Court of Appeal for Ontario

Date: 2019-12-06 Docket: C66596 Judges: Feldman, Fairburn and Jamal JJ.A.

Between

Kelly Cormier Plaintiff (Respondent)

and

1772887 Ontario Limited carrying on business as St. Joseph Communications Defendant (Appellant)

Counsel

Ian R. Dick, for the appellant

Christopher Perri and Genevieve Cantin, for the respondent

Heard: October 21, 2019

On Appeal

On appeal from the judgment of Justice Paul M. Perell of the Superior Court of Justice, dated January 24, 2019, with reasons reported at 2019 ONSC 587, 53 C.C.E.L. (4th) 60.

Reasons for Decision

A. Overview

[1] This is an appeal from summary judgment arising from a wrongful dismissal claim.

[2] The respondent worked for the appellant as a wardrobe stylist and later as a fashion studio manager from 1994 until she was dismissed without cause in 2017. The motion judge determined that the respondent acted in the capacity of a dependent contractor between 1994 to 2004, after which she became the appellant's employee. The respondent brought an action seeking damages for wrongful dismissal. She also sought to be reimbursed for amounts that she said had been improperly deducted from her wages while she was still employed.

[3] The motion judge found that the termination clause in the employment agreement was void because it attempted to contract out of the minimum standards provided for under s. 5 of the Employment Standards Act, 2000, S.O. 2000, c. 41 ("ESA"). He granted summary judgment in favour of the respondent and awarded her 21 months' pay in lieu of notice, 10 percent of her base salary for loss of benefits, and $2,373 owing under her cellphone allowance, less any amounts that had been paid to date. The motion judge also held that the appellant had made unlawful deductions from the respondent's wages beginning in 2016, contrary to s. 13 of the ESA, and awarded her compensation for the lost wages.

[4] The summary judgment is appealed on several grounds. For the following reasons, the appeal is dismissed.

B. Analysis

(1) Was this an appropriate case for summary judgment?

[5] First, the appellant suggests that this was not an appropriate case for summary judgment because: there were material facts in issue; credibility findings had to be made; the respondent had not put her best foot forward by producing necessary documents, such as tax returns, to show her dependent contractor status; and the respondent did not plead that she was a dependent contractor between 1994 to 2004.

[6] In determining that this was an appropriate matter for summary judgment, the motion judge specifically referred to and applied Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87. He concluded that there was no genuine issue requiring a trial and that this case was appropriate for summary judgment. We see no error in that determination.

[7] As the motion judge noted, there were really only two factual issues in dispute: how to correctly characterize the parties' employment relationship between 1994 and 2004; and whether the respondent failed to mitigate her damages. Those issues turned largely upon non-disputed facts. The rest of the issues were largely ones focused upon contractual and statutory interpretation.

[8] The motion judge turned his mind to the question of credibility and found that there were no significant issues of credibility to be determined as few facts were even in dispute. Moreover, he specifically noted that there had been cross-examinations conducted with respect to all of the factual issues and it appeared that the parties had done their best to put forward all records and documents. As such, the quality and quantity of the record would not appreciably change at a trial. We see no error in those conclusions, all of which are supported by the factual record in this case.

[9] While the appellant claims that the respondent failed to put her best foot forward as it relates to documents supporting the issue of her employment status and her mitigation efforts, we disagree. During her cross-examination relating to outstanding documents for the period of 1994 to 2004, she gave explanations as to why those documents were missing. She also swore two affidavits about her efforts to mitigate her damages, which were subject to cross-examination. The appellant did not ask for further documents related to the respondent's mitigation efforts, apart from a request for her 2017 tax documents, which the respondent provided. A trial would not have improved the factual record on these points. In any case, the burden was on the appellant to demonstrate that the respondent had not mitigated her damages: Red Deer College v. Michaels, [1976] 2 S.C.R. 324, at p. 332; Belton v. Liberty Insurance Co. of Canada, 72 O.R. (3d) 81 (C.A.), at paras. 32-34.

[10] As for the pleadings argument, it is made for the first time on appeal. While the respondent did not specifically plead that she was a "dependent contractor" from 1994 to 2004, the pleadings were clear that the respondent was claiming that she had been employed since 1994 and was entitled to damages arising from that point in time. While the legal characterization of that employment relationship was not described by its precise name, the pleadings were clear as to what was being claimed. Both pleadings put in issue the nature of the relationship between the parties between 1994 and 2004. No one was taken by surprise. The parties had the opportunity to lead evidence on the degree of economic exclusivity in the work relationship and made written submissions that squarely addressed whether the respondent was a dependent contractor during that period. Accordingly, we would not give effect to this submission.

(2) Did the motion judge err by finding that the respondent was a dependent contractor between 1994 and 2004?

[11] The appellant also claims that the motion judge erred in concluding that the respondent was a dependent contractor from 1994 to 2004. The appellant argues that the motion judge erred by failing to consider all relevant factors. Specifically, the appellant says that the motion judge erred by focusing upon the exclusivity of the parties' working relationship, thereby failing to focus upon whether the respondent was economically dependent upon the appellant.

[12] We see no error in the motion judge's approach to this issue. He referred to all of the pertinent authorities. Among other authorities, the motion judge referred to both McKee v. Reid's Heritage Homes Ltd., 2009 ONCA 916, 315 D.L.R. (4th) 129, and Keenan v. Canac Kitchens Ltd., 2016 ONCA 79, 29 C.C.E.L. (4th) 33. The motion judge adverted to the correct legal test for determining dependent contractor status.

[13] We do not agree that the motion judge ignored whether the respondent was economically dependent upon the appellant. Indeed, relying upon the test set out in McKee, the motion judge specifically listed that consideration as one of the factors that differentiate a dependent from an independent contractor. His factual conclusion that, within a short time of engagement, the respondent "worked exclusively for [the appellant] and, practically speaking, [the appellant] was her boss" was telling. Read contextually, the motion judge clearly concluded that the respondent was not only in an "exclusive" relationship with the appellant, but an economically dependent one. We would defer to the motion judge's ultimate conclusion that "[w]hat stands out is that [the respondent] had a twenty-three [year] solid workplace relationship with [the appellant]." We would not give effect to this ground of appeal.

(3) Did the motion judge err by finding that the termination clause was unenforceable?

[14] The appellant also suggests that the motion judge erred in finding that the termination clause was unenforceable because it purported to contract out of the requirements of the ESA. While the appellant acknowledges that an employer cannot contract out of the minimum standards provided for under the ESA unless that contracting out provides a greater benefit for the employee than that provided for under the ESA, the appellant says that the motion judge erred in concluding that there had been a contracting out.

[15] This is a matter of contractual interpretation to which the standard of review requiring a palpable and overriding error applies: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 50. We would not give effect to this ground of appeal.

[16] Section 60(1)(c) of the ESA says that during a notice period, the employer "shall continue to make whatever benefit plan contributions would be required to be made in order to maintain the employee's benefits under the plan until the end of the notice period." Accordingly, the ESA requires that an employer continue all benefits during the applicable notice period. Yet the impugned clause in this case purported to contract out of two things: (a) short-term and long-term disability benefits during the notice period; and (b) other benefits absent the "consent of the Company's insurers":

Termination without Cause

(b) In addition to the foregoing and subject to the consent of the Company's insurers, you will be entitled to continue to receive Company benefits (excluding STD and LTD benefits) during the notice period specified above. [Emphasis added.]

[17] We find no palpable and overriding error in the motion judge's interpretation of the impugned clause within the employment contract. He concluded that it allowed the employer "upon termination to provide [the respondent] with only some of the employee benefits that she received before termination and even then, only subject to the consent of [the appellant's] insurers." Clearly, the long and short-term disability benefits were excluded and other benefits would be excluded unless the insurer consented to giving effect to those benefits. This constituted a contracting out of and fell short of the s. 60(1) ESA benefit protections. As such, in accordance with this court's decision in Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158, 134 O.R. (3d) 481, at para. 46, the termination clause was unenforceable and the motion judge was correct to apply the common law to determine the appropriate period of notice.

(4) Did the motion judge err in calculating the damages for wrongful dismissal?

[18] The appellant also submits that the motion judge erred in calculating the amount of damages arising from the duration of employment (including the stage when the respondent worked as a dependent contractor) and the amount of damages for lost benefits. This was a matter within the discretion of the motion judge.

[19] The appellant argues that the respondent was required to provide contributions toward her benefits and, therefore, should not have benefited from the typical calculation that provides for 10 percent of base salary for loss of benefits. We would not interfere with the conclusion reached by the motion judge. While there may be cases where an employee's contribution to benefits could reduce the typical percentage of base salary awarded in lieu of benefits during the notice period, this is not one of those cases. There was no evidence to support the claim that the amount of damages in lieu of benefits should be reduced to five percent. The real question was what the appellant paid for the benefits. That information lay exclusively within their knowledge and no evidence was led on this point. Accordingly, we would not interfere with the motion judge's calculation.

[20] The appellant also challenges the 21 months of notice, claiming that it was unreasonable and that the motion judge wrongly thought that it had conceded the point. The motion judge said that, although the appellant asked for a lesser notice period, that request "depended in the main on the enforcement of the termination clause or on defining [the respondent's] years of employment as commencing with an original hire date of June 7, 2004." If the respondent was found to have had a longer employment relationship, though, the motion judge noted that the appellant "actually suggested that the appropriate notice period was around twenty to twenty-one months."

[21] We agree with the motion judge's characterization of the appellant's position. In the appellant's written submissions on the motion, it accepted that based upon a "hire date of 1994", the reasonable notice period would be 21.6 months. In any event, in the circumstances of this case, and considering the 23-year work history, 21 months of common law notice was squarely within a reasonable range.

[22] The appellant also points out that there is a clause in the employment contract that says, "Your original hire date of June 7, 2004 will be recognized as your start date for the calculation of your years of service, vacation entitlement and heath care benefits under this agreement." The appellant argues that this clause means that the length of the reasonable notice period at common law should not be calculated with regard to the period of time prior to June 7, 2004, when the respondent acted as a dependent contractor. We disagree. Years of service may be used for any number of purposes that do not relate to an employee's rights on termination. If an employer wishes to contract out of the common law reasonable notice period, the contract must clearly specify another period of notice: Wood, at para. 15, citing Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986, at p. 998. This contract did not contain the type of clear language that would be needed to contract out of that notice.

(5) Did the motion judge err in finding that the appellant had made wrongful deductions from the respondent's wages, contrary to s. 13 of the ESA?

[23] There is also an issue about whether the motion judge was correct in concluding that there was a deduction from the respondent's wages that offended s. 13 of the ESA.

[24] In June 2016, the appellant advised the respondent that as part of a cost-saving measure, all employees would be required to take two weeks of unpaid vacation between July 1, 2016 and June 30, 2017. Starting on July 1, 2016 until the end of her employment, the appellant held back $125.54 from the respondent's biweekly pay. This was all done on a unilateral basis. No amendment was made to the employment contract. At the time of termination, a total of $3,264 had been deducted from the respondent's pay.

[25] The motion judge concluded that the "unpaid vacation plan did not comply" with the ESA because it was "implemented by deductions from wages, and s. 13 of the [ESA] prohibits an employer [from] making deductions from wages unless, among other things, the deductions are authorized by court order or by the employee's written authorization." Section 13(1) reads:

13(1) An employer shall not withhold wages payable to an employee, make a deduction from an employee's wages or cause the employee to return his or her wages to the employer unless authorized to do so under this section. [Emphasis added.]

[26] As there was no authorization in this case, the motion judge found that s. 13 of the ESA had been offended and damages to replace the deducted wages should be granted.

[27] The appellant argues that the motion judge erred in concluding that the wages had been "deducted" as opposed to reduced. The appellant argues that s. 13(1) is designed to prevent deductions from earned wages, but not a reduction of wages. According to the appellant, in effect, the appellant imposed a two-week layoff on all of its employees with a corresponding "reduction" in wages that were to be paid in the coming year. The ESA is said not to apply to this kind of situation. Although such a reduction could amount to a material change in the employment terms and, theoretically, constitute a constructive dismissal (a claim that the appellant presumably would have opposed), the respondent did not claim constructive dismissal. As a result, she was not owed the money because the lesser amount did not constitute a "deduction from" her wages as captured by s. 13(1) of the ESA.

[28] In all of the circumstances here, we see no error in the motion judge's conclusion that the appellant's conduct breached s. 13(1) of the ESA. The appellant acknowledges that the unpaid vacation leave was tantamount to a temporary lay-off, the cost of which was spread out over multiple pay periods. The program was for all intents and purposes funded through periodic deductions from the employees' wages.

[29] Any suggestion that the respondent effectively waived her contractual rights does not answer the breach of s. 13(1). For a binding waiver to apply, the respondent would have had to authorize the reductions in writing in accordance with ss. 13(3) and (5) of the ESA.

(6) Did the motion judge err in awarding the respondent damages to compensate for the loss of her cell phone allowance?

[30] The appellant maintains that the motion judge erred when he awarded the respondent $2,712 to compensate her for the loss of her cell phone allowance over the notice period. She received $113 per month to cover the cost of a cell phone. The appellant argues that no damages are owed for the cell phone because the payments were intended as nothing more than reimbursement for the respondent's business expenses, which she was no longer required to incur after termination.

[31] We note that the employment contract refers to the appellant as being required to "reimburse" the respondent for "all expenses actually and properly incurred" in the performance of her services under the employment agreement. Under that agreement, "acceptable expenses" included cell phone expenses.

[32] The point of a damages award for wrongful dismissal is to compensate for "all losses arising from the employer's breach of contract in failing to give proper notice", and to "place the employee in the same financial position he or she would have been in had such notice been given": Paquette v. TeraGo Networks Inc., 2016 ONCA 618, 352 O.A.C. 1, at para. 16 (citation omitted).

[33] It was open to the motion judge to arrive at the conclusion that, while the respondent was being reimbursed for her cell phone expenses, she personally benefited from the use of the cell phone. Accordingly, it was open to the motion judge to award damages on that basis. We see no error in his approach.

C. Disposition

[34] The appeal is dismissed.

[35] On the agreement of the parties, we award costs to the respondent in the amount of $15,000, inclusive of disbursements and applicable taxes.

"K. Feldman J.A."

"Fairburn J.A."

"M. Jamal J.A."