McNevan v. AmeriCredit Corp. et al.

[Indexed as: McNevan v. AmeriCredit Corp.]

94 O.R. (3d) 458

Court of Appeal for Ontario,

Blair, Juriansz and Epstein JJ.A.

December 15, 2008

Employment law -- Wrongful dismissal -- Notice -- Plaintiff dismissed without cause from managerial position after 13 months' service -- Trial judge erring in taking defendant's failure to warn plaintiff of perceived failings into account in setting base notice period at six months -- Failure to warn irrelevant in cases of dismissal without cause -- Six-month notice period still within appropriate range -- Trial judge erring in granting six-month Wallace extension of notice period -- Extension of notice period based on failure to warn being duplicative -- Trial judge taking irrelevant factors such as defendant's failure to give plaintiff letter of reference into account in extending notice period -- Defendant's conduct not high-handed and unduly sensitive. [page459]

The plaintiff was dismissed without cause from his position as assistant vice-president at one of the defendant's call centres after 13 months' service. The defendant had concerns about the plaintiff's managerial ability. As it believed that management skills could not be taught, it was the defendant's policy to terminate unsatisfactory management relationships. The plaintiff was not provided with feedback about the defendant's concerns, nor was there any progressive discipline. He was offered three months' pay in lieu of notice. He rejected that offer and brought an action for damages for wrongful dismissal. The trial judge found that the appropriate base notice period was six months. He granted a Wallace extension based on bad faith and unfair dealing in the manner of dismissal. The Wallace extension was based on two factors: the failure to warn the plaintiff of his perceived management failings; and the insensitivity and lack of care with which the defendant dealt with the return of the plaintiff's personal property, his T4 slip, his Record of Employment, his bonus and a refund of deductions from his paycheque for the Employee Stock Purchase Option. He concluded that each of those two factors warranted a three-month extension, of the notice period, so that the plaintiff was awarded damages based on a notice period of 12 months. Finally, the trial judge awarded the plaintiff damages for the denial of the opportunity to participate in an Employee Stock Purchase Plan during the notice period. The defendant appealed.

Held, the appeal should be allowed in part.

Per Epstein J.A. (Blair J.A. concurring): The trial judge made one error in his calculation of the base notice period in that he took into account the defendant's failure to warn the plaintiff about its dissatisfaction with his managerial skills. Failure to warn about dissatisfaction in job performance is not a relevant consideration in determining the appropriate notice period in the context of a dismissal without cause. Despite that error, a six-month notice period for a 44-year-old man looking for work in a smaller urban area, where the opportunities to match his skills and experience to an available position were scarce, was not outside the reasonable range. The trial judge erred by increasing the notice period by two three-month Wallace extensions. The first Wallace extension was influenced by the defendant's failure to warn the plaintiff, something which the trial judge had already factored into the base notice period. The trial judge also considered inappropriate factors in awarding the first Wallace extension, such as the failure to provide a reference letter, the failure to offer assistance in a job search and the offer of three months' salary in lieu of notice, conditional on the signing of a release. The second Wallace extension was based on a mischaracterization of the defendant's conduct, which could not be described as high-handed or in bad faith.

The trial judge did not err by finding that there was no failure on the part of the defendant to mitigate his damages.

The trial judge erred in his valuation of the plaintiff's entitlement under the Employee Stock Purchase Plan. His approach was speculative and based on an unrealistic assumption that the plaintiff would have been lucky or astute enough to dispose of his shares at the top of the market during the relevant period. The notional sale price should be based on the average market value of the shares during the relevant period.

Per Juriansz J.A. (dissenting in part): On the issue of Wallace damages, greater deference should be shown to the findings of the trial judge regarding the nature of the employment relationship, the manner and circumstances of the plaintiff's dismissal and the effects of the dismissal on the plaintiff. However, the trial judge's award of extended notice should be replaced by an award [page460] of monetary damages in the amount of $30,000 for mental distress to reflect the recent decision of the Supreme Court of Canada in Honda Canada Inc. v. Keays.

APPEAL from the judgment of MacDougall J. of the Superior Court of Justice dated December 7, 2006 for the plaintiff in a wrongful dismissal action.

Cases referred to

Bardal v. Globe & Mail Ltd., [1960] O.J. No. 149, 24 D.L.R. (2d) 140, [1960] O.W.N. 253 (H.C.J.); Honda Canada Inc. v. Keays (2008), 92 O.R. (3d) 479, [2008] S.C.J. No. 40, 2008 SCC 39, [2008] CLLC Â230-025, EYB 2008-135085, J.E. 2008-1354, 166 A.C.W.S. (3d) 685, 66 C.C.E.L. (3d) 159, 376 N.R. 196, 294 D.L.R. (4th) 577, 239 O.A.C. 299; Wallace v. United Grain Growers Ltd. (c.o.b. Public Press), [1997] 3 S.C.R. 701, [1997] S.C.J. No. 94, 152 D.L.R. (4th) 1, 219 N.R. 161, [1999] 4 W.W.R. 86, J.E. 97-2111, 123 Man. R. (2d) 1, 3 C.B.R. (4th) 1, 36 C.C.E.L. (2d) 1, 97 CLLC Â210-029, 74 A.C.W.S. (3d) 788, consd

Other cases referred to

Ditchburn v. Landis & Gyr Powers Ltd. (1997), 34 O.R. (3d) 578, [1997] O.J. No. 2401, 101 O.A.C. 72, 29 C.C.E.L. (2d) 199, 97 CLLC Â210-015, 71 A.C.W.S. (3d) 1093 (C.A.); Gismondi v. Toronto (City) (2003), 64 O.R. (3d) 688, [2003] O.J. No. 1490, 226 D.L.R. (4th) 334, 171 O.A.C. 1, 24 C.C.E.L. (3d) 1, [2003] CLLC Â210-043 (C.A.); Hall v. Canadian Corporate Management Co., [1984] O.J. No. 61, 3 O.A.C. 289, 4 C.C.E.L. 166, 25 A.C.W.S. (2d) 160 (C.A.); Isaacs v. MHG International Ltd. (1984), 45 O.R. (2d) 693, [1984] O.J. No. 3155, 7 D.L.R. (4th) 570, 3 O.A.C. 301, 4 C.C.E.L. 197, 25 A.C.W.S. (2d) 219 (C.A.); Lowndes v. Summit Ford Sales Ltd., [2006] O.J. No. 13, 206 O.A.C. 55, 47 C.C.E.L. (3d) 198, [2006] CLLC Â210-005, 144 A.C.W.S. (3d) 878 (C.A.); Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986, [1992] S.C.J. No. 41, 91 D.L.R. (4th) 491, 136 N.R. 40, J.E. 92-783, 53 O.A.C. 200, 40 C.C.E.L. 1, 92 CLLC Â14,022 at 12108, 33 A.C.W.S. (3d) 256; Minott v. O'Shanter Development Co. (1999), 42 O.R. (3d) 321, [1999] O.J. No. 5, 168 D.L.R. (4th) 270, 117 O.A.C. 1, 40 C.C.E.L. (2d) 1, 99 CLLC Â210-013, 85 A.C.W.S. (3d) 351 (C.A.); Mulvihill v. Ottawa (City) (2008), 90 O.R (3d) 285, [2008] O.J. No. 1070, 2008 ONCA 201, 235 O.A.C. 113, 65 C.C.E.L. (3d) 61, [2008] CLLC Â210-035, 166 A.C.W.S. (3d) 91; Titus v. William F. Cooke Enterprises Inc., [2007] O.J. No. 3148, 2007 ONCA 573, 284 D.L.R. (4th) 734, 228 O.A.C. 232, 61 C.C.E.L. (3d) 202, [2007] CLLC Â210-036, 160 A.C.W.S. (3d) 273; Wilson v. Goodyear Canada Inc., [2007] B.C.J. No. 531, 2007 BCCA 136, 238 B.C.A.C. 44, 66 B.C.L.R. (4th) 99, 59 C.C.P.B. 142, 156 A.C.W.S. (3d) 373

Statutes referred to

Workers' Compensation Act, R.S.O. 1990, c. W.11 [rep.] Workplace Safety and Insurance Act, 1997, S.O. 1997, c. 16, Sch. A

Douglas F. Best and Janela Jovellano, for appellants. Robert W. Becker, for respondent.

EPSTEIN J.A. (BLAIR J.A. concurring): --

I. Overview

[1] The appellants, AmeriCredit Corp. & AmeriCredit Financial Services of Canada Ltd. ("AmeriCredit"), hired the respondent, [page461] Douglas McNevan, in June 2001. Thirteen months later, AmeriCredit fired him without cause. McNevan rejected AmeriCredit's offer of three months' pay in lieu of notice and brought an action seeking damages for failure to provide him with reasonable notice.

[2] After a five-day trial, MacDougall J. granted judgment in favour of McNevan, as follows: (1) damages of 12 months' pay in lieu of notice, totalling $63,296.13; (2) damages of $2,651.64 for reimbursement of mitigation expenses; and (3) $12,984.26 for losses arising from the Employee Share Purchase Plan.

[3] AmeriCredit appeals the trial judge's judgment on a number of grounds. The principal ground concerns the trial judge's decision to grant a Wallace extension based on bad faith and unfair dealing in the manner of dismissal, which doubled the notice period from six to 12 months.

[4] In my view, the trial judge erred in, among other things, awarding a Wallace extension. The record does not support an increase of the base notice period by reason of bad faith in the manner of dismissal.

[5] Accordingly, for the reasons that follow, I would allow the appeal in part.

II. The Facts

[6] AmeriCredit is an independent auto finance company with a head office in the United States. It operates in Canada through various call centres.

[7] On June 4, 2001, McNevan, who wanted to relocate to Peterborough, was hired to work in AmeriCredit's new Peterborough call centre as assistant vice-president, collections. His starting salary was $60,000, plus benefits, and he was eligible for a bonus. Shortly after he was hired, the company increased his salary to $62,500 as a result of a "market adjustment" by the company.

[8] The evidence demonstrated that McNevan was a dedicated and hard-working employee. He brought considerable experience in the automobile collection business to his position, particularly during the start-up phase of the Peterborough call centre, and he was well-liked by his colleagues. In his capacity as assistant vice-president, McNevan was assigned to three departments that collected delinquent loans and was responsible for approximately 45 to 60 people. By all accounts, he successfully [page462] responded to the task of addressing these difficult accounts. McNevan's hard work and ability to develop teamwork meant that his departments frequently met their targets.

[9] However, AmeriCredit's senior management had concerns about McNevan's management ability. During the month of June 2002, shortly before McNevan's first scheduled performance review, the vice-president and the senior vice-president of the company had discussions about McNevan's performance and whether he was capable of fulfilling the position of assistant vice- president. They discussed their concerns about McNevan's leadership style, the manner in which he ran departmental meetings and issues regarding his time management skills. At that point, they decided to terminate McNevan's employment on the basis that he had not demonstrated the skill set required of an assistant vice-president.

[10] The corporate perspective was that those in leadership positions either have management skills or they do not and so it was the company's policy to terminate unsatisfactory management relationships. Consequently, McNevan was not provided with feedback about the concerns with his management skills nor was there any progressive discipline. He was simply fired.

[11] On July 4, 2002, the date of McNevan's first annual performance review, the vice-president of the company told McNevan that he was fired, effective immediately. He was given a letter offering three months' salary. The letter contained a paragraph stating: "We would ask that you indicate acceptance of this offer by signing and returning one copy of this letter and the enclosed Release to me. You are encouraged to obtain independent legal advice prior to signing these documents." The letter went on to thank McNevan for his contributions to the company and to wish him success in his future endeavours.

[12] Losing his job was very upsetting for McNevan. He asked for reasons but received only a general response. He requested a meeting with senior management to try to work something out that would involve keeping his job. However, the meeting never took place.

[13] The sudden termination caused McNevan to feel overwhelmed, dejected and depressed. He visited his family doctor for feelings of depression and sleeplessness. The doctor prescribed medication to help him sleep.

[14] His distress increased during the months that followed his dismissal as he dealt with the company over matters pertaining to the termination of his employment, such as his statutory benefits and the return of the personal property he had left in his office. [page463]

[15] In September or October 2002, McNevan regained sufficient strength to begin tying up loose ends with AmeriCredit and to begin seeking new employment. He tried to obtain information from the company's human resources department about his entitlements and about the return of his property. He participated in courses on résumé writing, attended seminars and presentations on job search strategies and started to make contacts within the automotive industry. In July 2003, he secured a six-month contract with the City of Peterborough.

III. The Trial Decision

[16] Against this factual background, the trial judge considered the appropriate length of the notice period.

(1) "Extended Bardal factors"

[17] The trial judge considered the factors outlined in Bardal v. Globe & Mail Ltd., [1960] O.J. No. 149, 24 D.L.R. (2d) 140 (H.C.J.) as relevant in determining the reasonable notice period in wrongful dismissal cases. The trial judge found there to be a dearth of similar employment available in McNevan's chosen field of automotive finance. He noted that McNevan was a manager with a major degree of responsibility and the emotional satisfaction that McNevan experienced from his work. He also observed that McNevan was 44 years old at the time of termination and still had a considerable period of time left in a normal work life.

[18] After considering the traditional Bardal factors, the trial judge identified AmeriCredit's "corporate culture" as being one of sharing information, promoting open communication and providing regular performance feedback to its employees. He noted that McNevan had not received "any indication whatsoever from his superiors that his job performance was unsatisfactory" and therefore he "had no opportunity to change, modify, improve or make inquiries of areas where he apparently was not fulfilling his role". Further, while there was no holding out that McNevan's position would be long-term, the trial judge found that it would have been reasonable for him to assume that his position was secure given the experience that he brought to the position and the success he had achieved during the year he was with the company.

[19] The trial judge held that, in all of these circumstances, particularly in the light of the corporate culture, an extended notice period of six months was justified. [page464]

(2) The "Wallace extensions"

[20] Next, the trial judge considered McNevan's claim for Wallace damages: Wallace v. United Grain Growers Ltd. (c.o.b. Public Press), [1997] 3 S.C.R. 701, [1997] S.C.J. No. 94. He began with what he referred to as "the first Wallace factor" -- AmeriCredit's failure to warn McNevan of his perceived management failings, combined with the abruptness of his dismissal.

[21] The trial judge found that given that AmeriCredit had not provided McNevan with any feedback, it was reasonable for him to believe that he was meeting the company's expectations. In the light of the company's corporate policy emphasizing an atmosphere of open communication and regular feedback, the trial judge found that the circumstances regarding the termination of McNevan's employment constituted a failure by the company to treat McNevan fairly, reasonably and decently.

[22] The trial judge went on to consider the letter of termination. He noted that it contained no offer to assist in finding new employment and no offer to provide a letter of reference. He observed that AmeriCredit's offer of three months' salary in lieu of notice was conditional upon McNevan's signing a release in respect of "any claims whatsoever", including those under the Workers' Compensation Act, R.S.O. 1990, c. W.11 and the Workplace Safety and Insurance Act, 1997, S.O. 1997, c. 16, Sch. A. Further, the offer indicated no willingness to attempt to negotiate a mutually acceptable resolution.

[23] The trial judge held that AmeriCredit's failure to warn and the manner of the dismissal was "misleading and insensitive". As a result, McNevan suffered increased emotional upset, trauma and anxiety. The notice period was therefore extended by three months.

[24] The trial judge then turned his attention to post- termination conduct -- the second so-called "Wallace factor". He found that AmeriCredit should have known that immediately after being fired, McNevan would be in a weakened emotional and economic position. Notwithstanding, the company failed to make reasonable efforts to ensure that a number of matters were properly handled.

[25] As an example, the trial judge commented on AmeriCredit's manner in dealing with McNevan's personal property. The person charged with packing up the items in McNevan's office failed to do so with care and the property arrived in a damaged condition. Further, the human resources department mishandled payment to McNevan of his vacation pay. The error in the calculation was only corrected when McNevan pressed the matter. This lack of [page465] care and attention was also evident in the manner in which the company handled McNevan's T4 slip, his Record of Employment, his bonus and a refund on deductions from his paycheque for the Employee Stock Purchase Plan.

[26] The trial judge found that this inefficient level of performance by a large company with a well-staffed human resources department increased the level of indignity McNevan experienced. When the company realized its first mistake it should have taken extra care to honour the remainder of its obligations to its former employee.

[27] In reviewing all of these matters, the trial judge found that there was a degree of callousness in the manner of McNevan's dismissal that supported a further three-month extension of the notice period.

(3) Mitigation of damages

[28] The trial judge then considered whether AmeriCredit had proven that McNevan failed to mitigate his losses. He held that it was not unreasonable that it took McNevan until October 2002 to begin looking for work. Given the narrow field in which McNevan was looking for comparable employment, the trial judge concluded that AmeriCredit failed to meet the onus of demonstrating any failure to mitigate.

[29] The trial judge carefully considered the legitimacy of McNevan's various mitigation expenses and fixed them at $1,000 plus $1,651.64 for a career consultant, for a total of $2,651.64.

(4) Loss of Employee Stock Purchase Plan

[30] Finally, the trial judge was called upon to calculate the damages McNevan suffered by reason of being denied the opportunity to participate in the Employee Stock Purchase Plan during the notice period. All AmeriCredit employees were entitled to purchase company stock, twice a year. Stock prices were guaranteed for two years and could be purchased by employees at a discount of approximately 15 per cent. McNevan claims that within the 12-month notice period, he would have been able to purchase stock on two occasions.

[31] In dealing with the only issue between the parties on this point, namely the method of valuing the loss of the stock purchases, the trial judge noted that the share price was guaranteed by the company for a period of two years from the date of purchase, and then used the difference between the discounted purchase price on the two days when McNevan could have purchased shares and the highest share price within two years [page466] from the date of the "notional purchases", and arrived at the figure of $12,984.26.

IV. Issues

[32] This appeal raises four issues concerning whether the trial judge erred in: (1) fixing the length of the base notice period at six months; (2) increasing the notice period by two three-month Wallace extensions; (3) finding that there was no failure to mitigate and in determining the amount of the award for mitigation expenses; and (4) awarding damages for the Employee Stock Purchase Plan.

V. Analysis

(1) Did the trial judge err by awarding six months' notice of termination?

[33] Since AmeriCredit did not allege cause, the company was obligated to give McNevan reasonable notice of his dismissal or pay him his salary for the appropriate notice period.

[34] As Laskin J.A. said in Minott v. O'Shanter Development Co. (1999), 42 O.R. (3d) 321, [1999] O.J. No. 5 (C.A.), at pp. 343-44 O.R.:

Determining the period of reasonable notice is an art not a science. In each case trial judges must weigh and balance a catalogue of relevant factors. No two cases are identical; and, ordinarily, there is no "right" figure for reasonable notice. Instead, most cases yield a range of reasonableness. Therefore, a trial judge's determination of the period of reasonable notice is entitled to deference from an appellate court. An appeal court is not justified in interfering unless the figure arrived at by the trial judge is outside an acceptable range or unless, in arriving at the figure, the trial judge erred in principle or made an unreasonable finding of fact. If the trial judge erred in principle, an appellate court may substitute its own figure. But it should do so sparingly if the trial judge's award is within an acceptable range despite the error in principle. (Citation omitted)

[35] From Minott, it is clear that this court is generally reluctant to interfere with a notice period that is within an acceptable range, even when the trial judge has made an error in principle.

[36] AmeriCredit argues that in awarding six months of "extended notice", the trial judge erred in principle by considering inappropriate factors in his determination of the notice [page467] period. Further, AmeriCredit submits that, in any event, the notice period was excessive in comparison with other cases with similar facts.

(i) Whether the trial judge erred in principle by considering inappropriate factors

[37] In a frequently cited passage, at p. 145 D.L.R., of Bardal, McRuer C.J.H.C. outlined the factors a court should consider in determining the period of reasonable notice:

There can be no catalogue laid down as to what is reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant.

[38] In Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986, [1992] S.C.J. No. 41, the Supreme Court of Canada endorsed the Bardal approach to the determination of a reasonable notice period. However, the court made it clear that the Bardal factors are not exhaustive and that, depending on the case, other factors may be relevant.

[39] AmeriCredit acknowledges that the trial judge properly identified the traditional Bardal factors to be considered in the determination of the reasonable notice period. However, the company submits that the trial judge erred by relying on so- called "extended Bardal factors" that are not relevant in the context of a without cause termination. Specifically, the trial judge erred by imposing on the company a duty to warn McNevan about dissatisfaction in his job performance and then by taking the failure to fulfill that duty into account in determining the notice period.

[40] I agree with AmeriCredit's submissions that the failure to warn about dissatisfaction in job performance is not a relevant consideration in determining the appropriate notice period in the context of a without cause dismissal.

[41] An employer's obligations in an action such as this arise from an implied term in the employment contract to give reasonable notice of termination, or damages in lieu thereof, to the employee in the absence of just cause. While regular and candid performance appraisals are undoubtedly helpful for many reasons, McNevan's contract of employment contained no implied term to provide feedback -- positive or negative -- to an employee as a necessary precursor to dismissal without just cause. This is the case regardless of the existence of the corporate culture of open communication. [page468]

[42] I acknowledge that where an employer relies upon inadequate job performance to justify the dismissal of an employee on a with cause basis, the employer may be under a duty to warn the employee of the performance concerns to give the employee an opportunity to improve. In appropriate circumstances, the lack of a warning may contribute to a finding of no just cause.

[43] However, AmeriCredit does not allege that McNevan was dismissed for cause. AmeriCredit dismissed McNevan without cause on the basis that, rightly or wrongly, it held the view that he did not demonstrate that he had the necessary skill set or sophistication to manage others. Given the company's view that there was nothing McNevan could have done to correct his problems and salvage his position with the company, a warning would have accomplished nothing other than offer McNevan the false hope that he could take steps to avoid dismissal. Feedback would have been a charade -- a potentially hurtful one.

[44] Taking into account AmeriCredit's failure to warn McNevan of his perceived management difficulties in determining the base period constituted an error in law.

(ii) Whether the notice period was unreasonable

[45] AmeriCredit further submits that the six-month period of notice awarded is unreasonable.

[46] In my view, while certainly generous, the notice period is within an acceptable range. Although McNevan worked for AmeriCredit for just 13 months, he did hold a responsible management position. In addition, McNevan was a 44-year-old man looking for work in a smaller urban area where the opportunities to match his skills and experience to an available position were scarce. The relevant circumstances are such that six months' notice was not outside the reasonable range: see, e.g., Isaacs v. MHG International Ltd. (1984), 45 O.R. (2d) 693, [1984] O.J. No. 3155 (C.A.); see, also, Hall v. Canadian Corporate Management Co., [1984] O.J. No. 61, 4 C.C.E.L. 166 (C.A.).

[47] Although I have concluded that the trial judge erred in his determination of the base notice period by taking an irrelevant factor into account, in consideration of the importance of deference emphasized in Minott, I would not interfere with the base notice period of six months.

(2) Did the trial judge err by increasing the notice period by two three-month Wallace extensions?

[48] In Wallace, the Supreme Court of Canada held that bad faith conduct in the manner of dismissal is another factor that is [page469] properly compensated for by an addition to the notice period. While a dismissed employee is not entitled to compensation for injuries flowing from the fact of dismissal, employers ought to be held to an obligation of good faith and fair dealing in the manner of dismissal.

[49] At para. 98, the court explained that the standard that employers must meet when dismissing an employee is, at minimum, one of candour, reasonableness and honesty. Employers should refrain from engaging in conduct that is unfair or in bad faith such as being "untruthful, misleading or unduly insensitive".

[50] A trial judge's determination that an employer has engaged in bad faith conduct or unfair treatment during the dismissal process is based upon findings of fact. An appellate court will not interfere with those findings absent palpable and overriding error. If the trial judge erred in principle in awarding Wallace damages, however, the standard of review is correctness.

[51] In this case, the trial judge concluded that McNevan had met the onus of demonstrating that AmeriCredit's conduct amounted to bad faith justifying two three-month extensions of the notice period, amounting to a total notice period of 12 months.

[52] In my view, the trial judge erred in principle in awarding Wallace damages. As outlined below, the record does not support the conclusion that the company acted in bad faith in its dealings with McNevan. Further, it is clear that the first Wallace extension was duplicative.

(i) The first Wallace extension

[53] The first Wallace extension awarded by the trial judge was influenced by AmeriCredit's failure to warn McNevan. It cannot stand for the reasons advanced by AmeriCredit.

[54] First, the trial judge's reasons indicate that the company's failure to warn McNevan of its concerns about his lack of management skills was already factored into the base notice period. Utilizing the failure to warn as part of the justification for a Wallace extension is a duplication and therefore an error in principle.

[55] Second, the trial judge considered factors he should not have. I have already expressed my view that the failure to warn in the context of a without cause dismissal is not a relevant factor in the determination of the notice period. On its own, that failure cannot amount to bad faith.

[56] Additionally, the trial judge considered several other inappropriate factors in awarding the first Wallace extension: the failure to provide a reference letter; the failure to offer assistance in a job search; and the offer of three months' salary in lieu of notice which was conditional on the signing of a release. [page470]

[57] This court has recognized that an employer is under no legal obligation to provide a letter of reference: see Titus v. William F. Cooke Enterprises Inc., 2007 ONCA 573, [2007] O.J. No. 3148, 284 D.L.R. (4th) 734 (C.A.), at para. 42. Moreover, McNevan never asked for a letter of reference, or for assistance in finding another job. Further, in the circumstances, I do not regard AmeriCredit's request for McNevan to sign a general release before receiving a severance package as high-handed or in bad faith: see Wilson v. Goodyear Canada Inc., 2007 BCCA 136, [2007] B.C.J. No. 531, 66 B.C.L.R. (4th) 99 (C.A.). Rather, an offer of severance conditional on the execution of a release is not only standard, but also wise corporate practice.

(ii) The second Wallace extension

[58] My analysis of the second Wallace extension based on AmeriCredit's post-termination conduct leads me to the same conclusion. While there is no problem with duplication in relation to this additional Wallace extension, it would be erroneous to characterize the company's post-termination actions as high-handed or in bad faith.

[59] In my view, the record does not support a finding of bad faith in the company's post-termination conduct that rises to the level contemplated in Wallace. Referring specifically to the words of Iacobucci J. in Wallace, at para. 98, there is no evidence that the company, in the manner in which it dealt with McNevan after his employment was terminated, engaged in conduct that was "untruthful, misleading or unduly insensitive". There is no evidence that the company was unduly insensitive in the manner in which it dealt with McNevan's personal property. It arranged for the goods to be packed and for them to be shipped by courier to McNevan. Unfortunately, in the process, a glass candy jar broke and an ice tea can punctured, causing damage to some photographs. Further, while there may have been some lack of care and expediency in relation to McNevan's various entitlements arising from his employment and its termination, in my view it would be erroneous to characterize the company's handling of McNevan's vacation pay, the delivery of his T4 and Record of Employment and the refund of deductions on his paycheque as being high-handed or unduly insensitive.

[60] Bad faith in relation to the second Wallace extension was not established, and therefore the further three-month extension to the notice period must be set aside.

(iii) Parcelling the analysis into two separate Wallace extensions

[61] I wish to comment that my reasons should not be taken as endorsing how the trial judge parcelled the bad faith analysis [page471] into two separate Wallace extensions, awarding one extension to compensate for certain bad faith conduct and then a separate extension to compensate for other bad faith conduct. In my view, when taking bad faith conduct on the part of the employee into consideration in the context of a wrongful dismissal action, the nature of the alleged bad faith should be considered as a whole, along with its overall impact upon the employee. This approach is consistent with that sanctioned by the Supreme Court of Canada in Wallace, where, at para. 108, Iacobucci J., for the majority, identified various discrete examples of bad faith that would justify an extension of the notice period. It is also consistent with the Supreme Court of Canada's most recent pronouncement on Wallace damages in Honda Canada Inc. v. Keays (2008), 2008 SCC 39, 92 O.R. (3d) 479, [2008] S.C.J. No. 40, 294 D.L.R. (4th) 577.

(iv) The impact of the Supreme Court of Canada's decision in Keays v. Honda Canada Inc.

[62] After oral argument and while this decision was still under reserve, the Supreme Court of Canada released its decision in Keays. The court altered the approach to bad faith damages holding, at para. 59, that "in cases where damages are awarded, no extension of the notice period is to be used to determine the proper amount to be paid". Rather, bad faith damages are to be compensatory based upon actual damages the employee suffers.

[63] At this court's request, counsel made further written submissions based upon Keays. In their submissions, the parties were divided as to whether this court should consider Keays and the legal propositions it stands for. I need not resolve that debate due to my conclusion that the record does not support a finding that AmeriCredit acted in bad faith in its dismissal of McNevan. There can no justification for an extended notice period under Wallace, or a separate damage award under Keays, without a finding of bad faith.

(3) Did the trial judge err by finding that that there was no failure to mitigate?

[64] AmeriCredit's main argument in support of its contention that McNevan failed to mitigate his damages is the lack of documentation supporting any such efforts. In my view, the trial judge was entitled to conclude that AmeriCredit failed to prove McNevan did not meet his mitigation obligations.

[65] The trial judge accepted McNevan's evidence that, given the circumstances surrounding his dismissal, it was not unreasonable that it took him until October 2002 to begin looking for [page472] new employment. The trial judge explicitly dealt with the lack of documentary evidence in support of McNevan's mitigation efforts. He noted that it was important to recognize again how narrow the field was in which McNevan was looking for comparable employment.

[66] While documentation would certainly have assisted, the trial judge was entitled to rely on the evidence he did have before him, being McNevan's testimony about his efforts with the federal government facilities and other efforts including communicating with former contacts in the automobile financing and auction business.

[67] Further, the trial judge found that AmeriCredit had not demonstrated that any failure to mitigate actually caused part of the loss. His decision is entitled to deference.

[68] The company also submits that the trial judge erred in his decision to reimburse McNevan for job search expenses in the amount of $2,651.64 since $1,651.64 was spent on a private career consultant at a time outside of the 12-month notice period awarded. Fairly, McNevan agrees that including this expense was an error. On consent, that part of the judgment is reduced to $1,000.

(4) Did the trial judge err in his valuation of McNevan's entitlement under the Employee Stock Purchase Plan?

[69] I now turn to the trial judge's calculation of damages arising from McNevan being unable to purchase AmeriCredit shares under the Employee Stock Purchase Plan during the notice period. At the outset, I observe that the trial judge based his determination of McNevan's loss in this regard by taking into account the shares he would have purchased during a 12-month notice period. As I would reduce the notice period to six months, this part of the judgment must be reduced accordingly.

[70] A further adjustment is also called for -- an adjustment having to do with the sale price, the conversion rate and the pre-judgment interest.

[71] The trial judge approached this part of his task by stating that his objective was to put McNevan in a position that he would have been in had he worked during the notice period and purchased shares under the plan. The purchase price was straightforward. It was calculated as the market price of the stock on the day when McNevan could have purchased shares, less the employee discount of 15 per cent. The problem lies in the determination of the sale price.

[72] Taking into account that the company guaranteed the share price for a period of two years from the date of purchase, [page473] the trial judge decided that the reasonable approach to determining the sale price would be to use the highest share value within the two years from the date of the "notional purchase". McNevan's loss was then valued as the difference between the price of the shares that he could have purchased on the two dates, at the discounted price, and the highest share value within the two years from the date of the notional purchases.

[73] I agree with AmeriCredit that the trial judge erred in his approach to quantifying this aspect of McNevan's loss as it was speculative and based on an unrealistic assumption -- that McNevan would have been lucky or astute enough to dispose of his shares at the top of the market during the two-year period.

[74] Effectively, what the trial judge was called upon to do was value the employment benefit of offering employees the right to purchase stock at a 15 per cent discounted price and sell it at 100 per cent of the market value on the date of sale, with the share price guaranteed for two years. Expert evidence could have been put before the trial judge to assist in valuing this asset. Unfortunately, it was not. In fact, the trial judge was provided with little guidance with respect to this aspect of McNevan's claim.

[75] On the consent of the parties, further evidence and submissions were filed with this court. In my view, based on the limited evidence and argument on this point, the notional sale price should be based on the average market value of the shares during the two-year period following the notional purchase. This approach, among other things, has the advantage of being at least less arbitrary and more fair than the method upon which the trial judge relied.

[76] The remaining dispute has to do with the rate to be used to convert the amounts that factor into the calculation from U.S. to Canadian currency and with pre-judgment interest. I agree with McNevan's submission that the conversion from U.S. to Canadian values, the commencement date and rate of pre- judgment interest should be as of the date of the deemed disposition -- when the shares first traded at the average price of $19.46 per share. This date is July 16, 2004.

[77] Based on this analysis, McNevan is entitled to an amount that would reflect a notional purchase of 375.74 shares of AmeriCredit as of December 9, 2002 at an acquisition cost of US$3,745.20 and sold on July 16, 2004 at US$19.46 per share. The conversion into Canadian dollars will be done as of July 16, 2004. McNevan will be entitled to pre-judgment interest on that amount from that date to the date of judgment in the amount of 3 per cent. Taking half of the interest credit calculation provided in McNevan's submissions, a further $326.21 must be deducted. [page474] Accordingly, the loss due to McNevan's inability to participate in the Employee Stock Purchase Plan is $5,868.99.

[78] I would vary para. 3 of the judgment accordingly.

VI. Disposition

[79] For these reasons, I would allow the appeal, in part, in accordance with this judgment.

[80] Since success has been divided, there will be no order as to costs of the appeal. If the disposition of this appeal has any impact on trial costs, the parties may make brief submissions to the panel within ten days of the release of these reasons.

JURIANSZ J.A. (dissenting in part): --

Introduction

[81] I have read the reasons of Epstein J.A. and would take a different view of one issue. I am in agreement with her that this court should not interfere with the trial judge's award of six months' notice, nor with his findings that the respondent took reasonable steps to mitigate, nor his assessment of the amount of the respondent's mitigation expenses. I also agree that the trial judge's assessment of the damages flowing from the employee stock purchase plan is flawed and must be set aside. While the record does not provide sufficient information to enable a definitive calculation of these damages, I concur with the methodology Epstein J.A. suggests. However, I take a different view of the trial judge's award of Wallace damages. I would show greater deference to the findings of the trial judge regarding the nature of the employment relationship, the manner and circumstances of the respondent's dismissal and the dismissal's effects on the respondent. I would, though, replace the trial judge's award of extended notice under Wallace to an award of monetary damages to reflect the Supreme Court's recent decision in Honda Canada Inc. v. Keays (2008), 2008 SCC 39, 92 O.R. (3d) 479, [2008] S.C.J. No. 40.

Notice Period

[82] Although Epstein J.A. would not disturb the trial judge's award of six months' notice, she finds that he erred by taking into account the appellant's failure to warn the respondent of his perceived management difficulties in determining the period of reasonable notice. She points out that an employer's failure to warn about dissatisfaction in job performance is not a relevant consideration in determining the appropriate notice period in the context of a without cause dismissal. This conclusion affects her [page475] analysis of his approach to the Wallace damages as she finds he considered "failure to warn" again at that stage. The double counting is one reason she sets aside the award of Wallace damages. In my view, however, the trial judge did not consider the employer's "failure to warn" in his assessment of the period of reasonable notice. A review of his reasons for awarding six months' notice is necessary to explain why I take this view.

[83] The trial judge's reasons made it clear that he accepted the respondent's submissions that the "most important factor" in determining the notice period was the "availability of similar employment". It would be "a virtual impossibility" for the respondent to find comparable employment in the field of automotive finance, let alone at the assistant vice-president level. The trial judge found this "critical" factor supported an increased notice period.

[84] The second factor the trial judge mentioned was the character of the respondent's employment. He described this factor as both "significant" and "important". The trial judge found the respondent was a senior executive with a major degree of responsibility in the company. He was professionally qualified in a "narrow specialty" in which he had 19 years of experience.

[85] The trial judge also noted that the respondent was 44 years old at the time of termination and that he still had a considerable work life remaining.

[86] The trial judge's analysis and discussion of the above factors reflect a classic Bardal approach to the assessment of reasonable notice. I agree with Epstein J.A. that these factors would support the award of six months' notice.

[87] The trial judge, however, went further. He went on to describe in some detail the respondent's performance and accomplishments. In doing so, he pointed out that the respondent had never received any indication that there was any dissatisfaction with his job performance or his management style. Quite the contrary, as the trial judge highlighted, the respondent's department had received commendations from the appellant. In the course of these observations, the trial judge stated that the respondent had had no opportunity to make the changes required to satisfy his superiors.

[88] These comments of the trial judge, considered on their own, could be understood to show he took into account the employer's failure to warn even though he did not use those specific words. However, on my reading of his reasons, the trial judge made these observations to support his conclusion that the respondent was dismissed from "long-term employment".

[89] After making the above observations, the trial judge remarked that, despite any specific discussion at the time of hiring [page476] that the respondent was being offered "long- term employment", it was a reasonable conclusion that he enjoyed long-term employment. Alluding to his earlier comments, the trial judge stated that "reinforcing the impression would be the fact that he had received no negative feedback and that his departments had been generally successful". The trial judge then added that "this factor also needs to be considered in the context of the company's 'corporate culture'". He pointed out that the appellant had made great efforts to promote its corporate culture, which emphasized, among other things, "the importance of sharing information, promoting open communication, measuring performance and providing regular feedback and treating their employees with respect".

[90] In my view, these observations were part of the rationale why the trial judge found that the way that the appellant dealt with and communicated with him made the respondent's impression his employment was "long term" reasonable in the circumstances.

[91] As I read his reasons, the trial judge's assessment of the notice period was based on his view that the respondent was a senior manager with specialized qualifications and experience who was terminated from long-term employment with an almost complete unavailability of similar employment. These findings support an award of six months' notice.

Wallace damages

[92] In his written submissions, the respondent argues that the Honda case should not be applied to this case as the parties have already gone through a trial and an appeal relying on the law articulated in Wallace. I do not agree. This case is still before the courts, and in making its decision the court must apply the existing law. There is no unfairness as the parties were allowed to make written submissions on the import of Honda.

[93] In Honda, the Supreme Court revised its approach to an award of damages for manner of dismissal. Under the revised approach, such damages are only available if the mental distress suffered by the terminated employee meets the following conditions: (1) the mental distress suffered is beyond the normal distress and hurt feelings that result from dismissal from employment; and (2) it was within the reasonable contemplation of the parties at the time of contract formation that a breach of the contract in certain circumstances would cause the plaintiff particular mental distress. [page477]

[94] If these conditions are met, damages will be available only if they result from the circumstances described in Wallace, namely -- where the employer engages in conduct during the course of dismissal that is "unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive".

[95] Finally, under the revised approach, the remedy is no longer an extension of the notice period as under Wallace, but rather a monetary award that reflects the actual damages suffered.

[96] In this case, the task of re-examining the trial judge's findings on the Wallace issue through the lens of the Honda decision is not difficult. While the trial judge may have chosen his words differently had the Honda decision been available, he did find, as I explain below, that the respondent suffered more than ordinary mental distress and that the mental distress that the respondent suffered was within the reasonable contemplation of the parties. Since these prerequisites are met, damages for mental distress should be available if they result from the "circumstances described in Wallace", as Bastarache J. stated at para. 57 of Honda. The trial judge found the Wallace standard was met, and a review of his reasons for so finding is straightforward.

[97] In regards to the first preliminary condition for damages under Honda, the trial judge accepted that the termination left the respondent "totally devastated" and caused him to feel overwhelmed, dejected, depressed, agitated and unable to sleep. It was necessary for him to go to his doctor for feelings of depression and sleeplessness. The trial judge found the conduct of the appellant to be "misleading" and "insensitive". He found that the appellant's conduct "increased the 'expected' emotional upset, trauma and anxiety for the plaintiff" and "resulted in increased intangible injuries". The trial judge found that certain aspects of the appellant's conduct "would naturally have increased the Plaintiff's anxiety, frustration and upset" while other aspects "would naturally have increased the Plaintiff's level of anxiety in the circumstances" and still others would have "increased the level of indignity that the Plaintiff was already experiencing". I am satisfied that the trial judge found, in effect, that the respondent suffered mental distress beyond the normal distress and hurt feelings that result from dismissal from employment.

[98] Turning to what was in the contemplation of the parties, in Ditchburn v. Landis & Gyr Powers Ltd. (1997), 34 O.R. (3d) 578, [1997] O.J. No. 2401 (C.A.), this court upheld a trial judge's award of $15,000 in additional compensation for mental distress suffered by a terminated employee. Goudge J.A. found no error in the trial judge's reasoning that the parties must have contemplated that a [page478] sudden and unlawful discharge in the circumstances would cause the respondent mental distress. The case was decided before Wallace but, in some ways, foreshadows the Supreme Court's approach in Honda.

[99] As in Ditchburn, the trial judge in this case found that the appellant was terminated suddenly, when he had the reasonable expectation of long-term employment. It was in the context of the parties' expectations that the trial judge stressed that the appellant's policies emphasized "teambuilding, practising open communication, regular feedback and treating the team members with respect" and that the respondent had only received positive feedback. Rather than open communication and feedback, the letter of termination that was "handed" to him at the time of his dismissal left him wondering why he had been terminated. He asked his superior for the reasons for his dismissal and received only "a general response". He asked his superior to try and arrange a meeting with the senior vice president to "get an explanation for his termination", and though there was some preliminary discussion about a meeting "to get answers", that meeting never took place.

[100] The trial judge stopped short of finding that the duty to warn was an implied term of the contract. Rather, he quoted Iacobucci J.'s reference in Wallace (para. 108) to "the abrupt manner in which Wallace was dismissed despite having received compliments on his work from his superiors only days before" as example of bad faith. The trial judge took the view that the respondent's termination was abrupt.

[101] The trial judge found that the appellant failed to treat the respondent "fairly, reasonably, and decently", a phrase Iacobucci J. used in Wallace (para. 107). He found the conduct of the appellant was "misleading and insensitive" and demonstrated "callousness" in the manner of the respondent's dismissal.

[102] In reaching these conclusions, the trial judge was entitled to consider, as he did, some events that occurred after the respondent was handed the termination letter. The scope of a judge's inquiry into a claim for damages for mental distress is not limited to the manner in which the employee is informed that they are dismissed. It extends to matters that form part of the context that fuelled and surrounded the dismissal. In Gismondi v. Toronto (City) (2003), 64 O.R. (3d) 688, [2003] O.J. No. 1490 (C.A.), Rosenberg J.A., speaking for this court (para. 23), accepted that Wallace damages are not limited to acts of the employer at the very moment of dismissal, but can include "the employer's conduct pre- and post-termination . . . and the conduct of the employer in its aftermath" as long as they are components of the manner of dismissal. In [page479] Lowndes v. Summit Ford Sales Ltd., [2006] O.J. No. 13, 206 O.A.C. 55 (C.A.), Cronk J.A. approved of the trial judge having looked at events that predated the actual dismissal because "they form part of the context that fuelled and eventually surrounded the dismissal itself" (para. 19). In Mulvihill v. Ottawa (City) (2008), 90 O.R. (3d) 285, [2008] O.J. No. 1070, 2008 ONCA 201, this court focused on events that occurred both before and after the termination letter that was sent to the plaintiff. Gillese J.A. said [at para. 68] "What Wallace requires is an examination of the manner of dismissal, taking into account the full context of the employment relationship."

[103] In my view, the trial judge could view the manner in which the appellant dealt with the respondent's personal property and the manner it dealt with his statutory entitlements and termination documents as components of the manner of his dismissal.

[104] While this court in Mulvihill found that a mistake will not furnish a basis for Wallace damages, here the trial judge found there was a "litany of mistakes" that would support a finding of recklessness on the part of the employer. The appellant cited no authority that deliberate or intentional conduct is required for the finding of Wallace damages. Indeed, in Wallace both the Manitoba Court of Appeal and the Supreme Court of Canada agreed that the impugned conduct of the employer fell short of any independent actionable wrong (para. 74), including the tort of intentional infliction of mental suffering (para. 33). Likewise, under Honda, the issue is simply whether the employee suffered mental distress beyond the ordinary within the contemplation of the parties.

[105] It is useful to review some of the trial judge's findings regarding the "litany of errors" committed by the employer in the handling of the respondent's statutory entitlements and termination documents. These include the following: -- The respondent was entitled by law to receive his vacation pay automatically within seven days. He eventually received the final portion of his vacation pay some four years and three months after his termination. -- He did not receive his T4 when entitled to by law and had to instruct his lawyer to write the appellant asking for it. -- He did not receive his Record of Employment as required by law and had to contact the appellant to ask for it. -- He was entitled by his employment contract to a bonus in early August 2002. His claim for a bonus was not resolved until October 2003, after he made several inquiries about it. [page480] -- A refund in respect of deductions from his paycheque for employee stock purchases went missing and was not reissued to the plaintiff until a year later.

[106] The trial judge found that "this inefficient level of performance would have increased the level of indignity that the [respondent] was already experiencing" and that the appellant "should have known that this would likely add to [the respondent's] humiliation and frustration".

[107] In my view, there was evidence to support all of the trial judge's findings of fact. It is worth repeating the caution of Gillese J.A. in Mulvihill, at para. 46:

A trial judge's determination that an employer has, when dismissing an employee, engaged in bad faith conduct or unfair treatment is based on findings of fact. As an appellate court, we must show appropriate deference to those factual findings; they are not to be set aside absent palpable and overriding error.

[108] In Lowndes (para. 18), Cronk J.A. indicated that grounds for appellate intervention are required even when the case for Wallace damages is not strong.

[109] In this case it seems to me that the appellant seeks to quarrel with the findings of the trial judge. I would conclude that the appellant has failed to demonstrate sufficient grounds for appellate intervention.

[110] Given that this case falls within the transition period from the Wallace regime to the Honda regime, this court must assess the respondent's mental distress according to the findings of the trial judge. I would award the respondent $30,000 to compensate him for the mental distress he suffered beyond what might be normally expected upon termination from employment. The elimination of the extended notice granted by the trial judge under Wallace affects the respondent's entitlement under the employee stock purchase plan. His entitlement must be calculated on the basis of only six months' notice. As stated in my introduction, I concur with Epstein J.A.'s approach to the calculation of the respondent's damages arising from the employee stock purchase plan.

[111] In conclusion, I would dispose of the appeal as Epstein J.A. does, except in regard to the damages for mental distress. In that regard, I agree the trial judge's award of six months' extended notice under Wallace should be set aside, but I would replace that award with an award of $30,000 for mental distress. I agree with Epstein J.A.'s disposition of costs as success is divided.

Appeal allowed in part.