SUPERIOR COURT OF JUSTICE – ONTARIO

COURT FILE NO.: CV-12-448114-0000
DATE: 20121012

RE: FREUDENBERG HOUSEHOLD PRODUCTS INC., Applicant

AND:

FRANCA DIGIAMMARINO, Respondent

BEFORE: MORAWETZ J.

COUNSEL:
David McNevin, for the Applicant
Craig Lewis, for the Respondent

HEARD: OCTOBER 1, 2012

ENDORSEMENT

[ 1 ] The Applicant has requested an interpretation of paragraph 7 of the Employment Contract as between the Applicant and the Respondent.

[ 2 ] This provision reads:

7. In the case that the Company would decide to terminate the contract with the employee in the first 4 years after the signature, the Company will pay to the employee an indemnity compensation of two (2) years salary including the bonuses . In the case the Company terminates the contract following employee’s behaviour that could put the company in financial/commercial danger as a result of illegal or dangerous act, this compensation will not be payable any more. This indemnity will include any other compensation arising from normal labour regulations.

After these 4 years, this indemnity compensation will be no more applicable and the potential separation will be regulated by normal Canadian labour regulations . [emphasis added]

[ 3 ] On its own evidence, the Applicant takes the position that it does not allege that it had just cause to terminate the Respondent’s employment.

[ 4 ] Further, the evidence of the Applicant’s representative is that “In the summer of 2011 Freudenberg had internal discussions regarding whether or not to terminate Franca’s employment at that time ostensibly for just cause given her performance or more particularly, her lack of performance. At that time, a decision was made to terminate her employment but to allow the four year term promised by Freudenberg to run its course ”. [emphasis added]

[ 5 ] A plain reading of paragraph 7 of the Employment Contract is such that, in my view, the indemnification obligation is triggered if the company decides to terminate the contract with the employee in the first four years after the signature.

[ 6 ] The contract was entered into in November 2011. The decision to terminate the Respondent’s employment was made in the summer of 2011. Freudenberg, by its own choice, chose not to inform the Respondent of the decision to terminate her until the four-year term referred to in the Employment Contract had run its course.

[ 7 ] However, by delaying the communication of the termination to the Respondent, this does not, in my view, alter the fact that the indemnity provision in paragraph 7 had been engaged. The decision to terminate had clearly been made within the four-year term of the contract. It is this step – the decision to terminate – that engages the indemnity obligation.

[ 8 ] If the Applicant intended for the indemnity provision to apply based on the date of termination as opposed to the date of the decision to terminate, then the Applicant should have said so in the employment contract. It did not. Rather, the provision clearly states that it is engaged when the Company decides to terminate the contract.

[ 9 ] Paragraph 7 of the Employment Contract sets out the compensation payable, namely, two years’ salary including the bonuses. The indemnity also includes any other compensation arising from normal labour regulations which, in my view, includes benefits that were paid to the Respondent during the course of her employment.

[ 10 ] On the issue of mitigation, Bowes v. Goss Power Products Limited , 2012 ONCA 425 is the controlling authority. The Court of Appeal held that where an employment contract contains a stipulated entitlement on termination without cause and is silent as to the obligation to mitigate, the employee will not be required to mitigate. That is the situation that faces the parties. There is no duty on the Respondent to mitigate.

[ 11 ] In the result, I have determined that paragraph 7 of the Employment Contract applies. A lump sum payment for the two-year period including bonuses and benefits is payable. Payments made to the Respondent by way of salary continuation since January 9, 2012 are to be credited against the amount owing to the Respondent. The amounts paid to the Respondent from the time of the decision to terminate in the summer of 2011 up to January 9, 2012 have, in my view, been properly paid to the Respondent for services rendered during that period and do not form part of any credit as against the two-year indemnity calculation.

[ 12 ] In my view, the foregoing interpretation of paragraph 7 is consistent with a plain reading of the contract. Contrary to the position taken by counsel to the Applicant, it does not, in my view, produce an absurdity. To hold otherwise would require a reading out of the words “would decide to” from paragraph 7 and endorse a situation where the Applicant, having made the decision to terminate, could unilaterally delay the communication of such a decision so as to avoid the provisions of paragraph 7.

[ 13 ] As a secondary matter, the Applicant requested that the court assess and fix the reasonable notice period. This issue only becomes relevant in the event that my finding on the applicability of paragraph 7 of the Employment Contract is in error. To the extent that it is in error and paragraph 7 of the employment contract is not engaged, it seems to me that, based on the age of the Respondent (45 years of age at the time of termination) and the length of her employment (21.5 years), an appropriate notice period would be 21 months. As previously indicated, there is no issue regarding whether employment has been terminated without cause. However, in these circumstances, the damage calculation would have to be reduced to recognize the Respondent’s duty to mitigate.

[ 14 ] The Respondent, having been successful, is entitled to her costs. A costs outline was submitted claiming $17,729.55 on a partial-indemnity basis based on actual fees and disbursements of $20,499.18. Counsel to the Applicant submitted that there should be no costs awarded, but that in the event that costs should be awarded, suggested the sum of $7,500 in these circumstances.

[ 15 ] Having reviewed the costs outline and taken into account the factors referenced in Rule 57, it seems to me that an appropriate amount to fix by way of costs is $10,000 inclusive of disbursements and HST. This calculation reflects the fact that this was, in my view, a straight forward motion and that there was undoubtedly a degree of duplication in having three professionals involved.

MORAWETZ J.

Date: October 12, 2012