COURT OF APPEAL FOR ONTARIO

CITATION: Evangelista v. Number 7 Sales Limited, 2008 ONCA 599

DATE: 20080902

DOCKET: C45787

BEFORE: O’CONNOR A.C.J.O., WATT J.A. and HACKLAND R.S.J. (ad hoc)

BETWEEN:

MARIO EVANGELISTA Plaintiff (Respondent)

and

NUMBER 7 SALES LIMITED Defendant (Appellant)

COUNSEL: Barry J. Goldman for the appellant J. Paul Wearing and Madeleine Loewenberg for the respondent

HEARD: May 2, 2008

On appeal from the judgment of Justice K.A. Hoilett of the Superior Court of Justice, dated July 6, 2006 with reasons reported at [2006] O.J. No. 2742.

O’CONNOR A.C.J.O.:

[1] The respondent sued the appellant for wrongful dismissal. After a seven day trial, the trial judge found that the appellant had constructively dismissed the respondent. He awarded the respondent damages on the basis of a fifteen month notice period together with three months “Wallace damages” and vacation and public holiday pay for a period of eight years pursuant to the Employment Standards Act, R.S.O. 1990, c. E. 14 and the Employment Standards Act, 2000, S.O. 2000, c. 41 (the “Act”).

FACTS

[2] At the time of the trial, the respondent was fifty-eight years old. He had worked in the used car business for over thirty years. In 1988, he was hired by the appellant as its used car sales manager.

[3] For the first five years, the respondent was paid through a company that he owned with a partner. He was paid on a commission-only basis – thirty percent of gross profits. In 1993, the appellant began to pay the respondent directly. The rate of compensation remained the same as did the respondent’s duties as used car sales manager.

[4] In April 2003, the appellant proposed reducing the respondent’s compensation from thirty percent to eighteen percent of gross profits, effective December 2003. The trial judge accepted the respondent’s evidence that this came as a shock to him and that he was disappointed and hurt. However, the respondent accepted the new compensation package and it was implemented in December 2003.

[5] In March 2004, the appellant proposed reducing the respondent’s compensation again, this time, from eighteen percent to nine percent of gross profits. The appellant did not complain about the respondent’s performance as used car sales manager. Rather, the appellant’s sales manager, Mr. Corridore, told the respondent that he was making too much money in comparison to others in similar positions in the business. A number of discussions followed. The respondent did not accept the proposed reduction. The parties were at an impasse.

[6] Following the discussions in March 2004, the respondent, who was suffering from depression, informed the appellant that he had to see a doctor and would be taking time off work. There was no contact between the parties from April 1, 2004 until July 2004. In July, the respondent met with the president of the appellant and further discussions ensued. Again, no resolution was reached, and on July 29, 2004, the respondent commenced the within action for wrongful dismissal.

[7] After a seven day trial, the trial judge found in favour of the respondent. He concluded that the respondent had been constructively dismissed and made the awards set out in para. 1 above.

ANALYSIS

Constructive Dismissal

[8] The appellant argues that the trial judge erred in finding that it constructively dismissed the respondent. I disagree.

[9] The trial judge’s conclusion was based on findings of fact. He accepted the respondent’s evidence that the appellant unilaterally reduced his compensation from eighteen to nine percent of gross profits. He rejected the appellant’s evidence that the reduction was merely an opening offer in a negotiation.

[10] The trial judge found that the appellant’s unilateral action in changing the compensation constituted a fundamental breach of the employment contract which entitled the respondent to consider himself constructively dismissed: Farber v. Royal Trust Co., 1997 CanLII 387 (SCC), [1997] 1 S.C.R. 846 at para. 33. I see no merit in this ground of appeal.

The Notice Period

[11] Applying the principles in Bardal v. Globe & Mail Limited (1960), 1960 CanLII 294 (ON SC), 24 D.L.R. (2d) 140 (H.C.J.), the trial judge awarded the respondent a notice period of fifteen months.

[12] The appellant argues that the trial judge made two errors in arriving at the fifteen month period. First, it says the trial judge erred in taking into account that the respondent “had been induced” into leaving an employer, in his case self-employment, to join the appellant in 1988.

[13] The respondent testified that in 1988, the owner of the appellant asked him to come and work for him. Initially, the respondent turned him down, but agreed after being approached a second time. He accepted a position as sales manager of the used car department.

[14] The trial judge accepted this evidence. I see no error in the way the trial judge considered these circumstances as one of several factors in arriving at the appropriate notice period.

[15] The appellant also argues that the trial judge erred in considering the first five years of the respondent’s work for the appellant in determining the appropriate notice period. During that five year period, the respondent was paid his commissions through a pre-existing partnership rather than directly to him. The respondent also provided some services for two other car dealerships owned by the same person who owned the appellant. As a result, the appellant says the respondent was actually employed by the appellant for only eleven years.

[16] The trial judge was alive to the circumstances under which the respondent was employed during the first five years. The trial judge did not rest his conclusion that fifteen months notice was the appropriate notice period solely on a finding of sixteen years of employment. Rather, the trial judge considered all of the appropriate factors -- the respondent’s age, his responsibilities as a used car sales manager, his employment prospects as well as his length of service with the appellant -- and considered that fifteen months struck a “happy balance”. I see no basis for interfering with this conclusion.

Wallace Damages

[17] The appellant argues that the trial judge erred in awarding the respondent three months Wallace damages. In particular, the appellant takes issue with the trial judge’s conclusion that there existed a “toxic work environment” when the appellant constructively dismissed the respondent.

[18] The trial judge carefully and thoroughly reviewed all of the circumstances surrounding the respondent’s dismissal. He accepted the respondent’s evidence and rejected the evidence of the appellant where it differed. He concluded that the appellant demonstrated palpable insensitivity in the manner in which it dealt with the respondent. The appellant was disingenuous and subjected the respondent to undue pressure at a time the respondent was in poor health. The respondent felt humiliated and let down by the conduct of the appellant. The trial judge’s characterization of this environment as “toxic” was entirely reasonable.

[19] The trial judge’s findings of fact supported an award of damages under the principles set out in Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (SCC), [1997] 3 S.C.R. 701.

[20] After the argument of this appeal, the Supreme Court of Canada released its judgment in Honda Canada Inc. v. Keays, 2008 SCC 39, [2008] S.C.J. No. 40. Obviously, the trial and this appeal were not argued on the basis of the law as set out in Honda. That said, given the trial judge’s strong findings of fact, I see no reason to interfere with the Wallace award.

Mitigation of Damages

[21] I agree with the trial judge that the respondent acted reasonably in trying to mitigate his damages. He confined his job search to the used car sales market. Given that he was fifty-eight years old and had worked for thirty years in the used car business, his efforts were appropriate.

[22] Moreover, given the “toxic work environment” referred to above, it was not reasonable to expect the respondent to continue to work for the appellant during the notice period.

[23] The appellant argues that the respondent failed to mitigate because he did not apply for disability benefits during the notice period. The problem with this argument is that the appellant did not establish that the respondent was entitled to the benefits available under the disability plan. The evidence was equivocal in this respect.

[24] Moreover, the appellant did not advise the respondent that the benefits were available, and the respondent was unaware that he might qualify for those benefits.

[25] In these circumstances, the trial judge found, correctly in my view, that the appellant did not discharge the onus of showing that the respondent failed to mitigate his damages by applying for disability benefits.

Public Holiday and Vacation Pay

[26] The trial judge awarded the respondent compensation for unpaid public holiday and vacation pay for 1996 through 2003, as required under the Act. The trial judge accepted the respondent’s evidence that he had not received such payments during this period.

[27] The appellant did not keep records as required by the Act relating to public holiday and vacation pay. It was only after a Revenue Canada audit in 2003 that the appellant first made a vacation pay payment to the respondent.

[28] The Act requires an employer to give an employee time off from work for public holidays and vacation and to pay the employee for that time off.

[29] The relevant sections in the current Act are as follows:

26(1) If a public holiday falls on a day that would ordinarily be a working day for an employee and the employee is not on vacation that day, the employer shall give the day off work and pay him or her public holiday pay for that day.

33(1) An employer shall give an employee a vacation of at least two weeks after each vacation entitlement year that he or she completes.

35.2 An employer shall pay vacation pay to an employee who is entitled to vacation under section 33 or 34 equal to at least 4 percent of the wages, excluding vacation pay, that the employee earned during the period for which the vacation is given.[^1]

[30] The appellant argues that the award of public holiday and vacation pay should be set aside or reduced. It makes three arguments. First, the appellant argues that the trial judge erred in holding that the exemption from paying public holiday and vacation pay found in s. 3(1)(h) of Regulation 325, R.R.O. 1990, Reg. 325 and the successor provision, s. 2(1)(h) of Ontario Regulation 285/01, O. Reg. 285/01, did not apply to the respondent.

[31] Section 3(1)(h) of Regulation 325 provided:

3(1) Parts IV, V, VI, VII and VIII of the Act do not apply to a person employed,

(h) as a salesperson, other than a route salesperson, who is entitled to receive all or any part of his or her remuneration as commissions in respect of offers to purchase or sales of goods, wares, merchandise or services and which offers or sales are normally made at a place other than the place of business of the employer.

[32] Section 2(1)(h) of Ontario Regulation 285/01 provides:

Parts VII, VIII, IX, X and XI of the Act do not apply to a person employed,

(h) as a salesperson, other than a route salesperson, who is entitled to receive all or any part of his or her remuneration as commissions in respect of offers to purchase or sales that,

(i) relate to goods and services, and

(ii) are normally made away from the employer’s place of business.

[33] The appellant argues that the exemption sections referred to above should be interpreted to include the respondent because he spent one day each week away from the appellant’s premises buying and selling cars at the Toronto Auto Auction. As a result, the argument goes, the appellant received part of his compensation in respect of offers or sales which were normally made at a place other than the appellant’s place of business.

[34] I do not accept this argument. I do not read these sections as denying statutory benefits payable under the Act to salespersons who carry out only a small portion of their duties away from the employer’s business premises.

[35] In my view, the subsections are directed at salespersons who normally carry out their duties off-site in the sense that they spend most of their time away from their employer’s place of business. I do not read the word “normally” in the subsections as applying to a situation in which an employee regularly earns a relatively small portion of his or her compensation while working off-site. I read the phrase “which offers or sales are normally made at a place other than the place of the business of the employer” as encompassing all of the offers or sales made by the salesperson. Consistent with this approach, I understand that the reference to a salesperson “who is entitled to receive all or any part of his or her remuneration as commissions” simply indicates that the subsections apply to a salesperson whose compensation is not entirely based on salary.

[36] My interpretation of the subsections is consistent with what I conclude is the purpose of those subsections. I agree with the decisions of the Ontario Labour Relations Board which have identified the purpose of the exemption as relating to the control an employer exerts over its employees. The rationale for exempting employees who are “normally” away from the employer’s business premises is that employers should not be required to provide vacation pay or statutory benefits when they cannot control or monitor the hours employees work or how they do their job. In Isomeric Inc., [2000] O.E.S.A.D. No. 194, the Board was considering the application of the exemption to a claim for the statutory minimum wage. At para. 22, it held,

The exemption found in section 3(1)(h) of Regulation 325 appears to be based on the notion that employees who are not subject to the usual controls of the employer in terms of reporting for duty, or, for that matter, actually performing work cannot expect a guarantee of statutory minimum wages.

[37] See also Wright (Re), [1992] O.E.S.A.D. No. 91 and Knox Insurance Brokers Ltd. (Re), [1996] O.E.S.A.D. No. 5.

[38] The interpretation urged by the appellant would deny statutory benefits to an employee who spends even a small portion of his or her time away from the employer’s premises. That seems illogical and potentially very unfair. It is reasonable to expect that if the legislature intended that result, it would have set that intention out in clear and unequivocal language.

[39] I agree with the trial judge that the respondent did not fall within the exemption from statutory benefits set out in the regulations referred to above. The respondent went to the car auction every Tuesday from 10:00 a.m. to 4:00 or 5:00 p.m. The rest of the time, he worked on-site. On Wednesdays and Thursdays, he worked from 9:00 a.m. to 9:00 p.m. and on Fridays and Saturdays from 9:00 a.m. to 6:00 p.m. Thus, the respondent spent less than twenty percent of his working time away from the appellant’s place of business. He was not “normally” off site.

[40] Moreover, accepting that the purpose of the subsections is to exempt employers from paying vacation pay and other benefits to employees whom they cannot monitor or control, that purpose would not be fulfilled in the case of the respondent. The appellant knew exactly where the respondent was each working day and what he was doing. The appellant was well-positioned to monitor and control the way the respondent exercised all of his duties.

[41] In summary, I agree with the trial judge that the respondent did not fall within the exemption from statutory benefits set out above.

[42] The appellant’s second argument is that the trial judge erred in awarding the respondent the full amount of the vacation pay claimed without taking into account the fact that the respondent took at least three days vacation each November to go hunting and that on two occasions he took time off for family reasons. This argument assumes erroneously that an employee is not entitled to vacation pay when he or she takes time off for a vacation. Under s. 28 of the Employment Standards Act, 1990, employees are entitled to receive time off for vacation as well as vacation pay.

[43] Finally, the appellant argues that the trial judge erred in allowing public holiday and vacation pay going back to 1996 notwithstanding the two year statutory limitation period in s. 96(3) of the Act and/or the two year limitation period in the Limitations Act 2002, S.O. 2002, c. 24, Sch. B.

[44] Section 96(3) of the Act does not apply to civil lawsuits. It applies to filing complaints with the Ministry of Labour.[^2]

[45] As to the Limitations Act, 2002, the appellant first paid the respondent vacation pay in December 2003. The trial judge accepted the respondent’s evidence that he was not aware of his entitlement to vacation or public holiday pay before that time. The trial judge held that the respondent’s lack of awareness as to his entitlement went to the issue of discoverability. As a result, the respondent’s action, which was commenced in July 2004, was well within the two year limitation period in the Limitations Act, 2002.

[46] I see no basis to interfere with the trial judge’s conclusion that the respondent’s entitlement to public holiday and vacation pay should not be reduced on the basis of the operation of a limitation period.

DISPOSITION

[47] For the reasons set out above, I would dismiss the appeal. I would order the appellant to pay the respondent’s costs of the appeal fixed in the amount of $15,000, inclusive of disbursements and GST.

RELEASED: September 2, 2008 (“DOC”)

“D. O’Connor A.C.J.O.”

“I agree David Watt J.A.”

“I agree Hackland J. (ad hoc)”

[^1]: The Employment Standards Act, 1990 had similar provisions: see ss. 25(2), 28(1)(2) and (3).

[^2]: Section 96(3) provides: “A complaint regarding a contravention that occurred more than two years before the day on which the complaint was filed shall be deemed not to have been filed.”