standards Act. Mr. Giza decided to cease work on the same day, instead of working through the 5 week notice period, and commenced an action for wrongful dismissal damages.
At trial, the action was dismissed. The trial judge held that although 5 weeks notice was insufficient, not complying with the employer's obligation to give common law reasonable notice, the plaintiff was required to work though the notice period, and only after could he sue for damages.
The appeal court referred to the trial reasons where it was written:
[11] At para. 36 of her reasons, the judge quoted from this Court's decision in Zaraweh v. Hermon, Bunbury & Oke, 2001 BCCA 524 (CanLII), 2001 BCCA 524, B.C.L.R. (3d) 223 at para. 14:
The common law provides that, in cases of indefinite hiring without written contract establishing terms of dismissal, an employer may terminate the employment without cause by giving reasonable notice to an employee that the employment will terminate. During this time the employee is required to work and to conduct himself or herself in a fashion compatible with the employment relationship.
[12] At para. 39, the judge had this to say:
In this case, the 5 weeks of notice was not adequate. [The respondent] breached the employment contract by giving Mr. Giza too little notice. The legal effect of giving inadequate notice depends on all the facts.
Appeal:
The BC Court of Appeal allowed the appeal.
The appeal court accepted the trial judge's analysis of the obligation of an employee who receives insufficient notice. The employee in those circumstances cannot normally treat the inadequate notice as a repudiation of the employment contract, but is rather required to work through the notice period before commencing a wrongful dismissal action.
[27] This Court in Zaraweh v. Hermon, Bunbury & Oke made it clear that an employee terminated with notice is required to work during the notice period (para. 14.). Saunders J.A. referred to this Court's decision in Suleman v. British Columbia Research Council 1990 CanLII 746 (BC CA), (1990), 52 B.C.L.R. (2d) 138, 24 A.C.W.S. (3d) 508, in which Mr. Justice Hutcheon observed at p. 141 that, subject to conduct by the employer amounting to constructive dismissal,
... the contract of employment is not terminated until the end of the notice period and during that period the employer has the right to the services of the employee. It follows that the employee must remain ready and willing to carry out the contract of service.
Therefore, in leaving his job immediately after notice was given, the employee had acted improperly.
Importantly, though, the Appeal court disagreed with the Trial court as to the effect of the employee's conduct.
At trial, the court had seen the refusal of Mr. Giza to work through the notice period as a repudiation of the agreement. He was found, in effect, to have voluntarily left his employment - ie. to have quit.
The court of appeal determined that by leaving the job early, the employee had lost his right to complain of any loss of income he could have enjoyed during the notice period, but not his general right to damages. The Appeal Court wrote:
[26] I do not agree with the judge's conclusion at para. 53 that by failing to work during the notice period, the appellant lost his entitlement to reasonable notice or damages in lieu thereof.
and
[39] In my view, it is clear that the respondent did not constructively dismiss the appellant and that the appellant repudiated the employment contract by failing to work during the notice period. In classic terms, he evidenced an intention not to be bound by the contract, but that did not deprive him of his right to damages for the respondent's breach of contract in giving him inadequate notice.
[40] In Zaraweh, Saunders J.A. stated at paras. 35 and 36 that
... the breach of contract by provision of inadequate notice gave Ms. Zaraweh a cause of action for damages although it did not constitute a repudiation ... . The entitlement to sue did not die with Ms. Zaraweh's repudiation of the employment relationship.
...
... Ms. Zaraweh was entitled to ... damages based on the difference between the notice provided ... and the period of reasonable notice ... .
[41] In Hadcock v. Georgia Pacific Securities Corp., 2006 BCCA 536 (CanLII), 2006 BCCA 536, 64 B.C.L.R. (4th) 308 at para. 48 this Court, relying on the Supreme Court of Canada's decision in Guarantee Co. of North America v. Garden Capital Corp., 1999 CanLII 664 (SCC), [1999] 3 S.C.R. 423, explained that although repudiation ends the ongoing rights and obligations of parties under a contract, it does not affect rights and obligations that have accrued. In the present case, the appellant's right to damages in lieu of reasonable notice had accrued when he was given inadequate notice. His repudiation did not take away that right and it did not take away the right of the respondent to the appellant's services during the period of notice given.
[42] In summary:
1. the respondent breached its contract of employment by failing to give adequate notice of termination;
2. the respondent's conduct did not amount to a constructive dismissal, that is, a repudiation by the respondent of the employment relationship; it continued during the notice period;
3. the respondent's breach gave the appellant a cause of action for damages in lieu of reasonable notice;
4. the period of reasonable notice for which damages could be recoverable is the period of reasonable notice to which the appellant was entitled less the period of notice actually given during which the appellant could have and should have worked and been paid;
5. the appellant's failure to work during the notice period was a repudiation that brought to an end the employment relationship and the ongoing rights and obligations of the parties under it;
6. that repudiation did not take away the appellant's cause of action for damages in lieu of notice or the respondent's right to have the appellant's services during the notice period that was given because those rights had accrued before the repudiation.
Reasonable Notice at Common Law:
The court itself assessed damages for failure to give reasonable notice at common law, citing Bardal:
[45] The "seminal enunciation" of what length of notice is reasonable at common law derives from Bardal v. The Globe & Mail Ltd. (1960), 24 D.K.R. (2d) 140 (Ont. H.C.J.) at 145, in which McRuer C.J. held that
[t]here can be no catalogue laid down as to what is reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant.
This test was adopted by, inter alia, McEachern C.J.S.C. in Ansari v. B.C. Hydro 1986 CanLII 1023 (BC SC), (1986), 2 B.C.L.R. (2d) 33.
[46] An examination of cases reasonably comparable to the present case suggests that the appropriate range of notice is somewhere between three and 11 months. There obviously is considerable variability.
[47] At the time the contract of employment was terminated, the appellant was 61 years of age. He had been employed by the respondent for approximately five years. He had worked previously as a professional forester, but the availability of forestry work had diminished by the time he left this industry and began working as a school bus driver. The appellant has had little success in obtaining alternative employment.
[48] The appellant seeks nine months' notice. In my view, reasonable notice in this case would have been six months. For the purpose of calculating damages, the period of actual notice during which the appellant could have worked and been paid must be deducted. I would calculate damages based on a notice period of five months.
Summary:
Mr. Giza had acted hastily when he left, having been given inadequate notice. By leaving, he lost the legal right to recover damages for the short notice period given by the employer, but he could still recover damages for a reasonable notice period, if in excess of the actual notice period given by Sechelt. The court set a six month notice period, with no comment as to the "character of employment" factor diminishing the amount of notice required, and the ultimate notice period was in excess of one month per year of service.
BC Supreme Court Rejects Just Cause Allegation against Manager with Abrasive Management Style, Awards $50,000 Punitive Damages and $35,000 Aggravated Damages
Written by Dan GleadleMr. Justice Goepel of the BC Supreme Court handed down comprehensive reasons for judgment on January 27, 2012 dismissing a just cause defence by the BC Liquor Distribution Branch in a wrongful dismissal damage claim by a senior manager.
Vernon v. British Columbia (Liquor Distribution Branch), 2012 BCSC 133 (CanLII)
Ms. Vernon had been employed by the BC LDB since age 19, for a period of 30 years, during which she was promoted from entry level positions to the role of Senior Store Manager in the Richmond Branch. She had a "rough and ready" management style, and had over the years functioned effectively in an environment that persons with modern sensibilities would find offensive. Her style involved swearing and directions to employees given in a manner which might be found offensive. A complaint was filed by an employee with particular sensibilities, and the LDB launched an investigation, followed by a summary dismissal.
Flawed Investigation
The court found that the investigation leading to the dismissal was flawed. So seriously flawed, in fact, that an award of both aggravated and punitive damages was granted.
The key aspects of the finding as to a flawed investigation were:
- it was headed by another employee who, by reason of prior involvement with the dismissed employee, even in relation to recent HR disputes between the complainant and the manager, should not have been given the task of investigating
- there was a "rush to judgment" which was apparently motivated by arbitrary deadlines dictated by employer policies as a quasi governmental organization
- the investigator chose to speak mainly to persons critical of the plaintiff, and not to other employees who supported the plaintiff
- the investigator was not a neutral, but self regarded as a prosecutor
- when the investigator talked to others who were supportive of the manager, their comments were not accepted at face value, but rather challenged
- the manager was confronted with a long list of accusations at a threatening meeting, without any sufficient warning of the accusations or even the reason for the meeting
- no sufficient reason was given to warnings, or other discipline short of dismissal, or mandatory remedial courses, as the employer was apparently of the view that it did not have those choices, in error
- the employee was left "in limbo" for an unnecessary and unreasonable period of time
- those in charge of the investigation changed over time, with inadequate communication between those handing off responsibility, so that the person who concluded the investigation reported to those making the termination decision an inaccurate conclusion - that the manager denied all accusation against her, and thus was both untruthful, and incapable of training, as she did not accept any responsibility. This was found to be incorrect and an important failure
- those in charge of the investigation failed to "take a step back" and put the allegations in their proper context, where the employee was a long service employee without any prior performance problems, and in fact a most credible work history
Just Cause
Judge Goepel followed well established precedent in his consideration of the question of whether just cause existed for summary dismissal.
He referred to the 2001 decision of the Manitoba Court of Appeal in Boulet, where a useful list of factors was set out for cause cases.
[285] In Boulet v. Federated Co-operatives Ltd. 2001MBQB 174, 157 Man.R. (2d) 256 aff'd 2002 MBCA 114, 170 Man. R. (2d) 9 ("Boulet"), McCawley J. summarized the principles applicable when cause is alleged at para. 3:
- Each case must be decided on its facts.
- An employer's displeasure at an employee's performance is not enough to warrant dismissal. There must be some serious misconduct or substantial incompetence.
- The onus of proving just cause rests with the employer and the standard of proof is beyond a balance of probabilities.
- The performance of an employee, especially one in a management position, must be gauged against an objective standard.
- The employer must establish (a) the level of the job performance required, (b) that the standard was communicated to the employee, (c) that suitable instruction and/or supervision was given to enable the employee to meet the standard, (d) the employee was incapable of meeting the standard, and (e) the employee was warned that failure to meet the standard would result in dismissal.
- Where the employee's performance is grossly deficient and the likelihood of discharge should be obvious to the employee, warnings and reasonable notice are not required.
- While the standard of incompetence to warrant discharge for cause is severe, the threshold of incompetence necessary to warrant dismissal for cause is significantly lower where dismissal is preceded by many warnings indicating unsatisfactory performance.
- In considering whether an employer has provided adequate warning to an employee, where the dismissal is for repeated instances of inadequate work performance, the employer must show (a) it has established a reasonable objective standard of performance, (b) the employee has failed to meet those standards, (c) the employee has had warnings that he or she has failed to meet those standards and the employee's position will be in jeopardy if he or she continues to fail to meet them; and (d) the employee has been given reasonable time to correct the situation.
- An employer who has condoned an inadequate level of performance by his employee may not later rely on any condoned behavior as a ground for dismissal.
- Condoned behavior is relevant if the employee fails to respond after appropriate warnings. Condonation is always subject to the implied condition that the employee will be of good behavior and will attempt to improve.
Aggravated Damages
The court awarded $35,000 in aggravated damages, recognizing that this head is only appropriate by way of compensation for losses experienced by the plaintiff, flowing from some sort of wrongful behavior on the part of the employer at the time of or in the manner of dismissal.
[369] Aggravated damages in wrongful dismissal cases are compensatory in nature. It is an implied term of an employment contract that an employer will act in good faith in the manner of dismissal: Beggs v. Westport Foods Ltd., 2011 BCCA 76 (CanLII), 2011 BCCA 76, 14 B.C.L.R. (5th) 1 at para 48.
[373] The foundation of the claim for aggravated damages is the manner of dismissal. The meeting of April 19, 2010, could not have been handled in a more insensitive manner. Ms. Vernon, a 30-year employee with an unblemished record, was summoned to a meeting where she was told her conduct was shameful and that she was an embarrassment to the LDB. When she asked for additional time to consider her position she was told she only had until noon on Friday because Mr. Branham was not prepared to wait around until 4:00 p.m. on a Friday to learn her decision. Having told Ms. Vernon that she was to be terminated, the LDB then suspended her without pay and left her in limbo from April 19 to May 31 when they finally got around to telling her she was fired.
[377] I find that the LDB's conduct during the course of dismissal was unfair and unduly insensitive. I accept the evidence of Ms. Vernon and Dr. Phillips that the manner of dismissal caused Ms. Vernon mental distress over and above the normal distress and hurt feelings resulting from the dismissal itself. She is entitled to an award of aggravated damages.
Punitive Damages
The court awarded $50,000 by way of punitive damages - clearly distinguishing this head of damages as an award appropriate for other policy reasons, aside from compensation.
[381] Unlike aggravated damages (which are compensatory in nature), punitive damages are directed towards punishment. The leading authority remains Whiten v. Pilot Insurance Co.,2002 SCC 18 (CanLII), 2002 SCC 18, [2002] 1 S.C.R. 595 at para. 36("Whiten")
[382] The three objects of punitive damages are retribution, deterrence and denunciation. The Supreme Court of Canada has directed trial courts to approach punitive damages with caution and restraint and to resort to them only in exceptional circumstances: Whiten at para. 69.
[383] An award of punitive damages is rational only when compensatory damages do not adequately achieve the objectives of retribution, deterrence and denunciation:Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd.,2002 SCC 19 (CanLII), 2002 SCC 19, [2002] 1 S.C.R. 678 at para. 87.
[386] In this case, I have made an award of aggravated damages arising out of the insensitive manner in which Ms. Vernon was terminated. To award punitive damages for the same conduct would lead to double punishment for the same acts.
[387] There is, however, one exception. At the termination meeting of April 19, Ms. Ferrara told Ms. Vernon that if she agreed to resign, the LDB would provide her with a reference letter. While an employer is under no obligation to give a reference letter (Shinn v. TBC Teletheatre B.C., 2001 BCCA 83 (CanLII), 2001 BCCA 83, 85 B.C.L.R. (3d) 75), to offer Ms. Vernon a reference letter, conditional on her resignation, was reprehensible and departed to a marked degree from ordinary standards of decent behaviour. If Ms. Vernon's conduct was sufficiently serious that the LDB had the right to summarily dismiss her without notice, it would have been improper for the LDB to give her a reference letter. To offer a reference letter as a carrot to resign, is, in my opinion, conduct which is properly the subject matter of retribution, deterrence and denunciation.
Summary and Conclusion
This decision will give employers cause for serious concern when considering the dismissal of long term managers for conduct which has been accepted as useful without complaint.
Employers will be well advised to avoid conduct in the course of investigations which might be seen as impartial, or heavy handed, particularly with long service employees.
The consequences of a finding of conduct meriting a punitive damage award are not just financial, and employers should consider the impact of their actions on employees, or risk unwanted outcomes.
Dan Gleadle Article in Human Rights Reporter
Written by Dan GleadleDan Gleadle has written an article for the Canadian Human Rights Reporter issue published on Januayr 16, 2012, entitled "So What Exactly Constitutes Just Cause?"
Szczypiorkowski v. Coast Capital Savings (Bonus Claim, Mitigation of Damages, 18 month notice period)
Written by Dan GleadleIn this recent BC employment law case, the plaintiff recovered wrongful dismissal damages after long service. Just cause was not alleged at trial, but had been considered based on the plaintiff's circulation via company email of offensive jokes of a sexual nature.
Facts: (the court wrote)
[2] The plaintiff is 62 years old. He was employed by the defendant for approximately 18 and a half years and, at the time of his termination, was a Senior Manager, Commercial Real Estate Lending. The defendant is one of Canada's largest credit unions. When the plaintiff was terminated, his total remuneration was in the range of $100,000 to $150,000 per year.
Issues: (the court wrote)
[11] Since the defendant is not relying on just cause as a defence to the claim for wrongful dismissal, the issues to be decided are:
1) What is a reasonable notice period in these circumstances?
2) What measure of compensatory damages is appropriate? Under this heading, I must consider not only salary, but also:
a) whether in assessing damages, the Court should include in Mr Szczypiorkowski's total remuneration the bonuses he had been receiving over the years;
b) whether the Court should reduce the amount because the plaintiff has failed to mitigate his damages; and
c) whether the Court should apply a discount to the notice period contingent on the likelihood that the plaintiff will find work before the end of the notice period.
3) Has the plaintiff established that the Court should award punitive damages?
Findings:
Reasonable Notice: The court found that in the circumstances an 18 month notice was appropriate, given the plaintiff's age, length of service, and the character of his employment.
Bonus Claim:
The court applied the normal test for awarding bonuses - whether the bonus was a benefit that was an "integral part of the employee's wage or salary structure". The court concluded that in this case the test was satisfied:
[71] On this point, in Gillies v Goldman Sachs Canada Inc. 2000 BCSC 355 (CanLII), (2000), 2000 BCSC 355, 49 C.C.E.L. (2d) 236 at para. 63 ["Gillies"], the Court confirmed four factors in deciding whether a bonus was an integral part of a plaintiff's compensation. The Court should consider, in the words of that decision, whether
1) A bonus is received each year although in different amounts;
2) Bonuses are required to remain competitive with other employers;
3) Bonuses were historically awarded and whether the employer had never exercised his discretion against the employee; and
4) The bonus constituted a significant component of the employee's overall compensation.
[72] The employee bears the onus of persuading the Court that had the employee worked throughout the notice period, he would have been entitled to receive a bonus as a matter of contract, on the basis that "past history establishes that it has become an integral part of the plaintiff's wage structure." He must also show the basis for assessing the amount of any such bonus. See Sandelson v. International Vintners Ltd. 1987 CanLII 2978 (BC SC), (1987), 18 B.C.L.R. (2d) 86 at 90, 6 A.C.W.S. (3d) 882 (S.C.).
[73] In considering a wrongfully dismissed employee's entitlement to bonuses, the Court in Hansen v. Altus Energy Services Partnership, 2010 ABQB 820 (CanLII), 2010 ABQB 820, 86 C.C.E.L. (3d) 297 concluded at para. 30:
[30] A bonus scheme that has historically become an integral part of an employee's wage or salary structure gives rise to a reasonable expectation of a bonus. Such a bonus is a benefit that has a value and should form part of the calculation of the employee's damages. In the case of quasi or non-formula bonuses, if they are routinely awarded in a certain amount or in a certain range, they should be included in the assessment of damages, just like any other fringe benefit. Hansen had received bonuses in all but 2-4 of his 23 years of employment and therefore the bonuses could be considered as routinely awarded.
This case also involved an issue as to whether a dismissed employee, who was not working at the time a bonus would have been payable, should receive compensation for a bonus in any event, both before the dismissal and for the notice period. The court rejected the defendant's argument on the basis that the bonus would have been payable if the employer had given proper working notice. This is consistent with the general course of authority in BC courts.
The court said on this point:
[65] Turning to the defendant's first argument, I find this position without merit for the simple reason that had CCS not wrongfully dismissed the plaintiff, Mr. Szczypiorkowski would have been employed and entitled to his bonus. Based on Mr. Szczypiorkowski regularly receiving a bonus in the past, it is reasonable to assume he would have continued to receive a bonus if he had continued his employment with the defendant. In Ferguson v. Kodak Canada Inc., [1992] B.C.J. No. 2545 (S.C.), when considering a similar argument with regard to the award of dividends to a wrongfully dismissed employee, the court stated:
In my view the clause was not designed to meet the situation of a wrongfully dismissed employee who was deprived of the opportunity to work. He is entitled to be compensated by an award of damages
Another interesting issue was as to the amount of the bonus that should be awarded. The defendant's argument that larger bonuses in prior years should be excluded as they were extraordinary, but the court refused to accept this submission. The court assessed the bonus claim on the basis of a projection of historical averages, including higher and lower periods alike, writing:
[74] In my opinion, there is no reason to exclude the 2006 bonus or the $10,000 bonus from 2008 in this calculation. These facts differ from Reynolds v. First City Trust Co. reflex, (1989), 27 C.C.E.L. 194 at 200 (B.C.S.C.), where McKenzie J. concluded that one very large bonus of $70,000 "did not fit any pattern so far as amount was concerned," and did not include a bonus more than 11 times the average in his calculation of a bonus award within compensatory damages.
The defendant also argued that the amount of any bonus should have been reduced to reflect the fact that the employer might have placed the employee on a "performance improvement plan" if working notice had been given. The court rejected this argument, writing:
[66] With regard to the defendant's second argument, I find Mr. Berg's assertion that he would "probably" have put the plaintiff on a performance improvement plan if he had not been dismissed to be mere speculation. Mr. Berg's conjecture does not undermine the fact that the plaintiff received bonuses in the past on a continuous basis, and there was no evidence of prior misconduct or poor performance evaluations.
[67] Similarly, Ms. Fordy asserted that Mr. Szczypiorkowski would have been rated as "needs to do better" in "interpersonal-communications-related competencies." This is not certain enough, nor clear enough in its explanation of the rating categories and their relative values, for me to conclude that he would not have been considered to be doing a "good job" in four out of five core competencies—which is all that is required for an employee to be eligible for a bonus as far as job performance is concerned.
[68] Again, I am satisfied the reasonable probability is that, had the plaintiff not been wrongfully terminated in November 2010, he would have continued to receive a bonus.
Mitigation of Damages: The court adopted a 2 part test, commonly followed in BC wrongful dismissal cases, requiring the employer seeking a deduction from notice period damages to discharge an onus that, firstly, efforts made by the plaintiff were not adequate and, secondly, that if extra effort had been made, earnings would have resulted. The court wrote in this regard:
[88] In Forshaw v. Aluminex Extrusions 1989 CanLII 234 (BC CA), (1989), 27 C.C.E.L. 208 at 212-213, 39 B.C.L.R. (2d) 140 at 144 (C.A.), our Court of Appeal addressed the issue of mitigation:
The duty to "act reasonably", in seeking and accepting alternate employment, cannot be a duty to take such steps as will reduce the claim against the defaulting former employer, but must be a duty to take such steps as a reasonable person in the dismissed employee's position would take in his own interests - to maintain his income and his position in his industry, trade or profession. The question whether or not the employee has acted reasonably must be judged in relation to his own position, and not in relation to that of the employer who has wrongfully dismissed him.
[89] On this point, I am mindful of Burnyeat J.'s description in Smith v. Aker Kvaerner Canada Inc. and Kvaerner Power Inc, 2005 BCSC 117 (CanLII), 2005 BCSC 117 ["Smith v. Aker"], of the dismissed employee's duty to search for new employment. At para. 31, he said:
[31] In seeking and accepting alternative employment, the plaintiff has a duty to act reasonably and to take such steps as a reasonable person in the plaintiff's position would take in his own interest to maintain his income and his position in his industry, trade or profession. The duty involves a constant and assiduous application for alternative employment, an exploration of what is available through all means....
[90] However, the defendant must prove that the terminated employee has failed to mitigate damages. This onus is "by no means a light one" (Red Deer College v. Michaels (1975), 1975 CanLII 15 (SCC), [1976] 2 S.C.R. 324 at 332, 57 D.L.R. (3d) 386 at 391). The defendant must establish, first, that it would have been reasonable for the plaintiff to do more in an attempt to find new employment and, second, that if the plaintiff had done more, he would have been successful in obtaining employment. See Jorgenson v. Jack Cewe Ltd., (1978), 93 D.L.R. (3d) 464, [1979] 1 A.C.W.S. 138 (B.C.C.A.), aff'd 1980 CanLII 177 (SCC), [1980] 1 S.C.R. 812, 111 D.L.R. (3d) 577; Sifton v. Wheaton Pontiac Buick GMC (Nanaimo) Ltd, 2010 BCSC 353 (CanLII), 2010 BCSC 353, aff'd 2010 BCCA 541 (CanLII), 2010 BCCA 541; and Smith v. Aker at para. 32.
[91] In my opinion, the plaintiff has attempted to find work in his field. He has monitored and applied for offers of similar employment. As well, even if the defendant was correct that Mr. Szczypiorkowski could have found the same job postings as did Mr. French, I am still not satisfied that there is sufficient evidence to conclude that these postings should be considered comparable job offers: again, there was no indication of the salary level offered for any of these positions (see Edge v. Kilborn Engineering (B.C.) Ltd. [1987] B.C.J. No. 992 aff'd [1998] B.C.J. No. 807).
[92] Moreover, turning to the second part of the mitigation test, given the plaintiff's present circumstances, it is highly unlikely that even if Mr. Szczypiorkowski had made substantially greater efforts, he would have succeeded in finding "comparable alternative employment" (see Carlysle-Smith v. Dennison Dodge Chrysler Ltd., 1997 CanLII 972 (BC SC), (1997) 33 C.C.E.L. (2d) 280 (B.C.S.C.) at para. 38). This is especially so when Mr. Szczypiorkowski's employer of the last 18 and a half years has exercised its right not to provide him with a letter of reference.
[93] I also bear in mind Burnyeat J.'s comments on similar circumstances in Systad v. Ray-Mont Logistics Canada Inc., 2011 BCSC 1202 (CanLII), 2011 BCSC 1202 at para. 31. I must regard Mr. Szczypiorkowski's "physical and mental condition": while he did not suffer an illness himself, he had just given care to two people with serious conditions for many months. I also take into account "the reasonable period of time" needed "to get over the shock of having his employment terminated." See also Smith v. Aker at para. 35.
Pension Benefits Not Deductible from Wrongful Dismissal Damages
Written by Dan GleadleOn August 2, 2011, the British Columbia Court of Appeal unanimously dismissed an appeal by an employer to have an employee's pension benefits recieved during an appropriate notice period offset against wrongful dismissal damages for the same period.
See Reasons for Judgment in Waterman v. IBM Canada Limited, 2011 BCCA 337 (CanLII).
The court alluded to a possible policy argument against interpretation of the employment contract in favour of deductibility of pension benefits, while stating that such a policy argument had not been advanced in this case. The policy argument was that contracts of employment should not be interpreted, in wrongful dismissal cases, in a manner which might encourage employers to terminate more senior workers, in the expectation that such workers would receive deductible pension benefits.
The BCCA wrote:
[1] This appeal raises an issue as to the deductibility of pension benefits from an award of damages for wrongful dismissal. The trial judge found that pension benefits paid to Mr. Waterman during the period of reasonable notice were not deductible from damages on the basis of the majority judgment in Girling v. Crown Cork & Seal Canada Inc. 1995 CanLII 954 (BC CA), (1995), 9 B.C.L.R. (3d) 1 (C.A.), as applied in MacGillivray v. Telus Communications Inc., 2004 BCSC 1394 (CanLII), 2004 BCSC 1394. He rejected IBM's submission that Girling had been overruled, by necessary implication, by the Supreme Court of Canada in Sylvester v. British Columbia, 1997 CanLII 353 (SCC), [1997] 2 S.C.R. 315 ("Sylvester SCC").
[13] This Court's decision in Girling dealt with pension benefits, rather than disability benefits, in the context of an action for wrongful dismissal. Mr. Justice Carrothers, speaking for the majority, stated the issue before the Court at para. 1:
At issue in these appeals is whether a terminated employee is entitled to receive benefits under a non-contributory company pension plan by way of unreduced early retirement pension effective from termination of employment, as well for the same period as payment by way of damages in lieu of reasonable notice of such termination without any adjustment of either such payment to compensate for the apparent overlap.
[14] In that case, as here, the employer argued that the employee would not have been entitled to receive a retirement pension while still working and still receiving salary and that the same result should apply in determining damages for wrongful dismissal. This Court rejected that submission. At para. 10 of the decision, Mr. Justice Carrothers stated:
I am in accord with the resolution of this conundrum by the Chambers judge who determined that the pension benefits of the employment contract are collateral benefits of the employment contract which should not be considered income and should not be deducted from damages which are income in lieu of notice. The damages (pay in lieu of notice) flow from breach of the employment contract and the collateral pension benefits are payable pursuant to the contractual arrangements therefor. They are not to be modified by the appearance of duplication.
[19] It is apparent from Sylvester SCC that the question of whether Mr. Waterman is entitled to both salary and payment of his pension benefits during the notice period in these circumstances turns on the construction of the contractual arrangement between the parties. The principal difference between the Supreme Court of Canada analysis, and the analysis of this Court in Sylvester, Girling and related cases, is that the former treated the contractual arrangement as consisting of one contract encompassing both salary and disability benefits, whereas this Court regarded the contractual arrangement as consisting of two separate and distinct contracts; one being the basic contract of employment, pursuant to which the employee was entitled to his salary, and the other a contract for disability (or pension) benefits, both of which had been breached, and both of which attracted a separate and independent remedy. (emphasis added)
...
[29] I begin this discussion by observing that Sylvester SCC is distinguishable from this case in that it was dealing with disability benefits rather than pension benefits. Because of the difference in the nature of these benefits, it cannot be assumed that Sylvester SCC dictates that pension benefits, like the disability benefits under consideration in that case, are deductible from an award of damages for wrongful dismissal, even where the pension benefits are payable under a plan fully funded by the employer. Rather, as stated by the court in Sylvester SCC, the question of deductibility will depend on an interpretation of the contractual arrangement between the employer and the employee, taking into account the nature of the benefits in issue.
[30] Applying the contractual analysis in Sylvester SCC, I am satisfied that the DB Plan constitutes part of one overall employment contract between Mr. Waterman and IBM. In other words, I adopt the "one contract" approach of Mr. Justice Major in Sylvester SCC, as contrasted with the "two contract" approach taken by this Court in Sylvester CA, Datardina, Bohun and Girling. Whether one contract, or two, however, the critical question is what conclusions can be drawn from that contract with respect to the deductibility of paid pension benefits from damages for wrongful dismissal.
[31] Under Mr. Waterman's' employment contract, including the provisions of the DB Plan, there is no express provision which governs the issue before the Court. In other words, the parties did not expressly provide for Mr. Waterman's rights in the event IBM terminated his employment, without cause or reasonable notice, at a time when he was entitled to a fully paid-up pension.
[32] In the absence of an express provision, the question arises whether one can ascertain, or infer, from the provisions of the contract whether the parties intended that Mr. Waterman would be entitled to receive both salary and pension benefits in these circumstances. It is common ground that he would not have been entitled to simultaneous receipt of pension benefits and salary at the time of his termination but/for the failure of IBM to provide him with reasonable notice of his dismissal.
[33] In Sylvester SCC, the court attempted to ascertain the intention of the parties by reference to the terms of the contract and the nature of the benefits in issue. It found that the disability benefits in issue were intended to be a substitute for the employee's regular salary during the period that the employee was disabled. Further, payment of the benefits was premised on the employee being unable to work. The court in Sylvester SCC concluded from these facts, and the fact that the employer had fully funded the disability plan, that the parties must be taken to have intended that disability payments paid during the notice period would be deductible from damages; that is, the parties could not have intended that the employer pay both salary and disability benefits during the period of reasonable notice. Disability payments were a proxy for salary. As with other forms of salary replacement, for example, salary earned with another employer during the period of reasonable notice, such payments were deductible from damages, at least where the disability plan was fully funded by the employer. (The court did not decide that disability payments were not deductible where the employee contributed to the disability plan, but declined to decide that issue one way or the other.)
[34] IBM submits that pension payments, like disability payments, are a substitute for salary and should be treated the same as the disability payments in Sylvester SCC in terms of deductibility. It says that Mr. Waterman would not have been entitled to receive salary and pension payments while working for IBM, unless he continued to work for IBM past age 71. (It relies on the Interpretation Document in that regard but, as earlier noted, there is no express provision in either the Interpretation Document or the DB Plan to that effect.)
[35] In short, IBM submits that the disability benefits at issue in Sylvester SCC are not significantly different than the pension benefits payable to Mr. Waterman in relation to deductibility.
[36] In considering this submission, I have reviewed the authorities to which counsel have referred which discuss the nature of pension benefits, on the one hand, and disability benefits, on the other. Those authorities indicate that, historically, and with particular reference to the issue of double recovery in tort, pension benefits and disability benefits have been regarded as being different in kind, and requiring different treatment in terms of deductibility from damages. While it is clear that the measure of damages in tort and contract are different, and that contract principles apply in this case, I find these authorities to be of assistance in characterizing the nature of the benefits in issue. The characterization of these benefits, in turn, informs the analysis of whether these parties would have intended the pension benefits to be deductible from salary during the period of reasonable notice.
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[57] As a practical matter, I have little doubt that, at the time Mr. Waterman entered into his contract of employment with IBM in 1967, he did not turn his mind to what his contractual rights would be if he were dismissed 42 years later at a time when he was entitled to full pension benefits. There is no evidence as to whether IBM turned its mind to this eventuality (in relation to its employees generally) by way of memoranda or legal opinions.
[58] I am satisfied, however, that Mr. Waterman never would have intended that his fully earned pension benefits could be utilized to reduce the amount of damages IBM would be required to pay him during the notice period if he were wrongfully dismissed. This would have been viewed by him as adding insult to injury. How could IBM force him into retirement, on the one hand, and then effectively claw back the very pension payments they had triggered in so doing, on the other?
[59] Nor am I persuaded that IBM would have intended this result. To find this was IBM's intention would require an assumption that IBM intended to target its older employees – those who had put in the most years of service on IBM's behalf – as being the first to be subject to dismissal in the event of downsizing, on the basis that the pension benefits of those employees could be used to offset damages for wrongful dismissal. Undoubtedly, one of the enticements IBM used, and continues to use, to attract loyal and capable employees, is a generous and competitive wage and benefits package. A benefits package which was not competitive would adversely affect its success in the employment market. No one has suggested that using pension benefits to offset damages for wrongful dismissal was, or is, a common employer practice, whether in a depressed economy, or otherwise. That being the case, I am not prepared to attribute the intention to do so to IBM, despite the position taken by its counsel on this appeal.
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[61] All of these provisions support the view, reflected in Parry, Chandler and other decisions that the pension benefits available to IBM employees are earned by and belong to the employee. The suggestion that the parties would have intended to treat Mr. Waterman's pension benefits as a trade-off or offset against salary owing during the notice period is, in my view, incompatible with these provisions. Although pension benefits provide an income stream when paid, they are not a substitute for salary. In that respect, they are not like the disability payments in Sylvester SCC which the court found were intended to replace salary at a time when the employee was incapable of working. Here, there is no inherent inconsistency between an employee receiving both salary and pension; there are many instances of that in the workforce, including those who receive statutory pension benefits, private pension benefits from former employment, and even payments from IBM where the employee has earned a pension, retires, and is later hired back. These are benefits IBM employees enjoy in addition to salary. Once they have earned the benefit according to the terms of the DB Plan, they have rights to it similar to those enjoyed by individuals with private pensions, subject to any specific restrictions which may be contained in the Plan.
[62] Although I am attracted to the analysis of the pension benefits as earned property rights analogous to private pension plans, to which the employee is entitled upon meeting the vesting and other qualifying requirements of the DB Plan, I am satisfied from my review of the authorities that the pension benefits in issue are also properly characterized as a form of non-deductible, non-indemnity insurance, as described by Madam Justice McLachlin in Cunningham.
[63] Whether regarded as the property of Mr. Waterman in the sense of an investment or RRSP earned by him over many years of labour, as discussed in Chandler, or as the equivalent of a non-indemnity insurance policy provided by IBM through "premiums" paid on his behalf, the payments are not payments of salary, or in lieu of salary. While these benefits would normally not be triggered until Mr. Waterman chose to retire at the end of his working career, the benefits were triggered by IBM in terminating Mr. Waterman without cause or notice and thereby effectively forcing him into early retirement. Having effectively compelled him to take the benefits, IBM cannot now complain that he is entitled to retain those benefits together with the salary to which he is entitled for breach of the term of his contract providing for reasonable notice of termination. IBM could have avoided this result by providing reasonable notice, but they chose not to do so. To the extent that choice was made for sound economic reasons (which I assume to be the case), they have presumably benefited from it.
Summary and Conclusion: In this extremely thoughtful and thorough analysis, the BC Court of Appeal has, we think, at least for the province of BC, put to the rest the attempts by employers to seek offset from wrongful dismissal damages, by reason of pension benefits to which the dismissed employee becomes entitled at or near the end of employment.
Ontario Court of Appeal - 22 months notice for unskilled worker
Written by Dan GleadleIn Di Tomaso v. Crown Metal Packaging Canada LP, 2011 ONCA 469 (CanLII) the Ontario Court of Appeal upheld an award of 22 months for an unskilled worker.
The Facts: The plaintiff had worked for over 33 years as a mechanic and pressman, roles which involved no supervisory or management role. He was 62 years old when dismissed, earning just over $30 per hour.
Character of Employment: The employer argued that the court should apply the law as set out by the same court in Cronk, which had for many years been relied on by employers as capping the notice available to unskilled workers at 12 months.
In Di Tomaso, Ont. Court of Appeal referred to its earlier decision in Minott v. O'Shanter Development Company Ltd. as an answer to Cronk, and confirmed that there is no "upper limit" on the notice periods available to unskilled non-managerial employees.
"Moreover, the imposition of an arbitrary 12 months ceiling for all non-managerial employees detracts from the flexibility of the Bardal test and restricts the ability of courts to take account of all factors relevant to each case and of changing social and economic conditions."
CONCLUSION
For years, Ontario awards of damages to employees without supervisory or managerial responsiblities, and without education or training in some technical field were thought to be limited to 12 months. This has now been modified for Ontario. In other Canadian jurisdictions, including British Columbia (Byers, etc.) and New Brunswick (Bramble etc.) this change occurred much earlier.
Mr. Di Tomaso obtained an award of 22 months, not materially different than the award that would have been given to a person whose job would have once been regarded as justifying longer awards.
The "character of employment" factor has not disappeared as a factor, but it is now less important than it once was, and specific evidence will be required to elevate the factor to it's historical prominence.
Whiting v. Boys and Girls Club Services of Greater Victoria
Written by Dan GleadleIn Whiting v. Boys and Girls Club Services of Greater Victoria, 2011 BCSC 681 the Honourable Mr. Justice Masuhara of the British Columbia Supreme Court handed down a decision which contains some interesting analysis in the context of a wrongful dismissal action.
Facts: Ms. Whiting was 57 years old and had worked as a "Program Director" for Victoria's Boys and Girls Club for 13 years when she was given only 8 weeks notice of termination, not for just cause, but because the defendant claiming it had funding problems. The plaintiff had begun working with a contract which contained a probationary term, and a clause permitting dismissal with minimum notice periods under the Employment Standards Act. She was unsuccessful in finding new work until 2 years after dismissal, though, in her effort to mitigate her damages, she had undertaken efforts to find new work and to upgrade her training.
The Court wrote:
[28] In general, employment contracts for an indefinite term have an implied term that it can be terminated by the provision of reasonable notice (or payment in lieu). The term can be rebutted by a specific notice provision with or more than the statutory minimum. See: Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC), [1992] 1 S.C.R. 986.
[29] The references and authorities provided by the plaintiff indicate that an employee who continues past the end date of a definite term contract is deemed to be employed for an indefinite term unless they are clear and unequivocal language that states the contrary. See for example: Howard A. Levitt, The Law of Dismissal in Canada, 3rd ed., looseleaf (Aurora, Ont.: Canada Law Book, 2010) at 8-67 to 8-68; Peter Barnacle, Roderick Wood, Geoffrey England & Innis Christie, Employment Law in Canada, 4th ed., looseleaf (Markham, Ont.: LexisNexis, 2005) at 12-5 and 12-6; Buckley v. The Students Union of St. Thomas University, Inc. 1992 CanLII 2704 (NB QB), 1992 CanLII 2704 at p. 5 (N.B.Q.B.); and Bohn v. Midwest Veterinary Purchasing Cooperative Ltd., 2009 MBQB 216 (CanLII), 2009 MBQB 216.
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[31] ... It should be noted that one cannot contract out of the minimum requirements set out in the Act: s. 4 of the Act; Shore v. Ladner Downs, [1997] B.C.J. No. 1013 (S.C.) at para. 15, aff'd [1998] B.C.J. No. 1045 (C.A.).
[32] New or additional consideration is required to support a variation of an existing agreement in the employment context: Francis v. Canadian Imperial Bank of Commerce (1993), O.R. (3d) 75. Continued employment is not consideration for a new term: Hobbs v. TDI Canada Ltd., (2004) 245 D.L.R. (4th) 43. See also Singh v. Empire Life Insurance Co., 2002 BCCA 452 (CanLII), 2002 BCCA 452.
[33] The meritorious and non-profit nature of an employer is not a valid consideration in terms of liability: Bazley v. Curry, 1999 CanLII 692 (SCC), [1999] 2 S.C.R. 534; Lewis v. Terrace Tourism Society, 2010 BCCA 346 (CanLII), 2010 BCCA 346; and Wright v. Chilliwack Community Services, 2000 BCSC 972 (CanLII), 2000 BCSC 972.
[34] Interruption in employment as compared to the whole length of the employment does not affect the calculation of the notice period: Statsny v. Dependable Turbines Ltd., 2009 BCSC 1648 (CanLII), 2009 BCSC 1648.
[35] In terms of mitigation, the burden is on the defendant to show that the plaintiff did not take reasonable steps to mitigate her damages. The defendant must establish that the plaintiff failed to make reasonable efforts to find alternate work and that such work could have been found had the plaintiff done so: Sifton v. Wheaton Pontiac Buick GMC (Nanaimo) Ltd., 2010 BCCA 541 (CanLII), 2010 BCCA 541 at para. 25.
Reasonable Notice
[46] Reasonable notice is determined by the circumstances of each particular case. The approach as set out in Bardal v. Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.J) at p. 145 remains an important guide:
There can be no catalogue laid down as to what is reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant.
[47] Equally applicable is Ansari v. British Columbia Hydro and Power Authority 1986 CanLII 1023 (BC SC), (1986), 2 B.C.L.R. (2d) 33 (S.C.), McEachern, C.J.S.C. (as he then was) identified the following non-exhaustive factors:
(a) responsibility of the employment function;
(b) age;
(c) length of service; and
(d) availability of equivalent alternative employment.
[48] The plaintiff submits that she should be entitled to 20 to 24 months notice with credit to the defendant of two months provided.
[49] Cases which the plaintiff submits are similar and support her position are: Orlando v. Vancouver Coastal Health Authority, 2005 BCSC 926 (CanLII), 2005 BCSC 926, Bachynski v. DC DiagnostiCare Inc., 2001 BCSC 36 (CanLII), 2001 BCSC 36; Jamieson v. Finning International Inc., 2009 BCSC 861 (CanLII), 2009 BCSC 861; Lyle v. Aluminex Extrusions Ltd., [1996] B.C.J. No. 203 (S.C.), and MacGillivray v. Telus Communications Ltd., 2004 BCSC 1394 (CanLII), 2004 BCSC 1394.
[50] Ms. Whiting was 57 years old when terminated and is now 60 years old. Her age poses greater challenges in finding employment. She held a supervisory position in which she oversaw in the order of twenty frontline programs. She has worked the entirety of her life in the social services field. Her tenure with the Club was approximately thirteen years. Her job search was at a time when opportunities in her field were limited.
[51] It took Ms. Whiting two years to find employment in her field but not in a supervisory role that she formerly held.
[52] The defendant acknowledged that if a period of reasonable notice was required, it did not take issue with the factors to be considered as submitted by the plaintiff.
The court found that 18 months notice was appropriate.
Mitigation
[54] The defendant takes the position that the plaintiff did not take reasonable steps to mitigate her damages.
[55] The defendant points to the following reasons supporting the plaintiff's lack of reasonable mitigation:
(a) she did not start looking for a job until after the employer's stated notice period expired, even though the defendant did not require her to work;
(b) she did not look for work in the most obvious market, Vancouver;
(c) she did not look for work in doing "front-line work";
(d) she took retraining that was limited or of no applicability to her employment;
(e) she wanted to work with her husband "up-island" doing a different kind of work, possibly involving design.
[56] In my view, the defendant has not established a failure to mitigate. Rather, the evidence clearly supports the view that the plaintiff took reasonable steps. It was not unreasonable for Ms. Whiting to take some time to regroup following her termination. In regard to moving to Vancouver to pursue a position in social work, I agree with the view that it was impractical as her spouse worked on Vancouver Island, she owned a home on Vancouver Island, and her brother for whom she had care responsibilities was integrated into the community where they lived. Further, there was no evidence that Ms. Whiting could have obtained employment in Vancouver.
[57] In terms of the suggestion that Ms. Whiting could have taken up a new career path, the duty to mitigate relates to take steps to maintain her position in her industry, trade, or profession: Sifton at para. 25. Ms. Whiting should not be penalized for not embarking on an entirely new career path following dismissal in the circumstances of an employee who is 58 years old, whose education, training, and experience has been in the field of social services work. Though there are cases which support the decision of an employee to take up their own business. There was also no evidence that she could obtain meaningful employment in the other areas explored.
Summary: Aside from being a fairly straightforward case based on principles relevant to reasonable notice and mitigation, the case contains a useful analysis of the effect of termination clauses in a series of fixed term employment agreements, the requirement of consideration for an employer's requirement that an employee agree to clauses during employment, and the basic principle that termination for lack of funding is no different for reasonable notice purposes than any other wrongful dismissal.
Lawyer's Weekly Article - McCormick wins in BC Court
Written by Dan GleadleThe Lawyer's Weekly, in its June 17 2011 issue, in an article written by Jeremy Hainsworth, comments on the recent victory by Mr. McCormick and his counsel Murray Tevlin of TevlinGleadle Employment Law Strategies.
In the decision referred to, the BC Supreme Court upheld the decision of the BC Human Rights Tribunal in this important employment law matter, involving a claim by a 66 year odl lawyer to be entitled to the protections of the BC Human Rights Code's rules against discrimination based on age. The Tribunal, and now the court has concluded that Mr. McCormick is entitled to the anti-discrimination protection of the Code, even though he is a partner in a law firm.
The article is available here.
Globe and Mail, Report on Business - Update on McCormick v. Fasken
Written by Dan GleadleThe Globe and Mail has published an article on the McCormick v. Fasken age discrimination claim in its Report on Business.