Court File and Parties
COURT FILE NO.: CV-14-120773 DATE: 20170526 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: PETRE POPESCU Plaintiff – and – WITTMAN CANADA INC. Defendant
Counsel: Vlad Popescu for the Plaintiff David Hager for the Defendant
HEARD: May 15, 2017
Reasons for judgment Boswell J.
Introduction
[1] Petre Popescu is a mechanical engineer. He used to work for Wittman Canada Inc. designing continuous desiccant dryers and some of the other products they manufactured. He spent about twelve years working for them.
[2] Apparently sales slowed considerably for Wittman in 2014. The slowdown must have come on pretty suddenly because one Friday they handed Mr. Popescu a letter telling him not to bother coming in for work the following Monday. He was laid off with immediate effect. He was told the lay-off was expected to last approximately 35 weeks.
[3] At the time he was laid off, Mr. Popescu was earning a salary of about $58,000 per year. He immediately applied for Employment Insurance benefits. He also started looking for a new job, which he found about three months after he was laid off.
[4] Mr. Popescu asserts that he was constructively dismissed and he sues for payment of 8 weeks’ salary in lieu of notice in accordance the provisions of a written employment contract he had with Wittman. Wittman argues that Mr. Popescu was not terminated and is not entitled to the payment he seeks.
[5] The action came on for trial before the court on May 15, 2017. It proceeded as a simplified trial. Each side filed an affidavit, with exhibits, a factum and a casebook. No cross-examinations were conducted and no further evidence called. Counsel made their submissions over the course of about ninety minutes.
[6] The reasons that follow explain why I grant judgment in favour of Mr. Popescu.
The Central Issue
[7] Mr. Popescu had a written employment contract with Wittman. It contains a termination clause but is otherwise silent about the right of the employer to impose a lay-off and/or about any obligations it may have in the circumstances of a lay-off. The written agreement provides that Mr. Popescu is entitled, on termination, to the notice – or payment in lieu of notice – provided for terminated employees under the Employment Standards Act, 2000, S.O. 2000, c. 41 (the “ESA”).
[8] The ESA provides that eight weeks’ notice of termination are to be provided to employees, like Mr. Popescu, with more than eight years’ service. But it also provides that an employee on a temporary lay-off is not a terminated employee (s. 56(1)(c)). A temporary lay-off is defined as one of no more than 35 weeks in a 52 week period, provided that one of a number of listed conditions is present. One of those conditions is where the employer continues to make contributions towards a group insurance plan. Wittman did so in this case. It further provides that an employee who is constructively dismissed is not terminated unless he or she resigns his or her employment within a reasonable period of time after the constructive dismissal. Mr. Popescu did not do so.
[9] The facts are not generally in dispute. The question is whether Mr. Popescu was terminated and thereby entitled to payment equal to the notice period provided for in the ESA. If so, the parties are agreed that the amount owing is $9,002.09.
The Employment Contract
[10] The employment contract is dated June 4, 2001. I infer that it was prepared by the employer.
[11] The contract contains a boilerplate “entire agreement” clause at para. 8.3, which provides as follows:
The provisions herein constitute the entire agreement between the Corporation and the Employee with respect to the subject matters hereof and supersedes all previous expectations, understandings, communications, representations and agreements, whether verbal or written, between the Corporation and the Employee with respect to the subject matters hereof and may not be modified except by subsequent agreement in writing executed by the Corporation and the Employee.
[12] Article 6 of the contract deals with the issue of termination. Section 6.1 deems Mr. Popescu’s employment to terminate should he die. Section 6.2 provides that Mr. Popescu can be terminated for cause at any time without notice. Section 6.3 provides that Mr. Popescu can terminate his employment by providing written notice of his intention to quit, provided he gives the same notice that he would be entitled to under the ESA if the employer had terminated the employment without just cause.
[13] Section 6.4 is at the centre of the litigation. It provides for termination upon notice by the employer and states:
The Corporation my (sic) terminate the employment of the Employee without just cause, by giving the Employee the period of written working notice and payment of severance pay, if any, required by the Employment Standards Act (Ontario) or, in the alternative to such notice and severance pay, by making such benefits contributions and by giving the Employee the termination and severance pay, if any, required by the Employment Standards Act (Ontario).
[14] The contract does not mention anything about lay-offs.
The Employment Standards Act
[15] The ESA provides for minimum standards to be adhered to in all but certain identified classes of employment contracts in Ontario. Section 5(1) prohibits employers and employees from opting out of any of the standards set by the Act. Section 5(2), however, permits an employer and employee to include provisions in an employment contract that provide greater benefits to the employee than the ESA otherwise provides. In such a case, the provisions of the contract supersede the standards of the Act.
[16] Standards relating to the termination of employment are found in Part XV of the ESA (sections 54 - 62).
[17] Termination is defined in s. 56(1) as follows:
- (1) An employer terminates the employment of an employee for purposes of section 54 if,
(a) the employer dismisses the employee or otherwise refuses or is unable to continue employing him or her;
(b) the employer constructively dismisses the employee and the employee resigns from his or her employment in response to that within a reasonable period; or
(c) the employer lays the employee off for a period longer than the period of a temporary lay-off.
[18] The term “temporary lay-off” is defined in s. 56(2) and includes:
(b) a lay-off of more than 13 weeks in any period of 20 consecutive weeks, if the lay-off is less than 35 weeks in any period of 52 consecutive weeks and,
(ii) the employer continues to make payments for the benefit of the employee under a legitimate retirement or pension plan or a legitimate group or employee insurance plan…
The Parties’ Positions
[19] Mr. Popescu submits that the employment contract is a complete agreement between the parties as to the terms of his employment. It did not give Wittman the right to lay him off. Such a unilateral lay-off, he argues, amounts to a constructive dismissal at common law and is a breach of the employment contract.
[20] Mr. Popescu says that he was terminated and interprets s. 6.4 of the contract as requiring Wittman to pay him eight weeks’ salary in lieu of notice, in accordance with the provisions of the ESA applicable to terminated employees.
[21] Wittman concedes that Mr. Popescu was constructively dismissed according to the common law. They argue, however, that s. 6.4 of the employment agreement imports, by direct reference, the statutory benefits, if any, provided for in the ESA. The question, in the result, is whether the constructive dismissal of Mr. Popescu triggers termination pay, according to the provisions of the ESA. In Wittman’s submission, it does not.
[22] Wittman interprets s. 6.4 as saying, in effect, that in the event of termination, Mr. Popescu is entitled to what the ESA gives him, if anything. Under the ESA, not every terminated employee is entitled to termination pay. For instance, an employee constructively dismissed is not entitled to termination pay unless the employee resigns from his or her employment within a reasonable period of time in response to the constructive dismissal. In this case, Mr. Popescu was advised of his lay-off on March 7, 2014. He did not notify Wittman that he was resigning. He simply failed to show up when recalled to work on September 29, 2014. Moreover, the ESA specifically provides that no termination pay is payable in the event of a temporary lay-off.
[23] Wittman also argues that Mr. Popescu failed to plead ESA damages in his statement of claim. The court is urged to dismiss the claim on that basis.
Discussion
The Sufficiency of the Pleadings
[24] I will begin my discussion of the live issues with the matter of the sufficiency of Mr. Popescu’s pleading.
[25] In the amended statement of claim dated November 18, 2014, Mr. Popescu sought damages of $20,870.40 for constructive dismissal, together with $15,000 in damages for an alleged breach by Wittman of its duty to act in good faith in the course of dismissing him.
[26] At paragraph 13 of the amended claim, Mr. Popescu described his claim as an entitlement to reasonable notice in accordance with common law principles. He sought pay in lieu of notice, equal to 18 months’ salary and benefits.
[27] Wittman is correct that Mr. Popescu did not expressly claim damages in accordance with the provisions of the ESA. At paragraph 18 of the amended claim, however, he stated the following:
The Plaintiff states that the Defendant has failed to provide him with even the minimum amounts as required by the ESA.
[28] At trial Mr. Popescu limited his damages claim to the notice provisions set out in s. 57 of the ESA, specifically 8 weeks’ notice.
[29] In its statement of defence, Wittman took the position that Mr. Popescu was validly laid off in accordance with the provisions of the ESA and was, accordingly, not terminated. In the alternative, if he was terminated effective March 10, 2014, his right to payment on termination was limited to 8 weeks’ salary.
[30] As Doherty J.A. observed in Rodaro v. Royal Bank of Canada (2002), 59 O.R. (3d) 74, at para. 60, “It is fundamental to the litigation process that lawsuits be decided within the boundaries of the pleadings.” A finding of liability and consequent damages against a defendant based on a cause not pleaded by the plaintiff prejudices the defendant who may well be unprepared to address the issue in evidence at trial.
[31] It is not the case, however, that pleadings are to be interpreted narrowly. A generous and liberal interpretation of pleadings is generally appropriate: see Link v. Venture Steel Inc. (2010), 69 B.L.R. (4th) 161. A liberal interpretation of pleadings is in step with Rule 1.04 of the Rules of Civil Procedure which requires the court to interpret the rules of the court with a view to achieving the most expeditious and cost-effective determination of a proceeding on its merits.
[32] This is, ultimately, a simplified trial of a $9,000 claim. The issue of payment in accordance with the notice provisions of the ESA may not have been expressly pleaded by Mr. Popescu. But the issue was engaged in the statement of defence. There is no question that Wittman was alive to the issue and has addressed it from the outset of the proceedings. It would not, in the circumstances, be fair, reasonable, or in the interests of justice to dismiss the claim on the basis that the issue was not pleaded clearly enough.
The Entitlement to Damages
[33] The issue of what, if anything, Mr Popescu is entitled to by way of damages turns on the court’s interpretation of s. 6.4 of the employment contract.
[34] The court is guided by certain principles in the interpretation of commercial contracts. In particular, a commercial contract is to be interpreted,
(a) as a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective;
(b) by determining the intention of the parties in accordance with the language they have used in the written document and based upon the "cardinal presumption" that they have intended what they have said;
(c) with regard to objective evidence of the factual matrix underlying the negotiation of the contract, but without reference to the subjective intention of the parties; and (to the extent there is any ambiguity in the contract),
(d) in a fashion that accords with sound commercial principles and good business sense, and that avoid a commercial absurdity.
[35] Employers and employees are entitled to enter into contracts that define their rights and obligations in relation to the employee’s employment. They may not, however, enter into provisions that attempt to contract out of the minimum standards of employment provided for in the ESA: see s. 5(1) of the Act and Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986, at para. 26.
[36] It is well-settled that at common law, employment may be terminated without cause only on the provision of reasonable notice. A provision in an employment contract that provides for a specific notice period (or payment in lieu of notice) will displace the common law presumption of reasonable notice, provided the provision meets the minimum standards of the ESA: Machtinger, paras. 34-35.
[37] In this case the parties agreed on a specific notice period by reference to the minimum notice periods set out in the ESA. There is no assertion that their agreement offends the minimum standards of the Act. They have, in effect, displaced the common law presumption of reasonable notice on termination and instead have turned the statutory minimum into a contractual maximum.
[38] The real question is, however, in my view, just exactly how much of the termination provisions of the ESA have the parties incorporated into the employment contract by reference? The answer is found in the wording of the contract.
[39] First, the parties have agreed that the content of the employment agreement is the whole of the agreement between them. There is no provision in the contract that permits Wittman to lay-off Mr. Popescu. In the result – and this is not contested – the purported lay-off was a constructive dismissal of Mr. Popescu.
[40] According to paragraph 6.4 of the contract, upon dismissal (termination) Mr. Popescu is entitled to “the termination and severance pay, if any, required by the ESA.”
[41] Wittman interprets this provision to mean that if there isn’t any termination or severance pay required by the ESA in the circumstances, then Mr. Popescu gets nothing.
[42] Wittman argues that there is no termination pay required by the ESA in the circumstances because (1) this was a constructive dismissal and Mr. Popescu failed to resign within a reasonable period of time; and/or (2) this was a temporary lay-off within the meaning of s. 56(2)(b)(ii). In other words, in accordance with the provisions of the ESA, Mr. Popescu was not terminated.
[43] I am unable to accept Wittman’s argument.
[44] I agree that, in accordance with ss. 56(1) and (2) of the ESA, an employee is not terminated if he is only temporarily laid off, or if he fails to resign within a reasonable time after being constructively dismissed. But in my view these provisions are not operative in this case; they have been displaced by the employment contract.
[45] Recall that the employment contract represents the entire agreement between the parties with respect to matters relating to Mr. Popescu’s employment.
[46] It is agreed that Mr. Popescu was constructively dismissed, according to the common law. While the ESA provides that a constructively dismissed employee is only a terminated employee if s/he resigns within a reasonable period after the constructive dismissal, the employment contract does not. In this sense the requirements under the employment contract are more beneficial to Mr. Popescu than those in the ESA. The contract displaces the ESA provisions.
[47] Furthermore, the ESA countenances temporary lay-offs of up to 35 weeks, without termination pay. But that’s a minimum standard. Here, the employment agreement does not countenance temporary lay-offs without termination pay. Again, the contractual terms displace the minimum standards of the Act.
[48] Section 6.4 expressly imports the notice provisions of the ESA. It does not expressly, nor impliedly, import the termination provisions of the ESA. It has its own express provisions for termination and those express provisions form the entire agreement between them.
[49] I find that Mr. Popescu was terminated. I further find that the employment contract, being the entire agreement between them, displaces the termination provisions of the ESA, save for the notice provisions which are expressly incorporated by reference.
[50] Mr. Popescu is entitled to the notice provided for terminated employees under s. 57 of the ESA. In his case that amounts to 8 weeks’ notice, or pay in lieu of 8 weeks’ notice. The parties are agreed that the amount is $9,002.09. Mr. Popescu shall have judgment in that amount.
[51] The parties have alerted me to their expectation that the issue of costs may be complex. I invite them to make written submissions on the following turnaround: Mr. Popescu shall have until June 9, 2017 to serve and file his submissions on costs. Wittman shall have until June 23, 2017 to serve and file their submission. Mr. Popescu shall have until June 30, 2017 to file any reply. Submissions are not to exceed 3 pages in length and are to be submitted to me through my assistant’s email: Diane.Massey@Ontario.ca.
Boswell J. Released: May 26, 2017