COURT FILE AND PARTIES

COURT FILE NO.: CV-11-1383-SR
DATE: 2012-04-02
SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Madeena Sandhu, Plaintiff

AND:

Solutions 2 Go Inc., Defendant

BEFORE: Ricchetti, J.

COUNSEL: R. Riteman, Counsel, for the Plaintiff

J. Hamilton, Counsel, for the Defendant

HEARD: March 26, 2012

ENDORSEMENT On Summary Judgment Motion

Issue- Entitlement to Bonus

1This is a summary judgment motion brought by Ms. Sandhu.

2The parties have settled all claims except whether Ms. Sandhu is entitled to a bonus for the period April 1, 2009 to March 31, 2010 and costs of the action.

3The amount at issue is a share of the profit sharing bonus, being approximately $16,055 paid to other employees of Solutions 2 Go who had worked for the entire 2010 fiscal year.

The Facts

4This is an action under the Simplified Procedure Rules .

5Ms. Sandhu was hired by Solutions 2 Go on November 7, 2005. She received a base salary and various benefits. She was paid approximately $13.50 per hour.

6Solutions 2 Go’s fiscal year was from April 1 to March 31.

7After the conclusion of Solutions 2 Go’s fiscal year on March 31, 2006, Ms. Sandhu was given $1,000. Whether this was a profit share or gratuitous payment is not relevant to what subsequently occurred.

8In approximately June 2006, Solutions 2 Go announced a profit sharing bonus plan for its employees. The details of the profit sharing bonus plan were not in writing.

9Several months after the end of the fiscal year in approximately June, Solutions 2 Go would announce the amount of the profit sharing bonus to be paid to its employees and paid that amount to its employees.

10The evidence of Solutions 2 Go was that its employees who had worked for the full fiscal year received a full share of the profit sharing bonus; those employees who had worked less than the full fiscal year but more than 6 months received ½ share of the profit sharing bonus; and those employees who had worked less than 6 months in the fiscal year received no part of the profit sharing bonus. The uncontradicted evidence is that each employee, who worked for the full fiscal year, received a full share of the profit sharing bonus.

11For example, in fiscal 2009 (fiscal year ending March 31, 2009) Solutions 2 Go announced a profit share bonus amount of $1,717,237.98. Most employees of Solutions 2 Go (83 employees) received $22,157.91 (a full share); 8 employees received $11,078.95 (one half share); and 2 employees received nothing. This meant that the 8 employees had worked more than 6 months but less than 12 months of the fiscal year – hence they received a ½ share of the profit sharing bonus and 2 employees had worked less than 6 months of the fiscal year – hence they received $0. This method of payment of the profit sharing bonus to Solutions to Go's employees is consistent with the profit sharing bonus paid in fiscal 2007 and fiscal 2008.

12Ms. Sandhu received the following profit sharing bonus amounts:

• April 1, 2006 – March 31, 2007 $11,880.06

• April 1, 2007 – March 31, 2008 $21,912.50

• April 1, 2008 – March 31, 2009 $22,157.91

13Given Ms. Sandhu’s hourly rate of $13.50 (when she started) and $14.50 per hour (when terminated in May 2010), her share of the profit sharing bonus was a very significant financial part of her overall compensation from Solutions 2 Go.

14Ms. Sandhu was terminated on May 25, 2010. No cause is alleged. There is no dispute that The Employment Standards Act, 2000 (“the Act ”) applied to Ms. Sandhu.

15She was paid 4 weeks pay in lieu of notice, vacation pay to June 22, 2010, group insurance to June 22, 2010 as required by the Act . Solutions 2 Go offered Ms. Sandhu an additional 2 weeks pay if she signed a release. Ms. Sandhu refused to do so.

16Solutions 2 Go announced the 2010 fiscal profit sharing plan bonus on June 18, 2010 and paid its employees a profit sharing bonus. There is no evidence that the bonus was distributed differently for fiscal 2010 than prior years or that Solutions 2 Go had varied how the amount each employee received was calculated.

17Ms. Sandhu, despite having been employed for the entire fiscal year ending March 31, 2010, received none of the profit sharing bonus for the fiscal period April 1, 2009 to March 31, 2010.

18There is no dispute that the Solutions 2 Go employees on June 18, 2010 received a share of the profit sharing bonus and the full share for the employees who had been employed for the entire fiscal 2010 was $16,055.

The RESPECTIVE Positions on the Bonus

19Ms. Sandhu submits the profit sharing bonus was or became an integral part of her compensation package. She denies there were any pre-conditions that:

a) She had to be an active employee at the time the profit share was announced to be entitled to her share; or

b) The profit sharing bonus was discretionary on the part of Solutions 2 Go.

20Ms. Sandhu denies she was told of the above pre-conditions alleged by Solutions 2 Go at the time of her employment.

21Solutions 2 Go submit that all of the employees were told and were aware that the profit sharing bonus was discretionary and subject to the condition the employee be actively employed when announced after the fiscal year. The affidavit of Ms. Dionisio, a current employee, who stated in her affidavit, that in approximately June 2006, the company announced the profit sharing plan and then went on to say:

It was always made very clear to us that an employee had to be an active employee at the time that the profit share was paid out in order to qualify for it. The profit share is not guaranteed or fixed part of my compensation. It has been a different amount every year that I have received it. As I understand, the management team discusses the profits earned at the end of the fiscal year and decides whether to declare a profit share and what that amount will be.” (emphasis added)

22The affidavit of Andrew Kotys, the Chief Financial Officer, who stated in his affidavit:

“At the time that the profit share was declared it was explained to the employees that in order to eligible for a full share, an employee had to have worked for the entire fiscal year..... As far as I am aware , when the profit distribution was announced these requirements were made clear to all employees.” (emphasis added)

“Management is not required to declare the profit distribution, and profit distribution has never been par t of any of the employment contracts of Solution’s employees. Profit share distribution is always discretionary. However, once declared, the entire amount is paid regardless of how many employees are determined to be eligible .” (emphasis added)

23I note that both these statements are very vague and do not affix clear knowledge and acceptance on the part of Ms. Sandhu to the "pre-conditions" alleged by Solutions 2 Go in 2006.

24As evidence that the profit sharing bonus was an integral part of the terms and conditions of her employment Ms. Sandhu points to:

a. an interview given by the Chief Operating Officer of Solutions 2 Go, Ms. Gabrielle Chavalier, to Profit Magazine. The article appeared in Profit’s Magazine on October 13, 2010 where the reporter wrote:

Another factor contribution to Solutions 2 Go’s speed is its employees’ willingness to work insane hours – not just in the run-up to Black Thursday but anytime a new game is ready to hit stores. “If we don’t have every single person in this officer working at a 200% level during that time, we couldn’t pull it off,” Chevalier says. A profit-sharing system, in effect since Day One, helps take the sting out of all the overtime. In 2009, the company gave every employee a bonus cheque for $23,000.

b. the fact the profit sharing bonus was paid to employees for fiscal year 2010 except her and several other employees terminated at the same time. Ms. Sandhu submits that, even accepting Solutions 2 Go's position, if Ms. Sandhu had received notice under the Act , she would have been employed on June 18, 2010 and would have received a full share of the profit sharing bonus. The implication was that the termination and payment in lieu of notice was done by Solutions 2 Go deliberately to avoid paying her a share of the profit sharing bonus she had “earned” in the prior fiscal year.

c. Another employee, Mr. Palmacio Vargas, received a letter from Solutions 2 Go on March 27, 2009 addressed “To Whom It May Concern”:

“This letter is to confirm that Mr. Palmacio Vargas has been employed with Solutions 2 Go Inc. since October 22, 2005. He holds a full time position (7.5 hours daily shift) as a Shipper. He currently earns $14.50 per hour plus overtime and a yearly bonus .” (emphasis added)

While Ms. Sandhu’s counsel admits that this letter is specific to Mr. Vargas, he submits it is some evidence that the “bonus” was acknowledged by Solutions 2 Go to be an integral part of the compensation for all employees of Solutions 2 Go.

25In November 2009 Mr. Kotys posted a memo in the warehouse and lunch room which stated:

Profit Sharing Eligibility Calculations

With respect to profit sharing eligibility, the guidelines are as follows:

In order to receive a full share of the profit share you must be a full time active S2G employee for all 12 months of the applicable fiscal year..... You must also be an active employee of S2G when the profit share is paid in June following the end of the applicable fiscal year. Profit share is a discretionary bonus.

There was no further information as to what "active employee" meant or what was "discretionary" about the profit sharing plan.

26In response to the posted 2009 memo, Ms. Sandhu responds that what was contained in the memo had not been told to her before then. She didn't agree to it and there was no consideration for a change in the terms and conditions of her employment.

27Once again, in December 2010, Solution 2 Go’s attempted to get all the employees to sign an employment contract which provided:

....An employee who resigns from their employment or who has received notice of termination prior to the payout date is ineligible for any payments under the profit sharing plan.

Ms. Sandhu did not sign the proposed employment contract.

The Combined Air Test

28The proper approach in summary judgment motions was recently canvassed by the Court of Appeal in Combined Air Mechanical Services Inc. v. Flesch , 2011 ONCA 764. The Court of Appeal described the “full appreciation” test to be used on Rule 20 summary judgment motions as follows:

[55]Thus, in deciding whether to use the powers in rule 20.04(2.1), the motion judge must consider if this is a case where meeting the full appreciation test requires an opportunity to hear and observe witnesses, to have the evidence presented by way of a trial narrative, and to experience the fact-finding process first-hand. Unless full appreciation of the evidence and issues that is required to make dispositive findings is attainable on the motion record – as may be supplemented by the presentation of oral evidence under rule 20.04(2.2) – the judge cannot be “satisfied” that the issues are appropriately resolved on a motion for summary judgment.

56By adopting the full appreciation test, we continue to recognize the established principles regarding the evidentiary obligations on a summary judgment motion. The Supreme Court of Canada addressed this point in Lameman , at para. 11, where the court cited Sharpe J.’s reasons in Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. , (1996), 28 O.R. (3d) 423 (Gen. Div.) , at p. 434, in support of the proposition that“[e]ach side must ‘put its best foot forward’ with respect to the existence or non-existence of material issues to be tried.” This obligation continues to apply under the amended Rule 20. On a motion for summary judgment, a party is not “entitled to sit back and rely on the possibility that more favourable facts may develop at trial”: Transamerica , at p. 434.

29As applied to Simplified Procedure actions, the Court of Appeal went on to say:

[253]The test for summary judgment in simplified procedure actions is now governed by Rule 20. Resolving the liability and damages issues in the appellants’ action would require the motion judge to weigh the evidence, evaluate the credibility of deponents, and draw reasonable inferences from the evidence. Under the principles we have established, the full appreciation test is the governing test. It must be asked: can the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of a trial?

254We wish to emphasize a significant additional factor that must also be considered in the context of a simplified procedure action. Given that simplified procedure claims are generally for amounts of $100,000 or less, the rule is designed to get the parties to trial with a minimum of delay and costs. Thus, one of the key objectives of the simplified procedure rule is to limit the extent of pre-trial proceedings and to bring the parties to an early trial conducted pursuant to tailored rules. That is why discovery is restricted, cross-examination on affidavits and examination of witnesses on motions are not allowed, and the procedure at a summary trial is modified to reduce the length of the trial. No doubt, in appropriate cases, a motion for summary judgment in a Rule 76 action can be a useful tool to promote the efficient disposition of cases. However, it will often be the case that bringing a motion for summary judgment will conflict with the efficiency that can be achieved by simply following the abridged procedures in Rule 76.

255When a judge is faced with a contested motion for summary judgment in a simplified procedure action that requires exercising the powers in rule 20.04(2.1), the judge will not only have to apply the full appreciation test, but will also need to assess whether entertaining the motion is consistent with the efficiency rationale reflected in the simplified procedures under Rule 76. We make two general observations that will inform this assessment.

256First, summary judgment motions in simplified procedure actions should be discouraged where there is competing evidence from multiple witnesses, the evaluation of which would benefit from cross-examination, or where oral evidence is clearly needed to decide certain issues. Given that Rule 76 limits discoveries and prohibits cross-examination on affidavits and examinations of witnesses on motions, the test for granting summary judgment will generally not be met where there is significant conflicting evidence on issues confronting the motion judge. While the motion judge could order the hearing of limited oral evidence on the summary judgment motion under rule 20.04(2.2), in most cases where oral evidence is needed, the efficiency rationale reflected in the rule will indicate that the better course is to simply proceed to a speedy trial, whether an ordinary trial or a summary one: see rules 76.10(6) and 76.12.

257Second, we are not saying that a motion for summary judgment should never be brought in a simplified procedure action. There will be cases where such a motion is appropriate and where the claim can be resolved by using the powers set out in rule 20.04 in a way that also serves the efficiency rationale in Rule 76. For example, in a document-driven case, or in a case where there is limited contested evidence, both the full appreciation test and the efficiency rationale may be served by granting summary judgment in a simplified procedure action.

Application to this Case

30There are two grounds advanced by counsel for Ms. Sandhu which, counsel submits, entitle Ms. Sandhu to a judgment for a share of the fiscal 2010 profit sharing plan:

i. The Act provides that, during the statutory notice period, Ms. Sandhu’s wages and terms of her employment were not to be altered. Since the profit sharing bonus was announced during the statutory notice period, it would be an alteration of the terms of her employment for Solutions 2 Go to have refused to pay Ms. Sandhu her share of the profit sharing bonus; and

ii. The profit sharing bonus was an integral part of Ms. Sandhu contract of employment at termination entitling Ms. Sandhu to her share in the profit sharing for fiscal 2010 with any precondition that the employee be “active” or that there was any “discretion” by Solutions 2 Go as to whether to pay Ms. Sandhu her share of the profit sharing bonus.

i) The Employment Standards Act, 2000

31The relevant portions of the Act provide as follows:

54. No employer shall terminate the employment of an employee who has been continuously employed for three months or more unless the employer,

(a) has given to the employee written notice of termination in accordance with section 57 or 58 and the notice has expired; or

(b) has complied with section 61.

57. The notice of termination under section 54 shall be given,

(d) at least four weeks before the termination, if the employee’s period of employment is four years or more and fewer than five years;

60. (1) During a notice period under section 57 or 58, the employer,

(a) shall not reduce the employee’s wage rate or alter any other term or condition of employment;

61. (1) An employer may terminate the employment of an employee without notice or with less notice than is required under section 57 or 58 if the employer,

(a) pays to the employee termination pay in a lump sum equal to the amount the employee would have been entitled to receive under section 60 had notice been given in accordance with that section; and

32The Supreme Court of Canada decision in Rizzo & Rizzo Shoes Ltd. (Re) , 1998 837 (S.C.C.) dealt with the manner in which the Act should be interpreted at para. 36:

Finally, with regard to the scheme of the legislation, since the ESA is a mechanism for providing minimum benefits and standards to protect the interests of employees, it can be characterized as benefits-conferring legislation. As such, according to several decisions of this Court, it ought to be interpreted in a broad and generous manner. Any doubt arising from difficulties of language should be resolved in favour of the claimant (see, e.g., Abrahams v. Attorney General of Canada , 1983 17 (SCC) , [1983] 1 S.C.R. 2 , at p. 10 ; Hills v. Canada (Attorney General) , 1988 67 (SCC) , [1988] 1 S.C.R. 513 , at p. 537) . It seems to me that, by limiting its analysis to the plain meaning of ss. 40 and 40 a of the ESA , the Court of Appeal adopted an overly restrictive approach that is inconsistent with the scheme of the Act.

33These above provisions of the Act are designed to ensure that an employee receives a minimum notice upon termination and to ensure that during that notice period, the employee receives all compensation and benefits they would have been entitled to during the notice period but for the termination. In other words, the employee is kept "whole" during the statutory notice period.

34S. 61 (1) (a) of the Employment Standards Act, 2000 permits the employer to terminate without notice but only if the employee receives what the employee would otherwise been entitled to receive from the employer under the terms and conditions of employment during the statutory notice.

35These provision do not just include wages but also precludes an employer from altering any term or condition of employment which is of financial benefit to the employee during the statutory notice period. The logic for these provisions is obvious. Otherwise, an employer could take advantage of an employee by terminating the employee immediately prior to a large payout and paying the employee just the wages portion during statutory notice period. This could apply in many situations such as profit sharing, stock options, commissions, Christmas bonus and so on.

36The courts have come to a similar conclusion with respect to an employee’s entitlement to damages for amounts payable after termination but prior to the end of the common law notice period. See Schumacher v. Toronto Dominion Bank (1997) 1997 12329 (ON SC) , O.J. No. 2004 (S.C.J.) at para 223 .

37In Poole v. Whirlpool Corp. , 2011 ONCA 808 , the Court of Appeal recently dismissed an appeal from Justice Hoy granting summary judgment to any employee for bonus post termination. The employee had been terminated on March 2010 but claimed bonuses payable in December, 2010 and 2011. Justice Hoy ( 2011 ONSC 4100 ) made the following comments at paragraphs 32-33:

In Grace v. Reader’s Digest Assn. (Canada) Ltd. , 1995 7287 (ON SC) , [1995] O.J. No. 2671 (Gen. Div.) , Sharpe J., as he then was, held at para. 64:

The case law is clear that where there is a non-discretionary bonus and where the employer seeks to rely on a term requiring the employee to meet certain conditions such as being on the pay-roll as of a certain date, the employer must communicate that requirement to the employee. If the employer has failed to do so, then the employee is entitled to claim the bonus.

It is clear that Mr. Poole’s bonus was an integral part of his compensation and he is therefore entitled to it during the notice period. The limitation on which Whirlpool relies was not incorporated specifically, or by reference, in the terms of his employment, set out in Whirlpool’s August 23, 2007 letter. There is no evidence that Mr. Poole at any time assented or agreed to this limitation. Nor is there evidence that Mr. Poole was given a copy of the 2005 Bonus Plan, or advised of this limitation. Simply posting the Plan on Whirlpool’s Intranet, without more, is insufficient.

i) "Discretionary"

38Exactly, what was “discretionary” is not expressly set out in Solutions 2 Go's evidence.

39Mr. Kotys chose not to clarify what he meant by a “discretionary bonus.” Does it mean discretionary as to whether Solutions 2 Go decides to pay a profit sharing bonus and the amount to be paid? If so, that becomes irrelevant in this case because Solutions 2 Go did declare a profit sharing bonus for fiscal year 2010 and paid the employees the various shares of the bonus as in prior years.

40Does it mean there is discretion as to which employees are entitled to receive a share of the profit sharing bonus and, if so, how much? There is nothing in the evidence to suggest it is the latter. Neither Mr. Kotys nor Ms. Dioniosis describe the discretion as such. In fact, when Mr. Kotys and Ms. Dioniosis described the amount each employee receives of the profit sharing bonus, it was described as only being dependent on the amount of time the employee had been employed during the fiscal year.

41Putting the evidence at its highest for Solutions 2 Go, if the profit sharing plan was discretionary, it was discretionary in the sense that it was within the discretion of Solutions 2 Go to decide whether to announce a bonus and determine the amount of the bonus for each fiscal year.

42There is no evidence that there was a performance or any other criteria which Solutions 2 Go could, would or did use as to differentiate between qualifying employees.

43There is no issue requiring trial on whether Solutions 2 Go could exercise its discretion to, once it announced its bonus for the fiscal year, to give all employees employed on June 18, 2010 a share of the bonus (save and except based on the amount of time the employee had worked during the fiscal period). It could not. Having decided to announce the profit sharing bonus on June 18, 2010, Solutions 2 Go had no further discretion as to which employees employed on June 18, 2010 were entitled to participate in the profit sharing bonus except based on how much of the fiscal year they had been employed by Solutions 2 Go.

44Whether Solutions 2 Go had a discretion to announce a profit sharing bonus or a discretion as to the amount of the profit sharing bonus does not have to be decided in this motion.

ii) "Active"

45The relevant and uncontested facts in this case are:

a) Ms. Sandhu was terminated on May 25, 2010;

b) Ms. Sandhu was entitled to four weeks notice under the Act; and

c) The profit sharing bonus was announced on June 18, 2010 which is within the four week statutory notice period Ms. Sandhu was entitled to under the Act .

46Let me go on to deal with Solutions 2 Go’s alleged pre-condition that the employee be “active” when the profit sharing was announced.

47Assuming Solutions 2 Go’s position that this pre-condition applied, essentially, Solutions 2 Go’s submission would be that Ms. Sandhu’s status as an “active” employee was changed to “inactive” when she was terminated on May 25, 2010 thereby disentitling her to a share of the profit sharing bonus.

48This would be a clear variation of one of the terms and conditions of Ms. Sandhu’s employment – here entitlement to receive share of the profit sharing bonus during the statutory notice period. It would convert her from an “active” employee with potential benefits if the profit sharing bonus was announced to an “inactive” employee with not potential benefits if the profit sharing was announced.

49The only conclusion based on the evidence is that Ms. Sandhu would have been entitled to share in the profit sharing bonus on June 18, 2010.

Entitlement under the Employment Contract

50Having determined that Ms. Sandhu is entitled to a share of the profit sharing bonus for fiscal 2010, there is no need for me to deal with the Plaintiff’s counsel’s alternate submission in these circumstances.

Conclusion

51A trial is not required to properly determine and to fully appreciate the evidence and issues that need to be decided in this case.

52Solutions 2 Go shall pay to Ms. Sandhu her share of the profit sharing bonus for fiscal 2010.

53I understand that the amount might have to be varied as the total amount of the profit sharing bonus is distributed to all the employees of Solutions 2 Go and the amount might have to be reduced proportionately to take into account the payment to Ms. Sandhu. If the parties cannot agree on the amount, I may be spoken to.

Costs

54The parties have agreed that I deal with costs of the action.

55Written submissions for any party claiming costs shall be provided to me within 3 weeks from the release of this decision. The submissions are limited to 3 written pages plus a bill of costs plus any authorities.

56Responding submissions to any claims for costs shall be provided to me within 2 weeks thereafter. The submissions are subject to the same limits on length.

57There shall be no reply submissions without leave.

Ricchetti, J.