COURT FILE NO.: CV-09-4749

DATE: March 12, 2014

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

KERRY MCCARTHY

Eric O. Gionet for the Plaintiff

Plaintiff

• and -

MOTION INDUSTRIES (CANADA) INC.

Dan J. Shields, for the Defendant

Defendant

HEARD: October 21, 22, 23, 2013

REASONS FOR DECISION

James J.

Introduction

[1] The plaintiff in this case is a salesman who was responsible for an account that grew exponentially in a short period of time. The plaintiff managed the account over the next four years with considerable support from his employer.

[2] In 2008, following the global financial crisis, sales collapsed in a matter of a few months, resulting in a major work force downsizing at the defendant’s branch in North Bay, Ontario. The plaintiff requested an opportunity to take some time off and agreed to a thirty-five week lay-off.

[3] This lawsuit focused on the circumstances surrounding the plaintiff’s pending return to work at the end of the lay-off period. The plaintiff says he was constructively dismissed and claims substantial damages.

[4] The defendant says that the position it offered to the plaintiff at the end of the lay-off period was not fundamentally different than the outside sales position he had always held. The defendant says it was entitled to reorganize the sales assignments as changing conditions warranted. The plaintiff chose not to return to work and resigned. Alternatively, the plaintiff should have mitigated his damages by resuming his sales responsibilities with the defendant at the end of the lay-off period.

[5] For the reasons that follow I have concluded that the plaintiff was constructively dismissed because the position offered to him at the end of the lay-off period was fundamentally different than the work he had been doing for the previous four years. He was not obliged to resume work with the defendant to minimize his damages, in part because the position offered to him was not well-defined.

The Facts

[6] The plaintiff is a fifty-year-old resident of North Bay, Ontario where he has lived for most, if not all, his life. The plaintiff’s work history involved the sale of hydraulic equipment and parts following his graduation from secondary school. He also worked as a service manager for an automobile repair shop for about three years. He spent ten years as a mechanic and shop foreman for a hydraulics firm called T.K. Hydraulics.

[7] In 1995 the plaintiff became employed with a local start up hydraulics firm called C.H.V. Hydraulics (“CHV”). Initially he worked on the order desk. In 1998 he became one of several outside sales representatives for CHV.

[8] The plaintiff had a book of existing accounts and made cold calls to build the customer base. He also sought work for CHV’s service department which had the capability to perform repairs and light fabrication. Everyone agrees the plaintiff was a very good salesman. He knew the hydraulics business, he knew his company’s line of products and he made it his business to get to know his customers and their needs.

[9] One of his accounts was the North Bay division of Boart Longyear. Boart Longyear is engaged in various aspects of the diamond drilling business. It serves the mining industry on a global basis. The North Bay division of Boart Longyear also built complete drill rig assemblies.

[10] In or about 2002 CHV was bought by a firm called Motion Canada. Motion Canada is part of a larger enterprise that distributes industrial parts internationally. Currently Motion Canada has 15 branches and two service centers in Ontario and a much larger presence in the United States.

[11] When Motion Canada took over CHV, it revised the commission structure for its outside sales representatives. In July 2002 the plaintiff and the defendant agreed to a written term sheet dealing with compensation for sales representatives. The plaintiff’s territory was comprised of North Bay and Sudbury. The agreement was for one year, from January 1^st, 2002 until December 31^st, 2002. It provided for termination by either party on two weeks’ notice. The plaintiff’s base salary was set at $27,600. His commission rate was 7.5% “on the gross margin in territory”. He was given a guaranteed minimum commission of $23,000 per year.

[12] Both the plaintiff and the defendant agree that the compensation agreement was not an employment contract. It did not contain all the terms applicable to the employer/employee relationship. Other than the compensation agreement, the terms of the plaintiff’s employment were not reduced to writing.

[13] In 2002 and early 2003, the plaintiff became aware of rumors that Boart Longyear was considering outsourcing its drill rig production to an American firm. This would have negatively affected the defendant’s sale of parts to Boart Longyear’s North Bay