COURT FILE NO.: CV-15-522160 DATE: 20160816 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

JOSS COVENOHO Plaintiff – and – PENDYLUM INC. Defendant

Joss Covenoho, on her own behalf Harjinder Mann, for the Defendant

HEARD: June 29, 2016

M. D. FAIETA j.

reasons for decision

INTRODUCTION

[1] The Plaintiff, Joss Covenoho, was hired by the Defendant, Pendylum Inc., under a fixed-term agreement for one year. The Defendant terminated the agreement after the Plaintiff had worked just less than three months. The main question raised by this motion for summary judgment is whether the Plaintiff is entitled to be paid damages for the remainder of the term of the agreement.

BACKGROUND

[2] The Defendant is a provider of workforce management systems in Canada. It provides services to companies that range in size from several hundred employees to more than 30,000 employees. As part of its business, it enters into agreements with independent contractors who assist in providing services to the Defendant’s customers.

[3] One of the Defendant’s clients is Ceridian Canada Ltd. (“Ceridian”). The Defendant and Ceridian entered into a Master Products and Service Agreement on April 5, 2010, whereby the Defendant would assist Ceridian in the development and implementation of certain payroll services provided to Ceridian’s customers.

Fixed Term Agreement

[4] On or about June 6, 2013, the Defendant posted a listing on Workopolis seeking a person on a “contract, full time” basis to perform all tasks required to complete the implementation of the Payroll/Human Capital management product.

[5] The Plaintiff responded to this job posting. On July 10, 2013, the Plaintiff signed a standard form agreement (“Agreement”) with the Defendant, whereby the Plaintiff agreed to provide certain consulting services as a “Time and Attendance Implementation Consultant” to the Defendant’s customers commencing July 15, 2013.

[6] Article 1.3 of the Agreement states the Plaintiff is an independent contractor.

[7] Article 1.1 of the Agreement states:

We will retain you on a contract basis to perform the Services as set out in “Appendix A” and you agree to be so retained.

[8] Appendix “A” states:

Term: 12 months, starting July 15, 2013 (Commencement Date) and ending July 14, 2014, automatically renewing for the same period unless either party gives to the other written notice at least 4 weeks prior to the current contract’s expiration of its desire not to renew the agreement.

Training Period: $30/hour for the first 160 hours for time worked as defined in Article 3.2

Rate: After the training period, $35/hour for time worked as defined in Article 3.2

Services: You will: 1) Provide the services of a Time and Attendance Implementation Consultant as directed by PENDYLUM and/or our clients.

[9] Article 3.2 of the Agreement states:

You acknowledge that we will only be required to compensate you for time worked. You will not be compensated for lunch breaks, travel time, statutory holidays, vacation, leave or sick days …

Request for Consent to Background Check

[10] On September 23, 2013, the Defendant’s Sales and Marketing Director, Nancy Gaughan, sent the following email to the Plaintiff and other staff members:

Ceridian has just informed us that it now requires Education and Criminal background checks on all contractors, due to the sensitive nature of the client data within its applications. To this end, Pendylum is engaging a third-party company called BackCheck … to conduct these Education and Criminal checks on our behalf.

These checks are mandatory; if you decline to consent to either of these checks, Ceridian has stated that it must release you from your duties there. …

[11] The Plaintiff refused to provide her consent for these background checks. On October 8, 2013, the Plaintiff sent the following text message to Gaughan:

They cannot terminate me on something that was not a condition when we signed. The matter will go to court and someone will win 1 year’s salary plus all costs …

Termination of Agreement

[12] On October 11, 2013, the Defendant sent the following letter to the Plaintiff:

Pursuant to paragraph 2.1 a) of your Contract Agreement with Pendylum Inc., dated July 10, 2013 and specifically by reason of Pendylum Client Ceridian’s decision to terminate its contract with Pendylum Inc. for your services we hereby advise you that your contract with Pendylum Inc. is hereby terminated with immediate effect.

We would also like to take this opportunity to remind you that, notwithstanding the termination of the Agreement with Pendylum Inc., certain of your obligations under your contract and other agreements that you may have signed with Pendylum continue. These obligations include, but may not be limited to, obligations of confidentiality and obligations relating to any intellectual property to which you may have contributed or had access. [Emphasis added.]

Disclosure of Confidential Information – Threats, Injunction and Contempt Proceedings

[13] Over the course of the next several months, the Plaintiff threatened to release confidential information on several occasions. The Defendant and Ceridian commenced an action against the Plaintiff to prevent the Plaintiff’s disclosure of confidential information. On May 9, 2014, Justice Belobaba granted a five-day ex parte injunction that: 1) restrained the Plaintiff from publishing or otherwise disclosing any confidential information relating to the business methods and software applications of the Defendant and Ceridian; and 2) required the Plaintiff to provide the Defendant and Ceridian with a list of persons to whom she had disclosed the above information: see Ceridian Canada Ltd. v. Azeezodeen, 2014 ONSC 3801. The circumstances for the issuance of the injunction were described, at paras. 12-13, as follows:

In November 2013, the defendant sent a letter to Ceridian in which she made numerous defamatory statements about the plaintiffs’ business practices and operations, which she threatened to make public. [Covenoho] advised Ceridian that unless she was paid the sum of $23.2 million, she would make public confidential information relating to Ceridian, Pendylum and their customers. On January 6, 2014, [Covenoho] again wrote to Ceridian threatening to “go public” with numerous allegations about Ceridian and Pendylum. [Covenoho] now offered not to publicize the allegations in exchange for a “settlement” of $500,000.

On April 24, 2014, Ceridian received another letter from [Covenoho] in which she made another threat that she intended to circulate a “press release” to “every press agency and HR and payroll agency across Canada and the U.S.” and that she would do so on May 12, 2014. The “press release” [that Covenoho] threatened to publish contained confidential information regarding Ceridian and Pendylum’s business methods. It also made various defamatory statements regarding the business dealings of Ceridian and Pendylum, including their dealing with the independent contractors. On May 8, 2014, [Covenoho] wrote again to Ceridian repeating her threat that she would widely disclose her “press release” on May 12, 2014.

[14] After receiving a copy of the injunction, the Plaintiff paid for the publication of her press release containing the Defendant and Ceridian’s confidential information, in contravention of the injunction. The press release was published on May 13, 2014. On June 24, 2014, the Plaintiff was found in contempt of court by Justice Belobaba. On July 15, 2014, the Plaintiff was sentenced to 20 days in jail, to be served intermittently over five weekends.

Claim under the Employment Standards Act, 2000

[15] On May 14, 2014, the Plaintiff filed a claim under the Employment Standards Act, 2000, S.O. 2000, c. 41 (the “ESA”) for the Defendant’s failure to compensate her for overtime pay, vacation pay and public holiday pay.

[16] An Employment Standards Officer appointed under the Act (“ESA Officer”) found that the Plaintiff was an employee of the Defendant. He stated:

BACKGROUND

The claimant, Ms. Joss Covenoho, states that she was employed as an Implementation Specialist with Pendylum Inc. from July 15 to October 11, 2013.

Ms. Covenoho filed an employment standards claim on May 14, 2014. She alleges that the employer required her to work as an independent contractor when she was in effect an employee. She also alleges that the employer contravened Section 22 of the Employment Standards Act, 2000 by failing to pay overtime pay, Section 24 by failing to pay public holiday pay, and Section 35 by failing to pay vacation pay.

The employer concedes that the claimant may have been an employee, pursuant to the Act, but denies the allegations.

EVIDENCE

The claimant filed a written claim and provided an oral statement, along with additional documentation. The employer provided an oral and written reply, along with documentation.

ANALYSIS – EMPLOYEE STATUS

Pursuant to Section 5.12.3 of the Act’s Policy and Implementation Manual, a person is generally deemed to be an employee if the following criteria are met: 1. She works at an employer’s premises. 2. She uses the employer’s equipment. 3. She has little opportunity to make a significant profit beyond the assigned duties. 4. She has little risk of incurring significant financial losses in the course of performing her duties.

The evidence provided by the parties indicates that the claimant’s employment circumstances fell within these parameters. Therefore, I find that she was an employee.

[17] The ESA Officer dismissed the Plaintiff’s claim for overtime pay as she had not worked more than eight hours per day and 44 hours per week. The ESA Officer found that the sum of $297.02 was owed for vacation pay and public holiday pay. However, the Plaintiff’s claim was dismissed because it had been filed more than six months after the payments were due.

Commencement of this Action

[18] The Plaintiff delivered a Fresh as Amended Statement of Claim on June 10, 2015. The Plaintiff claims $145,600 plus interest as follows:

(1) $56,000 representing the 40-week balance of the Agreement;

(2) $16,800 for three months of common law notice; and

(3) $72,800 for bad faith dismissal in a contract that would have automatically renewed had it not been breached.

[19] At the hearing of this motion, the Plaintiff dropped her claim in the amount of $16,800 for three months’ reasonable notice at common law. The Plaintiff maintained her claims for damages in the amount of $56,000 for the 40-week unexpired term of the Agreement, as well as $72,800 for the second year of the Agreement that she alleges would have been renewed.

[20] The Defendant submits that the Plaintiff was an independent contractor and that her services contract was terminated pursuant to its provisions or, alternatively, that the Plaintiff was an employee and was legally terminated within her probation period.

ISSUES

[21] This motion for summary judgment raises three issues:

(1) Is the Plaintiff’s claim barred by section 97 of the ESA?

(2) Is the Plaintiff entitled to notice under the ESA?

(3) Is the Plaintiff entitled to damages under the Agreement?

ANALYSIS

[22] A motion for summary judgment is governed by Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Summary judgment shall be granted if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.

[23] On a motion for summary judgment, a court must consider the evidence submitted by the parties and it may, unless the interests of justice dictate otherwise, weigh the evidence, evaluate the credibility of a deponent and draw any reasonable inference from the evidence.

[24] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court of Canada stated at para. 49:

There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[25] The onus is on the moving party to show that there is no genuine issue requiring a trial. Each side must put its “best foot forward” with respect to the existence or non-existence of material issues: see Papaschase Indian Band No. 136 v. Canada (A.G.), 2008 SCC 14, [2008] 1 S.C.R. 372, at para. 11. A motions judge is entitled to assume that the record contains all the evidence that the parties would present if there were a trial: see Aronowicz v. EMTWO Properties Inc., 2010 ONCA 96, 98 O.R. (3d) 641, at paras. 17-19.

Issue #1: Is The Plaintiff’s Claim Barred by Section 97 of the ESA?

[26] The Defendant submits that this action is barred by section 97 of the ESA, which states, in part:

When civil proceeding not permitted

97. (1) An employee who files a complaint under this Act with respect to an alleged failure to pay wages or comply with Part XIII (Benefit Plans) may not commence a civil proceeding with respect to the same matter.

Same, wrongful dismissal

(2) An employee who files a complaint under this Act alleging an entitlement to termination pay or severance pay may not commence a civil proceeding for wrongful dismissal if the complaint and the proceeding would relate to the same termination or severance of employment. [Emphasis added.]

[27] As noted, the Plaintiff only filed a claim under the Act for holiday pay, vacation pay and overtime pay. Those entitlements are within the scope of the prohibitions found in s. 97 of the ESA as they come within the definition of “wages” under section 1 of the ESA: see Halabi v. Becker Milk Co., (1998), 39 O.R. (3d) 153, at para 1. However, given that no claim is made in this action for holiday pay, vacation pay or overtime pay, I reject the submission that the Plaintiff’s action is barred under s. 97(1) of the ESA.

[28] Similarly, s. 97(2) of the ESA is inapplicable because the Plaintiff did not file a claim under the ESA alleging an entitlement to termination pay or severance pay. The Plaintiff’s claims in this action alleging an entitlement to termination pay or severance pay are not the “same matters” that were the subject of the complaint under the ESA. The Defendant’s reliance on Galea v. Wal-Mart Inc., [2003] O.J. No. 1765 is misplaced, as the plaintiff in that case had filed a claim for severance pay under the Act and thus was caught by the prohibition found in s. 97(2) of the ESA.

[29] Given that the Plaintiff is not advancing a claim for vacation pay, public holiday pay or overtime pay in this action, I find that the only issue determined by the ESA Officer that arises in this action is whether the Plaintiff was an employee of the Defendant. Applying the Supreme Court of Canada’s decision in Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460, I find that the doctrine of issue estoppel is applicable and thus the ESA Officer’s decision that the Applicant is an “employee” shall not be re-litigated in this action. I reach this conclusion for the following reasons: (1) the parties to this action were also parties to the hearing before the ESA Officer and exercised the opportunity to makes submissions to the ESA Officer on the issue of whether the Plaintiff was an “employee” of the Defendant; and (2) the parties have not submitted that it would work an injustice to apply the doctrine of issue estoppel in these circumstances.

Issue #2: Is The Plaintiff Entitled To Notice Under The Esa?

[30] Section 54 of the ESA states:

No termination without notice

54. No employer shall terminate the employment of an employee who has been continuously employed for three months or more unless the employer,

(a) has given to the employee written notice of termination in accordance with section 57 or 58 and the notice has expired; or

(b) has complied with section 61. 2000, c. 41, s. 54.

Employer notice period

57. The notice of termination under section 54 shall be given,

(a) at least one week before the termination, if the employee’s period of employment is less than one year;

(b) at least two weeks before the termination, if the employee’s period of employment is one year or more and fewer than three years; … [Emphasis added.]

[31] Given that the Plaintiff was employed less than three months, I find that she is not entitled to statutory notice of termination. Nevertheless, the question remains whether the Plaintiff is entitled to damages under the Agreement.

Issue #3: Is the Plaintiff Entitled to Damages under the Agreement?

[32] In Howard v. Benson Group Inc., 2016 ONCA 256, 129 O.R. (3d) 677, the Ontario Court of Appeal outlined the applicable legal principles:

20 There is a common law presumption that every employment contract includes an implied term that an employer must provide reasonable notice to an employee prior to the termination of employment. Absent an agreement to the contrary, an employee is entitled to common law damages as a result of the breach of that implied term … This presumption can only be rebutted if the employment contract "clearly specifies some other period of notice, whether expressly or impliedly" …

21 … Where an employment agreement states unambiguously that the employment is for a fixed term, the employment relationship automatically terminates at the end of the term without any obligation on the employer to provide notice or payment in lieu of notice. Such a provision, if stated unambiguously, will oust the implied term that reasonable notice must be given for termination without cause …

22 Of course, parties to a fixed term employment contract can specifically provide for early termination and, as in Bowes, specify a fixed term of notice or payment in lieu. However, and on this point the appellant and the respondent agree, if the parties to a fixed term employment contract do not specify a pre-determined notice period, an employee is entitled on early termination to the wages the employee would have received to the end of the term …

29 The respondent sought to use a fixed term contract either to eliminate its severance obligation entirely or to limit it to two weeks' notice on an early termination. It was, of course, free to do this. But the courts have consistently held that the consequences to an employee of such a bargain are so significant that the employer must communicate clearly in the contract that this is what it is intending to do … If an employer does not use unequivocal, clear language and instead drafts an ambiguous or vague termination clause that is later found to be unenforceable, it cannot complain when it is held to the remaining terms of the contract. [Emphasis added.]

[33] The Agreement between the Plaintiff and Defendant states:

2.1 The term of this Agreement will commence on the date of this Agreement and will continue in full force and effect unless the Agreement is terminated as follows:

(a) immediately by PENDYLUM providing written notice to you if you violate or fail to honor any of these provisions of this Agreement or fail to perform your duties as set out in Appendix A in a satisfactory manner as determined by PENDYLUM (known as Cause); or if the PENDYLUM Client to which you have been contracted terminate[s] its contract with PENDYLUM for your services; OR

(b) by either party providing written notice of at least two (2) weeks to the other.

2.2 In the event of termination, we will have no liability to you, save and except to pay any accrued and earned compensation up to and including the date of termination.

2.3 Upon termination or expiration of the agreement, you agree to return and/or destroy all confidential information and copies and sign an undertaking that all Confidential Information has been returned and/or destroyed. [Emphasis added]

[34] In my view, the language of the early termination provisions found in Article 2.1 is clear and unequivocal. Effect should be given to the reasonable expectations of the parties reflected by the words they have agreed upon.

Immediate Termination under Article 2.1(a)

[35] The Defendant’s letter dated October 11, 2013, terminates the Agreement “with immediate effect” as a result of “Ceridian’s decision to terminate its contract with Pendylum for your services.” Accordingly, it is my view that the Defendant's letter dated October 11, 2013 provided the notice required by Article 2.1(a) of the Agreement to immediately terminate the Agreement.

Alternative Arguments

[36] The Plaintiff submits that the Defendant’s decision to terminate the Agreement lacked “good faith” because she was terminated for refusing to do something (namely, submit to a background check) that she was not required to do by the terms of the Agreement. In Wallace v. United Grain Growers Ltd., 1997 SCC 332, [1997] 3 S.C.R. 701, at paras. 75-78, the Supreme Court of Canada refused to find that an employer is obliged in contract or tort to provide an employee with “good faith” reasons for dismissal. However, the Court, at para. 95, found that there was “… an obligation of good faith and fair dealing in the manner of dismissal, the breach of which will be compensated for by adding to the length of the notice period,” which required, as stated at para. 98, that “in the course of dismissal, employers ought to be candid, reasonable, honest and forthright with their employees and should refrain from engaging in conduct that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive.”

[37] The Defendant explained to the Plaintiff (and other employees) more than two weeks prior to her termination, that her employment would be terminated if she refused to consent to an educational and criminal background check. There was nothing untruthful, misleading or unduly insensitive about the Defendant’s actions. Accordingly, if I had found that the Plaintiff was entitled to damages for breach of the Agreement, I would not have awarded damages for the Defendant’s alleged lack of “good faith” in the manner that it terminated the Agreement.

[38] Further, had I not come to the conclusion that the Plaintiff was terminated in accordance with the provisions found in Article 2.1(a) of the Agreement, then I would have found that she was entitled to damages for the following reasons:

(1) Article 2.1(b) is not an effective basis for the termination of the Agreement as the Defendant’s letter dated October 11, 2013 purports to terminate the Agreement “with immediate effect” rather than provide at least two weeks’ written notice of the termination of the Agreement.

(2) As a result, the Plaintiff would have been entitled to damages equivalent to her salary for the remainder of the unexpired term of the Agreement without deduction for mitigation: see Howard, at para. 44.

CONCLUSIONS

[39] This action is dismissed as it raises no genuine issues requiring a trial.

[40] The Defendant shall provide its written costs submissions, not to exceed three pages in length exclusive of an outline of costs, and any settlement offers, within two weeks of today’s date. The Plaintiff shall deliver her reply submissions within four weeks from today’s date on the same terms.

Mr. Justice M. D. Faieta

Released: August 16, 2016

COURT FILE NO.: CV-15-522160 DATE: 20160816 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

JOSS COVENOHO Plaintiff – and – PENDYLUM INC. Defendants

REASONS FOR DECISION

Mr. Justice M. D. Faieta

Released: August 16, 2016