ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 12-53995
DATE: 20130913

BETWEEN:

DALE LEGGE
Plaintiff

– and –

TEKSmed SERVICES INC.
Defendant

Paul A. Webber and Katie Laframboise, for the Plaintiff
Tudor Carsten and Tatha Swann, for the Defendant

HEARD: June 25 and 26, 2013

REASONS FOR JUDGMENT

Métivier j.

1The Plaintiff, Dale Legge (“Legge”), is a businessman who resides in the city of Ottawa.

2The Defendant, TEKSmed Services Inc. (“TEKSmed”) is a limited company having its head office in the City of Chilliwack in the Province of British Columbia. It carries on business as a national provider of complete workers’ compensation claims management for employers.

3In January 2006, the Plaintiff became employed by the Defendant as Vice-President, Eastern Canada, in order to build the business in Ontario.

4In 2007, the Plaintiff was promoted to the position of Vice-President, Operations.

5In 2009, he was promoted to the position of President of the Defendant Company when the prior President “stepped back” from that position.

6In the spring of 2011, the Plaintiff became Vice-President, Corporate Development and, at the end of that year, in December, Mr. Legge would be Vice-President, Client Care, Eastern Canada.

7The Plaintiff was terminated without notice on March 12, 2012, after six years and two months of employment. The termination was said to be for cause.

Issues

8The evidence is that the Defendant suggested to the Plaintiff that he “incorporate himself.” He was told that this would address a possible future need to function on behalf of several companies which the Defendant stated he intended to set up.

9The Plaintiff accordingly created a company known as RDAL Management Services Inc. (“RDAL”). That company then provided the services of the Plaintiff to the Defendant Company from 2007 to 2009. He provided a monthly invoice to the Defendant.

10One of the issues herein has been whether the existence of that company changes the legal relationship of the Plaintiff to the Defendant.

11In Ligocki v. Allianz Insurance Co. of Canada, 2010 ONSC 1166, 100 O.R. 3(d) 624, the Court found that the employee’s use of an incorporated entity did not trump the determination that he was, at all times, an employee. Justice Hennessey found that the situation in that case had no indicia of an independent contractor relationship except in the manner in which the Plaintiff was paid and how he reported his income.

12This analysis applies to the case at Bar, where the employer himself suggested the incorporation to the employee. All job descriptions, decisions for promotions or demotions, all direction and instruction came from Mr. Ted Shipley who represented TEKSmed.

13In a letter to Mr. Legge prior to termination, Mr. Shipley advised that the use of the corporation “would not survive a payroll audit” and therefore they would be returning to a salaried compensation scheme rather than having the payments go through a corporation.

14The Defendant has now agreed that the Plaintiff was an employee throughout and I find that this status is applicable for all purposes, not merely for calculating damages for the notice period, as was suggested by the Defendant.

15Furthermore, no “cause” is now being alleged although, earlier, the employer took the position that the behaviour of another employee, introduced by the Plaintiff to the Defendant and who misconducted himself leading to that employee’s termination, was directly attributable to the Plaintiff, and that this was sufficient to give cause for termination of the Plaintiff’s employment.

16The issues which remain in dispute are the following:

a) The appropriate notice period and whether the Plaintiff has reasonably mitigated his damages;

b) The pay level on which payment in lieu of notice should be calculated: $120,000 or $70,000;

c) Expenses incurred by the Plaintiff on behalf of the Defendant Company and which have not been repaid nor admitted to be owing; and

d) The value, if any, of certain shares which were gifted to the Plaintiff and whether these must be redeemed by the Defendant.

A. Notice Period and Mitigation

Notice Period

17It is submitted by the Plaintiff that the notice period should be in the range of 12 – 15 months in keeping with the senior positions the Plaintiff held in the company.

18The Defendant submits that the notice period should be ten months.

19The case of Bardal v. Globe & Mail Ltd., 1960 294 (ON SC), [1960] O.W.N. 253, 24 D.L.R. (2d) 140 (Ont. H.C.) has set out a non-exhaustive list of factors to consider in determining an appropriate period of notice. By way of general statement, McRuer, C.J.H.C., set out at para. 21 as follows:

There can be no catalogue laid down as to what is reasonable notice in particular classes of cases. 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 servant, the age of the servant and the availability of similar employment having regard to the experience, training and qualifications of the servant.

20These factors are examined below.

Character of Employment

21The Plaintiff was hired in January of 2006 in the position of Vice President, Eastern Canada. In 2007, he was promoted to the position of Vice President, Operations.

22The character of the employment in the case at Bar includes a period of two years during which Mr. Legge served as President of the company and enjoyed a salary of $120,000. This occurred during a period when the President, Mr. Shipley, “stepped back from the company” and dealt with health issues, according to the Plaintiff. This indicated that the Plaintiff enjoyed, at least for some time, the confidence of the employer, which led to repeated promotions and that he assumed a position of significant responsibility.

23There is a paucity of evidence from the Defendant, as Mr. Shipley did not testify, and the only evidence on his behalf is found in some e-mails and documents which the Plaintiff identified.

24Mr. Legge’s evidence was that notice of his apparent “demotion” in March of 2011 was not couched in terms of criticism, but that Mr. Shipley was taking the Presidency back and making him Vice President, Corporate Development. At that point, his salary remained at $120,000.

25On January 1, 2012, Mr. Legge was told he would have a new salary of $70,000 and his title was to be V.P., Client Care (East), as that was where his strengths lay.

26He was terminated in March of 2012.

27In the absence of evidence to the contrary, except for the few e-mails expressing disappointment in the employee’s performance to others in the company and not to Mr. Legge, one must conclude he did his job competently. Mr. Legge testified that he was not told of these criticisms.

Length of Employment

28It is agreed that this period is one of six years and two months.

Age of Employee

29The Plaintiff is now 42 years old.

Availability of other Employment

30The evidence on this point is not clear. The Plaintiff has not been successful in obtaining employment in the field in which he was employed, being that of management of Workers’ Compensation Board claims.

31This is a rather narrow field and the Plaintiff, in the absence of finding another appropriate position, has now chosen to improve his education in order to better qualify for other employment.

Conclusion on Notice Period

32On consideration of the above factors and, on reviewing the case law submitted by each party, which reveals significant discrepancies in the notice periods awarded, I find that, in the circumstances here present, including the past responsibilities assumed and salary earned, the appropriate notice period is 13 months.

Mitigation

33The Defendant alleges that the notice period should be reduced because the Plaintiff has failed to reasonably mitigate his losses.

34It is further submitted by the Defendant that since the Plaintiff made his first job application only on July 30, 2012, he had done nothing for an unreasonable four and a half months after being terminated. He has made only ten applications since then and this is too few to be reasonable, says the Defendant.

35Further, the Defendant argues that the Plaintiff has unnecessarily limited his job search, given that his managerial skills are not unique or specialized.

36He also failed to keep the Defendant advised of current job searches.

37In at least one case, he failed to respond to a contact from a prospective employer for ten days. He did not contact any of his former clients. Overall, his efforts have been sporadic and half-hearted.

38Accordingly, it is submitted that the ten month notice period the Defendant advocates should be reduced to six months.

39One of the cases relied on for this principle is Walter Bustos v. Celestica International Inc., 2005 24598 (ON SC) at paras. 37 and 38. The employee claiming unjust dismissal did not commence his job search until 12 weeks after termination. The Court held that the time lapse was unreasonable and reduced the notice to which he would be otherwise entitled by eight weeks.

40The Plaintiff responds to these allegations that he applied on-line for positions and would go to various websites where jobs would be posted. There is often no record of such activity.

41With respect to not advising the Defendant’s counsel as to his ongoing job searches, his evidence was that he did not know that this was an obligation. There was no evidence of such an undertaking having been requested.

42He also explained that he was offered a certain settlement by the company, but that it came with a non-disclosure, non-solicitation and non-competition agreement. According to terms of these, he was not to disclose confidential information, approach any of the Defendant’s customers, or engage in any competitive activity for a period of 24 months.

43He was therefore fearful, he said, that if he approached former clients in any way or breached what he considered a fiduciary duty to his former employer, there might be serious repercussions. His fear was based on how the company had acted in a case similar to his.

44His reasoning may not have been entirely correct, but his knowledge of the company set the context for his conclusion, and I accept this explanation for some of the non-activity of which the Defendant complains.

Conclusion on Mitigation

45However, I cannot find that the Plaintiff’s efforts were as whole-heartedly energetic as one might expect. Accordingly, I reduce the notice period from 13 months to 12 months on the basis that while he may have had reason to tread softly, he should have begun his job search sooner.

B. Which Pay Level?

46The Plaintiff’s position is that the proper remuneration to consider when assessing damages is $120,000, the salary he received from 2009 to December 2011. Counsel points to the fact that the reduced salary of $70,000 was in pay for only two and one-half months, from January to March 12, 2012.

47The Defendant’s position is that the annual salary at the time of dismissal was $70,000. That is the annual salary he would have earned had he worked through a notice period.

48The Plaintiff has not alleged constructive dismissal arising from his demotion and the reduction of his salary from $120,000 to $70,000. There was some evidence that the Plaintiff expected the new salary to be $75,000, but the advice from the employer was that it would be in the amount of $70,000.

Conclusion on Pay Level

49Accordingly, I find that the pay level to be used is the one which the Plaintiff accepted without apparent objection and that is $70,000.

C. Expenses

50The history of financial remuneration of Mr. Legge reveals rather unorthodox procedures when dealing with monies owing to him by the company.

51The Defendant accepts that Mr. Legge is owed some of the expenses claimed. However, he resists the remainder on several grounds.

52Firstly, it is submitted that some expenses are caught by a limitation period of two years.

53The Limitations Act, S.O. 2002, Chapter 24, Schedule B (the“Act”) provides:

4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered. 2002, c. 24, Sched. B, s. 4.

5. (1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a). 2002, c. 24, Sched. B, s. 5 (1).

54I reject that entire contention as being without merit. The expenses were repeatedly requested by the plaintiff and known, alluded to, and discussed by both the Plaintiff and the Defendant. In some cases, the fact was that the employer was short of money and the Plaintiff assisted as he could in a few cases by advancing his own money and, in others, by waiting for undue periods of time for repayment of legitimate expenses.

55I am of the view that, in the circumstances here present, including the habitual pattern of the employer’s failure to pay monies owing to the employee, the Plaintiff employee was not in a position where he could have brought a claim while he was still employed. Therefore, I find the Act does not apply as the claim was brought shortly after termination.

56With respect to the RRSP to which all employees are entitled, the employer simply failed to live up to its obligation to contribute its share or, it seems, to even deposit the monies which it had already deducted from the employee for his personal contribution.

57What is clear is that the company repeatedly told Mr. Legge that they would “clean up your outstanding expenses during 2012” - this in an e-mail from Mr. Shipley to Mr. Legge in December of 2011.

58The evidence is that the Defendant was to repay expenses claimed at the rate of $5,000 per month over a six or possibly eight month period. This was repeated in their letter of termination in March of 2012 “… repayment of expenses will follow the agreed repayment schedule.”

59The laissez-faire attitude concerning the timely repayment of an employee’s expenses does not speak highly to the financial good faith of the company, nor to its fair treatment of Mr. Legge. The claim now that some of these expenses are out of time is unacceptable and must be rejected.

60There is corroboration to the company’s frequent insufficient funds, as the Plaintiff often had to ask if he could cash a cheque which he had received from the Defendant.

61I have already indicated that the Plaintiff was an employee throughout and that all payments made by him to the benefit of the Defendant are properly before this court.

62The Defendant has admitted that he owes:

a) The sum of $2,812.97 to the Plaintiff in reimbursement of expenses;

b) The sum of $ 11,266.06 to RBC for RRSP contributions it ought to have made on behalf of the Plaintiff (as part of an employee plan); and

c) The sum of $6,000 in reimbursement of payroll assistance provided by the Plaintiff to the Defendant on or about May 7th, 2009.

63Accordingly, Judgment will go for those amounts.

64I order that, after credit given for the above payments, the other expenses claimed by the Plaintiff also form part of this Judgment including the hotel expenses which are more than the alleged, but unproven, $100.00 limit indicated on some documents and including the $10,000 which the Plaintiff, through his company, paid to Quartech.

65I may be spoken to if there is any confusion concerning those expenses.

D. Shares

66It is common ground that Mr. Legge was given shares by Mr. Shipley.

67What is not clear is what is to become of these shares.

68The termination letter from the employer clearly stated that “Your shareholdings remain unaffected.”

69The Plaintiff asks that these shares be bought out for an amount of $160,000.

70The Defendant Company, on August 15 2008, wrote, in what is referred to as a Memorandum of Share Forfeiture: “Should RDAL and or Dale Legge cease being employed by TEKSMed the 8 shares gifted to you by Ted Shipley will be returned to Ted Shipley, President of TEKSMed without delay.”

71An Addendum to Memorandum of Share Forfeiture was created on August 21, 2008 and it stated:

In any case where the contractual relationship between Dale Legge and or RDAL Management and TEKSMed cease, TEKSMed retains the right to immediately and automatically retract the 8 shares gifted for $0.00 consideration. TEKSMed does not require the consent of Dale Legge or RDAL Management to execute retraction and may do so at the direction of the President of TEKSMed. TEKSMed may, at its sole discretion, either hold the retracted shares in its Treasury, or reissue them to existing or new shareholders for any consideration that it deems necessary.

72The Defendant’s position is that the retraction is set out to be for no consideration. With respect, I do not agree. I find that the phrase “for $0.00 consideration” modifies “gifted” and not “retract”, as advanced by the Defendant.

73The only other evidence we have is that of Mr. Legge, who claims that he was told that the value would be $20,000 per share, which amount was paid to a previous shareholder whose shares were taken back and which he was told was the amount to which he would be entitled. I accept this evidence.

74The submission from counsel for the Defendant is that forfeiture does not equate to a buyout of those shares which, in any case, were gifted to RDAL, and not to Mr. Legge personally. Given my previous findings on this corporate point and the continuous references to RDAL and/or Dale Legge in the two Memoranda, I find that there is little substance to that argument.

75Accordingly, I order that Mr. Legge turn over his eight shares to Mr. Shipley, despite the evidence that he no longer appears to be President of TEKSmed, upon payment to him of $160,000.

Costs

76I will receive brief written submissions (maximum three pages) for costs – from the Plaintiff on or before September 15, 2013 and from the Defendant on or before September 30, 2013.

Métivier J

Released: September 13, 2013

COURT FILE NO.: 12-53995
DATE: 20130913

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

DALE LEGGE
Plaintiff

– and –

TEKSmed SERVICES INC.
Defendant

REASONS FOR JUDGMENT

Métivier J

Released: September 13, 2013