Hari World Travel Inc. v. Asmina Jivan and Ministry of Labour
2099-00-ES Hari World Travel Inc., Applicant v. Asmina Jivan and Ministry of Labour, Responding Parties.
Employment Practices Branch File No. 30014294
BEFORE: Caroline Rowan, Vice-Chair.
APPEARANCES: Louise Horton and Prem Cohly for the applicant; Azmina Jivan appeared on her own behalf; Karen Northey for the Ministry of Labour.
DECISION OF THE BOARD; June 14, 2001
1This 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 in the amount of $11,000. The Order to Pay relates to unpaid wages plus vacation pay thereon found to be owing to the claimant, Ms. Azmina Jivan, by the applicant, Hari World Travel Inc. (the "Company").
2The Employment Standards Officer found that the claimant is entitled to compensation in the amount of $10,000 relating to four quarterly payments of $2,500 each, which should have been paid to her on March 31, June 30, September 30, and December 31, 1999 respectively. The Officer's narrative report notes that the assessment was made on the best available evidence (provided by the claimant), "since the employer did not respond to our letter sent to the address, provided by the claimant, which was returned unclaimed." For its part, the Company states that the first time it became aware of this claim was when it received the Order to Pay in issue.
3The Company asks that the Order to Pay be rescinded on the ground that the conditions necessary for payment of the quarterly bonus amounts in issue had not been met. In this respect, the Company contends that it had entered into a verbal agreement to pay the claimant $35,000 in regular salary and a further $10,000 bonus payable in $2,500 quarterly payments at the end of each quarter on the condition that the Company's Toronto office was profitable. The claimant, on the other hand, contends that the verbal agreement she had with Mr. Cohly, the President of the Company, was that she would be paid $35,000 salary plus $2,500 per quarter payable at the end of each quarter without conditions. In this regard, she states that the additional $10,000 per year was not really a bonus at all, but rather was simply an alternate way of paying her salary.
4The Company also submits that the claimant's claim for compensation for some or all of the alleged quarterly payments is, in any event, untimely. It notes that the claimant filed her claim with the Ministry of Labour on or about May 16, 2000. It was not therefore seriously disputed that, at a minimum, the officer erred in awarding compensation to the claimant for the $2,500 quarterly payment alleged to have become due to the claimant on March 31, 1999. This is because that amount would have become due to the claimant outside of the maximum twelve (12) month period of recovery prescribed under subsection 82.4 of the ESA relating to continuing violations. As such, there was little issue that the maximum the claimant could recover because of the time limits prescribed under the ESA is $7,500 plus 4% vacation pay thereon.
5The Company, however, argues that the additional amounts claimed are also out of time, since it takes the position that, in the circumstances of this case, the six month limitation on the period of recovery prescribed under subsection 82.3 of the ESA, in fact, applies. In this connection, the Company states that no monies became due to the claimant in the six month period prior to May 16, 2000, since she resigned her employment on December 10, 1999 and as such is not entitled to the quarterly payment allegedly due on December 31, 1999 in any event.
Facts
6The Board heard evidence from two witnesses. Mr. Prem Cohly testified on behalf of the Company and the claimant testified on her own behalf. In assessing the evidence and arriving at my findings of fact I have considered all of the evidence and have taken into account the demeanour of the witnesses, the clarity of their evidence, the witnesses' apparent ability to recall events and to resist the tug of self-interest in their responses to the questions, and what seems most reasonable and probable in all of the circumstances having regard to the evidence as a whole.
7The Company is in the travel agency business. During the period in question, it operated out of several office locations, including one in New York City and one in Toronto. The claimant commenced employment with the Company as office manager of the Toronto office on or about October 1998 and continued to work in that capacity until on or about December 10, 1999 when she resigned her employment with the Company.
8The claimant was hired in August 1998 following the departure of the Company's previous Toronto office manager who left the Company to open her own travel business. As the office manager position was vacant and the Toronto office was "free-floating" as a result, Mr. Cohly was anxious to find a competent replacement that could turn the business around. Mr. Cohly had heard from various people that the claimant might be interested in the position and as a consequence contacted her by telephone. They arranged to meet at the Toronto airport in August 1998 to discuss the opportunity.
9The claimant testified that, at that meeting at the airport, she requested an annual salary of $45,000, but that Mr. Cohly had responded by suggesting that he could not pay her more than $35,000 in salary, because he could not pay her more than his "old" staff. She stated that he countered by offering to pay her $35,000 in annual salary plus a bonus of $2,500 per quarter. She said that she agreed to the $2,500 quarterly payment "in the interest of the other employees". She, however, disputed Mr. Cohly's evidence that the agreement was that she would get the quarterly bonus only if she turned the Company around. In fact, she subsequently characterized the $2,500 amount as a "payment" rather than a "bonus". The claimant noted that they did have some discussion at the airport about making the Company profitable. However, she stated that what Mr. Cohly told her at that time was simply that her responsibilities were to bring the Company from a "red picture to a black picture".
10Mr. Cohly, on the other hand, testified that he had told the claimant at the airport that the Company was not doing well (not that it was in the red). According to him, the claimant indicated that she could turn the Company around and bring business with her, to which he replied: "if you can do that then I will pay you $35,000 per year and another $10,000 ($2,500 quarterly) if you can turn the Company around." Mr. Cohly explained that the criteria for receiving the bonus involved making the Company (the Toronto office) profitable such that the New York office would no longer have to send money to support the Toronto operation.
11As previously noted, the claimant commenced working for the Company in October 1998. Shortly thereafter, on or about November 11, 1998, following discussions with Mr. Cohly, Mr. Clements, a Vice President from the New York office, wrote outlining his observations regarding the Toronto operation and the expectations of management at the New York office for her and the Toronto office. In that letter, Mr. Clements states: "I will emphasize at the outset the fact we cannot continue indefinitely to pour funds into this operation. It will have to be self-sustaining and we have a limited amount of time to reach that status."
12The claimant pointed out that on or about January 8, 1999, Mr. Cohly provided a letter to her written on Company letterhead, which was not directed to anyone in particular. That letter states that her annual gross income is $45,000. It reads as follows:
January 8, 1999
To whom it may concern:
This is to confirm that Mrs. Azmina Jivan has been employed by Hari World Travel since October 08, 1998. Mrs Jivan is the office manager of our office located at One Financial Place, Adelaide Street, East Concourse Level, Toronto, Canada. Her annual gross income is 45,000 CAD. Any further information can be provided on request.
Sincerely,
Prem Cohly
President
Mr. Cohly wrote the letter at the claimant's request and she had suggested the wording used. He understood that she wanted the letter to submit to a school or college for one of her children. The claimant corrected him by stating that she, in fact, needed the letter to show to the Bank. Mr. Cohly stated that he had no concerns at that time about writing the letter she requested "to give to the authorities" and that it was too soon at that time to know if she was performing well. He indicated that she had the traits of a good manager and she was making the effort.
13The Toronto office, however, continued to perform poorly. The Company therefore engaged a third party to do a study (or audit) of the operations in or about March 1999. As a result of that study, a specific formula, which generally prescribed the number of tickets that the office needed to sell depending on the mark-up on each ticket and the number of office staff employed etc., was determined to ensure a profit. At or around March or April 1999, that formula was discussed with the claimant in an effort to explain what she needed to do to ensure that the Toronto office was profitable. Neither Mr. Cohly, nor the claimant, however, suggested that that formula was ever discussed with her in the context of her quarterly bonus.
14Instead, it appears that after March or April 1999, Mr. Cohly considered whether the necessary number of tickets had been sold according to that formula in order to assess the financial position of the Toronto operation. Prior to that time, Mr. Cohly stated that he simply looked at the number of tickets sold on a daily and a weekly basis, the margin on each ticket and the bank balances to determine the financial health of the Toronto operation. Having regard to these various indicia, he determined at different times that the operation was not profitable and as such that the claimant was not entitled to a quarterly bonus.
15The first quarterly bonus payment would normally have become due to the claimant on December 31, 1998. No payment was, however, made to her at that time, nor was any payment made to her on March 31, 1999, when the second quarterly payment would have become due. In fact, the only quarterly payment of $2,500 paid to her was provided to her sometime in July 1999. The claimant stated that that payment was for the period from October to December 1998.
16With respect to this payment, Mr. Cohly explained that the claimant had asked for her bonus for the first time in the month of June, since she needed the money and sales had been good that month (though he said that little money was coming in notwithstanding). Mr. Cohly understood that the claimant needed the money for expenses such as air travel associated with the recent death of her mother-in-law. According to the claimant, Mr. Cohly told her that he was providing the payment to her because of her mother-in-law and because she needed the money. She also testified that Mr. Cohly had only agreed to make this payment to her after she had been pestering him and telling him that he "had to show some appreciation". He said he would have to record the payment as a refund cheque because he did not want to let the accountant working at the Toronto office know he was making this payment to her as he was afraid other employees would also ask for additional money.
17No other "bonus" payments were made to her prior to or after the claimant resigned her employment effective December 10, 1999. As previously noted, the Company takes the position that no payments are due to her as the Toronto office was never profitable during the period of her employment. In support of its position, the Company introduced into evidence unaudited financial statements prepared by its accountant to demonstrate that the Company was losing money during the relevant period. Although the claimant disputed the accuracy of these statements, she conceded in evidence that the Toronto office was always in a red situation every month despite her best efforts to bring it into a black situation.
18In fact, the claimant acknowledged the poor financial state of the Toronto operation in her correspondence to Mr. Cohly dated April 27, 2000 written after the termination of her employment. In that correspondence, she responded to Mr. Cohly's query regarding why rent was not always paid on time, as follows:
- Rent and other fixed expenses.
The office rent was paid on time as much as possible and several times post dated checks were paid to avoid missing the remittance deadline. On several occasions, I called to inform you that there was a shortage of funds to make regular payment and these requests were ignored putting added pressure for me to hustle for more bookings to sustain the office. My whole year was spent with nightmares as the company was constantly on an overdrawn situation and money was always the top issue. Where were you expecting to get the funds to pay all the debts? [emphasis added]
It therefore appears clear that whatever the precise numbers, the Toronto office was not profitable during the period of the claimant's employment. In fact, the evidence suggests that the Toronto office was in a poor financial situation before the claimant commenced employment as office manager and ultimately never turned around and has since been closed down as a consequence. While the Board accepts the claimant's evidence that she worked hard to make the Company profitable, the evidence reveals that these efforts were nonetheless unsuccessful in turning the Company around.
Decision
19The first issue to be determined in this case is whether the claimant is entitled to the quarterly payments sought under the terms and conditions of her oral contract of employment. More specifically, the Board must determine whether, under the terms of the claimant's contract, she is entitled to an unconditional quarterly payment of $2,500 or whether those payments were in the nature of a conditional bonus payable only if the Company was profitable. In the event that the Board finds that the claimant is entitled to compensation, the next issue to be determined is whether or not her claim made on May 16, 2000 for those payments is timely.
20Having carefully considered the evidence in this case, the Board accepts Mr. Cohly's evidence that the oral agreement reached with the claimant was that she be paid a quarterly bonus conditional on the Company being profitable for the reasons that follow. The Board firstly notes that Mr. Cohly gave his evidence in a clear and forthright manner and that his testimony regarding his discussions with the claimant at the airport where the oral agreement was reached was relatively detailed and had the ring of truth to it.
21His evidence that he told her at that time that he would pay her an additional bonus if you turn the Company around is also consistent with what is probable having regard to the evidence as a whole. For example, this evidence is consistent with both Mr. Cohly and the claimant's statements regarding his explanation at that time of her responsibilities as office manager. In this respect, Mr. Cohly testified that at their meeting at the airport he told her that she was expected "to turn the Company" around. Similarly, the claimant stated that, at that time, he told her that her responsibilities were to bring the Company "from a red picture to a black picture".
22In addition, his evidence that the bonus offered to her was conditional on the Toronto office being profitable such that the New York office no longer needed to send it funds is also consistent with the concerns expressed to her by management at the New York office shortly after she started working for the Company. As such, it appears that management's concern about ensuring that the Toronto operation be self-sustaining was a significant concern, which existed early on in the employment relationship and was not instead a concern that arose for the first time long after she was hired.
23On the other hand, the claimant's explanation that no conditions were attached to the payment to her of an additional $10,000 over and above her regular salary of $35,000 is less compelling. In this respect, she stated that Mr. Cohly proposed a quarterly bonus of $2,500 (which she subsequently corrected herself by stating that it was, in fact, more in the nature of a payment, not a bonus) so as not to upset another long service staff person who was only making around $35,000 per year. She, however, provided no explanation as to how this arrangement involving the payment of an unconditional quarterly payment as an alternate form of salary differed (in terms of upsetting other staff) from her proposal of paying $45,000 in regular salary.
24In addition, Mr. Cohly suggested in his evidence that the claimant as office manager could simply have arranged for payment to herself of those quarterly amounts through the Company's payroll service had she truly considered the payments to be simply an alternate form of salary as she claimed. Notwithstanding this, the claimant also offered no explanation in her evidence as to why she did not do so in the circumstances.
25Perhaps more importantly, however, the claimant did not specifically dispute Mr. Cohly's evidence that she did not raise the issue of her bonus since the Company was not profitable until around June 1999, when the Company's sales started to improve. Had the agreement truly been that she would be paid an unconditional amount of $2,500 at the end of each quarter, then one might reasonably have expected her to ask about her "bonus" or "payment" earlier (ie. after December 31, 1998 and March 31, 1999). One would also expect that when she did raise the issue she would have done so by referring to their agreement, rather than by saying words to the effect that she deserved "some appreciation". As previously noted, the claimant testified that Mr. Cohly ultimately agreed to pay her the sum of $2,500 in July 1999 "for her mother-in-law", because she was pestering him that "he had to show [her] some appreciation".
26On the other hand, the Board notes that Mr. Cohly's letter dated January 8, 1999 written at the claimant's request does lend some credence to her claim that the quarterly bonus payments were not conditional. However, on balance, and having regard to the evidence as a whole, the Board prefers Mr. Cohly's evidence that the agreement reached was to provide a quarterly bonus conditional on the Company being profitable. It appears that Mr. Cohly simply complied with the claimant's request to write a letter in the form requested out of a desire to accommodate the personal needs of a manager on whom he relied to turn the Company around without a great deal of concern for any future consequences of his actions.
27Having carefully considered all of the evidence, the Board is satisfied that the $10,000 bonus payable quarterly, which was offered by Mr. Cohly and accepted by the claimant, was a discretionary bonus conditional on profits. No specific targets were set for achieving that bonus. Instead, the agreement was simply that the bonus would be paid if the claimant turned the Company around. The formula subsequently discussed in March or April 1999 following the external audit simply provided the claimant with guidance on what was necessary to turn the Company around. It did not reflect new or different criteria for obtaining her bonus.
28The Board therefore finds that the discretionary bonus agreed to by the parties does not fall under the definition of "wages" set out in section 1 of the ESA, which specifically excludes "any sums paid as gifts or bonuses that are dependent on the discretion of the employer and are not related to hours, production or efficiency." The Board, in any event, finds on the evidence before it that the condition that the Company be profitable before the bonus was payable was never met and therefore that no outstanding wages are owing to the claimant.
29Having regard to the Board's determination that no outstanding wages are owing to the claimant under the terms of her employment agreement with the Company, it is unnecessary to consider the Company's alternate ground for review based on the time limits prescribed under the ESA.
Disposition
30For all of these reasons, the Order to pay is hereby rescinded. The Board directs the Director to return the monies held in trust, including the administration costs, and interest thereon to the applicant, Hari World Travel Inc.
"Caroline Rowan"
for the Board