CITATION: Wolfman v. Rocktenn-Container Canada, L.P. 2015 ONSC 1432
COURT FILE NO.: CV-12-0470456
DATE: 20150306
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ALAN WOLFMAN
Plaintiff
– and –
ROCKTENN-CONTAINER CANADA, L.P.
Defendant
William R. Gale and Michael S. Stitz for the Plaintiff
Anne Gallop for the Defendant
HEARD: February 20, 2015
FAIETA, j
reasons for decision
[1] In October 2012 the plaintiff was terminated from his employment, without cause, by the defendant. The plaintiff brings this motion for summary judgment to have his claim for compensation determined.
[2] The following provisions of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 are material:
• Rule 20.01(1). A plaintiff may, after the defendant has delivered a statement of defence or served a notice of motion, move with supporting affidavit material or other evidence for summary judgment on all or part of the claim in the statement of claim.
• Rule 20.04(2)(b). The court shall grant summary judgment if the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment
[3] The parties have agreed to have the plaintiff’s claim determined by summary judgment. The affidavit evidence of the plaintiff, the plaintiff’s former manager and the defendant’s human resources manager were filed along with transcripts from their cross-examinations.
[4] The rules for summary judgment “must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims.”[1]
[5] This motion raises the following issues:
• What is the appropriate period of reasonable notice?
• What is the appropriate amount of base salary compensation?
• Is the plaintiff entitled to additional compensation under the bonus plan for 2012?
• Is the plaintiff entitled to compensation during the reasonable notice period for the value of his loss of bonus plan, group insurance plan, pension plan and car allowance?
• Did the plaintiff act reasonably to mitigate his losses?
Issue # 1 - Reasonable Notice
[6] The plaintiff was employed as a National Account Sales Representative by the defendant and its predecessor Smurfit Stone Container Canada L.P. (“Smurfit”) until his termination without cause in October 2012. At the time of termination the plaintiff was 52 years old and he had held this position for 16 years. He received a salary of about $140,000 along with bonus and benefits that resulted in total compensation of about $192,000 in 2011. There is no dispute that the plaintiff loyally and competently served the defendant employer and its predecessor.
[7] In his role as National Account Sales Representative the plaintiff was generally responsible for the brokering of recyclables from companies mostly in Canada and, to a limited extent, the United States of America and China.
[8] The plaintiff’s sales role was specific to the corrugated consumer packaging and recycling industry (“the industry”). The industry is dominated by a small number of large firms, mainly subsidiaries of American entities. The plaintiff had worked in this industry for 26 years. In fact, the plaintiff worked for the Canadian division of American based companies for most of his career. In Canada there are no corporations within the industry that are similar in size and structure as the defendant. As a result, it was difficult for the plaintiff to find new employment as a sales representative within the industry.
[9] For about the first month following this dismissal the plaintiff was in a state of shock and adjustment given that his many years of employment with the defendant had ended. Not surprisingly, the termination of his employment caused significant anxiety and depression for both the plaintiff and his family. Nevertheless, the plaintiff began reaching out, principally by telephone, to all of the individuals in his personal and professional network about job opportunities primarily within the industry. He also regularly reviewed websites such as Workopolis and LinkedIn.
[10] The plaintiff had discussions with three companies within the industry regarding employment. Ultimately, the plaintiff was hired by North South Fibres Inc. (“North”) in September 2013 at a base salary of $90,000.00.
[11] The plaintiff rejected the defendant’s offer, delivered in October 2012, of salary continuance for a period of 15 months following his termination of employment that was conditional upon the plaintiff agreeing to certain non-competition and non-solicitation covenants.
[12] The defendant’s position is that 12 months is a reasonable notice period in these circumstances if the restrictive covenants are not given by the plaintiff. The plaintiff’s position is that 20 months is an appropriate notice period.
[13] In Honda Canada Inc. v. Keays[2] the Supreme Court of Canada confirmed that a court must apply the following considerations, on a case by case basis, in order to determine what constitutes reasonable notice of termination:
• the age of the employee at termination;
• the length of employment;
• the character of the employment;
• the availability of similar employment, having regard to the employee’s experience, training and qualifications.
[14] As noted the plaintiff was 52 years old when his employment was terminated. He had been employed for 16 years by the defendant.
[15] Care must be taken to ensure that the “character of the employment” and the “availability of similar employment” factors are not under-emphasized when assessing what is a reasonable notice period.[3]
[16] The plaintiff’s position is that his duties as a National Account Sales Representative went beyond that of an ordinary sales person. The plaintiff states that his duties included:
• Commodity broker of recyclable paper and plastic. This was a unique position and responsibility in the company as colleagues based in the U.S.A. either purchased or sold recyclables, not both;
• Responsible for a budget valued at several million dollars (buying and selling) with minimal oversight;
• Purchasing recyclables from other companies in Canada, upstate New York and New England and selling them to customers in Canada, the U.S.A. and China;
• Assisted in purchases for company owned mills in Quebec, Montana and New York;
• Started the Canadian office of Smurfit/RockTenn;
• Procured new accounts and grew the business year over year;
• Dotted line reporting of customer and service employees to the plaintiff;
• Maintained a profitable book of business on behalf of the defendant;
• Securing the most cost effective freight rates and worked with Customs Brokers;
• Part of Export Group within the Recycling division;
• Regular interaction with the Vice President, Export; and
• Previously responsible for all purchases of recycled fibres for company owned mills in New Brunswick and Ontario.
[17] The affidavit evidence of Mike Quinn, Senior Procurement Manager, in the defendant’s Montreal office, indicated that:
• The plaintiff had no authority with respect to the hiring and firing of Customer Service Representatives, although he may have conducted interviews on two occasions for CSRs that were to work out of Burlington, Ontario since the CSR would be working closely with him;
• The responsibility for all of the managerial oversight and decision making in relation to CSRs, including conducting performance reviews and dealing with employment related issues like vacation scheduling were undertaken by Mr. Quinn rather than the plaintiff;
• A “dotted line” reporting relationship did not exist between the plaintiff and the CSRs and this is reflected by the absence of same on the organizational chart dated August 2011 that was appended to Mr. Quinn’s affidavit.
[18] A job questionnaire related to the plaintiff’s position was completed by Mr. Quinn six months before the plaintiff’s termination. The questionnaire identified many characteristics of the plaintiff’s job duties, including:
• The plaintiff typically received direct supervision, with periodic oversight;
• The plaintiff had no supervisory or leadership responsibility;
• The plaintiff had responsibility for development of a budget from $10-100 million within his division; no responsibility for budget management;
• Sales responsibilities included expanding volume and product mix of orders from existing customers; develop and pursue leads for new customers; and product pricing with full discretion;
• The minimum related work experience necessary to perform his job was 5-10 years;
[19] While I agree with the defendant’s position that the plaintiff’s duties were not supervisory or managerial, it is my view the character of the plaintiff’s duties were unique and entailed specialized skills.
[20] With respect to the availability of similar employment, I accept the plaintiff’s evidence described above regarding difficulty finding similar employment and I reject the defendant’s submission that the plaintiff’s skills were broadly transferrable skills which, as a consequence, would have expanded what is meant by “similar employment” far beyond his experience, training and qualifications which arose from 26 years of sales and buying experience in the industry.
[21] Having regard to the four factors described in Honda and having reviewed the various authorities submitted by the parties, it is my view that a period of reasonable notice in these circumstances is 16 months.
Issue #2: Base Salary Compensation
[22] The plaintiff’s base salary at the time of his dismissal was $140,120.46.
[23] The plaintiff is entitled to his base salary on a pro-rated basis for the 11 month period after his termination until he was hired by North: $128,443.00. The plaintiff received a payment as required under the Employment Standards Act, S.O. 2000, c. 41, of $65,129.60 from the defendant in March 2013. Once that payment is deducted, $63,313.40 remains owed.
[24] The plaintiff is also entitled to the difference in the base salaries paid by the defendant and North for five months which is balance of the 16 month reasonable notice period.
[25] Given that the starting annual salary paid by North for the first three months of his employment was $90,000, the difference between salaries on a monthly basis was $4,176.00. Over a three month period that amount totals $12,528.00.
[26] The plaintiff’s annual salary was increased to $95,000 by North after three months. The difference between salaries on a monthly basis was $3,760.00. Over a two month period that amount totals $7,520.00.
Issue #3: Bonus Plan
[27] The plaintiff participated in the defendant’s and Smurfit’s bonus plan at least as far back as 2000. Typically, each year every employee would receive a copy of the bonus plan (specifying its terms and conditions) as well as another document that outlined the employee’s objectives under the bonus plan for that year.
[28] The defendant purchased Smurfit in about May 2011. The plaintiff received the following bonus payments from defendant and Smurfit over the years:
• 2012 - $5,824.92 (RockTenn)
• 2011 - $36,725.26 (RockTenn)
• 2010 - $20,488.00 (Smurfit)
• 2009 - $26,343.32 (Smurfit)
• 2008 - $29,715.00 (Smurfit)
[29] The terms of the 2010-2011 half year bonus plan issued by Smurfit were similar to the bonus plan it had issued in the prior year except for the fact that it was a half year plan. Terms included:
• The plan aligns salaried full time sales representatives with the corporate objectives by measuring and rewarding each sales representative;
• The objectives set for each plan participant relate to specific measurable goals or targets that show improvement from the prior year in the targeted areas;
• Participation is at the discretion of the Division General Manager;
• Participants will be advised of their objectives, and must meet or exceed expectations to receive the bonus;
• Participants must be a full time salaried employee;
• The award date shall be after the bonus period and thus the bonus plan;
• The company may amend the plan at any time;
• Notwithstanding any other provision of this plan, the amount of bonus earned and unpaid is subject to forfeiture if, prior to the award/payout date, the employment of the participant is terminated by the company for any of the following reasons:
o The participant resigns or quits;
o The participant is terminated by the company for good cause as determined by the company in its sole judgment [underlining added]
[30] In the years 2008-2011 the bonus potential represented at least 35% of the plaintiff’s base salary.
2012 Bonus
[31] The plaintiff claims that he is entitled to an additional amount of bonus for 2012 (to reflect the amount of bonus paid in the average 2 prior years) on the basis that the defendant has amended the plaintiff’s employment contract by unilaterally amending the objectives of the bonus plan without notice.
[32] The background facts are as follows:
• As noted above, the bonus plan states that:
o The company may amend the bonus plan at any time;
o Participants will be advised by the employer of the bonus objectives.
• In fiscal year 2012 (ending September 2012) the plaintiff was paid a bonus of $5,284.92. The bonus was paid to the plaintiff in November 2012 about two weeks after his dismissal;
• In 2012 the vast majority of the defendant’s employees received a significant reduction in their bonuses in 2012 as a result of the company’s poor financial performance that year;
• The defendant did not provide any details to its employees, including the plaintiff, about the 2012 bonus plan or their 2012 bonus objectives until after fiscal year 2012 had expired;
• The defendant has never received a copy of the 2012 bonus plan however the defendant has provided a one page document that outlines the bonus objectives. The bonus objectives are entirely dependent upon satisfaction of corporate objectives and have no element of reward for satisfaction of personal objectives. Bonus objectives prior to 2012 rewarded satisfaction of both corporate and personal objectives. In 2009 and 2010 personal objectives accounted for more than 57% of the total bonus plan objectives.
• In the past Smurfit had provided the plaintiff with a bonus plan and bonus objectives either at the beginning of the fiscal year or during the year such that the plaintiff would be aware of what he had to do to maximize his bonus payment;
• From year to year, Smurfit often changed the objectives on which the plaintiff’s bonuses were calculated, for instance, by increasing or decreasing the weight given to corporate financial performance;
• Of the 41 employees who were employed and received bonuses in all of fiscals 2011, 2012 and 2013, their awards were, on average, approximately 70% less in 2012 than they had been in 2011. For those 41 employees, RockTenn paid approximately $1,698,185 in bonuses in 2011 compared to $520,014 in 2012. These 41 employees received bonus awards in 2013 that were, on average, about 147% higher than in 2012. The defendant paid these 41 employees a total of $1,287,766 in 2013;
• Prior to 2012 all bonus objectives were based on satisfaction of personal and corporate objectives;
• The defendant’s affiants acknowledge that following the defendant’s acquisition of Smurfit the 2011 bonus plan published by Rocktenn did not materially differ from the 2010 Smurfit bonus plan;
• The defendant and Smurfit’s past practice was to set the financial/profitability objectives without any input or approval from the plaintiff.
[33] The plaintiff relies upon Mathieson v. Scotia Capital Inc.[4] for the proposition that when awarding discretionary bonuses an employer must apply fair and reasonable criteria in a fair and reasonable process. In that context an employer may change bonus criteria from year to year and is entitled to place greater weight on certain criteria based on business judgment, changing market conditions, public policy and view amongst experts in the filed as to how to best award this form of compensation. The court stated at para. 58:
What is important in terms of fairness, is that the criteria each year are reasonable, that they are communicated to the employees and that they are applied “consistently among employees” …
[34] In my view Mathieson has no application in these circumstances as there is no indication that the Scotia Capital Incentive Plan in at issue in that case contained terms that gave the employer broad discretion to vary the criteria upon which bonuses were paid and to change the terms of the plan, as the bonus plan does in this case. The bonus plan provides significant discretion to the employer, and it is that plan which forms part of the plaintiff’s employment contract not the Scotia Capital Incentive Plan. Accordingly, the claim for an additional bonus for fiscal year 2012 is dismissed.
Bonus during the Reasonable Notice Period
[35] The defendant relies upon Chandran v. National Bank of Canada[5] for the proposition that only active employees are entitled to participate in a bonus plan. In Chandran the court ruled that the plaintiff was not entitled to a bonus payment after being wrongfully dismissed because the bonus plan made eligibility for an annual bonus conditional upon an employee being employed by the bank: 1) at the end of the fiscal year; and 2) when the bonus is paid.
[36] There is nothing in the defendant’s bonus plan that excludes an employee who is terminated “without cause” from participating in the plan. The plan does not make payment of a bonus conditional upon an employee being employed by the bank at the end of the fiscal year and when the bonus is paid.[6] Further, the plan provides that the entitlement to a bonus is forfeited by employees who “resign”, “quit”, or who have been “terminated by the company for good cause”. In my view the plan would not have included the phrase “for good cause” had the intention been to require employees terminated “without cause” to forfeit any bonus that had at the date of termination been earned and unpaid.
[37] Further, I accept the plaintiff’s submission that the bonus plan was an integral part of the total compensation. The following factors are germane to whether a bonus was an integral part of an employee’s compensation: (a) the bonus is received each year although in different amounts; (b) bonuses are required to remain competitive with other employers; (c) bonuses were historically awarded and the employer had never exercised its discretion against the employee; and (d) the bonus constituted a significant component of the employee’s overall compensation. Applying these criteria in these circumstances, it is my view that the bonus plan was an integral part of the plaintiff’s compensation.
[38] Given that they bonus plan an integral part of the plaintiff’s total compensation it would be “… inappropriate and unfair to the employee to be deprived of the bonus by reason of the unilateral action of the employer.” See: Schumacher v. TD Bank.[7]
[39] The plaintiff submitted that the plaintiff should be entitled to the amount of his bonus that he received in 2011 during the reasonable notice period. The amount of bonus entitlement during the notice period is calculated with reference to past bonuses. Unless there is evidence to the contrary, the bonus should be equal to the bonus in the proceeding year.
[40] In this case there is evidence that better reflects what the amount of the plaintiff’s bonus would have been had his employment continued. The evidence filed indicates that in 2013 the bonuses received by the defendant’s employees increased by an average of 147% from 2012 levels.
[41] In my view the plaintiff is entitled $8,562.63 per year an amount that reflects the 14790 average increase from 2012 levels for the 16 month reasonable notice period which in total amounts to $11,416.84.
Issue # 4 : Lost Benefits (Group Insurance Benefit Plan, Pension Contribution, Car Allowance)
[42] The defendant relies upon Wilks v. Moore Dry Kiln Co. of Canada[8] for the proposition that a claim for loss of benefits by a wrongfully dismissed employee is limited to losses or expenses actually incurred in making other provision for these lost benefits. A wrongfully dismissed employee’s claim for loss of benefits cannot succeed unless he has paid out or lost money or has otherwise suffered by reason of the absence of benefits.
[43] However Wilks has not been good law in Ontario for over 20 years as this decision of the British Columbia Supreme Court was considered and rejected by the Ontario Court of Appeal in Davidson v. Allelix Inc.[9] In Davidson the court stated at para. 21:
In my opinion the British Columbia decisions do not apply in Ontario where the law is settled that a wrongfully dismissed employee may claim, in addition to lost salary, the pecuniary value of lost benefits flowing from such dismissal.
[44] In para. 21, the court cited with approval an earlier decision of the Court of Appeal,[10] which stated:
The recovery of lost income is not limited to salary. In this case the appellant conceded that pension plan benefits should also be included … other income items should be admitted including contractual profit-sharing, a share purchase option, and many fringe benefits such as a company car, club membership, pension, disability and medical plans.
Group Insurance Plan Benefits
[45] The plaintiff’s evidence is that at the time of his dismissal the value of comprehensive group insurance benefit plan was no less than $35,725.26 or 20% of his base salary. It is also his evidence that his total compensation from North also includes a group insurance benefit plan. It is the evidence of Mr. Della Vecchia that the plaintiff’s benefit coverage was extended for a period of three months following his dismissal until January 12, 2013.
[46] Accordingly, the plaintiff is entitled to damages in the amount of $18,862.00 which represents the value of his group insurance for an 8 month period.
Pension Plan
[47] It is the plaintiff’s evidence that the defendant contributed about 4% per year of salary, which amounts to $8,407.20 at the time of his termination, to the plaintiff’s pension plan.
[48] The plaintiff’s evidence is that he was not permitted to participate in North’s pension plan until about two years following his dismissal as North required one full year of employment before he qualified.
[49] Accordingly, the plaintiff is entitled to damages in the amount of $11,209.60 representing pension contributions over the 16 month reasonable notice period.
Car Allowance
[50] The plaintiff’s evidence is that the defendant paid him a fixed amount of $606.01 per month as a car allowance in addition to compensation for variable mileage expenses incurred for business purposes. The defendant submitted that the car allowance was not a perquisite but rather served to reimburse the plaintiff for expenses incurred during the course of employment. However, the defendant’s view is inconsistent with the fact that the T4 slip issued to the plaintiff characterized the car allowance as a taxable benefit and thus not as a reimbursement for an employment expense. Upon being hired, the plaintiff was provided a car allowance by North.
[51] Accordingly, the plaintiff is entitled to damages in the amount of $6,666.11 for car allowance benefits over the 11 month period prior to being hired by North.
Issue #4: Mitigation
[52] I dismiss the defendant’s submission that the plaintiff did not take reasonable steps to mitigate his losses by failing to search outside the industry for sales positions. The plaintiff has 26 years of sales expertise within the industry and he found work, albeit at a significantly reduced salary, within 11 months. In my view, the plaintiff acted reasonably in the circumstances.
Conclusion
[53] This motion for summary judgment is granted in the amount of $131,515.35 which is comprised of the following amounts:
a) Reasonable Notice Period: $83,361.40
b) Bonus: $11,416.84
c) Group Insurance Benefit Plan: $18, 862.00
d) Pension Plan: $11, 209.60
e) Car Allowance: $6,666.11
[54] On consent of the parties the defendant’s name in this action is amended to Rocktenn Company of Canada Inc.
[55] If the parties are unable to reach an agreement on costs, then the parties shall provide the court with their written costs submissions, not to exceed three pages in length exclusive of an outline of costs, within one week of today’s date.
Mr. Justice M. Faieta
Released: March 6, 2015
CITATION: Wolfman v. Rocktenn-Container Canada, L.P. 2015 ONSC 1432
COURT FILE NO.: CV-12-0470456
DATE: 20150306
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ALAN WOLFMAN
Plaintiff
– and –
ROCKTENN-CONTAINER CANADA, L.P.
Defendant
REASONS FOR JUDGMENT
Mr. Justice M. Faieta
Released: March 6, 2015
[1] Hyrniak v. Maudlin, 2014 SCC 7, [2014] 1 S.C.R. 87, at paras. 1-6.
[2] 2008 SCC 39, [2008] 2 S.C.R. 362, at paras. 28-29.
[3] Love v. Acuity Investment Management Inc., 2011 ONCA 130, at paras. 21-22.
[4] 2009 64183 (ON SC), [2009] O.J. No. 4879.
[5] 2011 ONSC 4369.
[6] See Poole v. Whirlpool Corp., 2011 ONCA 808, at paras. 5-6.
7, 1997 12329 (ON SC), 147 D.L.R. (4th) 128..
[8] (1981) B.C.L.R. 149 (B.C.S.C.).
[9] (1991) O.R. (3d) 581 (C.A.), at para. 21. Also see Ludchen v. Stelcrete Industries Ltd., 2013 ONSC 7495.
[10] Peck v. Levesque Plywood Ltd. (1979), 27 O.R. (2d) 180, at p. 114.