3019-99-ES Victoria Will o/a Desboro Tavern, Applicant v. Angelika Lee and Ministry of Labour, Responding Parties.

Employment Practices Branch File No. 61004754

BEFORE: Caroline Rowan, Vice-Chair.

APPEARANCES: Victoria Will and Debbie Feltis for the employer; Angie Lee, David Brewster and Roy Lee for the claimant; Laurie Eisenberg for the Ministry.

DECISION OF THE BOARD; November 22, 2000

1. This is an application under section 68 of the Employment Standards Act, R.S.O. 1990, c.E-14, as amended (the "ESA") for review of an Order to Pay filed by the applicant, Victoria Will o/a Desboro Tavern. The Order to Pay in issue relates to eight weeks’ termination pay plus vacation pay thereon found to be owing to the claimant, Ms. Angelika Lee.

2. At the outset of the hearing, the parties identified the only issue requiring determination to be whether or not the claimant’s employment was terminated due to wilful misconduct within the meaning of subsection 57(10)(c) of the ESA. At that time, the applicant indicated to the Board that she did not dispute that eight weeks’ termination pay was owing in the event that entitlement to termination pay is found having regard to the claimant’s length of employment with the various owners of the tavern.

3. In final argument, however, the applicant took the position that no termination pay is owing to Ms. Lee under the terms of section 57 of the ESA, since:

(1) Ms. Lee was employed by Ms. Will, the current owner of the tavern, for less than three months and the sale of business provisions of the ESA do not apply in the circumstances of the present case; and

(2) Ms. Lee’s employment was terminated due to wilful misconduct and/or wilful neglect of duty within the meaning of the exception to the requirement to provide termination pay contained in subsection 57(10) (c) of the ESA.

4. The applicant did not dispute that the amount assessed in the Order to Pay represented eight weeks’ termination pay plus vacation pay thereon.

Facts

5. Ms. Lee worked for various owners of the Desboro Tavern for a period of in excess of eight years.

6. On or about April 21, 1999, Ms. Lee was given six (6) weeks’ written notice of termination effective May 29, 1999 from the then owners of the Desboro Tavern, Mr. Jack and Marilyn Williton. That notice, which Ms. Lee signed, reads as follows:

Desboro Tavern P.O. Box 41 Desboro, Ontario N0H 1K0

I, Angelika Lee, have received and read my notice of termination of employment. I accept and understand that my employment with the business owned and operated as the Desboro Tavern will be terminated as of May 29, 1999.

I acknowledge that this 6 week notice of termination is in accordance with the Employment Standards Act of Ontario and will have no cause of action toward the business owned and operated as the Desboro Tavern or its owners.

I understand this termination is due to a condition of sale of the aforementioned business and is in no way a reflection upon my employment performance.

Signed: (“A. Lee”)

Dated: April 21^st, 1999

Witnessed: (“Jack Williton”) (“Marilyn Williton”)

Jack Williton Marilyn Williton Co-owner Desboro Tavern Co-owner Desboro Tavern

7. The Desboro Tavern was closed for inventory count on or about May 30 and 31, 1999, following which it was reopened on June 1, 1999 under the new ownership of Ms. Will.

8. Ms. Will purchased the business operated as the Desboro Tavern on or about June 1, 1999. Victoria Will o/a Desboro Tavern continued the employment of Ms. Lee and several other employees, who had previously been employed by the former owners of the tavern, effective June 1, 1999.

9. Ms. Lee’s employment with Ms. Will was, however, subsequently terminated on or about August 18, 1999. Ms. Will explains that she decided to terminate Ms. Lee’s employment because of Ms. Lee’s “over service” of customers, her attitude toward Ms. Will, and her inability to get along with staff. Ms. Lee, on the other hand, contends that her employment with Ms. Will was terminated for personal reasons relating to her friendship with Mr. Ken Smith, Ms. Will’s common law spouse at the relevant time.

10. In assessing the conflicting evidence in this case, the Board has taken into account such factors as the demeanour of the witnesses, the clarity of their evidence, their apparent ability to recall events and to resist the tug of self-interest in their responses to questions. The Board has also considered what seems most reasonable and probable in all of the circumstances having regard to the evidence as a whole.

11. Ms. Will testified that she had spoken to Ms. Lee on at least three occasions about “over serving”. There is no dispute between the parties concerning the first occasion, which occurred at the initial orientation meeting held the day after Ms. Will took over the tavern. Ms. Lee and other members of staff attended that meeting. The discussion concerning “over service” of alcohol was not directed at Ms. Lee specifically, but rather dealt with the standard of performance expected of all staff. Topics discussed at that time included Ms. Will’s expectations concerning service of alcohol and in particular her desire to ensure that the bartenders abide by the guidelines learned by them in their “Smart Serve” training. At that time, Ms. Will also communicated some of the plans she had for changes to the operation of the tavern, that those changes would occur gradually, and that she envisaged a more family-oriented tavern where staff were careful not to “over serve” customers to the point of intoxication.

12. After that initial orientation meeting, Ms. Lee continued her regular duties as bartender under the supervision of Mr. Smith, who worked regularly at the tavern in the capacity of General Manager. Ms. Lee believed that she reported directly to him. In this respect, Ms. Lee stated that she perceived Mr. Smith to be her boss and Ms. Will to be simply the boss’ wife. Ms. Lee explained that this was because Ms. Will rarely attended at the tavern more than several times a week and as a consequence, Ms. Will was rarely present while Ms. Lee was working.

13. Toward the end of July 1999, Ms. Will promoted Ms. Lee to the position of bar manager, at which time her salary was increased from $6.80 to $7.60 per hour. The new position, however, came with few additional duties. Prior to this time, Ms. Feltis, the head cook, complained to Ms. Will regarding Ms. Lee’s “bossy” and controlling manner. Ms. Will testified that she ultimately decided to promote Ms. Lee to the position of bar manager because she felt that Ms. Lee needed to have a greater say in the management of the tavern.

14. At the time she promoted Ms. Lee to the position of bar manager, Ms. Will had heard rumours that Ms. Lee was over serving customers, but had not witnessed it directly and had not spoken to Ms. Lee about these rumours. Ms. Will states that she spoke to Ms. Lee thereafter about over serving customers on two subsequent occasions during Ms. Lee’s brief tenure as bar manager.

15. There is, however, a difference between Ms. Will and Ms. Lee concerning the content of these discussions. Ms. Will suggests that she reprimanded Ms. Lee orally on these occasions about “over service”. Ms. Lee, on the other hand, states that any such discussions she had with Ms. Will were no more than general discussions about being careful not to over serve particular customers, which is a commonplace occurrence at a tavern. She denies ever being reprimanded by Ms. Will or anyone else in this regard. According to Ms. Lee, neither Ms. Will, nor Mr. Smith, ever warned her about her performance in any respect. In fact, Ms. Lee testified that Mr. Smith had complimented her performance and attitude on a number of occasions.

16. Having carefully considered the evidence, the Board accepts that Ms. Will discussed the issue of “over service” with Ms. Lee on at least two occasions after the initial orientation meeting. For the following reasons, the Board is not, however, satisfied that Ms. Will made clear during these discussions that Ms. Lee’s employment would be terminated if she “over served” customers in future. In this regard, the Board notes that Ms. Feltis, the head cook, overheard one of these discussions concerning “over service”. Ms. Feltis did not perceive that discussion to involve a reprimand. More particularly, Ms. Feltis testified that she overheard Ms. Will “voicing her concern” to Ms. Lee about over service and that she did not perceive the conversation to entail a reprimand. Ms. Feltis also noted that it would be difficult to tell if Ms. Will was giving a reprimand, since Ms. Will does not have a harsh voice.

17. The last occasion occurred on or about August 14, 1999 after hours at approximately 3 am at a meeting between Mr. Smith, Ms. Will, Ms. Roberts and Ms. Lee. The meeting was held to discuss, among other things, a difference between Ms. Roberts and Ms. Lee concerning tips, and more specifically, to discuss Ms. Roberts’ proposal, which Ms. Will endorsed, to share tips on busy nights such as that one. According to Ms. Will, the topic of Ms. Lee’s “over service” of customers, as well as her attitude, toward Ms. Will were also raised at that time. Ms. Lee responded at that time by expressing her view that customers would leave if the tavern changed its practice with respect to service of customers.

18. While the Board accepts Ms. Will’s evidence that Ms. Lee’s perceived “over service” of customers and her attitude were raised at that meeting, the Board is not, satisfied that Ms. Will made it clear to Ms. Lee at that time that her employment would be terminated if there was no change. In this respect, the Board notes that Ms. Will herself conceded in cross-examination that she had not clearly warned Ms. Lee at that time that termination would result if she continued to over serve customers. In addition, the evidence suggests that the primary purpose of that meeting was to resolve the difference between Ms. Lee and Ms. Roberts concerning tips. In that context, it appears unlikely that Ms. Will would have given Ms. Lee, the bar manager at the time, a formal warning that her employment would be terminated in the presence of Ms. Roberts, a newly employed bartender.

19. The next day, Ms. Will advised Ms. Lee at the commencement of her shift that she would no longer be bar manager and as a result she was being demoted to the position of bartender. Ms. Lee’s salary was reduced to $7.50 per hour at that time.

20. According to Ms. Will, she advised Ms. Lee that she was being demoted because “the position of bar manager was not working out” whereas according to Ms. Lee, Ms. Will simply stated that “the position of bar manager was no longer necessary”. Little turns on the difference between these accounts.

21. Ms. Will testified that she made the decision to terminate Ms. Lee’s employment the following day after observing Ms. Lee work her next scheduled shift. She felt that Ms. Lee’s attitude toward her was disrespectful in that Ms. Lee was ignoring her. Ms. Will could not, however, recall whether or not Ms. Lee had refused to do something that she had asked and could not recall any incidents of Ms. Lee over serving alcohol that day.

22. Because Ms. Lee was absent from work for several days thereafter due to a back problem, Ms. Will did not communicate her decision to terminate Ms. Lee until Ms. Lee returned to work on August 18, 1999. That morning, Ms. Will had a heated verbal altercation with her common law spouse and business partner, Mr. Smith. The result of that altercation was that Ms. Will terminated his employment as General Manager. Shortly thereafter, Ms. Will told Ms. Lee “and you are fired too”.

Decision

(i) Wilful Misconduct or wilful neglect of duty

23. The applicant firstly submits that the exception contained in subsection 57(l0)(c) of the ESA applies, since the claimant “has been guilty of wilful misconduct or … wilful neglect of duty” within the meaning of the exception contained in subsection 57 (10)(c) of the ESA. That provision creates an exception to the obligation under subsection 57(1) of the ESA to provide notice of termination and reads as follows:

24. ...

(10) Exceptions — Subsections (1) and (2) do not apply to,

(c) an employee who has been guilty of wilful misconduct or disobedience or wilful neglect of duty and has not been condoned by the employer;

24. In order to establish that the employee's conduct was "wilful", the employer must establish that the claimant's conduct was intentional or reckless in the sense that the claimant appreciated its consequences to the employer. In The Aylmer Express Ltd. (October 31, 1985, Referee Raymond E. Brown, at pp. 8-9), the referee explained as follows:

The "misconduct" or "neglect of duty" referred to in the Act is preceded by the term "wilful". Therefore, it is not sufficient merely to show that an employee was indifferent, casual, thoughtless or neglectful in the performance of, or in the omission to perform, his or her duties or responsibilities. These acts or omission to perform must be the product of some deliberate or intentional act. The employee must consciously and deliberately engage in some positive act of misconduct or deliberately refrain from performing duties or responsibilities that he or she was required to perform. As I previously stated in Ago Cleaners (Windsor) Inc., July 10, 1985 at pp. 10-11:

Wilful misconduct for the purposes of the statutes requires some deliberate or intentional act on the part of an employee. It is not enough to show that the employee failed to perform the duties he was required to perform or performed them incompetently if it is not also shown that his acts or omissions were the product of deliberation and design on his part. Thus acts which are done carelessly, thoughtlessly, heedlessly or inadvertently are not acts of wilful misconduct even if they are done repetitively and may have been the basis for summary dismissal at common law.

In Post Road Health & Diet Inc. (May 27. 1998, Referee Gail Misra, at p.7), the Adjudicator also noted that the Company bears the onus of proving that an employee is guilty of wilful misconduct and that: “[a]n employee must be notified in advance that a breach of a company rule, or repetition of some unacceptable conduct, will result in termination. Thus, an employee must know in advance that his or her conduct will result in termination in order to support a claim of wilful misconduct.”

25. In the present case, the Board accepts that Ms. Will’s decision to terminate Ms. Lee’s employment was influenced by her perception that Ms. Lee “over served” customers, by Ms. Lee’s attitude toward Ms. Will and by Ms. Lee’s relations with other staff. It is less clear, however, that these were the only reasons for her decision. In this respect, the Board notes that Ms. Will neither challenged, nor explained, Ms. Lee’s evidence that on August 18, 1999 Ms. Will simply stated “there are a million and one reasons” in response to Ms. Lee’s question about why her employment was being terminated. In addition, the circumstances of Ms. Lee’s termination which occurred immediately after a heated altercation between Ms. Will and Mr. Smith during which Mr. Smith’s own employment was terminated suggests that personal reasons may also have been a factor in Ms. Lee’s termination.

26. However, assuming without deciding that Ms. Will’s stated reasons for Ms. Lee’s termination were the only reasons, the Board is nonetheless unable to find that the evidence establishes that Ms. Lee was guilty of wilful misconduct or wilful neglect of duty within the meaning of the ESA. As previously noted, the Board is not persuaded that Ms. Will provided Ms. Lee with a clear warning that her employment would be terminated if certain conditions were not met.

27. In any event, Ms. Will testified that she made the decision to terminate Ms. Lee based on her observation of Ms. Lee’s performance during the course her shift immediately after Ms. Will demoted her from the position of bar manager back to the position of bartender. On that occasion, Ms. Will states that she did not observe Ms. Lee over serving customers. As such, even if the Board had been satisfied that Ms. Will had made clear to Ms. Lee the night before that her employment would be terminated if she continued to over serve customers, there were no further incidents of alleged over service of customers thereafter.

28. Instead, it was Ms. Lee’s negative attitude toward Ms. Will that day that made Ms. Will reconsider the decision to demote Ms. Lee rather than simply to fire her. At best, Ms. Will’s evidence is that Ms. Lee simply ignored Ms. Will’s presence at the tavern while she worked, which amounts to little more than that Ms. Lee appeared upset and unfriendly to her that day. Ms. Lee did not refuse to perform any tasks she was asked to do and Ms. Will did not speak to Ms. Lee about any concerns about her demeanour that day. In all of the circumstances, the Board is further unable to find that Ms. Lee’s conduct that day as described by Ms. Will amounts to wilful misconduct or wilful neglect of duty within the meaning of the ESA.

29. In addition, the mere fact that Ms. Feltis found Ms. Lee to be somewhat “bossy”, and the fact that Ms. Roberts and Ms. Lee had a disagreement on one occasion on the issue of tips does not amount to “wilful misconduct” or “wilful neglect of duty”. Ms. Will never warned Ms. Lee that her employment would be terminated if she failed to “get along” with the other staff. Instead, she promoted Ms. Lee to the position of bar manager after Ms. Feltis complained to her that Ms. Lee was “bossy” and Mr. Smith complimented Ms. Lee’s performance and attitude. After Ms. Lee’s promotion, she had one disagreement with Ms. Roberts on the issue of tips, which was resolved when Ms. Lee reluctantly agreed to the proposal to share tips. Although there were no additional incidents of “conflict with staff”, Ms. Will decided to terminate Ms. Lee’s employment the next day, in effect, because Ms. Lee was upset after having been demoted and as a consequence was ignoring Ms. Will while she worked.

30. In all of the circumstances, the Board concludes that the applicant has not met its onus of proving that Ms. Lee “has been guilty of wilful misconduct" or “wilful neglect of duty” within the meaning of subsection 57(l0)(c) of the Act as alleged.

(ii) Application of Sale of Business Provisions of the ESA

31. The next issue to be determined is whether or not the employer is obliged to provide termination pay pursuant to the provisions of subsection 57(1) of the ESA in the circumstances of this case given the length of the claimant's employment. The employer argues that no termination pay is required, since the claimant in this case was employed by the current owner of the tavern for less than three (3) months and the sale of business provisions of the ESA do not apply in this case. The relevant portions of the ESA read as follows:

32. (1) Definitions – In this section,

“business” includes an activity, trade or undertaking, or a part or parts thereof;

“sells” includes leases, transfers or disposes of in any other manner and “sale” has a corresponding meaning.

(2) Continuity of employment – Where an employer sells a business to a purchaser who employs an employee of the employer, the employment of the employee shall not be terminated by the sale, and the period of employment of the employee with the employer shall be deemed to have been employment with the purchaser for the purposes of Parts VII, VIII, XI, and XIV.

57. (1) Notice of Termination No employer shall terminate the employment of an employee who has been employed for three months or more unless the employer gives,

(h).......... eight weeks notice in writing to the employee if his or her period of employment is eight years or more; …

(14) Payments where employment terminated without notice - Where the employment of an employee is terminated contrary to this section,

(a).......... the employer shall pay termination pay in an amount equal to the wages that the employee would have been entitled to receive at his or her regular rate for a regular non-overtime work week for the period of notice prescribed by subsection (1) or (2), and any wages to which the employee is entitled;

Section 57 of the ESA requires the employer to provide written notice of termination or pay in lieu of notice to "an employee who has been employed for three months or more". Under section 13 of the ESA, where the employer sells a business to a purchaser who employs an employee of the employer, employment with the employer is deemed to have been employment with the purchaser for various purposes including notice of termination.

32. There is no dispute that Ms Will purchased the business operated as the Desboro Tavern from the previous owners’, the Williton’s, on or about June 1, 1999. There is also no dispute that Ms. Lee was employed at the tavern by the previous owners for a period of in excess of eight years and that following the sale Ms. Will continued her employment at the tavern effective June 1, 1999. Ms. Will, however, argues that section 13(2) of the ESA does not apply in the circumstances of the present case because Ms. Lee’s employment at the tavern was not continuous. In this respect, she notes that there was a break in service between the date of May 29, 1999 when Ms. Lee’s employment with the Williton’s was terminated and June 1, 1999 when she took up employment with Ms. Will. During this two (2) day period, the Desboro Tavern was closed for inventory count.

33. The Board (differently constituted) in King Craft Division of Polk Canada Ltd., (Board File No. 3403-98-ES, unreported decision dated October 3, 2000) has recently considered the impact of any period of unemployment prior to being employed by a purchaser on the application of subsection 13(2) of the ESA. In that case, the Board found that the sale of business provisions of the ESA applied to the former employees of the vendor of the business and therefore applied notwithstanding that there had been a break in service prior to their reemployment with the purchaser of the business.

34. The issue in that case related to the entitlement of fifteen (15) former employees of the vendor who were subsequently employed by the purchaser, King Craft, to count their employment with the vendor for certain purposes including accruing vacation pay under Part VIII of the ESA. In determining that the sale of business provisions under subsection 13(2) of the ESA apply even where there has been a break in service prior to being employed by the purchaser, the Board reasoned as follows:

35. King Craft’s obligations with respect to vacation pay owing to the 15 employees arises from the language of section 13(2) and the definition of employee. Section 13(2) says:

“Where an employer sells a business to a purchaser who employs an employee of the employer, the period of employment of the employee with the employer shall be deemed to have been employment with the purchaser for the purposes of Part VII, VIII, XI, and XIV”. Part VIII is “Vacation with Pay”. The definition of employee includes “a person who was an employee” and the definition of employer includes “ a person who was an employer”. Therefore, in the plain language of section 13(2), a person who is hired by the purchaser who was an employee of the vendor is entitled to count her period of employment with the vendor for certain purposes including accruing vacation pay. In this case the 15 employees were employees of the vendor were therefore entitled to continue to have their vacation pay accrue and to be paid by King Craft when it became due. The Board notes that although similar issues have been considered by Adjudicators in the past, it does not appear that anyone has considered that the plain words of the statute dictate that the word “employees” in subsection 13(2) must include anyone who was an employee.

35. The same considerations are applicable in the circumstances of the present case where the entitlement to termination pay under Part XIV rather than vacation pay under Part VIII is in issue. The language of section 13(2) of the ESA does not require that an employee’s employment with the vendor and his subsequent employment with the purchaser is uninterrupted in order for that subsection to apply. In fact, the definition of employee as defined in the ESA includes a “former employee”. In the present case, subsection 13(2) of the ESA therefore applies notwithstanding the fact that there may have been a hiatus of two days between Ms. Lee’s employment with the Williton’s and her employment with Victoria Will o/a the Desboro Tavern.

36. In the present case, all of the preconditions to the application of subsection 13(2) of the ESA have been met. The former owners of the Desboro Tavern sold the business to Victoria Will o/a the Desboro Tavern, who in turn employed Ms. Lee, an employee (or former employee) of the vendor. In these circumstances and by virtue of the provisions of subsection 13(2) of the ESA, Ms. Lee’s employment is not terminated by the sale. In addition, the period of her employment with the vendor is deemed to have been employment with the purchaser for the purposes of Part XIV (Termination Pay).

37. A plain reading of the notice of termination provided to Ms. Lee by the Williton’s makes abundantly clear that the termination of Ms. Lee’s employment effective May 29, 1999 was solely because of the sale of the business. By virtue of subsection 13(2) of the ESA, her employment is, however, deemed not to have been terminated by the sale for the purposes of calculating her entitlement to notice of termination or pay in lieu thereof under section 57(1) of the ESA.

38. The Board therefore finds that Ms. Lee is entitled to eight (8) weeks’ notice of termination or pay in lieu thereof under subsection 57 of the ESA plus vacation pay thereon.

Disposition

39. For the foregoing reasons, the Order to Pay is affirmed. The Board directs the Director, Employment Standards, to pay out the monies held in trust, less the administration costs, as well the interest accumulated thereon to the claimant, Ms. Lee.

“Caroline Rowan”

for the Board