Ceccol v. Ontario Gymnastic Federation, 2001 ONCA 8589

Ceccol v. Ontario Gymnastic Federation [Indexed as: Ceccol v. Ontario Gymnastice Federation]

55 O.R. (3d) 614

[2001] O.J. No. 3488

Docket No. C31743

Court of Appeal for Ontario

Osborne A.C.J.O., Doherty and MacPherson JJ.A.

September 6, 2001

Employment -- Employment contract -- Employee entered into series of one-year contracts over 17-year period -- Each contract stated that agreement was subject to renewal if employee received favourable performance reviews and if parties could agree on terms and conditions of renewal -- Courts require unequivocal and explicit language to establish fixed- term contract -- Contract in question did not contain such unequivocal and explicit language -- Employment contract was for indefinite term.

Employment -- Wrongful dismissal -- Reasonable notice -- Presumption of reasonable notice can only be rebutted if employment contract clearly specifies some other period of notice -- Employment contract provided that parties agreed to abide by Employment Standards Act concerning notice of termination of employment -- Contract could plausibly be interpreted as not dealing with termination without cause so that clause respecting Employment Standards Act did not apply to termination without cause -- Clause did not achieve sufficiently high level of clarity to rebut presumption of reasonable notice -- Interpretation which would provide long- term loyal senior employee with reasonable notice preferable to interpretation which would provide employee with minimal termination pay -- Employment Standards Act, R.S.O. 1990, c. E.14.

The plaintiff was employed for 16 years as the Administrative Director of the defendant non-profit athletic organization. She was the number two person in a 14-person office. Her employment relationship was governed by a series of one-year contracts, the terms of which were very similar. Each contract stated that the agreement was subject to renewal if the plaintiff received a favourable performance review and if the parties could agree on the terms and conditions of renewal. In December 1996, the plaintiff and other employees were given written notice that their contracts, which were to expire in June 1997, would not be renewed or extended. In May 1997, the defendant confirmed that the plaintiff's contract would not be renewed. The defendant paid the plaintiff her salary and benefits until June 30, 1997 and offered her ex gratia severance payments potentially totalling three months' salary if she signed a release. She declined this offer and brought an action for damages for wrongful dismissal. Shortly after her termination, the plaintiff decided to become an independent distributor for a Japanese company that produces preventive health care products. She made an outlay of about $4,500 for start-up costs and made no profit during the first 16 months. She did not consider or seek employment of any other kind. The trial judge held that the plaintiff was an indefinite-term, not a fixed- term, employee and that she was entitled to reasonable notice, not the statutory notice in the Employment Standards Act. In reaching that conclusion, he looked to the parties' reasonable expectations and found that the plaintiff and all her immediate supervisors prior to the last one, who came on the scene in 1996, believed and acted as if the plaintiff were a full-time permanent employee. He fixed the reasonable notice at 16 months but reduced it by four months because of the plaintiff's failure to properly mitigate her damages. The defendant appealed and the plaintiff cross-appealed.

Held, the appeal and cross-appeal should be dismissed.

The consequences for an employee of finding that an employment contract is for a fixed term are serious: the protections of the Employment Standards Act and of the common law principle of reasonable notice do not apply when the fixed term expires. Accordingly, the courts require unequivocal and explicit language to establish such a contract, and will interpret any ambiguities strictly against the employer's interests. A court should be particularly vigilant when an employee works for several years under a series of allegedly fixed-term contracts. Employers should not be able to evade the traditional protections of the Employment Standards Act and the common law by resorting to the label of "fixed-term contract" when the underlying reality of the employment relationship is something quite different, namely, continuous service by the employee for many years coupled with oral representations and conduct on the part of the employer that clearly signal an indefinite relationship. The contract in this case was ambiguous. The words "subject to renewal" in article 1.2 were not self-defining and cast doubt on the defendant's argument that article 1.1, which set out a term of 12 months, was effective in creating a clear fixed-term contract. There was a fair amount of language in the contract that contemplated automatic renewal. The ambiguity surrounding the extension of the contract justified the trial judge's decision to hear, and ultimately rely on, evidence about the parties' intention and conduct relating to the contract. The contract which governed the relationship between the plaintiff and the defendant did not contain the unequivocal and explicit language necessary to establish a fixed-term contract. The employment contract was for an indefinite term, subject to renewal and termination in accordance with other provisions in the contract.

Article 5.4 of the contract stated that the parties agreed to abide by the Employment Standards Act and regulations concerning notice of termination of employment. However, the contract could plausibly be interpreted as permitting only three types of termination -- by the employer for cause (article 5.1), by the employer of probationary employees (article 5.2) and by the employee (article 5.3). The contract did not deal with terminations without cause. Accordingly, article 5.4 could be interpreted as having no application to the termination of employment without cause. The presumption of reasonable notice can be rebutted only if the employment contract clearly specifies some other period of notice. Article 5.4 did not achieve that high degree of clarity. Moreover, it was important to acknowledge what was at stake in the conflicting interpretations put forward by the parties. The plaintiff worked loyally and professionally for the defendant for almost 16 years. Her final salary was $50,000. If sh e was entitled to only the eight week payment established by the Act, she would receive approximately $7,700. If she was entitled to reasonable notice, which the defendant was content to accept was 16 months, she would receive approximately $66,700. The interpretation of the contract which would provide a loyal and professional 16-year senior employee with $66,700 in termination pay was to be preferred over the interpretation which would provide her with $7,700.

The trial judge did not err in his approach to the issue of mitigation or in his conclusion that the plaintiff might have found employment in her area of expertise.

APPEAL and CROSS-APPEALfrom a judgment of Pitt J. (1999), 1999 14881 (ON SC), 41 C.C.E.L. (2d) 312 (Ont. Gen. Div.) in an action for damages for wrongful dismissal.

Machtinger v. HOJ Industries Ltd., 1992 102 (SCC), [1992] 1 S.C.R. 986, 7 O.R. (3d) 480n, 91 D.L.R. (4th) 491, 134 N.R. 386, 40 C.C.E.L. 1, 92 C.L.L.C. 14,022, 11 C.P.C. (3d) 140 (sub nom. Lefebvre v. HOJ), apld Gagnon v. Chambly (Ville), 1999 703 (SCC), [1999] 1 S.C.R. 8, 235 N.R. 265; Lambert v. Canadian Assn. of Optometrists (1996), 1996 10216 (ON CA), 19 C.C.E.L. (2d) 315 (Ont. C.A.), affg (1994), 1994 7382 (ON SC), 6 C.C.E.L. (2d) 129 (Ont. Gen. Div.); MacDonald v. ADGA Systems International Ltd. (1999), 1999 3044 (ON CA), 41 C.C.E.L. (2d) 5, 99 C.L.L.C. 210-018 (Ont. C.A.) [Leave to appeal to S.C.C. dismissed (1999), 243 N.R. 398n], distd Other cases referred to Alberta Union of Provincial Employees v. Alberta (Attorney General), 1987 88 (SCC), [1987] 1 S.C.R. 313, 51 Alta. L.R. (2d) 97, 38 D.L.R. (4th) 161, 74 N.R. 99, [1987] 3 W.W.R. 577, 28 C.R.R. 305, 87 C.L.L.C. 14,021; Consolidated-Bathurst Export Ltd. v. Mutual Boiler & Machinery Insurance Co., 1979 10 (SCC), [1980] 1 S.C.R. 888, 112 D.L.R. (3d) 49, 32 N.R. 488, [1980] I.L.R. 1-1176; Gillespie v. Union Optics Corp. (Canada) Ltd. (1987), 18 C.C.E.L. 58 (Ont. H.C.J.), affd (1989), 26 C.C.E.L. xxiv (C.A.); Peet v. Babcock & Wilcox Industries Ltd. (2001), 2001 24077 (ON CA), 53 O.R. (3d) 321, 142 O.A.C. 314 (C.A.); Tilden Rent-A-Car Co. v. Clendenning (1978), 1978 1446 (ON CA), 18 O.R. (2d) 601, 4 B.L.R. 50, 83 D.L.R. (3d) 400 (C.A.); Wallace v. United Grain Growers Ltd., 1997 332 (SCC), [1997] 3 S.C.R. 701, 123 Man. R. (2d) 1, 152 D.L.R. (4th) 1, 219 N.R. 161, 159 W.A.C. 1, [1999] 4 W.W.R. 86, 36 C.C.E.L. (2d) 1, 97 C.L.L.C. 210-029, 3 C.B.R. (4th) 1 Statutes referred to Employment Standards Act, R.S.O. 1990, c. E.14, ss. 57(1), (12), (13) Authorities referred to England, G., Individual Employment Law (Toronto: Irwin Law, 2000)

Connie Reeve and Jason Beeho, for respondent. William Gale and Natalie MacDonald, for appellant.

The judgment of the court was delivered by

MACPHERSON J.A.: --

A. Overview

[1] In the domain of employment law, a fundamental common law principle is that "a contract of employment for an indefinite period is terminable only if reasonable notice is given": see Machtinger v. HOJ Industries Ltd., 1992 102 (SCC), [1992] 1 S.C.R. 986 at p. 997, 91 D.L.R. (4th) 491 (per Iacobucci J.) ("Machtinger"). The principle is not an absolute one; in Machtinger, Iacobucci J. described it as a "presumption, rebuttable if the contract of employment clearly specifies some other period of notice, whether expressly or impliedly" (p. 998 S.C.R.). Moreover, as Iacobucci J.'s statement of the general principle clearly indicates, it applies only to employees engaged for an indefinite period. The principle does not apply to fixed-term contracts. An employee whose contract is not renewed at the conclusion of a fixed term is not dismissed or terminated; rather her employment simply ceases in accordance with the terms of the contract: see Gagnon v. Chambly (Ville), 1999 703 (SCC), [1999] 1 S.C.R. 8, 235 N.R. 265.

[2] The present appeal requires consideration of both the line between fixed and indefinite term employment contracts and the requirements for successfully rebutting the common law presumption of reasonable notice. These issues arise in the context of a 16-year employment relationship between a non- profit athletic association and one of its senior managers which the association terminated, it concedes, without cause.

B. Facts

(1) The parties and the events

[3] The appellant, The Ontario Gymnastic Federation ("the Federation"), is an incorporated non-profit athletic association. It is an amateur sport governing body for the sport of gymnastics in Ontario, consisting of about 160 clubs and 60,000 individual members. The activities of the Federation include educational programs, training programs, coaching, certification and judging. These activities are carried out by several hundred volunteers throughout the province and a paid professional staff at a central office in Toronto.

[4] The respondent, Diana Ceccol ("Ceccol"), was the salaried Administrative Director of the Federation [See Note 1 at end of document] from September 1, 1981 to May 9, 1997. She was essentially the number two person in a 14-person office. She had degrees in physical education from the University of Ottawa and in education from Queen's University.

[5] In July 1981, Ceccol accepted the position of Administrative Director with the Federation, and she commenced employment on September 1, 1981. For the next 15 years and 8 months, Ceccol's employment was governed by a series of one-year contracts. [See Note 2 at end of document] The terms of these contracts were very similar. For convenience, I will refer to the 1996-7 contract which was in force when Ceccol's employment ceased. The crucial provisions of that contract were:

1. TERM

1.1 The Federation hereby hires the Employee and the Employee hereby agrees to serve as the Administrative Director of the Federation for a period of 12 months, commencing July 1, 1996 and terminating on June 30, 1997, unless sooner terminated or extended as hereinafter provided.

1.2 Subject to acceptable performance reviews, this Agreement is subject to renewal, upon the consent of both parties as to terms and conditions.

5. TERMINATION OF EMPLOYMENT

5.1 The Federation may terminate this Agreement at any time according to the current Employment Standards Act by reason of the Employee's dissipation, violation of reasonable instructions or policies/procedures of the Federation, failure to comply with provisions of this Agreement as herein set out or for other cause. Any termination is subject to ratification by the Board of Directors. Participation/involvement in activities during business hours, which are contrary to or, violate the Criminal Code of Canada will be grounds for immediate dismissal.

5.3 The Employee shall have the right to terminate this Agreement at any time by giving reasonable written notice (a minimum of 2 weeks) to the Federation. In terminating this Agreement, pursuant to the terms of this subparagraph, the Employee must give reasons in writing explaining such termination.

5.4 The Federation and the Employee agree to abide by the Ontario Employment Standards Act and regulations concerning notice of termination of employment.

[6] In the late fall of 1996, there were 14 employees at the Federation's head office. On December 3, a staff meeting was called and Harold Sanin, the Vice-President (Administration), presented all of the employees with a written notice:

NOTICE

This letter will confirm information presented at the full staff meeting held December 3, 1996.

All staff have contracts which expire June 30, 1997. You are advised that the employment and professional services now in force will not be renewed or extended on June 30, 1997.

We hope to be able to offer positions to you before June 30, 1997, but cannot guarantee that this will be possible.

Any offers of employment or for services contracts that may be made on or before that date will be in revised format and may contain different and differing conditions, terms, clauses, and position descriptions and requirements.

[7] In the spring of 1997, most of the senior managers were informed that the Federation would not renew their contracts after June 30. For Ceccol (and for Joe Rabel, the Executive Director), the axe fell on May 9, 1997:

Dear Diana:

You were notified at the December 3, 1996 Staff Meeting, which notice was confirmed by letter dated December 3, 1996, that the Ontario Gymnastic Federation ("O.G.F.") was undergoing a review of all service contracts and that some contracts would not be renewed. We hereby re-affirm the notice of termination and expiry you received at that meeting. With this letter, we confirm that your contract as Administrative Director of the O.G.F. will not be renewed at the end of its one year term on June 30, 1997. Effective today, you will no longer be required to provide services to O.G.F.

[8] The Federation paid Ceccol her salary and relevant benefits until June 30, 1997. It also offered her ex gratia severance payments potentially totalling three months' salary if she signed a release. Ceccol declined this offer and commenced a wrongful dismissal action.

(2) The litigation

[9] The action proceeded to trial before Pitt J. who heard four days of evidence and argument from December 14-18, 1998. In written reasons released on February 15, 1999, the trial judge held that Ceccol was an indefinite term, not a fixed term, employee and that she was entitled to reasonable notice, not the statutory notice in the Employment Standards Act, R.S.O. 1990, c. E.14 ("ESA"). He fixed the reasonable notice at 16 months but reduced it by four months because of Ceccol's failure to properly mitigate her damages. Pitt J.'s decision is reported at (1999), 1999 14881 (ON SC), 41 C.C.E.L. (2d) 312.

[10] The Federation appeals the trial judge's decision relating to the nature of the term of Ceccol's employment and to its obligation to provide her with reasonable notice. Ceccol cross-appeals on the mitigation issue.

C. Issues

[11] The issues on the appeal and cross-appeal are:

(1) Did the trial judge err by concluding that Ceccol was an indefinite term employee?

(2) Did the trial judge err by concluding that Ceccol was entitled to reasonable notice rather than to the notice provided in the ESA?

(3) Did the trial judge err by reducing Ceccol's notice period by four months for failure to mitigate her damages?

D. Analysis

(1) The Federation's appeal

(a) Duration of Ceccol's employment

[12] The Federation and Ceccol entered into 15 annual contracts. Each contract contained, in article 1.1, a specific final date, June 30, from 1992 onwards. However, the trial judge concluded [at p. 317 C.C.E.L.] that Ceccol was not a fixed-term employee:

I find as fact that the plaintiff and all her immediate superiors prior to Sanin, who came on the scene in 1996, believed and acted as if the plaintiff were, what the plaintiff and her witnesses described as a "full-time" permanent employee.

The trial judge gave effect to this shared perception because, in his words, "[i]n the final analysis, in these cases the decision to be made is what are the reasonable expectations of the parties".

[13] I agree with the trial judge's conclusion. His observation about the importance of the parties' reasonable expectations is a faithful application of one of the leading decisions of the Supreme Court of Canada in the contract law domain. In Consolidated Bathurst Export Ltd. v. Mutual Boiler & Machinery Insurance Co., 1979 10 (SCC), [1980] 1 S.C.R. 888 at p. 901, 112 D.L.R. (3d) 49, Estey J. said:

[T]he normal rules of construction lead a court to search for an interpretation which, from the whole of the contract, would appear to promote or advance the true intent of the parties at the time of entry into the contract. Consequently, literal meaning should not be applied where to do so would bring about an unrealistic result or a result which would not be contemplated in the commercial atmosphere in which the insurance was contracted. Where words may bear two constructions, the more reasonable one, that which produces a fair result, must certainly be taken as the interpretation which would promote the intention of the parties.

[14] In this passage, Estey J. linked the factors of the parties' intention and unrealistic or fair results with contractual words that "bear two constructions". Is it fair to conclude that article 1.1 of the Federation-Ceccol contract admits of more than one construction? In my view, it is.

[15] Article 1.1 sets a term of 12 months for the contract. However, article 1.1 also specifically contemplates that the contract may operate either shorter or longer than 12 months: "unless sooner terminated or extended as hereinafter provided". The longer life of the relationship is then dealt with in article 1.2 which provides that the contract is "subject to renewal" if the employee has received acceptable performance reviews and if the parties can agree on the terms and conditions of renewal. The shorter life of the relationship is dealt with in article 5 of the contract which covers various termination scenarios, including (for sure) termination for cause, termination of probationary employees and termination by the employee, and (possibly) termination without cause. [See Note 3 at end of document]

[16] In my view, this is not a case like Chambly, supra, where the contract was for a single fixed term and contained no clause dealing with renewal. Rather, there is a renewal provision (article 1.2) and it is explicitly linked to the term provision (article 1.1) by the closing words of article 1.1 ("unless . . . extended as hereinafter provided"). Moreover, it is arguable (I put it no higher) that renewals are not optional. There is a fair amount of language in the contract that contemplates automatic renewal, including the linking of renewals to "acceptable performance reviews" (article 1.2), the requirement that performance reviews "shall be considered in annual salary negotiations" (article 12.1), and the requirement that the employee's salary be negotiated by a specified date before the end of the contract (article 4.2).

[17] The Federation relies on Lambert v. Canadian Assn. of Optometrists (1994), 1994 7382 (ON SC), 6 C.C.E.L. (2d) 129 (Ont. Gen. Div.), affd (1996), 1996 10216 (ON CA), 19 C.C.E.L. (2d) 315 (C.A.) ("Lambert"), to support its contention that its contract with Ceccol is a clear fixed- term contract. In that case, the plaintiff was employed by the defendant as Executive Director pursuant to a series of written employment contracts. The final one stated a term from January 1, 1989 to December 31, 1992. The defendant provided the plaintiff with proper notice that his contract would not be renewed and his employment would end on December 31, 1992. The plaintiff brought a wrongful dismissal action, contending that his term of employment was not fixed. He submitted that his employment was subject to the performance appraisal process in the defendant's Personnel Policy Manual and that there was a link between the continuing employment and the appraisal process. This link gave rise to an express or implied term that the termination cla use in the contract would not be invoked unless the plaintiff was given notice of the reasons for his dismissal and an opportunity to be heard.

[18] Bell J., in reasons expressly adopted by this court, dismissed the plaintiff's action. She found, at a factual level, that the Personnel Policy Manual did not apply to the Executive Director position, and that the plaintiff had never received a written performance appraisal in his nine years of employment. Bell J. also held that there was no link in the contract between the termination clause and the performance appraisal process in the manual.

[19] The present appeal is distinguishable from Lambert on both bases. Ceccol was subject to a formal appraisal process and received detailed written appraisals each year. More importantly, the Federation-Ceccol employment contract contains wording in articles 1.1 and 1.2 that not only contemplates renewal, but also explicitly links a potential renewal to acceptable performance reviews.

[20] In summary, in my view, the relationship between articles 1.1 and 1.2 in the contract is not entirely clear. In particular, the words "subject to renewal" in article 1.2 are not self-defining and cast doubt on the Federation's argument that article 1.1 is effective in creating a clear fixed-term contract.

[21] This ambiguity surrounding the extension of the contract (it is worth noting that the contract was in fact renewed 15 times) justified the trial judge's decision to hear, and ultimately to rely on, evidence about the parties' intentions and conduct relating to the contract. That evidence was, as the trial judge found, overwhelming in support of Ceccol's contention that she was hired, and performed for almost 16 years, as an indefinite-term employee.

[22] Ceccol's uncontradicted testimony about the initial job interview leading to her first contract was, inter alia:

Q. Do you remember what was discussed at that interview?

A. We discussed the position, the duties, my qualifications, my experience, and also talked about the position in the employment that it was a full-time position, a full-time permanent position.

Q. Did they tell you that?

A. We talked about that, yes.

Q. How do you know that you talked about that?

A. Because this was a position with a great deal of responsibility. I was managing the affairs of the corporation. I was the only --- well, I was one of two staff people the other was a secretary. So this was not a position that they would hire someone for a one year term and then have them leave. They needed someone who would provide continuity because there was such a turnover of volunteers and the staff was the person that they would turn to be there on a permanent basis.

THE COURT: The question is why do you remember?

THE WITNESS: Because it was important to me at that time to find a full-time permanent position. I was not in the market looking for a one-year job. And I would never have applied for one-year position.

[23] Ceccol's testimony about her understanding of the nature of the employment contract was replicated by testimony from senior officers and managers of the Federation. Joe Rabel, the Executive Director from 1989-1997, and David Williams and George Curran, both former Presidents of the Federation, all testified that they regarded Ceccol as an indefinite employee and that the 12-month term in article 1.1 of the contract was simply the vehicle by which the terms and conditions of a new contract were negotiated. In Mr. Williams' words, the employees, including Ceccol, "were treated as full-time employees, certainly not a year to year arrangement".

[24] I conclude with this observation. Fixed-term contracts of employment are, of course, legal. If their terms are clear, they will be enforced: see Chambly and Lambert, supra.

[25] However, the consequences for an employee of finding that an employment contract is for a fixed term are serious: the protections of the ESA and of the common law principle of reasonable notice do not apply when the fixed term expires. That is why, as Professor Geoffrey England points out in his text Individual Employment Law (Toronto: Irwin Law, 2000), "the courts require unequivocal and explicit language to establish such a contract, and will interpret any ambiguities strictly against the employer's interests" (p. 222).

[26] It seems to me that a court should be particularly vigilant when an employee works for several years under a series of allegedly fixed-term contracts. Employers should not be able to evade the traditional protections of the ESA and the common law by resorting to the label of 'fixed-term contract' when the underlying reality of the employment relationship is something quite different, namely, continuous service by the employee for many years coupled with verbal representations and conduct on the part of the employer that clearly signal an indefinite-term relationship.

[27] In the present case, Ceccol served the Federation loyally, professionally and continuously for almost 16 years. The Federation does not say otherwise. I cannot say that the contract which governed their relationship contains the "unequivocal and explicit language" necessary to establish a fixed-term contract. I conclude that the employment contract was for an indefinite term, subject to renewal and termination in accordance with other provisions in the contract.

(b) Reasonable notice or not?

[28] The conclusion that a contract is for an indefinite term has as a corollary that, in normal circumstances, the employer can terminate the contract only by providing reasonable notice. This principle is not, however, an absolute one. There is an important exception, set out succinctly by Iacobucci J. in Machtinger, at p. 998 S.C.R.:

I would characterize the common law principle of termination only on reasonable notice as a presumption, rebuttable if the contract of employment clearly specifies some other period of notice, whether expressly or impliedly.

[29] The Federation relies on this exception. It submits that article 5.4 expressly specifies some other period of notice. For convenience, I set out article 5.4 again:

5.4 The Federation and the Employee agree to abide by the Ontario Employment Standards Act and regulations concerning notice of termination of employment.

[30] The ESA provides:

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 employer if his or her period of employment is eight years or more, . . . .

[31] The Federation submits that, reading article 5.4 of the contract and s. 57(1)(h) of the ESA together, the result is clear: Ceccol is entitled to eight weeks of statutory/ contractual notice, and not reasonable notice under the common law.

[32] I begin by noting, parenthetically, that, at a factual level, the Federation's position is undercut by its own non- compliance with the ESA when it notified Ceccol that her contract would not be renewed. The notification was communicated to Ceccol on May 9, 1997, which is not eight weeks before June 30.

[33] With respect to this matter, the Federation cannot say that the May 9 notice merely confirmed the earlier December 3, 1996 notice to all employees. The December 3 notice simply presaged that some employees might not be offered new contracts; it did not explicitly inform Ceccol that her contract would not be renewed. Moreover, the evidence clearly establishes that Vice-President Sanin got in a great deal of trouble with the Board of Directors of the Federation for the form and contents of the December 3 notice. At a board meeting in February 1997, an apparent crisis was defused only by the board deciding that the December 3, 1996 notice was not a notice of termination to employees.

[34] In support of its legal position, the Federation relies on this court's decision in MacDonald v. ADGA Systems International Ltd. (1999), 1999 3044 (ON CA), 41 C.C.E.L. (2d) 5, 99 C.L.L.C. 210-018, leave to appeal to S.C.C. dismissed [1999] S.C.C.A. No. 147 ("MacDonald"). In that case, the plaintiff, a retired Canadian Air Force Lieutenant Colonel, was hired by the defendant for an initial term of two years. The contract was renewed for two additional two-year terms. In 1994, the defendant did not renew the contract for a fourth term. The termination clause in the contract provided:

12. The Company may terminate this Agreement without notice at any time by reason of the Employee's dissipations, violation of any instruction or rule of the Company, or failure to comply with any of the agreements on the part of the Employee as herein set out. In addition it is also agreed that either party to this Agreement may terminate this Agreement at any time by giving not less than one (1) month's prior written notice sent either by registered mail or bailiff.

(Emphasis added)

[35] The emphasized passage in this clause was in issue in MacDonald. The court's conclusion, expressed by Abella J.A., was, at p. 9 C.C.E.L.:

In this case, the common law presumption in favour of reasonable notice has been rebutted. There is a clear -- and clearly expressed -- term providing for not less than one month's notice.

[36] The Federation contends that article 5.4 of its contract with Ceccol is equally clear; it explicitly links termination with s. 57(1) of the ESA.

[37] I say, candidly, that the Federation's submission on this issue is a plausible one. However, in the end, I am not persuaded by it. Whereas the wording of the termination clauses in Machtinger and MacDonald was clear, in my view, the wording of article 5.4 is noticeably different and creates genuine uncertainty. [See Note 4 at end of document]

[38] In MacDonald, the crucial words are "The Company may terminate" and "either party to this Agreement may terminate". In Machtinger, the relevant clause provided:

Termination -- Employer may terminate employment at any time without notice for cause. Otherwise, Employer may terminate employment on giving Employee ______ weeks notice or salary . . . in lieu of salary.

(Emphasis added)

[39] In both cases, the active words "may terminate" explicitly authorized the employer to terminate the employee. In both cases, the authorization explicitly covered terminations for cause. As well, in both cases, the authorization also clearly covered terminations without cause because of the words "In addition" in MacDonald and "Otherwise" in Machtinger.

[40] In my view, the structure and wording of article 5 of the Federation-Ceccol contract are different and less clear. There are the same clear active words in several places in article 5. Article 5.1 states "The Federation may terminate" in a termination for cause scenario. Article 5.2 states that the Federation "may terminate" during the probationary period of employment. Article 5.3 provides that "The Employee shall have the right to terminate this Agreement". However, none of these clauses with virtually identical wording to the clear clauses in Machtinger and MacDonald covers terminations without cause, which is the Ceccol scenario.

[41] The Federation concedes as much. Its submission is that the Ceccol situation is covered by article 5.4 and that its wording is also clear and points to the application of the eight-week notice period in s. 57(1)(h) of the ESA.

[42] Not without hesitation, I disagree with the Federation's submission. As I mentioned above, the Federation's interpretation of article 5.4 is a plausible one. However, in my view, it is not the only plausible interpretation. I find it strange that the Federation would deal quite clearly ("may terminate") with three scenarios, termination with cause, termination of probationary employees and termination by the employee, but be silent, or at least tangential, in its treatment of a fourth and very common scenario, namely termination without cause. I am also troubled by the absence in article 5 of language, as in Machtinger ("otherwise") and MacDonald ("in addition"), linking terminations without cause to the explicit "may terminate" language of the termination clauses.

[43] In my view, the absence of "may terminate" wording in article 5.4 which, I underline, is the provision on which the Federation relies, leads to a second plausible interpretation. The interpretation is this: The Federation-Ceccol contract permits only three types of termination -- by the employer for cause (article 5.1), by the employer of probationary employees (article 5.2) and by the employee (article 5.3). The contract does not deal with terminations without cause. It does not contain the explicit linking language of Machtinger and MacDonald. Moreover, importantly, article 1.2 does link renewal to "acceptable performance reviews", a signal, arguably, that terminations without cause were not contemplated.

[44] The question then arises: if article 5.4 is not a provision dealing with terminations without cause, what roles does it play? My answer -- and I do not claim it is the only possible answer -- is that article 5.4, with its "abide by the ESA . . . concerning notice of termination" wording, qualifies the three termination scenarios dealt with in articles 5.1-5.3. Article 5.4 says to the parties: if you invoke the right to terminate the employment relationship pursuant to any of articles 5.1-5.3, you must do so in accordance with the ESA. On the employer's side, this would mean, inter alia, co-operating with the Minister of Labour, if requested, concerning the re-establishment of the employee (s. 57(12)) and maintaining the employee's salary and benefits during the notice period (s. 57(13)).

[45] Which of the two plausible interpretations of article 5.4 should govern the Federation-Ceccol employment contract? Machtinger instructs that the presumption of reasonable notice can be rebutted only if the employment contract "clearly specifies some other period of notice" (p. 998 S.C.R.). I do not think that article 5.4 achieves that high level of clarity.

[46] Moreover, I think it is important to acknowledge what is at stake in the conflicting interpretations put forward by the parties. Ceccol worked loyally and professionally for the Federation for almost 16 years. Her final salary was $50,000. If she is entitled to only the eight-week payment established by the ESA, she will receive approximately $7,700. If she is entitled to reasonable notice, which the Federation is content to accept is 16 months, she will receive approximately $66,700.

[47] In an important line of cases in recent years, the Supreme Court of Canada has discussed, often with genuine eloquence, the role work plays in a person's life, the imbalance in many employer-employee relationships and the desirability of interpreting legislation and the common law to provide a measure of protection to vulnerable employees: see Alberta Union of Provincial Employees v. Alberta (Attorney General), 1987 88 (SCC), [1987] 1 S.C.R. 313, 38 D.L.R. (4th) 161, Machtinger, supra, and Wallace v. United Grain Growers Ltd., 1997 332 (SCC), [1997] 3 S.C.R. 701, 152 D.L.R. (4th) 1 ("Wallace").

[48] These factors have clearly influenced the interpretation of employment contracts. In Wallace, Iacobucci J. said, at pp. 740-41 S.C.R.:

The contract of employment has many characteristics that set it apart from the ordinary commercial contract. Some of the views on this subject that have already been approved of in previous decisions of this Court (see e.g. Machtinger, supra) bear repeating. As K. Swinton noted in "Contract Law and the Employment Relationship: The Proper Forum for Reform", in B.J. Reiter and J. Swan, eds., Studies in Contract Law (1980), 357, at p. 363:

. . . the terms of the employment contract rarely result from an exercise of free bargaining power in the way that the paradigm commercial exchange between two traders does. Individual employees on the whole lack both the bargaining power and the information necessary to achieve more favourable contract provisions than those offered by the employer, particularly with regard to tenure.

[49] In the present appeal, there are, as I have tried to demonstrate, two plausible interpretations of article 5.4 of the employment contract. One interpretation would remove the common law entitlement to reasonable notice; the other would preserve it. One interpretation would result in a termination provision which the trial judge described as "especially stringent and onerous"; the other would provide an employee with notice which at common law, both parties accept, is reasonable. One interpretation would provide a loyal and professional 16-year senior employee with $7,700 in termination pay; the other would provide her with $66,700. In my view, in each instance the second interpretation is preferable. It is also, in my view, consistent with the leading decisions of the Supreme Court of Canada in the employment law domain.

(2) Ceccol's cross-appeal

[50] Ceccol cross-appeals from the trial judge's decision to reduce the notice period from 16 to 12 months for failure to properly mitigate her damages.

[51] Shortly after she was terminated on May 9, 1997, Ceccol decided to become an independent distributor for NIKKEN, a Japanese company that produces preventive health care products. She made an outlay of about $4,500 for start-up costs and made no profit during the first 16 months. She did not consider or seek employment of any other kind, including in the sports administration field where she had worked for her entire career. I note, parenthetically, that Joe Rabel, the Executive Director of the Federation, who was terminated on the same day as Ceccol, became the Executive Director of Judo Canada within four months of his termination.

[52] There is certainly case law supporting decisions by employees to attempt to start their own businesses as appropriate mitigation strategies in certain circumstances: see Gillespie v. Union Optics Corp. (Canada) Ltd. (1987), 18 C.C.E.L. 58 (Ont. H.C.J.), affd (1989), 26 C.C.E.L. xxiv (C.A.), and Peet v. Babcock & Wilcox Industries Inc. (2001), 2001 24077 (ON CA), 53 O.R. (3d) 321, 142 O.A.C. 314 (C.A.) ("Peet"). However, each case needs to be assessed on its own facts. As Finlayson J.A. said in Peet, "[t]he trial judge was in the best position to assess the evidence, its relevance, and the weight to be attributed to it" (p. 324 O.R., p. 317 O.A.C.).

[53] I can see no error in principle in the way the trial judge approached and decided the mitigation issue in this case. Ceccol contends that the trial judge erred in concluding that she might have found employment in her area of expertise because there was no evidentiary basis to support such a conclusion. I disagree. Although the Federation led no direct evidence on the mitigation issue, its counsel's cross- examination of Ceccol and Rabel provided a sufficient evidentiary basis to support the trial judge's conclusion on the mitigation issue.

E. Disposition

[54] I would dismiss the appeal and the cross-appeal, both with costs.

Appeal and cross-appeal dismissed.

Notes

Note 1: Ceccol's initial employment was with the Ontario Rhythmic Sporting Gymnastic Federation. In 1984, this organization merged with the Ontario Gymnastic Federation. For convenience, I will refer to the Federation throughout these reasons.

Note 2: On one occasion, when the Federation changed its year end, the contract covered 15 months.

Note 3: See discussion in the next section.

Note 4: I note that my analysis on the second issue in this appeal differs in part from that of the trial judge. The trial judge found that the termination provision was clear but that it did not apply to Ceccol becaue a standard form contract was used and the termination provision was especially stringent and onerous; as a result, the employer had a duty to draw the termination provision to Ceccol's attention. In my view, the employment contract was not similar to the complex standard form printed car rental agreement in issue in Tilden Rent-A-Car Co. v. Clendenning (1978), 1978 1446 (ON CA), 18 O.R. (2d) 601, 83 D.L.R. (3d) 400 (C.A.), which the trial judge applied. Accordingly, the Federation did not have a duty to specifically draw the termination provision to Ceccol's attention.