CITATION: Borrelli v. Dynamic Tire Corp., 2016 ONSC 1165 COURT FILE NO.: CV-12-107814-00 DATE: 20160216
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Domenic Borrelli Plaintiff
– and –
Dynamic Tire Corp. Defendants
Justin Baichoo, for the Plaintiff
Ryan Wozniak, for the Defendant
HEARD: In Writing
RULING on Disputed Form and Content of Judgment
mullins J.
Introduction
[1] In the judgment granted on October 28, 2013, the plaintiff was awarded damages premised on payment in lieu of notice over a period of 16 months. It was indicated that “the sum to be paid shall be representative of the salary to which the Plaintiff was entitled, together with commissions through the 16 month notice period prorated on the basis of his commissions earned before the notice of termination was delivered and during that fiscal year” (para. 51). The plaintiff was also awarded the sum equivalent to his car allowance, his unused and accrued vacation pay and his Canada Savings Bond contributions over the 16-month period. Pre-judgment interest was allowed on the amounts owing.
[2] Since the judgment was released, counsel for the plaintiff and defendant have been unable to agree regarding the exact amount to which the plaintiff is entitled.
Key Areas of Dispute and Positions of the Parties
[3] The plaintiff and defendant disagree on four primary issues:
(a) Whether the award should include an amount reflecting a car allowance;
(b) The method of calculation of the plaintiff’s salary and commissions for the 16-month period;
(c) Whether the sum as calculated above is subject to statutory withholdings and deductions, including the repayment of employment insurance (EI) benefits; and
(d) The method of calculation of pre-judgment interest.
Car Allowance:
[4] The plaintiff and defendant disagree as to whether the plaintiff should receive a sum representing his car allowance for the 16-month period.
Position of the Plaintiff
[5] The plaintiff takes the position that he is entitled to $8,000, reflecting a car allowance of $500 per month over 16 months (Submissions of the Plaintiff, dated October 16, 2015, at p. 2). The contract the plaintiff presented as evidence on the motion for summary judgment included a provision that entitled the plaintiff to this car allowance (Submissions of the Defendant, dated October 15, 2015, at Tab C).
Position of the Defendant
[6] The defendant takes the position that the plaintiff should not receive a sum representing the car allowance on the basis that: (1) no such allowance was in existence as of the date of his dismissal; and (2) Mr. Borrelli led no evidence in that regard during the motion, which is fatal given that he bore the onus of proving his damages (Submissions of the Defendant, dated October 15, 2015, at para. 2). Regarding the offer letter in evidence, the defendant submits that this was signed 14 years prior to the motion. When considering more recent evidence, such as the plaintiff’s 2011 T4, it is clear that the plaintiff was not receiving this allowance and, more importantly, he did not place the veracity of his T4 in issue on the motion.
[7] In any case, the defendant submits that Mr. Borrelli failed to include a claim for a car allowance in his pleadings in both his Amended Notice of Motion and his Statement of Claim, and therefore he should not be entitled to an amount reflecting this allowance.
Salary and Commissions:
[8] The plaintiff and defendant further disagree as to the method of calculating the award reflecting the plaintiff’s salary and commissions for the 16-month period.
Position of the Plaintiff
[9] The plaintiff submits that his salary is the amount of $114,101.47, less commissions. The plaintiff’s 2011 T4 shows that he received $31,525.90 in commissions that year. Therefore, the plaintiff’s salary is $82,484.57 per annum. This works out to a monthly salary of $6,873.71. Multiplied by 16, this reflects his salary over 16 months as being $109,979.42.
[10] The plaintiff submits that his commissions should be calculated separately from his salary. The plaintiff’s 2011 T4 reflects commissions in the amount of $31,525.90 for that year, up to the date of termination, October 7. The plaintiff was employed for a total of 40 weeks that year. Dividing $31,525.90 by 40 weeks gives a sum of $788.14 per week in commissions. When this sum is multiplied by 69 weeks (16 months), the total of $54,382.19 represents the sum that should be awarded to the plaintiff for commissions during the notice period.
[11] Therefore, the plaintiff submits that he should receive $164,361.61 ($109,979.42 + $54,382.19) as reflecting his salary and commission over the 16-month period. (Submissions of the Plaintiff, dated October 16, 2015, at p. 2) The plaintiff submits an accountant’s report supporting this method.
Position of the Defendant
[12] The defendant submits that Mr. Borrelli’s annual salary at the time of his dismissal, inclusive of commissions was $114,010.47. It submits that Mr. Borrelli’s monthly salary continuance payments included an amount for commissions.
[13] Therefore, the defendant submits that Mr. Borrelli’s total entitlement reflecting both salary and commissions should be calculated using the formula (16/12 x $114,010.47). This works out to a total of $152,013.96 (Submissions of the Defendant, dated October 15, 2015, at para. 8).
[14] Both parties agree that these amounts are then subject to a deduction for the amount already paid. It is undisputed that this amount is $65,122.76.
Withholdings and Deductions:
[15] It is not entirely clear from the most recent submissions whether the parties have agreed on whether the sum calculated above would be subject to statutory withholdings and deductions. However, based on the books of correspondence provided, it appears that counsel for the plaintiff and defendant have had a number of exchanges on this point and some disagreement may remain.
Position of the Plaintiff
[16] Counsel for the plaintiff makes no mention of statutory withholdings and deductions in his most recent submissions. However, based on correspondence with Mr. Wozniak, it appears that while he agrees that the figure representing salary and commissions is subject to a 30 percent withholding tax to be remitted to the Canada Revenue Agency (CRA), he does not agree that that amount is subject to a separate deduction representing EI benefits received that must be remitted to the Receiver General. The plaintiff takes the position that this issue is between Mr. Borrelli and Service Canada (Email, dated July 9, 2015).
Position of the Defendant
[17] Counsel for the defendant takes the position that any award representing salary and commissions is subject to both withholding tax and an EI deduction. The defendant submits it is unable to pay the full amount of the judgment without written confirmation from the plaintiff from Service Canada whether he has an obligation to repay EI benefits.
Pre-Judgment Interest:
[18] The plaintiff and defendant also differ on the method of calculating pre-judgment interest on the total award to be paid to the plaintiff.
Position of the Plaintiff
[19] The plaintiff submits that pre-judgment interest is calculated on the total amount owed for salary and commissions ($164,361.61), plus the car allowance ($8000), less the amount paid on each continuous salary payment made prior to judgment ($65,122.76). The sum the plaintiff arrives at is $107,238.85.
[20] The plaintiff submits that this amount should be multiplied by 1.3 percent, for a total of $2,868.42.
Position of the Defendant
[21] The defendant submits that the plaintiff’s entitlement to pre-judgment interest should be calculated in accordance with the Ontario Court of Appeal’s ruling in Lowndes v. Summit Ford Sales Ltd., 2006 14 (ON CA). According to the defendant, the proper method to calculate pre-judgment interest in this case is:
(a) Calculate the interest owed on the difference between what the defendant paid the plaintiff and what he was owed from the beginning of the notice period (October 7, 2011) to the end (February 7, 2013) on a monthly basis; then
(b) Calculate the interest on the balance owing at the end of the notice period to the date of judgment (Email, dated July 7, 2015).
[22] Using this method, the defendant arrived at a figure of $1,277.08.
Analysis
Car Allowance
[23] The plaintiff is entitled to a car allowance because the judgment states that this is part of the award. Any evidence that the plaintiff was not in fact receiving any money for a car allowance should have been brought forward on the motion for summary judgment. In Ducharme v. Cambridge Stamping Inc., 2008 19499 (ON SC), 67 C.C.E.L. (3d)132 van Rensburg J. cites Dawson v. Rexcraft Storage & Warehouse Inc., 1998 4831 (ON CA), for the proposition that “the motions judge is entitled to assume that the record contains all the evidence that the parties will present if there is a trial” (para. 11).
Salary and Commissions
[24] The plaintiff’s method of calculating the payment owed on account of salary and commission is correct.
[25] Mr. Borrelli’s 2011 T4 lists his salary up to his termination date, as well as his salary continuance through the end of the year. However, it lists the commission earned only until the termination date. I accept the calculations of the plaintiff. While the bonus referred to by the defendant may have been intended to represent lost commission, there is no reason to rely on it, rather than calculating the actual pro-rated commissions based on the plaintiff’s T4. The plaintiff’s method looks at the actual commissions earned by the plaintiff from the beginning of the year to the date of his termination. It divides that amount by the number of weeks that the plaintiff worked. It then multiplies the weekly commission by 69 weeks to determine the commission that the plaintiff would earn over a 16-month period. This corresponds to the judgment given, which awards commissions pro-rated over this period.
Withholdings and Deductions
[26] The law is clear that awards for wrongful dismissal are taxable and a percentage is remittable to the CRA. Both parties appear to agree on this.
[27] Regarding the issue of repayment of EI benefits, it is unclear whether the plaintiff does not believe that he will not have to repay EI benefits or whether it is simply not the defendant’s concern whether this happens. Sections 45 and 46 of the Employment Insurance Act, S.C. 1996, c. 23 (the “EIA”) seem clear. Section 46(1) of the EIA states:
- (1) If under a labour arbitration award or court judgment, or for any other reason, an employer, a trustee in bankruptcy or any other person becomes liable to pay earnings, including damages for wrongful dismissal or proceeds realized from the property of a bankrupt, to a claimant for a period and has reason to believe that benefits have been paid to the claimant for that period, the employer or other person shall ascertain whether an amount would be repayable under section 45 if the earnings were paid to the claimant and if so shall deduct the amount from the earnings payable to the claimant and remit it to the Receiver General as repayment of an overpayment of benefits. [Emphasis added].
[28] At para. 14 of Ducharme, van Rensburg J. addresses this issue:
The defendant's concern about employment insurance benefits that may have been received by the plaintiff is addressed under s. 46 of the Employment Insurance Act, which requires an employer to ascertain whether any amount would be repayable under s. 45 as an overpayment of benefits and to deduct and remit such amount to the Receiver General. [Emphasis added].
[29] In the recent arbitration of Kaszyca and Air Canada, Re, 2015 CarswellNat 2463 (Canada Adjudication (Canada Labour Code Part III)) the arbitrator directed that the award reflecting the claimant’s loss of salary was subject to a deduction reflecting the EI benefits the complainant had received during the notice period. This was ordered to be remitted by the employer to the Receiver General (para. 31).
[30] The Ontario Labour Relations Board has also considered this question in Osmun v. ING Engineering Inc., 2013 CarswellOnt 10784 (OLRB). At para. 7 the Vice-Chair stated:
Counsel do not agree on how I should take account of this amount. The employer suggests it should be deducted from what it would otherwise owe the applicant, and the applicant says it should not be deducted, but acknowledges that it may be subject to a repayment obligation. From my review of sections 45 and 46 of the Employment Insurance Act, S.C. 1996, c.23 it seems to me that an employer who has knowledge that EI benefits have been received and can ascertain their amount is obliged to deduct them from any wage order made against it and to remit them to the Receiver General. [Emphasis added.]
[31] In light of these cases, the defendant is correct. If it suspects that the plaintiff has received EI benefits during the notice period, it must ascertain the amount received, deduct it from the award and remit it to the Receiver General.
Pre-Judgment Interest
[32] The defendant appears to be correct regarding the method of calculating pre-judgment interest on this type of award.
[33] The plaintiff relies solely on s. 128 of the Courts of Justice Act, R.S.O. 1990 c. C. 43.
[34] However, the defendant has provided Lowndes v. Summit Ford Sales Ltd. as authority for its method of calculating interest. In that case, the Court of Appeal explicitly considered the trial judge’s assessment of pre-judgment interest in a wrongful dismissal case where the defendant had made salary continuance payments, as the defendant has here. The trial judge used a “lump sum” methodology, net the total severance payments made by the respondent (para. 22). The Court of Appeal found that this methodology was inappropriate in that case. The plaintiff/respondent had received periodic severance payments every month for 21 months following the date of termination of his employment. The court considered that he had enjoyed the use of part of the damages to which he was entitled during this period and accordingly, his entitlement to pre-judgment interest concerned only the “shortfall” in the payments made during the period of salary continuance. Put another way, the plaintiff/respondent was only entitled to interest on the difference between what he ought to have received in that period plus the damages payable by the defendant/appellants for the balance of the notice period during which no severance payments were made (para. 24). At para. 25, the court stated:
This recognizes that the respondent's prejudgment interest entitlement concerns only the loss of interest on the moneys that would have been payable to him from time to time had his severance payments been calculated in accordance with the quantum of monthly payments held by the trial judge to be owing and paid during the full notice period.
[35] It goes on, at para. 27:
In this case, the effect of the trial judge's award of prejudgment interest from the date of the respondent's dismissal on the amount of damages payable to the respondent was to award interest on payments before they were due. In effect, the award provided for a 'prepayment' of interest on salary continuance payments before they were earned. To this extent, the award conferred on impermissible windfall on the respondent: see Celanese Canada Inc. v. Canadian National Railway, 2005 8663 (ON CA), [2005] O.J. No. 1122 (Ont. C.A.).
[36] This case has been followed in wrongful dismissal cases where salary continuances were paid, including Mathieson v. Scotia Capital Inc., 2009 64183 (ON SC) 78 C.C.E.L. (4th) 163 and Chandran v. National Bank of Canada, 2011 ONSC 4369, aff’d Chandran v. National Bank of Canada, 2012 ONCA 205, 99 C.C.E.L.(3d) 277.
[37] Lowndes was distinguished in Olivares v. Canac Kitchens, 2012 ONSC 5946, 10 C.C.E.L. (4th) 163. In that case, the judge considered the Court of Appeal’s statement in Lowndes at para. 23 that “it is unnecessary for the disposition of this appeal to determine whether an award of pre-judgment interest on a lump sum basis is generally appropriate in a wrongful dismissal case." [Emphasis in Olivares.] The trial judge considered that a lump sum payment was appropriate in the circumstances of the case before him because, at the time the plaintiff was terminated, the defendant was closing its operations in Canada. The court found that “if proper notice had been given, the plaintiff would have received pay in lieu of notice in a lump sum.” This is unlike the present case, where the plaintiff received installments over time and therefore the fact that Lowndes was not followed has no effect.
[38] Lowndes is directly on point regarding the calculation of pre-judgment interest on wrongful dismissal awards where a salary continuance has been provided over a number of months. I have not found a case that has overturned this one and the plaintiff has not provided any cases that would negate its binding authority. Therefore, the defendant’s submissions regarding the methodology of calculating pre-judgment interest should be followed. I note however that this does not mean that the number they have thus far arrived at is accurate, as the calculation was based on submissions regarding the car payment and the quantum of damages representing lost salary and commissions. The defendant’s method of calculation must be applied to the amounts calculable under the terms of this endorsement.
Madam Justice A. M. Mullins
Released: February 16, 2016
CITATION: Borrelli v. Dynamic Tire Corp., 2016 ONSC 1165 COURT FILE NO.: CV-12-107814-00
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Domenic Borrelli Plaintiff
– and –
Dynamic Tire Corp. Defendants
RULING
Madam Justice A.M. Mullins
Released: February 16, 2016