COURT FILE NO.: CV-10-412399 DATE: 20160623 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Michael Nufrio Plaintiff – and – Allstate Insurance Company of Canada and the Allstate Corporation Defendants
J. Brian Johnston, Q.C. and Kenneth Alexander, for the Plaintiff Seann D. McAleese and Kathryn L. Meehan, for the Defendants
HEARD: April 4, 5, 6, 7, 8, 2016
Pollak J.
Facts
[1] The Defendant, Allstate Insurance Company of Canada (“Allstate”) sells personal car and home insurance in Ontario, Quebec, New Brunswick and Nova Scotia.
[2] The Plaintiff, Mr. Nufrio, was employed by Allstate as a Sales Agent for personal, home and car insurance from February 28, 1985 to November 6, 2008.
[3] Throughout his employment, Allstate changed its compensation and sales distribution model, with the last change effective on September 1, 2009. Mr. Nufrio was given a lot of notice of the change and his income was guaranteed during and after the transition.
[4] Mr. Nufrio’s employment was terminated “for cause” on November 6, 2008 because of his refusal to accept these changes.
[5] Mr. Nufrio claims that his termination was without cause. It is important to note that he does not claim that he has been constructively dismissed.
[6] Mr. Nufrio’s first written employment agreement (Agent Compensation Agreement, "830 Agreement") was entered into on May 5, 1998 after he got his license to sell insurance. He later entered into the Neighbourhood Office Agent Agreement (“NOA Agreement”), which amended the 830 Agreement.
[7] The 830 Agreement provides that Allstate has the sole discretion to assign the work locations of sales agents; that Allstate owns the business written by its employees; and that Allstate can reassign clients to different sales agents. Further, it provides that no sales agent has any interest or property right in clients serviced or the renewal income generated from such business. The Agreement also gives Allstate the right to amend compensation, including commission rates.
[8] Mr. Nufrio knew that clients and associated income were unilaterally reassigned by Allstate. He agreed that the 830 Agreement and the NOA Amendments were changed with respect to his business location, compensation, and insurance products. He also agreed that Allstate had made significant changes affecting his employment without his consent.
[9] After a July 24, 2007 general announcement made by Allstate of a change in its business model, Mr. Nufrio was advised by letter that he would be a "Business Development Agent" and was later told that he would work in the office in Etobicoke. He was told that these changes would be phased in between September 1, 2007 to 2009. He acknowledged that as of July 2007, he knew that by December 2008 (or before) he would be required to move to the new office. He testified that that is why "we went to the lawyer's office."
[10] The Plaintiff was provided with a full description of bonus arrangements: Agency Performance Bonus (which included renewals, called "retention"), Individual Performance Bonus, and special Top Up Bonus.
[11] Mr. Nufrio did not want to accept these changes and tried to negotiate terms with Allstate. He testified that Allstate's new agent distribution model changed fundamentally how he would sell their products and his compensation. The Neighbourhood Offices would be closed, and consolidated with "Allstate Insurance Agency" offices (“AIA offices”).
[12] He testified that under the NOA agreement he “ran his own business”, hired his staff and chose his office location subject to Allstate’s approval. He developed relationships and managed the business including logistics, phones, copiers, faxes, and filing and set his own hours of work. He was a highly successful agent with excellent retention and renewal rates. He enjoyed his work independence and the certainty of his compensation program. He complained that with the changes being imposed by Allstate, he would lose his autonomy and the certainty of his compensation which was replaced with discretionary bonuses.
[13] Mr. Nufrio submits that the methodology for calculating his income would change when he assumed his new duties in the new AIA office. Under the 830 Agreement he received commission on new business and commission on renewal business. Under the new model his income would no longer be based on his own new sales and renewals, but largely on the success of the agency as a whole. He would receive bonuses relating to the group's production (Agency Performance Bonus; Independent Performance Bonus; and Top-Up Bonus). Most importantly, in the past, his income was based on his own efforts and was within his own control. He was a top producer for Allstate. Under the new model his income to a large extent would be based on the effort of the group and his ability to manage the group and motivate them to produce.
[14] Under the administration provisions of the three bonus plans under the Allstate Insurance Agency model, Allstate had discretion with respect to the bonuses. These incentive pay plans were administered under the Leadership Team (“LT”) of Allstate:
"The LT reserves the right to change, amend or terminate the plan or the provisions of the plan at any time. The LT shall have final approval of the payment of awards and on the eligibility of employees to participate in the plan. Extenuating circumstances may preclude issuance of an award."
[15] Mr. Nufrio relies on his rights under the 830 Agreement and the NOA amendment to that Agreement which governed the employment terms between the parties.
[16] He submits that it was reasonable for him to insist on protection of his rights under the 830 Agreement and the NOA amendment.
[17] Allstate argues that Mr. Nufrio was given a lot of notice of the change and was offered continued employment with the only effective change being to his work location. Although his compensation structure was changing after 24 months, he was guaranteed the equivalent of his current compensation for 24 months. He was asked to move from one suburb of Toronto to another. Allstate also agreed to move Mr. Nufrio to the Scarborough office because it was closer to his home than the Etobicoke office. Mr. Nufrio knew he had to move by September 2, 2008.
[18] Allstate submits that it gave Mr. Nufrio a 24 month working notice period with an income guarantee based on his prior year's income. He was also given an extended guaranteed income for four additional years.
[19] Further, Mr. Nufrio would no longer have to pay his own office expenses.
[20] The evidence is that Mr. Nufrio did benefit greatly from the guarantee top up to compensate for his falling earnings after the announcement of the changes while he was still in his own office before the implementation of the change. Mr. Nufrio suggested that the lack of staff was the reason for his poor sales. The payroll evidence did not, however, support his explanation.
Did Allstate have cause to terminate Mr. Nufrio’s employment?
[21] Both parties rely on the case of McKinley v. B.C. Tel, 2001 SCC 38, [2001] 2 S.C.R. 161.
[22] Both parties agree that the Court must consider: (1) the nature and extent of the misconduct; (2) the surrounding circumstances; and (3) decide whether dismissal is warranted.
[23] Allstate submits it had the right to require Mr. Nufrio to follow terms of new employment needed for the company to operate under its new business model, because reasonable notice of the changes was given, even if the changes were fundamental changes. Allstate relies on the case of Kafka v. Allstate Insurance Company of Canada, 2012 ONSC 1035, 2012 C.C.E.L. (3d) 53 (Div. Ct.). In that case, the Divisional Court stated as follows with respect to the notice that was given to employees (including Mr. Nufrio) by Allstate:
[37] The Court of Appeal [in Wronko v. Western Inventory Service, 2008 ONCA 327, 90 O.R. (3d) 547] held that an employer cannot simply unilaterally change the terms of an employment contract. On the facts of the case, it held that the employer had not provided Wronko with notice that it intended to treat his objection to the new termination provision as grounds for dismissal. It concluded that, “[g]iven Wronko's continued opposition to this change in his contract, Western's act of terminating Wronko in September 2004 constituted a wrongful dismissal that triggered the termination provision in his existing contract.” (Wronko, at para. 43).
[38] In Wronko, Winkler C.J.O. distinguished its circumstances from those in Farber v. Royal Trust Co., [1997] 1 S.C.R. 846:
The Supreme Court [in Farber] … was not purporting to outline the rights and obligations of the parties in circumstances where an employee registers an unequivocal rejection of an intended fundamental change to the terms of his employment and where the employer permits him to continue to work according to the existing terms without giving notice that refusal to accept the new terms will result in termination. Those are the circumstances in the present case. [at para. 30.]
[39] The Court of Appeal held that the period during which the employee had been permitted to work according to his existing contract could not count as notice in lieu of damages in the absence of notice that refusal to accept them would result in termination.
[40] The circumstances of Wronko, however, are not those of the present case. The general announcement and individual letters sent by Allstate in July 2007, as well as the notice provisions provided, made it very clear that the changes would be implemented in September 2009. The record does not support the inference that employees were permitted to continue as though nothing was changing. There was a clear transitional period and it was understood as such. Some employees accepted the new positions offered, some negotiated further changes, and some resigned. In the meantime, Allstate provided compensation during the 24 month period of notice that maintained or exceeded employees’ prior levels of compensation.
[41] This was not a case, like Wronko, where the employer issued an ultimatum following a period of time in which it had permitted an employee to continue employment after he had refused to accept proposed terms. In Wronko, the two year period between 2002 and 2004 was one of some ambiguity. As the Court held, it was not made clear to Mr. Wronko that he would be terminated if he did not accept the change prior to September 2004. It makes sense, in those circumstances, that the two year period prior to September 2004 would not be considered as notice.
[42] This case is very different. There was no ambiguity, in my view, in Allstate’s position. The changes it announced were to be implemented, and were in fact implemented, in September 2009. The appellants submit that the only option open to Allstate in the circumstances would have been to terminate all the employees and then offer them new contracts of employment at that time. However, in these circumstances, unlike Wronko, there could be no suggestion that Allstate was acquiescing to the continuation of the Old Model.
[43] The appellants’ position does not make sense in the circumstances. Had Allstate chosen to terminate all the agents in July 2007, there is no suggestion that they would have been obligated to provide for any more notice than the 24 months’ notice that they did, in fact, provide. An employee terminated outright in July 2005 would not have been in any better position than he or she actually was in light of the manner in which Allstate proceeded.
[44] Moreover, the suggestion made by the appellants ignores the potentially increased level of stress and trauma that notices of termination would likely have had on the employees. Employment law increasingly recognizes the importance of one’s work to one’s emotional well-being and self-respect. There is little doubt that many employees found the changes announced by Allstate to be stressful. Having said that, it seems that receiving letters of termination instead would have been much worse. Given that Allstate was providing as much notice as it would have been required to provide if it had, in fact, terminated the employees and provided new offers in July 2009, it would seem very strange to require an employer to pursue a course of conduct likely to engender more stress and trauma than the course it pursued.
[45] In short, the Wronko analysis does not change or purport to change the law established by the Supreme Court in Farber, which affirmed that a fundamental change does not amount to a constructive dismissal where the employer provides the employee with reasonable notice of the change. [Emphasis added.]
Allstate submits that it did give Mr. Nufrio the appropriate reasonable notice of the changes and he therefore had no right to refuse to comply with the new terms of employment.
[24] Mr. Nufrio disagrees and argues that notwithstanding these guarantees, the changes were fundamental to how he conducted business for Allstate and as such he could not accept them.
[25] In particular, Mr. Nufrio relies on the following terms of the 830 Agreement:
“Page 2 of the agreement outlines the percentages that Mr. Nufrio would receive upon the sale or renewal of a policy, specifically 15%, and 6.5%, respectively.”
Part XI of the 830 Agreement provides that:
"In no event shall an employe be released for any reason without the following review and approval procedure having been adhere to:
(1) For employes with less than four years service, review and approval by the Vice-President, Human Resources.
(2) For employes with more than four years, but less than ten years service, additional review and approval by the President of Allstate Insurance Company of Canada is required.
(3) For employes with more than ten years service, review and approval in the Home Office by the Chairman of the Board of Allstate Insurance Company of Canada is required in addition to the above.
If this agreement is terminated by the Company, you have the right to review by the Agent Review Board as set forth in the Agent's Procedure Manual, unless such termination was in accordance with the provisions in PART FIVE" [sic]
Part XIV of the Agreement confirms that the document is the whole agreement and shall not be altered or amended except by an agreement in writing signed by you and by Allstate's authorized manager.
[26] The Plaintiff also submits that Allstate’s failure to follow the agent review board procedure had the effect of invalidating Allstate’s termination of Mr. Nufrio. Allstate, however, submits that the Plaintiff agreed in cross-examination that he did not request the agent review board procedure to be engaged. He also agreed that the issue was not raised until examinations for discovery on May 16, 2013, despite having had the benefit of legal counsel from at least October 2007.
[27] Allstate submits that there is no evidence that if the appeal review board process was followed, the outcome would have been any different and that as a technical breach of contract (as in the case of Albert v. Conseil Scolaire Francophone De La Colombie-Britannique, 2009 BCCA 19, 88 B.C.L.R. (4th) 260), Mr. Nufrio could be awarded only nominal damages. I agree.
[28] To support its position on “cause”, Allstate relies on the reasoning of the Court of Appeal in the case of Smith v. Viking Helicopter Ltd. (1989), 68 O.R. (2d) 228 (C.A.). In that case, the employer moved from Ottawa to Quebec, for economic reasons. It agreed to pay relocation expenses. The plaintiff wanted to stay in Ottawa on a contract basis. The company did not agree. The Court of Appeal stated the following at para. 10:
“As I understand counsel for the respondent in this Court, he was of the view that the company could not relocate its business to the financial detriment of the respondent without creating a fundamental breach of its contract of employment. Consequently, the move itself was the fundamental breach. Counsel seemed to equate the terms of employment with the personal situation of the respondent, a lifelong resident of Ottawa, who had a family and a home with a mortgage. It has never been my understanding that an employee is entitled to a job for life in a place of his choosing. If he wishes to remain an employee of a given company, he must expect reasonable dislocations in that employment including the place where it is to be performed.”
[29] Allstate also relies on the case of Froese v. Horton CBI Ltd., [1993] OJ No 2700 (Gen. Div.), wherein the court found just cause was established when the employee refused to relocate.
[30] Allstate further relies on the following summary in Randall Scott Echlin & Matthew Certosimo, Just Cause: The Law of Summary Dismissal In Canada, loose-leaf (consulted on 6 April 2016), (Toronto: Thomson Reuters, 2015) of the factors relevant to a determination as to whether an employee's refusal to relocate justifies summary dismissal:
- whether it was an implied or express term of the employment contract that the employee would accept relocation by the employer;
- whether it was within the reasonable contemplation of the parties that transfers could be effected, and such an implied term was necessary to give efficacy, in a business sense, to the employment contract, having regard to the employer's operations, size, geographic base and number of branches, whether national or international, the practice of the company and/or the industry, and the practice between the parties, specifically whether previous transfers had been accepted and whether the employer had a policy respecting transfers, such as with respect to reimbursing employees for the costs of relocation;
- whether the employer's order requiring the employee to transfer locations was clear and from an individual with the authority to make such an order;
- whether the order to relocate was bona fide, based on the legitimate business interests of the employer;
- whether the employee was unable to accept the transfer due to the "undue burden'' it caused and, therefore, the employee was entitled to refuse the order to relocate;
- whether the transfer amounted to a demotion, constituting constructive dismissal and, therefore, the employee was entitled to refuse the fundamental breach; and
- whether the employee was provided with a reasonable amount of time in which to consider the order to relocate and, as a corollary, whether the employer responded to the acceptance or refusal of the offer, within a reasonable period of time.
[31] Further, in the case of Stefanovic v. SNC Inc. (1988), 22 C.C.E.L. 82 (Ont. H. Ct.), the court held there was cause for termination when an employee would not relocate. The employer offered an employee a transfer from the Toronto office to the Montreal office at the same salary. He did not respond to the offer and was offered a position in another location, which he refused because he considered it a demotion. The plaintiff was then terminated. The Court dismissed the plaintiff's wrongful dismissal action, finding that the transfer was not a demotion. The court stated, at para. 24:
“I do not believe that in law the plaintiff had the right to refuse the transfer under these circumstances. I find that the refusal of the plaintiff to accept either of the job offers was cause for termination of his employment. The dismissal was not wrongful.”
[32] On October 6, 2008, Mr. Breuer of Allstate emailed Mr. Nufrio asking him to confirm his cooperation with the required transition to the new AIA office in Scarborough effective November 3, 2008.
[33] He followed up on October 23, 2008, asking Mr. Nufrio to call him to facilitate the transition to his new office. The Plaintiff did not respond to this letter. The Plaintiff testified that there are “only so many times you can respond” and that he told them to “leave him alone until September 2009.”
[34] On November 4, 2008, Mr. Breuer emailed the Plaintiff asking for confirmation of his intentions. Mr. Breuer told him that he was considered absent without leave and that if he failed to report to the Scarborough office by November 6, 2008, Allstate would conclude that he no longer wished to be employed.
[35] On November 4, 2008, Mr. Nufrio advised that he would not relocate to the office as directed by Allstate. Mr. Nufrio testified that he understood Mr. Breuer was telling him that he had to move or he would be fired.
[36] On November 6, 2008, Allstate notified Mr. Nufrio of his termination of employment for his continued refusal to report to work as directed.
[37] Allstate submits that Mr. Nufrio’s refusal to comply with lawful directions from his employer is insubordination, but also amounts to abandonment of his employment. Notwithstanding Allstate’s efforts to accommodate Mr. Nufrio’s requests to be moved to an office closer to his home, Mr. Nufrio refused to leave his office and the NOA business model. He clearly advised his employer on November 4, 2008 that:
"I prefer to continue my time on my guarantee from Allstate which expires September 2009 and I wish to remain at my present location under the current circumstances."
[38] In the alternative, Allstate relies on the case of Betts v. IBM Canada Ltd., 2015 ONSC 5298 at para. 62 wherein the court summarized the following test for abandonment of employment:
“While an actual resignation must be clear and unequivocal, the test for abandonment is similar to the test for resignation: do the statements or actions of the employee, viewed objectively by a reasonable person, clearly and unequivocally indicate an intention to no longer be bound by the employment contract?”
[39] Similarly, in the case of Pereira v. Business Depot Ltd., 2009 BCSC 1178, var’d on other grounds, 2011 BCCA 361, 93 C.C.E.L. (3d) 74, the court stated at paras 28-29:
“An employment relationship can come to an end based not only on the conduct of the employer, but also on the conduct of the employee. For example, an employee can voluntarily resign from his employment. In the usual course, this occurs when an employee expressly announces his or her intention to resign.
A similar but distinct concept is the abandonment of employment by the employee. It is an implied term of every employment contract that an employee attend at work, and that he is only excused from that obligation where he has the employer's permission or is unable to report for work. Abandonment occurs where that implied term is breached by the employee. Abandonment demonstrates an intention to no longer be bound by the employment contract and therefore constitutes a repudiation of the employment contract by the employee. The employer is then entitled to accept that repudiation and treat the contract as being at an end.”
[40] I agree with Allstate’s submissions that it had the right to impose the new terms of employment on Mr. Nufrio because he had reasonable notice that those changes in his employment terms would be made and there is no evidence that he lost any compensation during the transition period. Further, there is no evidence that there is anything unlawful or untenable about the new terms of employment.
[41] In fact, Mr. Nufrio received top-ups pursuant to the guarantees on his income during the transition period. An employer has the right to decide what terms of employment it is prepared to offer its employees. It cannot change terms of employment without giving an employee appropriate notice of the changes. Allstate did so in this case. Mr. Nufrio did not have the right to insist on employment terms he wanted.
Damages
[42] For the reasons that I have referred to above, I find that Allstate had just cause to terminate Mr. Nufrio’s employment.
[43] Mr. Nufrio submits that if this court finds that Allstate did not have cause to terminate his employment, he is entitled to 26 months of reasonable notice or $520,000.00 in damages. He relies on these cases: George v. Imagineering Ltd. (2001), 14 C.C.E.L. (3d) 102 (Ont. S.C.J.), aff'd George v. Imagineering Ltd. (2002), 23 C.C.E.L. (3d) 31 (Ont. C.A.); Lowndes v. Summit Ford Sales Ltd. (2006), 47 C.C.E.L. (3d) 198 (Ont. C.A.); Keenan v. Canac Kitchens, 2015 ONSC 1055; aff'd Keenan v. Canac Kitchens, 2016 ONCA 79, 29 C.C.E.L. (4th) 33.
[44]
[45] At the time of termination of employment, Mr. Nufrio had been employed as an insurance sales agent by Allstate for 23 years and was 56 years old.
[46] Allstate submits that Mr. Nufrio’s reasonable notice period is between 16 to 18 months.
[47] The parties agree that $20,000 per month, inclusive of pension, is the monthly figure to be used in calculating damages in lieu of reasonable notice entitlement.
[48] Allstate also submits that any reasonable notice awarded ought to be limited to the date upon which Mr. Nufrio intended to leave Allstate, which was September 2009. Evidence from the Plaintiff’s examination for discovery was read into court. Mr. Nufrio, during his cross-examination, had testified that he had the intention to retire from or leave Allstate in September 2009. He intended to stay for so long as he could receive the guarantee on his terms. Mr. Nufrio started receiving his retirement pension from Allstate after his termination of employment. Allstate argues that at a maximum, his entitlement should be the balance of his guaranteed salary over the remaining notice period (November 6, 2008 until August 31, 2009, or almost 8 months’ salary).
[49] Allstate also argues that Mr. Nufrio is required to take reasonable steps to mitigate his damages. In a claim for constructive dismissal where the employee failed to stay in the position until he found employment elsewhere, the employee was found not to have properly mitigated his damages. Mifsud v. MacMillan Bathurst Inc. (1989), 70 O.R. (2d) 701 (C.A.) at paras. 28-34, leave to appeal refused [1990] S.C.C.A. No. 32. Allstate argues that Mr. Nufrio was offered continued employment with Allstate, but refused to accept it. If this court had found that there was no cause for dismissal, Allstate submits that such refusal constitutes a complete failure to mitigate as it is a rejection of a reasonable offer of employment. Mr. Nufrio had the potential benefit of a 24 month working notice period with an income guarantee based on his prior year's income. This guarantee could have been extended for another 4 years, for a total of 6 years. All Mr. Nufrio was required to do was to move to an office which was closer to his home than his current location. I agree with these submissions and find that Mr. Nufrio could have mitigated any claims he had for his wrongful dismissal by accepting the offer of Allstate. The guarantees I have referred to would have exceeded the earnings he would have made during any period of reasonable notice.
[50] Mr. Nufrio also claims "that the 830 Compensation Agreement between the parties was never terminated by either party as per the provisions of Part XI at page 10 of the Agreement". Allstate disputes this claim and submits that it did advise Mr. Nufrio in writing of his termination of employment and because the termination was for cause, there was no notice requirement. I agree and as I have already found, Allstate gave Mr. Nufrio sufficient notice that the terms of the 830 Agreement were changing.
[51] Alternatively, Allstate argues that even if there was non-compliance with the provisions relied on, these damages would be much greater than what any court would award in terms of reasonable notice.
[52] Allstate relies on in the case of Gill v. Navigate Capital Corp., 2014 BCCA 462, 67 B.C.L.R. (5th) 77, wherein the plaintiff claimed ongoing commission payments after his termination of employment. The court found that the plain language of the employment contract indicated that the plaintiff's entitlement to commissions ended on his termination. The British Columbia Court of Appeal dismissed the appeal, in particular finding the following at para. 22:
“Respectfully, I consider Mr. Gill's submission on the interpretation of the contract to be flawed. The critical flaw is that Mr. Gill analyzes his entitlement to compensation in isolation from other aspects of the contract. Contracts are to be read as a whole and particular clauses are to be read in light of the whole…
It appears to me, as it did to the judge, that the contract, read as a whole, was one in which Mr. Gill was to be paid in exchange for services provided on a monthly basis. Those services were expressly enumerated in the employment contract. They included developing strong customer, industry and broker relationships, management of business development functions, product development, marketing strategy and execution, and staffing and training of sales and marketing teams, among other duties. … The essential nature of the employment contract did not change with the amendment. He was still being paid for services provided on a monthly basis. … It did not fundamentally alter the foundation of his entitlement to be compensated or what he was being compensated for. The employment contract remained an employment contract subject to the usual incidents of an employment contract and the implied terms inherent in such contracts.”
[53] Allstate submits that once he was terminated, Mr. Nufrio could not "earn" commission in succeeding months because he was no longer providing the services on which his compensation depended.
[54] It is Allstate's further position that there is no separate basis for "lifetime renewals" as claimed by the Plaintiff. This is made clear by the 830 Agreement, page 6, Part 3, section 4:
Such compensation interest will continue during this agreement so long as the line continues in force.
[55] I agree with Allstate that the termination of Mr. Nufrio’s employment terminated the provisions of the 830 Agreement which are relied on by Mr. Nufrio.
[56] Further, Allstate relies on Part 4, II of the 830 Agreement which provides that:
“You did not have…..any vested interest in any business produced under the terms of this agreement.”
[57] Finally, Allstate relies on page 11, section XII of the Agreement:
Any compensation payable under this agreement or any supplement thereto shall be payable only with respect to employment during the continuance of this agreement.
[58] I find that Mr. Nufrio is not entitled to any of the claims he has made pursuant to the 830 Agreement.
[59] For all of these reasons, I dismiss the claims of Mr. Nufrio in this action.
Costs
[60] If the parties are unable to agree on costs, they may make brief written submissions to me no longer than three pages in length. The Defendant’s submissions are to be delivered by 12:00 noon on July 5, 2016, and the Respondent’s submissions are to be delivered by 12:00 noon on July 15, 2016. Any Reply submissions are to be delivered by 12:00 noon on July 22, 2016.
