COURT FILE NO.: 49896/08
DATE: 2012/05/25
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEE N:
ROBERT McGREGOR
Michael J. Bonomi, for the Plaintiff
Plaintiff
- and -
ATLANTIC PACKAGING PRODUCTS LTD.
Howard A. Levitt, for the Defendant
Defendant
HEARD: October 18, 19, 20, 21 & 25, 2011
The Honourable Madam Justice L.M. Walters
OVERVIEW
[ 1 ] The plaintiff commenced employment with the defendant corporation (hereinafter referred to as “Atlantic”) on April 18, 2005 as a branch manager (Niagara Peninsula) within the supply chain division.
[ 2 ] He was terminated from his position of sales manager within the supply chain division on October 3, 2007, without any assertion of just cause and was offered a severance package.
[ 3 ] Mr. McGregor was unhappy with this package and, in February 2008, commenced this law suit claiming damages for wrongful dismissal.
[ 4 ] In April 2010, more than two years after the original Statement of Defence was served and filed, the defendant amended its pleadings to allege just cause.
[ 5 ] At trial, all claims by the defendant were abandoned except for the allegation that Mr. McGregor made fraudulent misrepresentations regarding future sales revenues during his hiring process. These fundamental misrepresentations resulted in Mr. McGregor being hired and the defendant relied on these misrepresentations to its detriment.
[ 6 ] The plaintiff denies any misrepresentation.
ISSUES TO BE DETERMINED
[ 7 ] The following are the issues to be determined:
(i) Did the plaintiff engage in gross misconduct amounting to “just cause”?
(ii) If not, what is the appropriate reasonable notice Mr. McGregor was entitled to?
(iii) Based on that notice, what is the proper calculation of damages?
(iv) Did Mr. McGregor act reasonably in his efforts to mitigate against his loss?
THE FACTS
[ 8 ] It is important at the outset to note that this matter proceeded under the Simplified Rules and, accordingly, there were limited discoveries.
[ 9 ] The facts of the case are very much in dispute. As much of the evidence of each witness was not documented, credibility of the parties is very much in issue.
[ 10 ] In particular, significant portions of the evidence of Mr. McGregor and Mr. Bedard were at odds.
[ 11 ] For the reasons which follow, if there is a conflict in the evidence between Mr. McGregor and Mr. Bedard, for the most part, I have preferred the evidence of Mr. McGregor.
[ 12 ] Although there were some inconsistencies and discrepancies in his testimony, Mr. McGregor gave his evidence in a straightforward manner. On essential points, his evidence was unshaken in cross-examination. On some very critical issues, his evidence was corroborated by e-mails, memos or other documents.
[ 13 ] On the other hand, the evidence of Mr. Bedard is glaringly devoid of written corroboration. In my view, his responses to questions often appeared as if he was making his answers up as he went along. A few examples are very illustrative.
[ 14 ] During the course of his cross-examination, when questioned about his failure to reply to Mr. McGregor’s e-mail of March 2, 2007, found at Tab 12, of Exhibit 1, he testified for the first time that he would have made a call to Mr. McGregor. When challenged that he would have a specific recollection of such a phone call four years later, he responded, “Absolutely.” When he was questioned about any lack of notes regarding the conversation, he went on to testify about having purged those files years ago. He went on to describe that he always jotted notes down but he didn’t keep them. When reminded that in his earlier testimony, he indicated that he did not keep notes, he tried to distinguish between documented notes and notes used just to reference for the next time he spoke with Mr. McGregor.
[ 15 ] This whole idea of note-taking and failure to document critical evidence arose again with respect to his evidence concerning a meeting he said he had with Mr. McGregor in September of 2007. He testified that he questioned Mr. McGregor about the business he promised in February 2005. Mr. Bedard said that Mr. McGregor told him, “Do you think if I had given you the real numbers you would ever have hired me and opened a warehouse in St. Catharines?” Mr. Bedard testified that he was shocked and upset by this admission. If true, this statement by Mr. McGregor would confirm that he had lied to Atlantic prior to his employment and misrepresented the numbers presented to the company. Mr. Bedard did not “jot” any note about this alleged lie. He did not send an e-mail or letter to Mr. McGregor setting out his anger or outrage at having been duped by him. He did not share this information with his immediate superior, Mr. Tocchet, or Mr. Cherry. He did not share this information with Human Resources or in any way refer to this lie in Mr. McGregor’s dismissal. Instead, the only thing he did was share the information with Jennifer Forget, who also did not document in any way this supposedly important conversation.
[ 16 ] I did not believe Mr. Bedard and as a result his credibility has suffered a serious blow. The only corroboration of his evidence at the most significant times was that of Ms. Forget, whose own credibility was suspect by the court.
[ 17 ] Ms. Forget is clearly a colleague and friend of Mr. Bedard. During the course of her evidence, she went to great lengths to portray Mr. McGregor in the most unfavourable light possible. Once again, however, other than complaining to Mr. Bedard, she did not speak with Andy Tocchet or John Cherry. She did not report it to anyone at Human Resources. She testified that she did not complain to anyone else because Mr. Bedard assured her she would no longer have to have contact with him. However, in fact, her evidence is that she did continue to have some contact with him. She, like Mr. Bedard, continued to insist that despite Exhibit 1, Tab 8, which classified Mr. McGregor’s transfer as a promotion, that it was a demotion, or at best a lateral move. She also insisted that there was no racking in the Niagara warehouse. Even Mr. Bedard acknowledged that there was some minimal racking. In all of the circumstances, I found her evidence of little assistance.
[ 18 ] Mr. Tocchet gave his evidence in a straightforward fashion. However, as with Mr. Bedard, there was little written corroboration of his testimony. Also of concern, was his inability, understandably so, to recall events with specificity given the failure of any written note to jog his memory.
[ 19 ] Despite the clear wording of the documentation found at Exhibit 1, Tab 8, and the letter he wrote at Exhibit 1, Tab 7, at trial, he testified that Mr. McGregor’s transfer to Burlington was really not a promotion, but a lateral move. His explanation was that this was the easiest way to have the matter approved through Human Resources and his boss was not credible in the circumstances.
[ 20 ] The court was left with the definite impression that the defendant’s witnesses tailored their evidence to support their eleventh hour claim of just cause.
[ 21 ] In addition, the court must comment on the witnesses who did not testify. Someone from human resources was present during Mr. McGregor’s dismissal but was not called. The president of the company, Mr. Cherry, was privy to much of what occurred at both the hiring and dismissal of Mr. McGregor and, again, the court did not hear from him.
[ 22 ] In the end, I have preferred the evidence of Mr. McGregor.
[ 23 ] On the basis of the evidence I do accept, I make the following findings of fact.
[ 24 ] Mr. McGregor was the vice-president of sales with G.T. French Paper where he worked for 25 years. Mr. McGregor signed a restricted covenant with G.T. French which prohibited him from competing in the same business for an 18 month period of time.
[ 25 ] Mr. McGregor approached Atlantic Packaging who he knew as a competitor of G.T. French, and in late 2004, began discussions with the defendant corporation. At the time of his employment with Atlantic, he had been out of work 18 months.
[ 26 ] By January 2005, although not yet hired, he had an understanding with Atlantic and was asked to put something together regarding the direction the company would take and how a distribution centre would be set up in Niagara.
[ 27 ] The actual commencement date of his employment was delayed because of his non compete clause.
[ 28 ] Mr. McGregor prepared the business plan found at Exhibit 1, Tab 1, including the budget. Although there was some dispute by Atlantic that this was the actual budget prepared, Atlantic failed to produce any other budget.
[ 29 ] The business plan was a forecast of sales over a five year period. This business plan was not a guarantee of sales or revenue. On its face, nothing in the business plan speaks to a guarantee or promise. The forecast itself was based on a market summary which included a number of unknown current corrugated accounts. The business plan identified potential sources of business in sales but did not guarantee those sales.
[ 30 ] Mr. McGregor could not guarantee customers from his former employment with whom he had had no contact with in 18 months because of the non compete clause. This was known to Atlantic.
[ 31 ] For whatever reason, the business at the Niagara warehouse location did not materialize as expected. As Atlantic conceded that Mr. McGregor was not terminated because of his poor sales performance, it is not necessary to make any specific findings regarding why the St. Catharines location was not successful. Much evidence was heard regarding Atlantic’s complaints that Mr. McGregor was not selling enough, but again, it was not his performance, but his alleged fraudulent misrepresentations at the time of hiring which gave rise to Atlantic’s claim of just cause.
[ 32 ] In August 2006, a decision was made by Atlantic to close the Niagara operation and consolidate it with the Burlington warehouse.
[ 33 ] Mr. McGregor was offered and accepted the position as sales manager, supply chain division, of Atlantic Packaging in September 2006. His salary was increased from $70,000 a year to $75,000 a year and, as far as Mr. McGregor understood, this was a promotion. The change was requested by Mr. Bedard and authorized by Mr. Tocchet and approved by Mr. Cherry.
[ 34 ] Although the change was effective September 2006, the actual re-location to Burlington and the assuming of responsibility for this new position by Mr. McGregor did not take place until March 1, 2007.
[ 35 ] This promotion did not result in any change in Mr. McGregor’s benefit package, vacation entitlement, company vehicle, insurance or gas. He was now eligible for a profit sharing plan of 1%, calculated on supply chain division profit increase over the previous year. No further specifics of any plan were provided to Mr. McGregor.
[ 36 ] Atlantic was still unhappy with Mr. McGregor’s performance and, on June 5, 2007 at a meeting with Mr. Bedard, Mr. McGregor was advised that his area of responsibility was reduced to London and Burlington. Mr. McGregor was told by Mr. Bedard that the company was changing direction and that he would now look after London and Burlington only and that someone else would look after Toronto and the east. Although unhappy with the decision, Mr. McGregor continued with his employment.
[ 37 ] On October 3, 2007, Mr. McGregor received a telephone call from Mr. Bedard requesting a meeting. At that time, Mr. Bedard told him that the company was going in a different direction and he was terminated. The conversation lasted seconds only and Mr. Bedard left. Thereafter, someone from Human Resources provided him with a termination letter, requested his computer and car keys. He was driven home in a taxi that Atlantic pre-arranged.
[ 38 ] Exhibit 1, Tab 17 is a copy of the letter and release he was asked to sign. He was not advised that his termination was for gross misconduct or just cause. There was no discussion of his performance. He was offered a severance, which he did not accept.
[ 39 ] The first time Atlantic alleged gross misconduct was after the original trial date in April 2010, some 2½ years after his termination. Despite the terms of the offer of employment in April 2005, which included a performance review, no such review was ever done. There was never any formal evaluation; there was never any discussion about the six month probation period. Mr. McGregor did not receive any verbal warnings, written warnings or suspensions.
[ 40 ] At the time of termination, Atlantic did not provide any job search assistance and did not provide a usable reference until the end of December 2007. Mr. McGregor did make some effort to search for other employment. He was 60 years of age. He had not prepared a résumé in more than 30 years. He did not look for positions outside his field, nor did he look for jobs outside of the Golden Horseshoe area. His efforts included calling people he knew in the industry advising them that he was available. He updated his résumé. He searched various newspapers. He did some internet searches and put a profile on Workopolis and Ladders. He hoped to stay in the same industry, in a management role, earning an equivalent salary to what he was earning at Atlantic. He was not prepared to go back to a plain sales job.
[ 41 ] Mr. McGregor also considered the possibility of self-employment through the purchase of a small business. He had two business opportunities, one with Jamestown Containers, which did not pan out. He was also involved with a business opportunity with an off-shore toilet tissue company in Argentina. He began talks with them in January of 2008, but after a few months, no efforts were realized. He ultimately was able to secure work as a broker for a couple of companies which started in the summer of 2008. He earned less than $10,000 from that employment.
THE LAW
[ 42 ] Absent gross misconduct amounting to just cause, an employer has the right to unilaterally terminate an employment relationship provided that reasonable notice of the termination or compensation is given to the employee ( Bardal v. Globe and Mail Ltd. (1960), 1960 294 (ON SC) , 24 D.L.R. (2d) 140 (Ont. H.C.)).
[ 43 ] In McKinley v. BC Tel , 2001 SCC 38 , [2001] 2 S.C.R. 161, 2001 S.C.C. 38, the Supreme Court of Canada set out the test to be applied in determining whether just cause exists. The court must first determine whether the employee engaged in misconduct and then must go on to consider whether or not the nature and degree of the misconduct warranted summary dismissal. Further, the court endorsed an analytical framework that examines each case on its own particular facts and circumstances.
[ 44 ] The onus is on the employer to prove that there was just cause for the summary dismissal of an employee ( Hill v. Down Chemical Canada Inc. 1993 7097 (Ab. Q.B.) and Tong v. Home Depot of Canada Inc. 2004 18288 (On. S.C.) at para. 9 ).
[ 45 ] If an employee’s misconduct is known to the employer, and the employer does not terminate the employee immediately, and instead provides the employee with commendation, a salary increase, a letter of reference, etc. the employer may be found to have condoned the misconduct. The employer cannot thereafter rely on the misconduct as a reason for dismissing the employee ( Geluch v. Rosedale Golf Assn. 2004 14566 (ON. S.C.) at para. 99 ).
[ 46 ] An employer does not have a duty to give reasons for dismissal at the time of termination, however, allegations of just cause alleged after the fact, will affect their weight (Levitt, H.A. The Law of Dismissal in Canada (3 rd Edition) (2011), p. 6-4).
[ 47 ] Although dishonesty on the part of an employee prior to the commencement of employment can justify dismissal, statements consistent with innuendo, puffery, embellishment or opinions do not rise to the level of fraudulent or dishonest misrepresentation ( Earle v. Grant Transport (1995) 7289 (Ont. S.C.).
[ 48 ] Reasonableness of notice must be decided with reference to each particular case having regard to all the relevant factors including: (i) the employee’s age; (ii) the length of the employee’s service; (iii) the employee’s position; and (iv) the availability of similar employment given the employee’s education, training and experience ( Bardal v. Globe and Mail Ltd. , supra ).
APPLICATION OF LAW TO THE FACTS
(i) Did the plaintiff engage in gross misconduct amounting to “just cause”?
[ 49 ] The misconduct relied on by Atlantic is that in order to secure a job with Atlantic, Mr. McGregor misrepresented the business he could bring to Atlantic including the number of clients, dollar amounts and the sources of revenue specifically set out in the business plan filed at Tab 1 of Exhibit 1. This business plan consisted of promises and guarantees Mr. McGregor made to Atlantic, knowing that the information was not correct in order to obtain employment.
[ 50 ] I have already determined that the business plan was not a promise or guarantee of sales but instead was a forecast of what Mr. McGregor hoped could be achieved over the next five years.
[ 51 ] In my view, it was unreasonable to assume that one would be able to control what a former client would do, particularly given the fact that Mr. McGregor had been out of the work force for a year and a half.
[ 52 ] Atlantic’s position that they relied on what they thought were promises and guarantees to incur the significant costs of starting up a Niagara branch is unbelievable. Atlantic was a large company employing thousands of individuals, and run by experienced businessmen. It is inconceivable that one would invest the dollars testified to without any due diligence, including speaking to their competitors at G.T. French, and confirming or analyzing the proposals of Mr. McGregor. More incredible is Atlantic’s position that it believed Mr. McGregor was in fact guaranteeing or promising these numbers, and yet, the offer of employment it prepared contained no provision whatsoever with respect to these promises or guarantees.
[ 53 ] More likely than not, Andy Tocchet was accurate when he indicated the company was taking a risk, and that they all hoped that the numbers would materialize. There was no guarantee from Mr. McGregor which could be relied upon by Atlantic.
[ 54 ] In all these circumstances, the answer to this question must be in the negative. Mr. McGregor did not engage in gross misconduct amounting to just cause.
[ 55 ] Even if I am wrong, and Mr. McGregor did engage in the conduct described by Atlantic, the defendants have still not satisfied the onus on them and their just cause defence must fail. By the time it was decided to close the Niagara branch, in August or September 2006, Mr. Bedard and Mr. Tocchet testified that they knew at that point in time that Mr. McGregor’s promises had not materialized and, according to Mr. Bedard, the Niagara branch was “hopeless.” Mr. Tocchet testified that Atlantic decided to move on and “forget the past.” Mr. McGregor was offered a new position in Burlington at an increased rate of pay. In doing so, Atlantic condoned or accepted Mr. McGregor’s conduct and decided to give him another chance. More than one year later, when they terminated him, they cannot rely on conduct which they knew had occurred more than a year earlier.
(ii) What is the appropriate reasonable notice Mr. McGregor was entitled to?
[ 56 ] Having determined that Mr. McGregor did not engage in gross misconduct, the court must turn to the second issue which is, what is the appropriate reasonable notice Mr. McGregor was entitled to?
[ 57 ] Mr. McGregor was 60 years of age at the time of termination. He had been employed with Atlantic for approximately 2½ years in a sales management position. Mr. McGregor had no formal education; all of his experience was job-related. By 2008, the evidence of both Mr. McGregor and Mr. Bedard was that there was a serious turn in the economy which would have affected this market.
[ 58 ] The position of Mr. McGregor is that he is entitled to six months’ notice in all these circumstances. The position of Atlantic was at first stated at three months, but later, in the course of his argument, Mr. Levitt suggested that two or two and a half months was the more reasonable notice period before any consideration of mitigation.
[ 59 ] Taking into consideration those principles set out in Bardal v. Globe and Mail Ltd. and Mr. McGregor’s circumstances, I am satisfied that the appropriate reasonable notice period is six months.
(iii) What is the proper calculation of damages?
[ 60 ] At the time of dismissal, Mr. McGregor was earning $75,000 a year. Therefore, six months’ notice would entitle Mr. McGregor to $37,500.
[ 61 ] Mr. McGregor has also made a claim for loss of employee healthcare benefits, profit sharing, use of company vehicle and the performance incentive reward of a trip to England and Scotland.
[ 62 ] The defendant does not dispute the loss of personal use of the company vehicle and, for a six month period of time, that loss is $1,005.33.
[ 63 ] With respect to the other amounts claimed, the position of the defendant is that the plaintiff has failed to prove his loss and, accordingly, no amount should be assessed against the defendant. The position of Mr. McGregor is that this information is in the hands of Atlantic and they have failed to provide that information to the court. Mr. McGregor has provided the court with his best estimates and the defendant has not led any evidence to the contrary.
[ 64 ] Although I have some sympathy with Mr. McGregor’s position, it is still the plaintiff’s obligation to prove his losses. Certainly, it was open to the plaintiff to bring a motion to the court to extend the time for discoveries so that Mr. McGregor could have asked Atlantic to provide this information. At the same time, there is some evidence before the court and, without any contrary evidence, I am prepared to accept that evidence as reasonable in the circumstances.
[ 65 ] At Tab 19, there is a record of employment which shows that Mr. McGregor was entitled to a profit sharing payment of $4,611.07. The court does not have any information as to how that amount was calculated, however, this is a document prepared by the defendant corporation. Mr. McGregor’s evidence was that he anticipated that he would have received profit sharing equal to at least what he had received the year before, which was $7,000. It was open to Atlantic to provide the exact information necessary to calculate the profit sharing payment, but failed to do so. The evidence of Mr. Bedard and Mr. Tocchet that one could only share in the profit sharing if they were employees at the end of the year does not coincide with the offer of employment and directly contradicts the record of employment at Tab 19 of Exhibit 1. In these circumstances, I am satisfied that the profit sharing payment as calculated by Atlantic is the proper one for the court to use and accordingly, Mr. McGregor shall be entitled to profit sharing of $4,611.07.
[ 66 ] Regarding the loss of employee healthcare benefits, although Mr. McGregor estimated that at his old employment, the value of such benefit was approximately $300 per month, there is not sufficient evidence before the court to make a proper assessment of this head of damage.
[ 67 ] It was open to Atlantic to provide the court with the actual information regarding the loss of the performance incentive reward, that is, the trip to England and Scotland, however, they chose not to do so. Mr. Tocchet gave evidence that such a trip had a value of between $2,500 and $3,000. Given his former position in the company, this is certainly information to which he would have been privy. In these circumstances, I am satisfied that $3,000 is a reasonable amount. I am also satisfied that but for the termination, Mr. McGregor would have been able to enjoy that incentive reward. That reward was based on past performance.
[ 68 ] Accordingly, the assessment of damages is as follows:
Wages $37,500.00
Loss of profit share $ 4,611.07
Loss of personal use of company vehicle $ 1,005.33
Loss of performance incentive reward
(trip to England and Scotland) $ 3,000.00
Sub-total $46,116.40
Less termination pay received $ 2,963.94
Total $43,152.46
(iv) Did Mr. McGregor act reasonably in his efforts to mitigate against his loss?
[ 69 ] The last issue for the court to determine is whether or not these damages should be reduced because of Mr. McGregor’s efforts, or lack of efforts, to mitigate against his loss.
[ 70 ] The onus is on the defendant to prove that Mr. McGregor failed to take steps to mitigate his loss and also that if he had taken steps to mitigate, he would have obtained comparable alternate employment. In my view, I am satisfied that Mr. McGregor took reasonable steps to mitigate his loss. It must be remembered that at the time of termination, Mr. McGregor was in shock and it is not unreasonable that he required some time in order to regroup and focus his energies on obtaining other employment. It is also important to remember that Mr. McGregor was 60 years of age, with limited formal education. He had not actively looked for employment in several years. When he was released from G.T. French, he was out of the work force for some 18 months and only approached Atlantic. He had not found it necessary at that point in time to prepare a résumé or undertake other job searches. Although Mr. Bedard testified that in 2007, the economy was still good, by 2008, he acknowledged that the economic climate had changed, and even Atlantic, a large company, was forced to downsize. This was the very time when Mr. McGregor was looking for new employment. Although his efforts were not stellar, they were not unreasonable. He prepared a résumé, made contact with those that he knew in the paper and packaging industry, checked daily newspaper ads and posted his profile on certain job search websites.
[ 71 ] It was not until the end of December 2007 that Atlantic provided Mr. McGregor with a proper letter of reference. At the time of termination, Atlantic did not provide counselling or job search assistance. Although the defendant’s witnesses testified that they would have looked for positions outside of the paper and packaging industry, it was not unreasonable that Mr. McGregor’s searches, at first, were within the same sector that he knew and had worked in for the past 30 plus years. Nor was it unreasonable to limit his contacts within a reasonable commuting distance from the Niagara area where he has lived for the past 40 years.
[ 72 ] Although Mr. Levitt, in cross-examination, identified certain available positions which Mr. McGregor did not apply for, that alone is not sufficient to meet the onus required of an employer.
[ 73 ] In the end, I am satisfied that Mr. McGregor’s efforts to find suitable alternate employment were reasonable in all of the circumstances and the damages set out in paragraph 68 will not be reduced.
[ 74 ] Judgment to go accordingly. If the parties are unable to agree on the issue of costs, they may provide me with written submissions, not to exceed five pages in length, within 30 days of these reasons.
Walters J.
Released: May 25, 2012