Court of Appeal for Ontario

Date: 2018-07-12 Docket: C64879

Judges: Simmons, Huscroft and Miller JJ.A.

Between

Rosemary Hagholm Plaintiff (Respondent/Appellant by way of cross-appeal)

and

Coreio Inc. Defendant (Appellant/Respondent by way of cross-appeal)

Counsel

For the Appellant: Andy Pushalik and Rachel Kattapuram

For the Respondent: Dennis Crawford and Madchen Funk

Heard: June 18, 2018

On appeal from: The judgment of Justice J.W. Sloan of the Superior Court of Justice, dated December 27, 2017.

Reasons for Decision

Background

[1] In January 1995 Ms. Hagholm began working full-time for a predecessor of the appellant Coreio Inc. on the understanding that she could work from home three days per week. On January 16, 2017, shortly after acquiring the business, the appellant informed Ms. Hagholm that commencing March 1, 2017, she could no longer work from home. Rather than report for work on March 1, 2017, Ms. Hagholm took the position that she had been constructively dismissed.

Motion Judge's Decision

[2] On a motion for summary judgment, the motion judge determined Ms. Hagholm had been constructively dismissed for two reasons. First, because the appellant breached an essential term of her employment contract, namely the term entitling her to work from home 60% of the time. Second, because the appellant arbitrarily set Ms. Hagholm's fourth quarter 2016 bonus in a manner contrary to the terms of her employment contract (she received $6,739 rather than something "close to $18,000", to which the motion judge found she was entitled).

[3] Further, the motion judge concluded that Ms. Hagholm was not obliged to "return to a former employer from a mitigation standpoint." He found this was not an option as the appellant had breached a major term of Ms. Hagholm's contract permitting her to work from home a substantial portion of the time. Further, a letter sent by the appellant's lawyer on March 2, 2017 was carefully worded. Had the appellant intended to convey that it was prepared to permit Ms. Hagholm to work from home 60% of the time, the letter should have said so.

[4] The motion judge awarded Ms. Hagholm:

i) 20.5 months of salary, less 10% of 10.5 months' salary for the contingency that she may find employment before the expiry of the 20.5-month period;

ii) $11,261 as compensation for the underpayment of her fourth quarter 2016 bonus; and

iii) compensation for lost benefits for 20.5 months.

Appeal

[5] The appellant appeals from the motion judge's judgment; Ms. Hagholm cross-appeals.

[6] The appellant raises two issues on appeal.

First Issue: Duty to Mitigate

[7] First, the appellant argues the motion judge erred in failing to find that Ms. Hagholm's duty to mitigate did not require her to return to work for the appellant. In this regard, the appellant submits that the motion judge conflated the test for constructive dismissal with the test for when an employee will be required to accept an offer of continued employment in order to mitigate damages for constructive dismissal. In addition, the appellant alleges Ms. Hagholm's claims that she was constructively dismissed are tainted by her subsequent application for multiple positions in the Greater Toronto Area ("GTA") requiring an equivalent or longer commute. Finally, the appellant argues the motion judge made palpable and overriding errors concerning the facts of Ms. Hagholm's commute.

[8] We do not accept these arguments. Even assuming the motion judge made a legal error concerning the applicable test or any factual errors concerning Ms. Hagholm's commute, it would not be objectively reasonable to require a sixty-year old employee who, more than 20 years earlier had stipulated she would not accept a position if it required her to commute from Waterloo to Toronto every day, to mitigate her damages for the appellant's breach of contract by doing so. Further, like the motion judge, we are not satisfied the appellant had any intention of permitting Ms. Hagholm to continue to work from home 60% of the time during the notice period. Finally, the motion judge did not accept that Ms. Hagholm's application to other employers in the GTA demonstrated that she would have accepted those jobs without a work-from-home provision. This finding was open to him on the record.

Second Issue: Bonus Calculation

[9] Second, the appellant argues that the motion judge erred by concluding that the appellant arbitrarily set Ms. Hagholm's fourth-quarter bonus payment for 2016. We reject this argument. The motion judge drew a negative inference from the appellant's inability to provide an "intelligible" description of how the bonus was calculated. On the evidence before him, he was entitled to do so. He also noted that although the appellant lost a significant client in 2016, that would not affect the appellant's bottom line until after 2016. He concluded that Ms. Hagholm's fourth quarter bonus for 2016 was "not calculated as it should have been, and had previously been, but was arbitrarily set" contrary to terms of her employment contract.

[10] The appeal is dismissed.

Cross-Appeal

[11] Ms. Hagholm raises two issues by way of cross-appeal.

[12] First, she argues that the motion judge erred by not awarding her the pro rata portion of her 2017 bonus for the two months she worked in 2017. Second, she argues that the motion judge erred by failing to award her all forms of compensation, including bonus compensation, for the duration of the notice period.

Cross-Appeal Decision

[13] We accept these submissions. Concerning the pro rata portion of Ms. Hagholm's 2017 bonus for the two months she worked in that year, apart from alluding to the appellant's loss of a major client in 2016, the motion judge gave no reason for denying her bonus entitlement for that period. If the 2016 loss of a client affected the appellant's first quarter 2017 performance or the manner in which it awarded bonuses to other employees, the appellant could and should have adduced evidence to demonstrate that. Further, the motion judge erred in failing to turn his mind to the question of bonus entitlement during the balance of the notice period. See: Paquette v. TeraGoNetworks Inc., 2016 ONCA 618, 352 O.A.C. 1, at para. 16.

[14] Rather than having the parties incur the expense involved in remitting this matter to the motion judge for determination, we conclude that it is in the interests of justice that we address it. As noted by the motion judge, Ms. Hagholm had always received in the range of 90% to slightly more than 100% of her annual bonus entitlement. At the time of dismissal her annual bonus entitlement was $72,000 per year, payable quarterly, with the opportunity to earn more bonuses. The bonus was patently an integral part of Ms. Hagholm's compensation package. Moreover, the appellant did not identify any terms of her compensation package that would disentitle her to a bonus over the notice period. Averaging Ms. Hagholm's bonuses over the five years immediately prior to her termination, leads us to conclude she should receive 100% of her bonus entitlement during the notice period (including the working notice period). See: Singer v. Nordstrong Equipment Ltd., 2018 ONCA 364, at paras. 21 to 25.

[15] We therefore allow the cross-appeal and direct that the motion judge's order be amended to provide that Ms. Hagholm receive her pro rata bonus entitlement throughout the notice period, including the working notice period, based on a quarterly bonus entitlement of $18,000.

Costs

[16] Costs of the appeal and cross-appeal are to Ms. Hagholm on a partial indemnity scale fixed in the agreed upon amount of $15,000 inclusive of costs and applicable disbursements.

"Janet Simmons J.A."

"Grant Huscroft J.A."

"B.W. Miller J.A."