Sills v. Children's Aid Society of the City of Belleville et al. [Indexed as: Sills v. Children's Aid Society of Belleville (City)]
53 O.R. (3d) 577
[2001] O.J. No. 1577
Docket No. C32750
Court of Appeal for Ontario
Goudge, MacPherson and Simmons JJ.A.
April 30, 2001
Employment--Wrongful dismissal--Damages--Deductions--Employee became disabled 2.5 months into 14.5-month working notice period--Employer did not pay employee's salary after she stopped working--Employee collected disability benefits from employer's group insurance carrier--Trial judge in employee's wrongful dismissal action did not err in crediting employer with 2.5 months worked by employee rather than full 14.5 months working notice and in awarding employee amount equivalent to salary to which she was entitled throughout working notice period--Employee contributed indirectly to disability plan --Trial judge did not err in failing to deduct disability benefits received by employee during period of working notice from damages.
In July 1992, the plaintiff was given 14.5 months' notice that her employment would be terminated due to an organizational restructuring. She was promised an additional 3.4 months' severance pay on termination, for a total of 17.9 months notice of termination or pay in lieu of notice. She suffered a disabling depression within two months of receiving notice, and was unable to work during any of the balance of the working notice period. She did not receive a salary from the defendant employer after she stopped working, but she did receive short-term disability payments from the defendant's group insurance carrier equivalent to 66 per cent of her salary, plus top-up of salary from her sick leave bank, for the period from September 29, 1992 to April 5, 1993. She applied for long-term disability benefits equivalent to 60 per cent of her salary, but her claim was not processed immediately. She accordingly entered into a written agreement with the defendant ("the repayment agreement") authorizing the defendant to deduct sick leave days from her sick leave bank effective April 5, 1993 until her long-term disability claim was established. The defendant paid the plaintiff the equivalent of 100 per cent of her salary for the period between April 5, 1993 and September 30, 1993 from her sick leave bank. The repayment agreement provided that when the plaintiff's claim was established, she agreed to reimburse the group insurer's payment portion of her salary by signing over the insurer's cheques, and further agreed to repay the top-up portion of her salary. Her employment was terminated as planned on September 30, 1993.
In late 1995, the plaintiff settled an action against the group insurer in which she had claimed long-term disability benefits totalling $31,075 for the period April 1, 1993 to March 1, 1994. She received a lump sum of $18,000 on account of her claim, plus $10,500 on account of interest and costs. Her net recovery was $10,411.74. She commenced an action for damages for wrongful dismissal. The defendant counterclaimed for repayment of the $10,411.74 which the plaintiff recovered on account of long-term disability payments, plus the salary top-up payments it had made pursuant to the repayment agreement subsequent to April 5, 1993, totalling $10,995, less a credit to the plaintiff for 50 per cent of the balance in her sick leave bank as adjusted on September 30, 1993.
The trial judge found that the proper notice period, in addition to the statutory severance period of 3.4 months, was 16 months, for a total of 19.4 months. He credited the defendant with the 2.5 months which the plaintiff worked after receiving working notice. He found that the plaintiff had earned her disability benefits as part of her compensation package, and that there was nothing to demonstrate the intention of the parties as to the entitlement of the plaintiff to receive both disability benefits and damages. He accordingly held that the disability payments could not be deducted because the plaintiff had contributed to the plan. The counterclaim was allowed. The defendant appealed, arguing that it was entitled to credit for the full 14.5 months of working notice that it gave the plaintiff as opposed to the 2.5 months of credit allowed by the trial judge, even if it did not pay her for the 12-month portion of that period during which she did not work, and alternatively, that the trial judge erred in failing to credit the defendant with the disability benefits received by the plaintiff during the period of working notice. The plaintiff cross-appealed.
Held, the appeal should be dismissed; the cross-appeal should be allowed in part.
Generally, insufficient notice of termination entitles an employee to treat his or her obligations under the contract as being at an end. Absent evidence of an employee's unequivocal intention to reject an employer's repudiation of a contract by giving insufficient notice of termination, the offer of continuing employment during the insufficient notice period should not be viewed as anything other than an opportunity for the employee to mitigate her losses. To hold otherwise would impose an unfair burden on wrongfully dismissed employees to gauge immediately the adequacy of the notice period and to otherwise assess their options. A disabled employee is entitled to damages during the notice period even though the employee lacks the ability to mitigate. The plaintiff did not adopt the position that her contractual relationship with the defendant ended immediately upon delivery of an insufficient notice of termination. Conversely, she did not assert that the contract of indefinite hiring was continued by making a claim for specific performance of her employment contract. She was entitled to accept the offer of continuing employment during the notice period in order to ensure her ability to mitigate if and when she was able to work. The trial judge did not err in awarding the plaintiff an amount equivalent to the salary to which she was entitled throughout the notice period.
An employer is not relieved of its obligation to pay damages for wrongful dismissal by virtue of the existence of a disability plan. Because disability payments are contractual in nature, the question of their deductibility turns on the terms of the employment contract and the intention of the parties. The parties to an employment contract can agree that an employee is entitled to receive both disability payments and damages for wrongful dismissal, and such an intention may be inferred. It is reasonable to assume that an employee would not willingly negotiate and pay for a benefit that would enable her employer to avoid responsibility for a wrongful act. It is reasonable to infer that parties would agree that an employee should retain disability benefits in addition to damages for wrongful dismissal where the employee has effectively paid for the benefits in question. As found by the trial judge in this case, the plaintiff earned the disability benefits as part of her compensation and as part of a trade-off in arriving at benefits and salary. The trial judge did not err in concluding that disability payments should not be deducted from damages in this case.
It was artificial, in the circumstances, to parse the wording of the repayment agreement or to try to match the net recovery achieved to the specific language used. The parties clearly never contemplated the possibility that the plaintiff might achieve something less than full recovery of benefits for the entire period of her disability. The position the plaintiff advanced on the top-up, specifically that the settlement reflected only 3.7 months of recovery, appeared to be contrary to her position relating to the time frame to which the settlement funds related, that is the entire period from April 1, 1993 to March 1, 1994. Clearly, the plaintiff's net recovery did not reflect the extent of benefits she received. With the benefit of hindsight, the plaintiff sought, in effect, to maximize draw down on her sick leave bank, which she was not permitted to do while receiving long-term disability benefits. The trial judge found that the plaintiff was, in fact, disabled for the entire period from April 1, 1993 to March 1, 1994. There was no evidence before him to clarify whether the settlement made by the plaintiff reflected payment of a reduced benefit for the entire period of her disability or payment of full benefits for a reduced period. It was within the plaintiff's control to specify the basis of her settlement by way of agreement. The trial judge did not err in implementing the finding he made regarding the intent of the repayment.
The trial judge only erred in failing to credit the plaintiffs' sick leave bank with the 14 statutory holidays which occurred while she was disabled.
APPEAL and CROSS-APPEAL from a judgment of Chilcott J. (1999), 99 C.L.L.C. Â210-046, 1999 14860 (ON SC), 46 C.C.E.L. (2d) 30 in an action for damages for wrongful dismissal.
Sylvester v. British Columbia, 1997 353 (SCC), [1997] 2 S.C.R. 315, 34 B.C.L.R. (3d) 1, 146 D.L.R. (4th) 207, 212 N.R. 51, [1997] 6 W.W.R. 625, 29 C.C.E.L. (2d) 1, 97 C.L.L.C. 210-012, revg (1995), 1995 822 (BC CA), 6 B.C.L.R. (3d) 7, 125 D.L.R. (4th) 541, [1995] 6 W.W.R. 537, 12 C.C.E.L. (2d) 71, 95 C.L.L.C. 210-034 (C.A.), distd Aasgaard v. Harlequin Enterprises Ltd. (1993), 48 C.C.E.L. 192, [1993] O.J. No. 1484 (Gen. Div.), affd, [1997] O.J. No. 1112 (C.A.); Cunningham v. Wheeler, 1994 120 (SCC), [1994] 1 S.C.R. 359, 88 B.C.L.R. (2d) 273, 113 D.L.R. (4th) 1, 164 N.R. 81, [1994] 4 W.W.R. 153 (sub nom. Shanks v. McNee, Cooper v. Miller (No. 1)); McKay v. Camco Inc. (1986), 1986 2544 (ON CA), 53 O.R. (2d) 257, 11 O.A.C. 356, 24 D.L.R. (4th) 90, 11 C.C.E.L. 256 (C.A.), revg (1983), 1983 1644 (ON SC), 43 O.R. (2d) 603, 2 D.L.R. (4th) 688, 3 C.C.E.L. 9 (H.C.J.); Suleman v. British Columbia Research Council (1990), 1990 746 (BC CA), 52 B.C.L.R. (2d) 138, [1990] B.C.J. No. 2707 (C.A.), revg (1989), 1989 2778 (BC SC), 38 B.C.L.R. (2d) 208, 27 C.C.E.L. 23 (S.C.), consd Statutes referred to Employment Standards Act, R.S.O. 1990, c. E.14
Wilfred Menninga, for appellant. Robert Reynolds, for respondent.
The judgment of the court was delivered by
1SIMMONS J.A.:-- Mary-Anne Sills expected she would retire from the Belleville Children's Aid Society when her working days were finished. She was 38 years old when the Society eliminated her position as office manager following an organizational restructuring. By then, she had worked at the Society for most of her adult life.
2On July 17, 1992, the Society gave Ms. Sills 14.5 months' written notice that her employment would be terminated on September 30, 1993 ("working notice"). It also promised an additional 3.4 months' severance pay on termination for a total of 17.9 months' notice of termination or pay in lieu.
3Ms. Sills became profoundly depressed within 2 months of receiving notice. She was unable to work during any of the balance of the working notice period. She received various forms of income replacement benefits until the end of the working notice period when her employment was terminated as planned.
4Following the trial of a claim for wrongful dismissal, the trial judge found the proper notice period should have been 16 months, in addition to the 3.4 months of severance pay. Based on a finding that Ms. Sills contributed indirectly to the disability plans from which she had received benefits, the trial judge found the disability benefits payments were not deductible from the damages he awarded for wrongful dismissal. He also dealt with a detailed counterclaim involving an agreement the parties entered into to provide Ms. Sills with an income while her claim for long-term disability benefits was processed, and adjustments to Ms. Sills' sick leave bank arising from the agreement.
5The issues on appeal relate to: the obligation of an employer to pay salary to a disabled employee to whom working notice has been given; the deductibility of disability benefits from an award of damages for wrongful dismissal where the employee has contributed to the disability benefits plan; and the determination of the counterclaim.
Facts
6Ms. Sills commenced employment with the Society in November 1976 as a clerk typist. By 1979, she had moved from a union position to a management position. She became the office manager for the Society in the early 1980s. During the course of her employment, she received evaluations regularly, and they were good.
7On July 13, 1992, the Society advised Ms. Sills that her position was to be phased out. On July 17, 1992, the Society gave Ms. Sills written notice of termination effective September 30, 1993 and indicated she would receive a further 3.4 months of severance pay in accordance with the Employment Standards Act, R.S.O 1990, c. E.14 on termination.
8Ms. Sills requested and was given an opportunity to make submissions to the full Board of the Society that her position should not be phased out. On September 28, 1992, the Board advised her in writing that the decision to phase out the position of office manager would stand.
9Ms. Sills became totally disabled on September 28, 1992 and ceased working as a result. She did not receive a salary from the Society after that date, however she did receive short-term disability payments from the Society's group insurance carrier equivalent to about 66 per cent of her salary, plus top-up of salary from her sick leave bank, for the period from September 29, 1992 to April 5, 1993. Thereafter, she applied for long-term disability benefits equivalent to 60 per cent of salary, but her claim was not processed immediately. She accordingly entered into a written agreement with the Society (the "repayment agreement") authorizing it to deduct sick leave days from her sick leave bank effective April 5, 1993 until her long-term disability claim was established. The Society paid Ms. Sills the equivalent of 100 per cent of her salary for the period between April 5, 1993 and September 30, 1993 in the amount of $27,486.86 from her sick leave bank pursuant to the repayment agreement.
10The specific terms of the repayment agreement are important to the determination of the counterclaim. It provided as follows:
I, Mary-Anne Sills hereby authorize the Agency to deduct my entire sick leave days from my sick leave bank effective April 5, 1993, until such time that the Long term disability claim be established with London Life.
When the claim is established, I agree to reimburse the London Life payment portion of my salary by signing over the London life cheques. I further agree to repay the top up portion of my salary. My sick leave days will be adjusted accordingly to reflect these repayments.
11Ms. Sills' employment was terminated as planned on September 30, 1993.
12It is significant to note that Ms. Sills was entitled to accumulate sick leave benefits at the rate of 1.5 days per month pursuant to her contract of employment. In the event of absence due to illness, she was entitled to draw on those days to maintain full salary, or to top up amounts received as short-term disability benefits from the disability insurer. Top-up of long-term disability benefits was not permitted. Ms. Sills was entitled to payout of 50 per cent of the accumulated value of her sick leave bank on termination, to a maximum of 100 days.
13It should also be noted that the Society pays somewhat reduced Employment Insurance premiums because its benefits package includes a short-term disability plan. The Society's premium reduction was about 37 cents per $100, of which about 15 cents per $100 was attributed to employee contribution. Rather than remit this reduction to the employees, the Society redirected it to the premiums for its overall benefits package.
14In late 1995, Ms. Sills settled an action against the group insurance carrier in which she had claimed long-term disability benefits totalling $31,075 for the period April 1, 1993 to March 1, 1994. She received a lump sum of $18,000 on account of her claim, plus $10,500 on account of interest and costs. Her net recovery was $10,411.74.
15Ms. Sills commenced this action for wrongful dismissal on June 11, 1996. The Society counterclaimed for repayment of the $10,411.74 Ms. Sills recovered on account of long-term disability payments, plus the salary top-up payments it had made pursuant to the repayment agreement subsequent to April 5, 1993 totalling $10,995, less a credit to Ms. Sills for 50 per cent of the balance in her sick leave bank as adjusted on September 30, 1993.
Decision at Trial
(i) Claim for wrongful dismissal
16The trial judge found the proper period of notice, in addition to the statutory severance period of 3.4 months, was 16 months, for a total of 19.4 months. He credited the Society with 2.5 months from July 17, 1992 to September 28, 1992 as Ms. Sills continued to work during that period. He went on to find that Ms. Sills had earned her disability benefits as part of her compensation package. The decision in Sylvester v. British Columbia, 1997 353 (SCC), [1997] 2 S.C.R. 315, 146 D.L.R. (4th) 207, dealing with deductibility of disability benefits from damages for wrongful dismissal where the plan was provided solely by the employer, did not therefore apply. He found nothing that demonstrated the intention of the parties as to the entitlement of Ms. Sills to receive both disability benefits and damages. He accordingly held the disability payments should not be deducted because the employee had contributed to the plan.
(ii) Counterclaim
17The trial judge found Ms. Sills was obligated to repay the Society the net sum of $10,411.74 she had recovered on account of long-term disability benefits, plus the salary top- up the Society had paid to her between April 5, 1993 and September 30, 1993 totalling $10,995, pursuant to the terms of the repayment agreement. He credited all of these sums to her sick leave bank. He found the Society was entitled to charge Ms. Sills' sick leave bank for the statutory holidays that occurred while she was disabled in calculating the balance as of September 30, 1993. He rejected Ms. Sills' assertion that she was entitled to draw her sick leave bank down to zero pursuant to the terms of the collective agreement and ordered Ms. Sills to pay the Society $10,702.87, being 50 per cent of the additional balance that would have been in her sick leave bank on September 30, 1993 after the additional credits were made.
Grounds of Appeal
(i) Claim
18The Society relies on the following grounds of appeal:
the trial judge erred in failing to credit the Society with the full 14.5 months' working notice given by the Society to Ms. Sills,
in the alternative, the trial judge erred in failing to credit the Society with the disability benefits received by Ms. Sills during the period of working notice.
(ii) Counterclaim
19Ms. Sills raises the following grounds of cross-appeal:
the trial judge erred in concluding the entire amount of the net recovery from the insurer was subject to the repayment agreement,
the trial judge erred in finding Ms. Sills was required to repay the entire amount of top-up paid to her by the Society for the period from April 5, 1993 to September 30, 1993. The order for repayment should have been limited to top-up proportionate to her actual net recovery from the insurer, namely 40 per cent of $10,411.74,
the trial judge erred in failing to credit Ms. Sills' sick leave bank with the 14 statutory holidays which occurred while she was disabled; and
the trial judge erred in failing to find Ms. Sills' entitlement to all of the credits in her sick leave bank crystallized upon her disability.
Analysis
Credit for working notice
20The Society's primary position is that it is entitled to credit for the full 14.5 months of working notice that it gave to Ms. Sills as opposed to the 2.5 months of credit allowed by the trial judge, even though it did not pay her for the 12- month portion of that period during which she did not work.
21The Society's position is based on several premises:
Ms. Sills would have been obligated to work during the balance of the period of working notice had she not become disabled;
Ms. Sills was relieved of the obligation to work when she became disabled;
the Society was relieved of the obligation to pay Ms. Sills' salary while she was disabled because her employment contract provided for disability benefits; and
the period of working notice was not interrupted by Ms. Sills' disability.
22The Society says all of these premises flow from Sylvester, supra, in particular, from the analysis of the Supreme Court of Canada in that case, in overruling the British Columbia Court of Appeal [(1995), 1995 822 (BC CA), 125 D.L.R. (4th) 541, 6 B.C.L.R. (3d) 7 (C.A.)], which had adopted and refined an approach taken in McKay v. Camco Inc. (1986), 1986 2544 (ON CA), 53 O.R. (2d) 257, 24 D.L.R. (4th) 90 (C.A.).
23In McKay, this court treated the notice period in a wrongful dismissal case as being interrupted by a period of intervening disability. Lambert J.A., writing for the British Columbia Court of Appeal in Sylvester, treated the entitlement to disability benefits and the entitlement to notice as distinct contracts, entitling the employee to separate claims for damages in the event of a breach. He reasoned that this would avoid problems arising from a "linear approach to the assessment of damages". He found the employee entitled to damages for wrongful dismissal throughout the notice period, as well as to the disability benefits payable for the same period.
24In reversing the British Columbia Court of Appeal, Major J. held at para. 13 that disability plan contracts should not be considered "contracts which are distinct from the employment contract, but rather as integral components of it". He found that it is necessary to examine the terms of the employment contract to determine whether the contract provides for a right to both disability benefits and damages, or whether such an intention can be inferred. He considered it generally inconsistent that an employee should be entitled to receive both disability benefits and damages for wrongful dismissal under the employment contract.
25The Society submits that the same analysis and conclusions are applicable to this case. It says the period of working notice it gave Ms. Sills continued to run while she was disabled. It was relieved of the obligation to pay Ms. Sills' salary during that period because of the existence of the disability benefits plan.
26I disagree. Sylvester does not stand for the proposition that an employer is relieved of its obligation to pay damages for wrongful dismissal by virtue of the existence of a disability plan. It merely provides that disability benefits are deductible from the damages payable in certain circumstances.
27In Sylvester, the parties had agreed on the quantum of damages during the notice period so there was no dispute before the court on that issue. Nevertheless, Major J. analyzed two distinct issues, the first being entitlement to and the measure of damages when a disabled employee is wrongfully dismissed, and the second being the deductibility of disability benefits. On the first issue, Major J. said the following at paras. 8 and 9:
The [British Columbia Court of Appeal] held that the disability benefits to which the respondent was entitled during the notice period should not be deducted from the damages for wrongful dismissal. It concluded that a disability benefits plan should be considered a distinct contract from the basic employment contract and that once an employee is given notice of termination, the employer is required to comply both with its obligation to pay salary during the notice period and with its obligation to pay disability benefits.
On appeal to this Court, there was no challenge to the finding that the respondent was entitled to short-term disability benefits under the STIIP from June 1, 1992 to December 31, 1992 and to long-term disability benefits under the LTDP from January 1, 1993 to December 31, 1993, nor to the finding that the respondent was entitled to 20 months' notice from July 23, 1992. The appellant did not challenge the finding that the respondent was entitled to damages of $102,100, being the salary he would have earned had he worked during the notice period. This is consistent with the principle that an employee who is wrongfully dismissed without adequate notice of termination is entitled to damages consisting of the salary the employee would have earned had the employee worked during the notice period. The fact that an employee could not have worked during the notice period is irrelevant to the assessment of these damages. They are based on the premise that the employee would have worked during the notice period. Therefore, an employee who is wrongfully dismissed while working and an employee who is wrongfully dismissed while receiving disability benefits are both entitled to damages consisting of the salary the employee would have earned had the employee worked during the notice period.
(Emphasis added)
28In relation to the second issue, it is clear Major J. did not intend his conclusions in that case to automatically dictate the result in a case where the employee had contributed to the disability benefits plan. He stated at para. 22:
The issue whether disability benefits should be deducted from damages for wrongful dismissal where the employee has contributed to the disability benefits plan was not before the Court.
29Sylvester does not therefore support the third premise advanced by the Society, namely that the Society was relieved of the obligation to pay Ms. Sills' salary while she was disabled because her employment contract provided for disability benefits.
30The Society says that, in any event, Major J.'s comments relating to the first issue in Sylvester, i.e. entitlement to and the measure of damages when a disabled employee is wrongfully dismissed, is distinguishable from this case because Sylvester is not a working notice case. It says there is no termination of the contract and no breach entitling a claimant to damages in a working notice case until the period of notice has expired: Suleman v. British Columbia Research Council (1990), 1990 746 (BC CA), 52 B.C.L.R. (2d) 138, [1990] B.C.J. No. 2707 (C.A.).
31In Suleman, an employee was given six months' notice of termination due to lack of work. The employee issued a statement of claim almost immediately, claiming damages for wrongful dismissal. The employer treated the statement of claim as an election to treat the employment contract as terminated prior to the expiry of the notice period and accepted the employee's resignation. The British Columbia Court of Appeal stated the following conclusion at [p. 142 B.C.L.R.]:
In other words, 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. In the present case, the named date was 31st March, 1987. It was not until that date that the cause of action accrued for the alleged breach of the contract to continue the relationship.
32I disagree that the decision in Suleman governs this case. First, I do not accept that Suleman necessarily supports the broad proposition for which the Society advances it, i.e. that generally, there is no termination of the contract and no breach entitling a claimant to damages in a working notice case until the period of notice has expired. In my view, Spence J. enunciated the governing principle correctly and more narrowly than the Society frames it in Aasgaard v. Harlequin Enterprises Ltd. (1993), 48 C.C.E.L. 192, [1993] O.J. No. 1484, affirmed on other grounds [1997] O.J. No. 1112 (C.A.), at para. 17:
Whether a notice of termination is to be construed as an immediate repudiation involves a consideration of the intention of the notifying party, as in the Oxman case [Oxman v. Dustbane Enterprises Ltd. (1988), 23 C.C.E.L. 157 (Ont. C.A.)]. In the present case, the defendant's intention was to bring the plaintiff's employment to an end only at the end of October. To determine whether there is an immediate repudiation, it is also necessary to consider the adequacy of the notice period and severance pay offered in respect of the notice. If an employer were to notify an employee under a contract of indefinite hiring that the employee was dismissed with severance pay that constituted reasonable notice, that act would not be wrongful; cf. Vorvis v. Insurance Corporation of British Columbia (1989), 1989 93 (SCC), 58 D.L.R. (4th) 193 (S.C.C.). If the employer in the example were instead to provide advance notice of the termination, but still with adequate severance, it follows that that act would not be wrongful either, because it would be done in accordance with the contract and not in repudiation of it. The termination would be effective on the designated date and the employee would at that time be entitled to the severance benefit. But the notice itself would not constitute an immediate termination. The situation would be different however if the employer at the time of giving the advance notice did not undertake to provide adequate severance following termination. In that case, by announcing its intention to dismiss the employee in a manner that would violate the contract, the employer would have immediately repudiated the contract and the employee would be able to claim for damages.
33In this case, Ms. Sills did not adopt the position that her contractual relationship with the Society ended immediately upon delivery of an insufficient notice of termination. However, in my view, no finding was made indicating Ms. Sills had, in any way, disentitled herself to claim the damages arising from insufficient notice.
34Second, and more importantly, Suleman did not deal with the specific issue the Society contests, i.e. whether an employer is required to pay damages to a wrongfully dismissed employee who is unable to work during the notice period given because of disability. Sylvester, on the other hand, did.
35The statement of the facts of Sylvester, as set out by Lambert J.A. for the British Columbia Court of Appeal, makes it clear that although the employee in that case was disabled at the time his position was eliminated, his employer purported to give him a period of paid notice as part of his termination package. That period is akin to the period of working notice given here. Lambert J.A. clearly adverted to and determined the issue of the employer's obligation to pay damages equivalent to salary during a notice period where a disabled employee is wrongfully dismissed at para. 29:
The fact that an employee is receiving benefits under a disability plan should not, in my opinion, have any effect on the length of the period of reasonable notice or the payment to the employee of his or her regular rate of pay throughout the notice period. I think that from a legal perspective the disability plan should be viewed as a contract that is distinct from the basic contract of employment, but like the basic contract of employment forming a part of the total employment package. It is true that if an employee is able to work, the employee would not receive disability benefits and, if the employee is receiving disability benefits while continuing as a regular employee, then the employee would not also be receiving wages or salary. So in the usual circumstances of continuing employment, no employee would be receiving both wages or salary and disability benefits with respect to the same period. Either the basic contract of employment is controlling the mutual obligations of the employer and employee, or the disability plan is controlling those obligations, but both are not operating at once. But the interrelationship of those two distinct contractual obligations changes when notice of termination is given. In my opinion both contracts then operate together and both must be complied with. And if the employer breaks the obligations under one or other of those contracts, or both, then damages can be assessed under the broken contract or the broken contracts.
(Emphasis added)
36Major J. declined to adopt Lambert J.A.'s analysis of how the employment contract and disability contract interact when an employee is wrongfully dismissed due to insufficient notice. However, although the continuing entitlement of a disabled employee to damages equivalent to salary during the notice period was not contested at the Supreme Court of Canada, Major J. clearly considered the issue, and approved the concept that a disabled employee remains entitled to such damages (see para. [27] above).
37It is not clear if a finding was made that Mr. Sylvester treated his contract of employment as being at an end upon receipt of the notice of termination. In my view however, such a finding is not crucial to an employee's right to receive damages equivalent to the salary accruing during the notice period actually given.
38Generally, insufficient notice of termination entitles an employee to treat his or her obligations under the contract as being at an end: Aasgaard. There may be cases where the insufficiency is so minor that the right does not arise, however that would be an issue of fact for the trial judge to determine. Absent evidence of an employee's unequivocal intention to reject an employer's repudiation of a contract by giving insufficient notice of termination, I see no reason to view the offer of continuing employment during the insufficient notice period as anything other than an opportunity for the employee to mitigate her losses. To hold otherwise would impose an unfair burden on wrongfully dismissed employees to immediately gauge the adequacy of the notice period and to otherwise assess their options. Sylvester confirms a disabled employee's entitlement to damages during the notice period even though the employee lacks the ability to mitigate.
39As noted, Ms. Sills did not adopt the position that her contractual relationship with the Society ended immediately upon delivery of an insufficient notice of termination. She did not, however, assert that the contract of indefinite hiring was continuing by making a claim for specific performance of her employment contract. She was entitled, in my view, to accept the offer of continuing employment during the notice period in order to ensure her ability to mitigate if and when she was able to work. It follows that, in this case, the trial judge did not err in awarding Ms. Sills an amount equivalent to the salary to which she was entitled throughout the period of working notice.
Credit for disability payments
40The Society says the trial judge erred in distinguishing Sylvester on the ground that Ms. Sills contributed indirectly to the disability plans. It says Ms. Sills made only a nominal and indirect contribution towards the premiums required to fund the plans by way of the nominal Employment Insurance premium reduction for employees covered under the disability policies. The employer established the plan, ran the plan, and paid all of the premiums save for the nominal employee contribution. The trial judge should therefore have focused on the terms of the contract to determine whether the parties intended Ms. Sills should have been entitled to retain her disability benefits and recover damages for wrongful dismissal.
41Contrary to the Society's assertion, in addition to the nominal employee contribution to the disability plan premiums by way of Employment Insurance premium reductions, the trial judge also found Ms. Sills earned the disability benefits "as part of her compensation and as part of a trade-off in arriving at benefits and salary". He said Ms. Sills "stated this in her evidence and it stood uncontradicted". As previously noted, it is clear Major J. did not intend his conclusions in Sylvester would necessarily govern where the employee had contributed to the disability benefits plan. The trial judge did not err in finding that Sylvester does not govern the question of deductibility of disability payments in this case.
42That said, the issue becomes what should be the governing principle. At para. 22 of Sylvester, Major J. commented:
There may be cases where an employee will seek benefits in addition to damages for wrongful dismissal on the basis that the disability benefits are akin to benefits from a private insurance plan for which the employee has provided consideration.
(Emphasis added)
43The insurance exception which exempts private insurance plan payments paid for by the injured party from the rule against double recovery in tort cases is explained in Cunningham v. Wheeler, 1994 120 (SCC), [1994] 1 S.C.R. 359, 113 D.L.R. (4th) 1, at pp. 400-03 S.C.R., pp. 10-12 D.L.R. per Cory J.:
I think the exemption for the private policy of insurance should be maintained. It has a long history. It is understood and accepted. There has never been any confusion as to when it should be applied. More importantly it is based on fairness. All who insure themselves for disability benefits are displaying wisdom and forethought in making provision for the continuation of some income in case of disabling injury or illness. The acquisition of the policy has social benefits for those insured, their dependants and indeed their community. It represents forbearance and self-denial on the part of the purchaser of the policy to provide for contingencies. The individual may never make a claim on the policy and the premiums paid may be a total loss. Yet the policy provides security.
Recovery in tort is dependent on the plaintiff establishing injury and loss resulting from an act of misfeasance or nonfeasance on the part of the defendant, the tortfeasor. I can see no reason why a tortfeasor should benefit from the sacrifices made by a plaintiff in obtaining an insurance policy to provide for lost wages. Tort recovery is based on some wrongdoing. It makes little sense for a wrongdoer to benefit from the private act of forethought and sacrifice of the plaintiff.
There is a good reason why the courts should be slow to change a carefully considered long-standing policy that no deductions should be made for insurance moneys paid for lost wages. If any action is to be taken, it should be by legislatures. It is significant that in general no such action has been taken.
Should the insurance exception apply in the situation where disability benefits are obtained not privately but pursuant to a collective bargaining agreement?
The Court of Appeal refused to exempt the disability payments received by the plaintiff because they were obtained as a result of a collective bargaining agreement, rather than by way of a direct deduction from his pay. That, I think, is too narrow an exception. They were bargained for and obtained as a result of a reduction in the hourly rate of pay. These benefits were therefore obtained and paid for by the plaintiff just as much as if he had bought and privately paid for a policy of disability insurance.
44There is an important distinction between damages in tort and damages in contract. Damages in tort are intended to restore the plaintiff to the position she would have been in had the tort not occurred. Damages in contract are designed to give the plaintiff what she contracted for: per Lambert J.A., Sylvester, at paras. 11 and 12, B.C.C.A. At the Supreme Court of Canada, Major J. determined that because disability payments are contractual in nature, the question of their deductibility turns on the terms of the employment contract and the intention of the parties. He found the contract in question did not provide for the employee to receive both damages for wrongful dismissal and disability payments. He further found that no such intention could be inferred in that case. He also recognized, however, that parties to an employment contract could agree that an employee is entitled to receive both disability payments and damages for wrongful dismissal and that such an intention co uld be inferred.
45Absent an express provision precluding double recovery, in my view, the principles enunciated in Cunningham assist in determining whether an intention that there would be double recovery in the event of a wrongful dismissal can be inferred. I consider it reasonable to assume that an employee would not willingly negotiate and pay for a benefit that would allow her employer to avoid responsibility for a wrongful act. I consider it reasonable to infer that parties would agree that an employee should retain disability benefits in addition to damages for wrongful dismissal where the employee has effectively paid for the benefits in question.
46The same reasoning applies to the suggestion in Sylvester that a disabled employee who receives adequate notice should not be treated differently [from] a disabled employee who is wrongfully dismissed -- an employer should not be relieved of the obligation to pay damages for a wrongful act because of a benefit plan provided by the employee. Moreover, the concern expressed in Sylvester, that disabled employees who are wrongfully dismissed be treated the same as working employees who are wrongfully dismissed, simply does not arise where the employee has paid for the plan that provides a disability income.
47Again, I find no error in the trial judge's conclusion that disability payments should not be deducted.
Counterclaim
Repayment agreement and top-up
48The trial judge found it was clear from the evidence at trial that the primary purpose of the repayment agreement was to permit Ms. Sills to receive full salary while she waited for London Life to recognize her disability claim. He said it followed exactly a similar agreement that had been in place to provide her with full salary while she waited for short-term disability payments. He dealt with an argument concerning the time frame of the repayment obligation as follows [at pp. 41-42 C.C.E.L.]:
The plaintiff further argues that the recovery by Sills against London Life pertains to the entire disability period running from September 28th, 1992 to March 1st, 1994. Whereas the repayment obligation should only pertain to the period April 5th, 1993 to September, 1993 when the plaintiff was receiving payments from the sick leave bank, being about 50 [per cent] of the period covered by the recovery from London Life. Therefore, the plaintiff maintains only 50 [per cent] of the amount recovered from London Life should be considered to be received by the plaintiff on account of the period April 5th, 1993 to September 30th, 1993, when the obligation, if there is any, for repayment would arise.
I cannot accept this argument, there is nothing before the court, testimony or documents, that allocate the settlement funds to a specific period of disability.
49As for top-up, the trial judge found Ms. Sills was relying on a policy in force in 1986 to resist the claim for repayment of top-up amounts. That policy permitted top-up of long-term disability benefits from the sick leave bank to 100 per cent of salary. The trial judge found that as of 1992, the relevant policies permitted top-up of short-term disability benefits but prohibited top-up of long-term disability benefits.
50Ms. Sills says if there truly was no evidence concerning the period to which her settlement with London Life applied, the trial judge ought not to have ordered any funds repaid, as her repayment obligation was limited to disability payments received on account of the period from April 5, 1993 to September 30, 1993. She says the trial judge misapprehended the evidence. There was evidence indicating the period to which the settlement funds applied, in the form of the statement of claim in which she asserted a claim for disability payments spanning the period from April 5, 1993 to March 1, 1994, and in the form of a letter from her lawyer to counsel for the insurer setting out the basis for the settlement, and specifically indicating that pre-judgment interest should run from March 1, 1994.
51On the issue of top-up, Ms. Sills says she effectively recovered only 3.7 months worth of long-term disability benefits e.g. her long-term disability entitlement was 60 per cent of salary, or $2,825 per month. She recovered $10,411.74 from the insurer, the equivalent of 3.7 months of benefits. She says her obligation to repay top-up amounts was limited to circumstances in which she received a matching disability benefit. She relies on the specific wording of the repayment agreement:
. . . I agree to reimburse the London Life payment portion of my salary by signing over the London Life cheques. I further agree to repay the top-up portion of my salary.
(Emphasis added)
The "salary" referred to in the second sentence is the "salary" in [the] first sentence of which the insurer paid its portion.
52It is artificial in these circumstances to parse the wording of the repayment agreement or to try to match the net recovery achieved to the specific language used. It is clear from a review of the repayment agreement that the parties never contemplated the possibility that Ms. Sills might achieve something less than full recovery of benefits for the entire period of her disability. The position she advances concerning top-up, i.e. that the settlement reflects only 3.7 months of recovery, appears to be contrary to her position relating to the time frame to which the settlement funds relate, i.e. the entire period from April 1, 1993 to March 1, 1994. Clearly, her net recovery does not reflect the quantum of benefits she received. With the benefit of hindsight, Ms. Sills seeks, in effect, to maximize draw down on her sick leave bank, which she was not permitted to do while receiving long-term disability benefits.
53The trial judge found Ms. Sills was in fact disabled for the entire period from April 1, 1993 to March 1, 1994. There was no evidence before him to clarify whether the settlement made by Ms. Sills reflected payment of a reduced benefit for the entire period of her disability or payment of full benefits for a reduced period. Correspondence from counsel for one party outlining the basis of a settlement proposal does not necessarily reflect both parties' intent. It was within Ms. Sills' control to specify the basis of her settlement by way of agreement. The trial judge implemented the finding he made concerning the intent of the repayment agreement. I cannot say that he erred in so doing.
Statutory Holidays
54The trial judge found that the Society charged Ms. Sills' sick leave bank with 14 statutory holidays between September 28, 1992 and September 30, 1993. The trial judge summarized and dealt with the issue arising from this step as follows [at p. 43 C.C.E.L.]:
The plaintiff argues that the Policy Manual and the Collective Agreement make it clear that the plaintiff was entitled to be paid for the statutory holidays regardless of the fact she was at the time absent from work due to disability. Accordingly, the balance of sick days remaining in the "bank" as of September 30th, 1993, the date of termination, should be 32.77 days rather than 18.77 days.
The defendant submits that the obligation to pay the absent employee's salary ceases when the employee becomes disabled, and by extension the employer's obligation to pay holiday pay to a disabled employee also ceases.
I agree with the defendant that it would seem unreasonable to permit the employee to receive full pay for holidays when she is not working and not entitled to a salary.
The plaintiff is not entitled to be credited with 14 days representing the statutory holidays.
The Society relies on the same position here.
55Article XVII of the collective agreement provides for 14 statutory and special paid holidays during the course of a year. Clause 17.05 provides:
17.05 An employee shall not receive holiday pay in the following circumstances:
(a) If he/she has been absent from work on his last regular scheduled work day before, or his first regular work day after such holiday unless such absence is beyond the control of the employee or is excused by the Director;
56Because Ms. Sills was wrongfully dismissed, the Society's obligation to pay her salary was not terminated in September 1992. She was entitled to damages for wrongful dismissal. Those damages include an entitlement to holiday pay. Nothing in Article XVII of the collective agreement derogates from that entitlement.
57Even if I had accepted the Society's position that it was under no obligation to pay Ms. Sills during the period of working notice because of her disability, I do not understand how that would have justified the Society's action in charging her sick leave bank for statutory holidays for which she was not paid.
58The balance of sick leave days in Ms. Sills' sick leave bank as of September 30, 1993 is accordingly increased from 18.77 days to 32.77 days.
Entitlement to Draw Sick Leave Bank Down to Zero
59The trial judge found Ms. Sills was entitled to be paid 50 per cent of her sick leave credit as of the date of termination of her employment in accordance with the terms of Article XIX of the collective agreement. He treated September 30, 1993 as the date of termination. Ms. Sills relies on the following portion of the British Columbia Court of Appeal decision in Sylvester at para. 21 to submit that her entitlement to the credits in her sick leave bank crystallized upon her disability and could not be reduced by the termination of her employment:
Section 2.02(d) [of the Long Term Disability Plan Regulation] must be read together with s. 2.08(a)(iii). They must both be interpreted in the light of the purpose of a long-term disability plan, namely, to provide income security to disabled employees for what would have been their full working lives. In that context it is my opinion that an employee who is eligible to start to receive benefits and who is totally disabled is entitled to continue to receive benefits until the employee recovers, resigns, dies, or reaches age 65, whichever occurs first. The employer cannot put an end to those benefits by terminating the employment. Section 2.08(a)(iii) does not deal with the receipt of benefits but with eligibility to start receiving benefits. The termination of employment referred to in that clause must be interpreted as a lawful termination, at the expiry of a lawful notice period, and cannot include an unlawful termination. Accordingly, if an employee becomes disabled during t he running of a period equal to the period of lawful notice of termination, the date of termination, for the purposes of s. 2.08(a)(iii), will be the end of the notice period and the employee will have become disabled within the period of eligibility and will remain entitled to benefits until he or she recovers, resigns, dies, or reaches age 65, whichever occurs first.
60The quotation relied on is an interpretation of the specific long-term disability plan in place in Sylvester. The issue here is the interpretation of the collective agreement provisions relevant to Ms. Sills. Ms. Sills had an option to draw on her sick leave bank when she became disabled or to claim disability benefits with top-up options as set out in the collective agreement. She chose the latter. She has not identified any provision in the collective agreement capable of supporting the position she advances.
Disposition
61As the credit in Ms. Sills' sick leave bank as of September 30, 1993 has been increased by 14 days, and as she is entitled to a payout of 50 per cent of the monetary value of that credit, I would reduce the amount awarded on the Society's counterclaim by $1,521.04, and increase the net amount awarded on the Judgment by the same amount. The appeal and cross-appeal are otherwise dismissed. Ms. Sills shall have her costs of the appeal. Each party shall bear their own costs of the cross- appeal.
Appeal dismissed; Cross-appeal allowed in part.
