ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 425-2010
DATE: 2012/10/23
B E T W E E N:
KENNETH JOSEPH FARWELL Plaintiff - and - CITAIR, INC. carrying on business as GENERAL COACH CANADA Defendant
Lianne J. Armstrong, for the plaintiff
Robert J. Atkinson, for the defendant
HEARD: September 18 th , 19 th and 20th 2012
Morissette J.:
[ 1 ] This is a wrongful dismissal action.
[ 2 ] The defendant operates a manufacturing plant in Hensall, Ontario. The plant has been in existence for approximately 65 years under various owners. In earlier times, the plant produced travel trailers, fifth wheels, truck campers, and motor homes and, to a lesser extent, part models. Since the mid-2000’s, in order to survive significant changes in the market conditions, the plant decided to focus exclusively on the production of park model homes and pre-fabricated cabins.
[ 3 ] The plaintiff’s career with the defendant began in 1971 as a general labourer/production line worker. Over the course of 38 years, the plaintiff, Kenneth Farwell (Ken) was promoted five times by the defendant, the particulars of which are as follows:
- 1972 – Promoted to the position of Assistant Purchasing Agent;
- 1975 – Promoted to the position of Materials/Purchasing Manager;
- 1993 – Promoted to Operations Manager of the Bus Division;
- 1996 – Promoted to the position of Operations Manager of the RV Division; and
- 2004 – Promoted to the position of Vice President of Operations.
[ 4 ] The last promotion was as a result of the then President, John Pryde, taking a leave of absence. He named Ken Vice-President of Operations. Roger Faulkner (Roger), who had been hired by the defendant in 1999 as Vice-President of Sales and Marketing, remained in that function and Al Taylor (Al) was the controller in charge of finances. All three were to run the Hensall plant together in his absence.
[ 5 ] The uncontroverted evidence was that although Ken’s title was changed, his duties and responsibilities remained unchanged. He was still in charge of the operations of the plant, while Roger was still in charge of sales and marketing.
[ 6 ] In the spring of 2005, Roger who was unhappy with three captains, complained to Head Office in the U.S.A. and the Chairman of the Board agreed to promote Roger to Vice-President and General Manager of the plant with Ken reporting directly to him. A short time later, Roger was named President, which included the overall responsibility for both the Hensall plant and the plant in Oliver, B.C.
[ 7 ] Although Ken was unhappy with the company’s decision, he tolerated the situation and reported to Roger as best he could. Ken testified that he saw this as a “power grab” by Roger.
[ 8 ] Ken had difficulty communicating with Roger and testified that Roger shut him out of many decisions. Roger on the other hand, testified that he was unaware of Ken’s feelings about him and that he did not intend to shut him out. In my view, there was a personality clash between these two gentlemen that has resulted in this litigation.
[ 9 ] All agree that Ken was an exemplary employee for the defendant, however, according to Roger, Ken was “in the wrong pigeon hole” and decided to place him back where he had excelled in the past as the purchasing manager.
[ 10 ] Roger decided to give Ken’s position of Operations Manager to Wayne Meidinger (Wayne). Wayne had been Ken’s foreman and reporting to Ken for a number of years. Approximately one month before announcing the news to Ken, Roger met with Wayne to offer him that position, which he accepted approximately two weeks later.
[ 11 ] Roger met with Ken on Monday, April 27 th , 2009 and told him of his decision and that he wanted Ken to accept the position of Purchasing Manager and that he would announce his decision to all employees on Friday at lunch. Ken was stunned and in shock. Ken testified that he told Roger he did not accept his decision and would not accept that position.
[ 12 ] Ken had not been the purchasing manager since 1993 when his brother, Tim Farwell, had been promoted to that position and had reported to Ken for all these years.
[ 13 ] In Ken’s mind, it meant that he would now be reporting to Wayne who had been reporting to him. This offer hit him at the core of his being.
[ 14 ] On the Friday morning of May 1 st , 2009, Roger asked Ken to help him write his speech to the employees. Ken refused to be involved except to tell him that he would not accept the position. Accordingly, Roger told the employees that as of Monday May 4 th , 2009, Wayne was going to be the Operations Manager and said nothing about Ken. Ken was present at that meeting and was humiliated and embarrassed.
[ 15 ] Ken was unable to return to work. He suffered from deep depression and anxiety. He was treated for these ailments and prescribed medication, however the stigma in a small rural area such as Hensall has left him withdrawn and unable to enjoy life as he did before.
[ 16 ] Notwithstanding his compromised mental health, Ken searched for alternative employment and on November 22 nd , 2010 accepted a position as Purchasing Agent for the defendant’s competitor, Northlander Industries.
Issue:
[ 17 ] The issues to be answered are as follows:
Was Ken constructively dismissed when he was assigned to the position of Purchasing Manager?
If so, what is the period of reasonable notice?
Did Ken mitigate his damages?
Is Ken entitled to damages for mental distress?
[ 18 ] Constructive dismissal occurs when the acts of the employer constitute a repudiation of the essential and fundamental terms of the contract demonstrating that it no longer intends to be bound by the employment contract.
[ 19 ] The leading case on the law of constructive dismissal in Canada is Farber v. Royal Trust Co. In that case, Gonthier J. as he then was, ruled that constructive dismissal occurs when:
an employer makes a unilateral and fundamental change to a term or condition of an employment contract without providing reasonable notice of that change to the employee. Such action amounts to a repudiation of the contract of employment by the employer whether or not he intended to continue the employment relationship. Therefore, the employee can treat the contract as wrongfully terminated and resign which, in turn, gives rise to an obligation on the employer’s part to provide damages in lieu of reasonable notice. [1]
[ 20 ] The test for determining whether a change to an employee’s position is sufficient to constitute a fundamental breach is an objective one. Accordingly, would a reasonable person, in the same position of the plaintiff, have considered the essential terms of the employment to have been substantially changed?
[ 21 ] Again in the Farber case, the Court found that “a demotion, which generally means less prestige and status, is a substantial change to the essential terms of an employment contract that warrants a finding that the employee has been constructively dismissed.” [2]
[ 22 ] Where a proposed change in position preserves an employee’s current salary, constructive dismissal may still be found provided that the reorganization entails a loss of status, title or a diminished role in a company. [3]
[ 23 ] In reorganizing, Ken’s role as VP Operations to Purchasing Manager involved a significant change in responsibilities and duties. It entailed a change in title to reflect his diminished role in the company resulting in a significant loss of status and prestige. In that regard, the evidence of all witnesses, including that of Roger, acknowledged that Ken’s proposed new role would be of lesser status, even though Roger attempted to convince this Court that all his managers are of importance, it remains a fact that from an objective point of view, the Purchasing Manager does not have the same status or prestige as the Operations Manager to whom the Purchasing Manager reports to.
[ 24 ] Accordingly, I find that Ken was constructively dismissed.
Reasonable Notice:
[ 25 ] As indicated in Bardal v. The Globe & Mail Ltd ., [4] the reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the employee, the age of the employee and the availability of similar employment, having regard to the experience, training and qualifications of the employee.
[ 26 ] Ken was 58 years of age in May 2009 and had been employed for 38 years. He had a high level managerial employment and had been very dedicated to the company.
[ 27 ] Given these factors, I find that a reasonable period of notice would be 24 months.
Mitigation of Damages:
[ 28 ] In assessing this issue, the Court must use an objective standard when considering whether a constructively dismissed employee ought to have accepted an offer of continued employment in an effort to mitigate his damages.
[ 29 ] As indicated in Evans v. Teamsters Local Union No. 31 , [5] one of the critical elements is that an employee not be obliged to mitigate by working in an atmosphere of hostility, embarrassment or humiliation and it is that factor which must be at the forefront of the inquiry into what is reasonable.
[ 30 ] It is further important that the non-tangible elements, such as work atmosphere, stigma and loss of dignity, as well as nature and conditions of employment, be included in the assessment.
[ 31 ] The offer to return to work as a Purchasing Manager entailed accepting a position that Ken had held 16 years earlier, which involved considerable loss of responsibility and status and authority within the company.
[ 32 ] Further in this case, the fact that an employee previously subordinate to Ken, would be elevated to his position, and in Ken’s mind, having to now report to Wayne, even though Roger testified otherwise, would be humiliating and embarrassing given the prior roles and responsibilities within the company. For these reasons, I find that requiring Ken to return to the company in order to mitigate his losses would be unreasonable.
[ 33 ] Finally, given Ken’s mental fragile health as a result of the depression he suffered from the humiliation of the loss of his position of the defendant, I find that he mitigated as best he could in the market at hand.
[ 34 ] Accordingly, Ken did mitigate his damages.
Moral damages:
[ 35 ] Moral damages are payable where an employee suffers actual injury as a result of the manner of termination, as opposed to the fact of termination. Bastarache J. (as he then was) stated in Honda Canada Inc. v. Keays , [6]
Damages for mental distress are available only where an employer engaged in conduct during the course of dismissal that was unfair or was in bad faith. Normal Distress and hurt feelings resulting from dismissal are not compensable.
[ 36 ] To be entitled to those types of damages for bad faith, a plaintiff must demonstrate that their damages were within the reasonable contemplation of the parties.
[ 37 ] Ken has provided some evidence of his medical condition regarding anxiety and depression which I accept. The issue here though is whether the manner in which his employment came to an end can be found to be in bad faith.
[ 38 ] Although it may have been humiliating to Ken at that meeting in front of all employees that Wayne was now going to have his job, it cannot be said to have been in bad faith on the part of Roger. Roger did approach two other employees about his decision and enquired about the soundness of his beliefs. I cannot find that to be in bad faith.
[ 39 ] In my view, the medical records and the deep depression that Ken suffered is as a result of his termination and not the manner in which he was terminated.
[ 40 ] For these reasons, I award no damages for mental distress.
Disposition:
[ 41 ] Ken is hereby granted a judgment in an amount to be agreed upon by the parties for compensation for 24 months of income and benefits.
[ 42 ] There were no bonuses paid since his departure and therefore none owing.
[ 43 ] Ken’s out-of-pocket expenses to be paid by the defendant in the amount of $2,326.76.
Costs:
[ 44 ] Should the parties be unable to agree on the issue of costs, I am prepared to hear submission at a time to be scheduled by the trial coordinator.
“Justice J. N. Morissette”
Justice J. N. Morissette
Released: October 23, 2012
COURT FILE NO.: 425-2010
DATE: 2012/10/23
ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N:
KENNETH JOSEPH FARWELL Plaintiff - and - CITAIR, INC. carrying on business as GENERAL COACH CANADA Defendant
REASONS FOR JUDGMENT Morissette J.
Released: October 23, 2012
[1] 1997 , [1997]1S.C.R. 846
[2] Ibid., para 36
[3] Jobber v. Addressograph Multigraph of Canada Ltd ., [1980] O.J. No. 1598 (ONCA)
[4] (1960), 24 D.L.R. (2d) 140 (Ont. H.C.J.) at para. 145
[5] [2008] SCR 661 paras. 26, 29 and 30.
[6] 2008 SCC 39