Lamontagne v. J.L. Richards & Associates Limited, 2021 ONSC 8049

CITATION: Lamontagne v. J.L. Richards & Associates Limited, 2021 ONSC 8049

DIVISIONAL COURT FILE NO.: DC-21-2640

DATE: 20211208

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

Swinton, J.A. Ramsay and Favreau JJ.

BETWEEN:

ANNICK LAMONTAGNE Applicant (Respondent on Appeal)

– and –

J.L. RICHARDS & ASSOCIATES LIMITED Respondent (Appellant)

COUNSEL: J.F. Lalonde and Andrew Donaldson, for the Applicant (Respondent on Appeal) Alan Riddell and Kyle Van Schie, for the Respondent (Appellant)

HEARD at Ottawa (by videoconference): November 17, 2021

REASONS FOR JUDGMENT

Swinton J.

Overview

[1] J.L. Richards & Associates Limited (the “appellant”) appeals from the judgment of Roger J. dated March 31, 2021 (2021 ONSC 2133). The application judge found that the termination clause in the parties’ employment contract was void because it breached the Employment Standards Act, 2000, S.O. 2000, c. 41 (the “ESA”). He held that the respondent Annick Lamontagne was entitled to ten months’ notice at common law and ordered the appellant to pay damages of $40,273.07 in lieu of notice, plus $1,058.80 in special damages and $40,000 in partial indemnity costs.

[2] The appellant argues that the decision of the application judge should be overturned because he made palpable and overriding errors. For the following reasons, I would dismiss the appeal, as the application judge made no errors of law or palpable and overriding errors of fact or mixed fact and law.

Factual Background

[3] The respondent, a chartered accountant, was employed by the appellant for about 6.25 years. On February 19, 2020, the appellant terminated her employment without cause. She was then 36 years old. Hired as an assistant controller, she had progressed to the position of controller, reporting to a vice-president. She was responsible for her employer’s accounting and oversaw a staff of six to eight persons.

[4] The appellant paid the respondent all amounts owing to the date of her dismissal and relied on the termination clause in her employment contract to pay the amounts owing under the ESA in lieu of notice of termination. The respondent then brought an application for determination of her rights arising pursuant to the employment contract. At issue was whether the termination clause was valid and sufficiently clear to rebut the presumptive entitlement to common law notice.

[5] The termination clause in the contract stated:

13. PROBATION AND TERMINATION

All new employees on six-months’ probation

Employment may be terminated during the six-month probationary period for any reason. It is understood that you will have no entitlement to common law notice of termination. If, in the circumstances, the Employment Standards Act of Ontario requires notice of termination or pay in lieu of notice, it is understood that the minimum period of notice or pay in lieu of notice specified in the Act will be provided and will constitute your complete entitlement to notice of pay in lieu thereof.

Following the six-month period and a satisfactory performance review, you will be confirmed as a full-time employee of the Company.

Employment may be terminated for cause at any time, without notice.

In the event that employment is terminated for any other reason, it is understood that you will have no entitlement to common law notice of termination. However, you will be provided with notice of termination or pay in lieu thereof and, if applicable, severance pay, both in accordance with the Employment Standards Act of Ontario or any successor legislation. With respect to notice of termination or pay in lieu thereof, it is understood that the minimum period of notice or pay in lieu thereof specified in the Act will be provided and will constitute your complete entitlement to notice or pay in lieu thereof.

The Decision of the Application Judge

[6] The application judge gave careful and thorough reasons for his decision. He carefully set out the governing legal principles found in the leading cases before he turned to the language of the contract before him.

[7] The application judge held that the fourth paragraph of the termination clause, stating that “Employment may be terminated for cause at any time, without notice” (the “For Cause” term), breached the ESA, because it attempted to allow for termination without notice or pay in lieu thereof on the standard of just cause at common law. This is a lower standard than the “wilful misconduct” standard required by the ESA to terminate without notice (see s. 55 and O. Reg. 288/01, s. 2(1)3). Therefore, the application judge held, pursuant to s. 5 of the ESA, that the termination clause, as a whole, was unenforceable, because the “For Cause” term was not severable. Subsection 5(1) provides:

Subject to subsection (2), no employer or agent of an employer and no employee or agent of an employee shall contract out of or waive an employment standard and any such contracting out or waiver is void.

[8] The application judge also found that the following paragraph in the termination clause, the “Without Cause” term, breached the ESA, because it attempted to contract out of the payment of benefits and bonuses during the period of notice.

[9] Since the termination clause of the employment contract was void, the respondent was entitled to common law notice. The application judge found that ten months was an appropriate period of notice, and he awarded damages for pay in lieu of notice, taking into account the respondent’s efforts at mitigation.

The Issues

[10] The appellant argues that the application judge made four palpable and overriding errors of law:

(i) He erred in finding the “For Cause” term contravened the ESA and was, therefore, void.

(ii) He erred in finding that the “Without Cause” term contravened the ESA and was void.

(iii) He erred, when determining the appropriate notice period at common law, in taking into consideration the threat of a possible global pandemic.

(iv) He erred, when determining the notice period, by failing to give any weight to the respondent’s young age and limited seniority in the organization.

The Standard of Review

[11] This is a judicial appeal. Accordingly, the Divisional Court can only intervene if there has been an error of law or a palpable and overriding error of fact (Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 8-11, 36.) If there has been an error of law, the standard of review is correctness.

[12] Generally, in matters of contract interpretation, an appellate court will intervene only if there has been palpable and overriding error. In the present case, that is the standard to be applied to the contractual interpretation by the application judge, as the contract in issue is not a standard form contract (Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 at para. 52).

Analysis

The “For Cause” term

[13] The appellant argues that the application Judge erred in finding that the “For Cause” term breached the ESA, because his interpretation contradicts the plain meaning of the clause and improperly imputes an intention to contract out of the ESA. The statutory obligation imposed on employers is to provide notice (s. 54) or pay in lieu thereof (s. 61) on termination with some exceptions. The clause here only contracted out of actual notice. There would only be a breach of the ESA if the clause explicitly eliminated both notice and pay in lieu of notice. Where the termination clause is merely silent regarding a statutorily prescribed benefit, the court must interpret that silence permissively and must not read words into the termination clause. The application judge erred in finding that an intention to contract out of notice necessarily indicates the intention to contract out of both notice and pay in lieu thereof. He failed to consider the language of the contract as a whole: all other instances of notice are explicitly followed by the terms “pay in lieu of notice” or “pay in lieu thereof” to indicate an intentional reference to both.

[14] In considering whether the “For Cause” term was an attempt to contract out of the minimum standards of the ESA, the application judge first set out the principles to be applied in determining the interpretation and enforceability of a termination clause in an employment contract (see North v. Metaswitch Networks Corporation, 2017 ONCA 790 at paras. 18, 19, 21 and 24, summarized at para. 7 of the application judge’s reasons). He then turned to a careful examination of the terms of the contract.

[15] In my view, the application judge correctly found that the words “for cause” in the termination clause incorporated the common law concept of “just cause”. Indeed, counsel for the appellant conceded this in oral argument on the appeal.

[16] The common law standard of just cause is a lower standard than the standard in the ESA for dismissal without notice. In accordance with the ESA, wilful misconduct is required for dismissal without notice.

[17] The reasonable interpretation of the language in the contract is that the employer has no obligation to give notice to those discharged “for cause”. It is reasonable to infer that this also means there is no right to payment in lieu of notice for those dismissed for cause - even if the employee’s conduct does not constitute wilful misconduct under the ESA.

[18] The subsequent paragraph in the termination clause deals with termination “for any other reason”. It is noteworthy that there is an explicit reference to notice or pay in lieu of notice in that paragraph. This wording ensures that those dismissed without cause are entitled to notice or payment in lieu of notice. However, as the application judge found, the “For Cause” term is reasonably interpreted to mean that a person terminated for common law cause will receive no notice. Nor would they receive pay in lieu of notice, since pay in lieu of notice is based on the employee’s entitlement to notice and calculated in accordance with the notice period to which the employee is entitled.

[19] I see no error in the application judge’s conclusion that the “For Cause” term was unenforceable, because it was an effort to contract out of ESA entitlements. As he stated at para. 37:

As a result, the “for cause” termination provision is illegal as it incorporates the common law “just cause” concept, which means that an employee could be terminated without any notice for conduct that is not “willful” or “bad on purpose”. This is an attempt to contract out of the minimum standards prescribed by the ESA and voids the entire clause. It does not matter what the employer might have done, the wording of the clause is determinative.

[20] Given the decision of the Court of Appeal in Waksdale v. Swegon North America Inc., 2020 ONCA 391 at para. 10, the application judge correctly held that the termination clause, as a whole, was void.

The “Without Cause” term

[21] Given the application judge’s finding respecting the first issue, he did not need to address the second issue, the enforceability of the “Without Cause” term. Similarly, it is not strictly necessary for this Court to deal with this issue on appeal. However, in the interests of completeness, I will do so.

[22] The application judge held that this term was unenforceable, because he interpreted it as an attempt to avoid the obligation to pay benefits during the notice period, as required by s. 61(1) of the ESA.

[23] The appellant argues that the application judge erred in ignoring the final eight words of this term, which I quote in the context of the entire sentence in which they are found: “With respect to notice of termination or pay in lieu thereof, it is understood that the minimum period of notice or pay in lieu thereof specified in the Act will be provided and will constitute your complete entitlement to notice or pay in lieu thereof” (emphasis added). According to the appellant, the words deal only with notice or payment in lieu of notice. Silence with respect to the payment of benefits or bonuses should not be construed as an attempt to contract out of the obligation to pay them, as in Roden v. Toronto Humane Society, 2005 33578 (ON CA) at paras. 59-62.

[24] The application judge concluded that the term here was closer to that in Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158 than the term in Roden. However, he was aware that the clauses in each of those cases were differently worded from the provision before him. He was also well aware that silence with respect to the obligation to pay benefits during the notice period was not determinative (Reasons at para. 43).

[25] Nevertheless, the application judge concluded that the Without Cause termination provision purported to limit the minimum statutory obligations. What he found to be problematic was the specific reference to severance pay in the pertinent paragraph followed by the sentence quoted above in paragraph 21 referring to “complete entitlement to notice or pay in lieu thereof”. He concluded that the phrase “complete entitlement” was an attempt to contract out of the payment of benefits and bonuses during the notice period. At para. 50, he stated, “The alternative reading that ‘complete entitlement’ only refers to notice or pay in lieu thereof is contradicted by the specific inclusion of severance pay.”

[26] The interpretation of the clause was reasonable, and there was no error in the conclusion that the term was unenforceable. While the wording was not identical to that in Woods, it was similar to it. As Laskin J. A. said in Woods at para. 40:

An employer and an employee can contract out of common law reasonable notice, but they must do so in clear and unambiguous language. The word “pay” does not clearly include both salary and benefits. At best for Deeley, the word is ambiguous. I would therefore interpret “pay” as referring only to salary or wages, not to benefits. That interpretation is consistent with the consideration I referred to earlier: where the language of a termination clause is unclear or can be interpreted in more than one way, the court should adopt the interpretation most favourable to the employee: Ceccol.

Therefore, I see no basis for appellate intervention on this issue.

The determination of the notice period at common law

[27] Even if the application judge made no error in determining that the termination clause is unenforceable, the appellant argues that he erred in awarding a notice period of ten months. First, he improperly took into consideration the threat of a global pandemic. Secondly, he failed to properly consider the respondent’s young age and her seniority in the company. Had he properly considered the relevant factors, he should have found a notice period of six to seven months was appropriate.

[28] The application judge set out the proper factors to consider in determining a period of notice at common law. Those factors are found in Bardal v. The Globe & Mail Ltd. (1960), 1960 294 (ON SC), 24 D.L.R. (2d) 140, l60 294 (Ont. H.C.) at p. 145: the character of the employment, the length of service, the age of the employee, and the availability of similar employment, having regard to the employee’s training, experience and qualifications.

[29] The Court of Appeal has stated that an appellate court owes deference to the determination of reasonable notice made by a judge at first instance (see Minott v. O’Shanter Development Co. (1999), 42 O.R. (3d) 321, 1999 3686 (C.A.)):

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 one “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 …

[30] With respect to the threat posed by the COVID-19 pandemic, the application judge took judicial notice that at the time of the respondent’s termination on February 19, 2020, the threat of a pandemic created uncertainty about the economy and the effect it might have on the respondent’s re-employment prospects.

[31] The appellant argues that the crystallization date for a judge’s assessment of the reasonable notice period is the date of termination of employment. Therefore, the application judge erred in taking judicial notice of the impact of the pandemic, given the evidence available to him about circumstances on February 19, 2020.

[32] The application judge gave no weight to the affidavit evidence of Guy Cormier, the president of the appellant at the time of employment termination. Mr. Cormier opined that the Ottawa job market was “red hot”. I see no error in the application judge’s failure to rely on this evidence. Mr. Cormier is not a labour market expert, and he was an interested party to the litigation.

[33] As well, I see no error by the application judge in taking judicial notice of the threat of a pandemic, given the date of the dismissal, and the uncertainty around that time. Moreover, this was only one of many factors that he took into consideration in determining the reasonable notice period.

[34] The application judge considered the relevant Bardal factors to determine the appropriate notice period. Contrary to the submission of the appellant, he did not ignore the respondent’s age and seniority, nor her position in the company (see his Reasons, paras. 57-58).

[35] Both parties have pointed to numerous cases to support their assertions about the proper notice period. It is evident from these cases that there is a range. The appellant suggests that six to seven months is appropriate, while the respondent suggested fifteen months at first instance. The period of ten months that the application judge found appropriate was within the range and, in my view, it was reasonable and deserving of deference. Again, there is no basis for appellate intervention.

Conclusion

[36] Accordingly, the appeal is dismissed.

[37] Costs are awarded to the respondent in the agreed amount of $25,000.00.

Swinton J.

I agree _______________________________

J.A. Ramsay J.

I agree _______________________________

Favreau J.

Date of Release: December 8, 2021