Court of Appeal for Ontario

Date: April 13, 2018

Docket: C64472

Judges: Feldman and Benotto JJ.A. and Sachs J. (ad hoc)

Between

André Singer Plaintiff (Appellant/Respondent by way of cross-appeal)

and

Nordstrong Equipment Limited Defendant (Respondent/Appellant by way of cross-appeal)

Counsel

Jeff C. Hopkins and Kristen Pennington, for the appellant/respondent by way of cross-appeal

Gerald Griffiths, for the respondent/appellant by way of cross-appeal

Heard: March 26, 2018

Appeal from Lower Court Decision

On appeal from the judgment of Justice James F. Diamond of the Superior Court of Justice, dated October 6, 2017, with reasons reported at 2017 ONSC 5906.

Reasons for Decision

Feldman J.A.:

Introduction

[1] The respondent terminated the appellant's employment as President and General Manager of one of two of its divisions, the East Division, without just cause in December 2016. The appellant was 51 years old at the time, and had been employed by the respondent for 11 years, 4 years as President. He reported to the Chief Financial Officer of the respondent's parent company, Canerector Inc.

[2] The appellant brought a motion for summary judgment to determine the issues of reasonable notice, loss of bonus for the 2016 year that he had worked, loss of bonus during the notice period, and loss of benefits during the notice period.

[3] The motion judge awarded the appellant 17 months' salary in lieu of reasonable notice, as well as an amount for his bonus for 2016. The motion judge denied the appellant's claim for his bonus during the 17 month notice period in 2017 and part of 2018, as well as any amount for the loss of his benefits package during the notice period.

[4] The appellant appeals the dismissal of his claims for his bonus and benefits during the 17 month period of reasonable notice. The respondent cross-appeals from the award of 17 months' reasonable notice, saying it should have been between 12 and 15 months, and from the award of a bonus for 2016. It will be most convenient to address the two issues on the cross-appeal first.

A. Issues on the Cross-Appeal

(1) Reasonable Notice Period of 17 Months

[5] The respondent submits that the motion judge erred in principle by awarding a period of reasonable notice that is outside the reasonable range for an employee in comparable circumstances, and by overemphasizing one of the Bardal factors, the character of the employment, while underemphasizing the other Bardal factors, such as length of service and the availability of similar employment.

[6] The motion judge began his analysis at para. 13 of his reasons by reciting all of the Bardal factors, and instructing himself to assess reasonable notice "in a holistic manner", without giving disproportionate weight to one factor over another. He was clearly alive to the very error the respondent alleges he committed.

[7] Furthermore, in his analysis, the motion judge cited a passage from Fisher v. Hirtz, 2016 ONSC 4768, where Perell J. explained that a longer notice period is generally justified for older, long term employees who are often at a competitive disadvantage in securing new employment. The motion judge's reliance on this passage demonstrates that he considered the other Bardal factors – age, length of service, and availability of similar employment – in determining the appellant's reasonable notice period.

[8] The motion judge also referred to the recent decision of Grace J. in Day v. JCB Excavators Ltd., 2011 ONSC 6848 as a comparable. In Day, where a 51 year old regional business manager's employment was terminated after over 14 years, Grace J. set the reasonable notice period at 17 months. The respondent objects that in that case, there was evidence of poor prospects in the industry for re-employment at the time. However, in this case, there was significant evidence of the appellant's attempts to mitigate and his inability to find a comparable position. This evidence addresses the factor of availability of similar employment that the respondent is concerned about.

[9] The respondent also refers to three other cases from 1988, 2002, and 2009, where damages based on reasonable notice periods of 14 months, 15 months, and 12 months were awarded respectively. It submits that those cases delineate the correct range as 12 to 15 months. The same submission was made to the motion judge. The motion judge was entitled to reject this submission, to refer to the Day case as a very recent comparable, and to apply the Bardal criteria as he did. I see no error in the approach taken or the result reached by the motion judge and no basis to intervene.

(2) Claim for 2016 Bonus

[10] The appellant produced in evidence a document provided to him and other employees in 2009 entitled "Canerector Inc. Corporate Culture", which describes the bonus or profit sharing plan of the parent company. The motion judge considered that document, other email correspondence between Canerector's operations manager and the appellant, and the appellant's past record of receiving bonuses of between 3.87% and 6.02% of pre-tax profit, and found at para. 25 that:

While there was some inherent variability in Singer's bonus payments from year to year, the language used in the Corporate Culture document, together with [Canerector's operations manager's] responding email of February 8, 2013, make it clear that, as Nordstrong East's President, Singer was entitled to a share of the bonus pool created by the earning of a positive pre-tax profit (a bonus typically falling within the "25 to 50% range").

[11] The motion judge awarded the appellant a bonus for 2016 based on 4.634% of 2016 pre-tax profit.

[12] Before the motion judge, the respondent submitted that the appellant should receive no bonus, on the basis that it discovered in 2015 that the appellant was not a good manager and that they hoped he would improve in 2016 but he did not, and was therefore not entitled to any bonus. In rejecting this submission, the motion judge noted that the appellant's termination letter made no mention of any concerns regarding his job performance. We note that in oral argument on the appeal, counsel advised that the appellant was not told about any performance concerns either in 2015 or after.

[13] The respondent argues on appeal that the motion judge erred by awarding the appellant a bonus for the 2016 year because: his division was not profitable enough, it was underperforming, he had not created expected efficiency gains, and the company had denied other division heads a performance bonus in the past for poor performance.

[14] By this submission, the respondent is essentially attempting to reargue the motion. It identifies no error of law or palpable and overriding error of fact by the motion judge. There is no basis to interfere with the finding of the motion judge that the appellant was entitled to share in the profit pool designated for bonuses for the 2016 year that he worked.

B. Issues on the Appeal

(1) Claim for Benefits During the Notice Period

[15] The motion judge denied the appellant's claim for the loss of his benefit package on the basis that the appellant did not prove that he suffered a loss. The appellant gave no evidence that he replaced the benefits during the notice period.

[16] The motion judge cited no authority for this approach to the benefits issue. However, the law in Ontario was settled by this court in 1991 in Davidson v. Allelix Inc., 7 O.R. (3d) 581, where the court stated at p. 589:

Allelix cross-appealed against the award of damages for loss of benefits proposed by the trial judge relying on a line of British Columbia decisions. They held that the loss of benefits from termination of employment is limited to losses or expenses actually incurred, the sum of $6,052.97 referred to above for which Dr. Davidson was entitled to be compensated under the benefit coverage: see Sorel v. Tomenson Saunders Whitehead Ltd., 16 C.C.E.L. 223, Wilks v. Moore Dry Kiln Co. of Canada, 32 B.C.L.R. 149, and McKilligan v. Pacific Vocational Institute, 28 B.C.L.R. 324.

Counsel for Allelix candidly acknowledged that there was conflicting jurisprudence on this point. In my opinion the British Columbia decisions do not apply in Ontario where the law is settled that a wrongfully dismissed employee may claim, in addition to lost salary, the pecuniary value of lost benefits flowing from such dismissal. This principle was referred to with approval by this court in Peck v. Levesque Plywood Ltd., 27 O.R. (2d) 108, where Dubin J.A. said at pp. 113-14 O.R., pp. 525-26 D.L.R.:

In a successful action for wrongful dismissal, an employee is entitled to damages for the breach of his contract of employment.

In Batt, Law of Master and Servant, 5th ed. (1967), at p. 263 the following proposition is enunciated:

. . . in Savage v. British India SS. Co., (1930), 46 T.L.R. 294, Wright, J., appears to have given the plaintiff twelve months' salary as damages because the plaintiff was entitled to twelve months' notice. But clearly the servant's damages ought not to be so limited; the master has committed a breach of contract and so all damages naturally flowing therefrom ought to be recoverable.

In the case of Lawson v. Dominion Securities Corp., June 30, 1977 and September 30, 1977, unreported, this Court held:

The recovery of lost income is not limited to salary. In this case the appellant conceded that pension plan benefits should also be included. . . . other income items should be admitted including contractual profit-sharing, a share purchase option, and many fringe benefits such as a company car, club membership, pension, disability and medical plans . . . McGregor on Damages (13th ed.), para. 885 at 595.

[17] The respondent refers to the 2010 decision of the New Brunswick Court of Appeal in Jean v. Pêcheries Roger L. Ltée, 2010 NBCA 10, 354 N.B.R. (2d) 300 and submits that this court should follow that decision. The court there stated at para. 56:

[T]he method of assessing damages for wrongful dismissal applied in the past must undergo fine-tuning to accord with the principles enunciated in Fidler v. Sun Life and Honda Canada v. Keays. Compensation in lieu of notice must now be calculated in accordance with the principles that inform the assessment of all damages for breach of contract. The purpose of such damages is to place the aggrieved employee in the same position he would have been in but for the breach by the employer of the implied term of the contract of employment to give reasonable notice. Therefore, courts must focus on the loss sustained by the employee by reason of the employer's failure to give proper notice instead of what it would have cost the employer had the employment continued throughout the notice period: Covered Bridge Recreation Inc. v. Shurman.

[18] I would not accept this submission. The argument asserted by the respondent and accepted by the motion judge was specifically considered and rejected by this court in the Davidson decision. If the law were to be changed, it would have to be by a five-judge panel of the court, upon the order of the Chief Justice.

[19] The motion judge erred in law by rejecting the appellant's claim for benefits during the reasonable notice period. The appellant proved on the motion that the cost to replace his benefits for one year was $6,676, and is therefore entitled to damages of $9,458, the replacement cost of his benefits over the 17 month notice period.

(2) Claim for Bonus During the Notice Period

[20] The motion judge rejected the appellant's claim to receive an amount to compensate him for the loss of his bonus during the reasonable notice period. His reasoning is at paras. 41-42:

The purpose of reasonable notice is to provide a terminated employee with sufficient time to locate comparable employment. Historically, bonuses were earned and calculated at the conclusion of the defendant's fiscal/calendar year, and no doubt granted on the basis of an employee's positive efforts and contributions to Nordstrong East's business.

Subject to successful mitigation efforts, Singer's employment with the defendant would have ended in or around May 2018. The purpose of the defendant's incentive plan is to maximize efforts to generate profits. As in Fulmer v. Nordstrong Equipment Limited, 2017 ONSC 5529, I do not find it to be within Singer's reasonable expectation to be able to earn a bonus for the 2017 and 2018 fiscal years while he searched for alternative comparable employment.

[21] I agree with the appellant that the motion judge erred in law by failing to apply the two-part test set out by this court in Pacquette v. TeraGo Networks Inc., 2016 ONCA 618, 352 O.A.C. 1, at paras. 30-31 for determining whether an employee is entitled to be compensated for the loss of his bonus as part of his damages for wrongful dismissal:

1. Was the bonus an integral part of his compensation package, triggering a common law entitlement to damages in lieu of bonus?; and

2. If so, is there any language in the bonus plan that would restrict his common law entitlement to damages in lieu of a bonus over the notice period?

[22] Had the motion judge applied the two-part test, based on his analysis regarding the bonus owed for the 2016 year, he would have found that the bonus was an integral part of the appellant's compensation package. Nor is there anything in the Canerector Inc. Corporate Culture document that would limit that right over the notice period.

[23] The respondent submits that the appellant would have known that it was the company's policy not to pay any bonus to employees after their employment was terminated, and that this was justified by the fact that part of the purpose of the bonus was to incentivize employees to perform.

[24] Although that may have been the company's de facto approach, it was not written into the document that governs the bonus payment scheme. Further, any bonus plan will include both an aspect of incentive, as well as an aspect of reward for performance, neither of which continue to apply to any employee who is no longer working for the employer. Nevertheless, where a bonus is considered an integral part of a compensation package and there is nothing in the bonus plan that negates entitlement to a bonus during a period of reasonable notice, damages for wrongful dismissal include compensation for loss of the bonus: Paquette, at paras. 17-18; and Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619, 402 D.L.R. (4th) 325, at paras. 84-86.

[25] As the motion judge erred in law, his decision on the issue of bonus during the notice period will be set aside and the amount claimed by the appellant, $166,945, will be awarded for the 17 month notice period. This amount is based on the average monthly value of the appellant's bonuses from the two years preceding the termination of his employment (which were $120,000 for 2015 and $115,687 for 2016), pro-rated to the end of the 17 month notice period.

Result

[26] In the result, I would allow the appeal on the issues raised by the appellant and dismiss the cross-appeal. The appellant is entitled to damages for loss of his 2016 profit entitlement, for his loss of salary during the 17 month reasonable notice period awarded by the motion judge, and also for the loss of the other components of his employment compensation during the 17 month notice period he claims: bonus in the amount of $166,945 and benefits in the amount of $9,458.

[27] I would award the costs of the appeal and cross-appeal to the appellant, fixed in the amount of $25,000 inclusive of disbursements and HST. As requested by the appellant, I would refer the issue of costs of the motion back to the motion judge to award based on the outcome of the appeal and on any offers to settle that he determines are appropriate to consider.

Released: April 13, 2018

"K. Feldman J.A."

"I agree. M.L. Benotto J.A."

"I agree. Sachs J. (ad hoc)"

Footnote

[1] The Bardal factors, which are relevant to determining the period of reasonable notice on wrongful dismissal, are derived from Bardal v. Globe & Mail Ltd., 24 D.L.R. (2d) 140, at p. 145.