ONTARIO SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-15-538549
DATE: 20180604
BETWEEN:
karen robinson
Plaintiff
– and –
h. j. heinz company of canada lp
Defendant
Garry J. Wise and Simran Bakshi, for the Plaintiff
Michael Horvat, for the Defendant
HEARD at Toronto: March 26 & 27, 2018
REASONS FOR JUDGMENT
Stinson J.
Introduction
[1] Karen Robinson began her career with Heinz Canada Ltd. in November 1999. By the time it ended in September 2015, she had received a series of promotions and held positions of increasing seniority and responsibility. After a major corporate merger and re-organization, however, she found herself with what she perceived to be a vastly diminished job and an uncertain future. She concluded she had been constructively dismissed and resigned her employment with the defendant.
[2] Fortunately for both parties, Ms. Robinson found a new job to which she was able to transition immediately from her position with the defendant. Her income was reduced, however, and she had to relocate to take the new job, incurring expenses to do so. She now sues to recover her losses arising from her reduced income and her relocation costs.
[3] At issue in this case are three questions:
(a) Was Ms. Robinson constructively dismissed?
(b) If Ms. Robinson was dismissed, when calculating her damages what treatment should be given to any sums awarded to her on account of statutory entitlements under the Employment Standards Act, 2000, S.O. 2000, c. 41 (“ESA”), and any mitigation income earned by her during her ESA severance pay period?
(c) What damages are recoverable by Ms. Robinson on account of mitigation expenses?
[4] Although the parties initially disagreed about the correct period of common law notice, counsel informed me at the conclusion of the trial that they had agreed that 15 months was the appropriate notice period to be used to calculate the plaintiff’s damages in the event she is found to have been constructively dismissal.
Assessment of Evidence
[5] The chronology of events surrounding the plaintiff’s employment, the various positions held by her and her responsibilities in them is largely non-controversial. However, there are some points in which the evidence proffered on behalf of the plaintiff is disputed by the defendant, especially in relation to the final months of her employment. This problem was identified by Kristjanson J. when this case was initially scheduled to be heard and decided by her on a motion for summary judgment. In the face of those controverted facts, she directed the parties to proceed to a so-called “mini-trial” so that the disputed issues of fact could be resolved.
[6] The principal factual issues in this case concern the extent and significance of the changes to the plaintiff's job responsibilities during the months of July and August 2015. The two witnesses who testified before me, Ms. Robinson and Jon Wollaston (former Controller with the defendant and Ms. Robinson’s direct superior over the relevant period) described these changes differently. Both were articulate witnesses who gave detailed explanations for their answers. Neither was seriously challenged or contradicted on cross-examination. On balance, however, for the reasons that follow, I find the evidence of Ms. Robinson to be more persuasive than that of Mr. Wollaston. Accordingly, where there is any material conflict between the evidence of these two witnesses, I prefer and accept that of Ms. Robinson.
[7] To begin with, I acknowledge that Ms. Robinson has an interest in the outcome of the litigation. By contrast, Mr. Wollaston is no longer employed by the defendant. That said, he was employed by the defendant at the time he swore his affidavit responding to the motion for summary judgment and when he was cross-examined on that affidavit. His testimony at trial, on behalf of the defendant, was a further step in that process.
[8] Moreover, as I will explain in more detail, as Ms. Robinson’s direct manager and supervisor, Mr. Wollaston must accept some of the responsibility for her conclusion that she had been constructively dismissed and her decision to resign. In effect, her conclusion was, to some extent, the product of the failure of the defendant to communicate clearly to her about her status in the company, in the face of the numerous changes that were taking place over the relevant period. In turn, a large part of the responsibility for that lack of communication lies at the feet of Mr. Wollaston. As her manager, had he been more attuned to Ms. Robinson’s circumstances and the changes that were affecting her, he might have prevented the situation from unfolding as it did, and averted the outcome that ensued. Thus, his evidence must be viewed with the knowledge that he was not a disinterested witness.
[9] I further note that Ms. Robinson's evidence concerning the changes in her responsibilities and the significant decline in her workload was confirmed and corroborated by the affidavits of two other individuals. There was no corroboration for Mr. Wollaston's testimony on this topic although, presumably, others could have confirmed his version of events. Several specific individuals associated with the defendant’s operations and reorganization at the relevant time could have provided evidence to confirm what Mr. Wollaston described, but the defendant neither submitted affidavits from them nor called them to testify.
[10] Another factor that leads me to prefer of the evidence of Ms. Robinson over that of the defendant on the various disputed facts is the written record or, more accurately, the lack of it from the defendant’s perspective. On several occasions, Ms. Robinson confirmed in writing her concerns regarding the ongoing changes to her job responsibilities and the reduced scope of her position. The complaints that she described in her evidence were largely consistent with the documents she authored at the time. By contrast, there was no documentary record of any significance – nor any actual conduct at the time – that was responsive to these written complaints. If, indeed, Ms. Robinson’s concerns were unwarranted or her descriptions inaccurate, one would have expected a response from the defendant, but none was forthcoming. Thus, Mr. Wollaston's explanations are largely an after-the-fact narrative that was not provided contemporaneously to the events in question.
[11] One specific aspect of Mr. Wollaston’s evidence seems at odds with the written record. In his internal corporate announcement of Ms. Robinson’s appointment as Senior Manager, Accounting – Canada, he expressly described her as “the ZBB Lead for Canada”. Yet during his testimony he sought to diminish the importance of that role and the significance it had in the plaintiff’s portfolio of responsibilities. In a sense, he was attempting to distance himself from a document that he himself had authored before matters became controversial.
[12] Another factor in my assessment of the reliability of Mr. Wollaston's evidence is that, by the time he provided it, a variety of organizational changes that had been in a state of flux during the plaintiff's tenure, had solidified. In other words, Mr. Wollaston gave evidence from the perspective of knowing the outcome of the various organizational issues that were uncertain over the summer of 2015. I consider that the subsequent clarity with which he now understands what was going on, has likely coloured his recollection of the situation at the time.
[13] Mr. Wollaston testified that he was not in the loop with respect to many of the decisions that were being made at that stage. He followed the company directive not to speculate and encouraged his inferiors not to do so. In light of his ongoing involvement in these changes following Ms. Robinson's departure, I believe it may now be difficult for him to discern with precision the state of affairs as it existed from time to time. This leads me to place less reliance on his evidence.
[14] I also have difficulty accepting that Mr. Wollaston was as familiar as he claimed to be with the details of the time spent by Ms. Robinson in relation to her various and numerous job responsibilities. By his own admission, he was not a "micro-manager" but instead left his direct reports to perform their functions, engaging with him only when necessary or required. Ms. Robinson was not the only person who reported to Mr. Wollaston. As a matter of logic, despite the fact that they may have worked in close proximity, Ms. Robinson would know far better than he just how much of her time and effort was dedicated to various functions.
[15] Subsequent to Ms. Robinson's departure, Mr. Wollaston redistributed some aspects of the plaintiff's remaining work assignments, and thus he had some insight as to their scope and magnitude. He testified about the demands placed on his time to do some of these functions. That said, to the extent he became directly involved in performing those functions, he was now doing work that had been routine for Ms. Robinson, and thus the amount of time he needed to perform the same tasks would have been greater. In other words, his personal experience performing the same functions is not a reliable measure of how much of the plaintiff’s time was required to complete the same tasks. These additional considerations lead me to further discount the weight I place on his testimony.
[16] For all these reasons, I prefer and accept the evidence of Ms. Robinson over that of Mr. Wollaston on any point of contradiction, save where Mr. Wollaston's evidence is confirmed and corroborated by a contemporaneously-created and undisputed document.
Findings of Fact
[17] The following section of these Reasons sets out the facts as I find them, based on my assessment of the evidence as stated above.
[18] Ms. Robinson holds the professional designations of Certified General Accountant, Certified Public Accountant and Certified Payroll Manager. She also has an MBA. She is dedicated to her career and has made it a priority to seek experience and advancement in her professional life. At the time of her departure she was a long serving employee who valued the career and reputation she had built over the years and who had intended to continue her professional career at Heinz Canada, potentially to retirement.
[19] After previous employment as a retail sales tax auditor and controller, Ms. Robinson joined the accounting department of what was then Heinz Canada Ltd. in November 1999, at its Leamington, Ontario office. Heinz Canada was the Canadian subsidiary of a large U.S.-based food conglomerate, Heinz Foods. At the time, Heinz Canada operated a very large production facility in Leamington, together with other operations elsewhere in southwestern Ontario. It had a corporate head office in Toronto.
[20] Ms. Robinson was initially hired as Supervisor, Accounts Payable. In May 2002, she was promoted to the position of Accounts Payable Manager. In November 2002, she was promoted to the position of Manager, Payroll and Benefits, reporting directly to the Controller of the defendant, Mr. Wollaston. In June 2005, she was promoted to the position of Manager, Leamington Accounting. In April 2009, she was promoted to a dual role as Manager, Leamington Accounting and Manager, Supply Chain – Finance for the company's St. Mary's, Ontario operations. In the latter position she continued to report directly to Mr. Wollaston. In the company announcement describing her 2009 promotion, Mr. Wollaston stated as follows:
Since joining Heinz in 2000 [sic] Karen has held increasing responsibilities in Finance, including Accounts Payable, Payroll Pension & Benefits, Inventory Control and Fixed Assets Control. Karen is also the Sarbanes Oxley Coordinator for Heinz Canada and has extensive experience with SAP and SAP project management.
(As a subsidiary of a U.S. parent corporation, Heinz Canada had to comply with American legislation known as the Sarbanes Oxley Act (“SOX”), which governs audit requirements and the accuracy and reliability of corporate disclosures. SAP is a project management software that was used at Heinz.)
[21] Thus, by 2013 Ms. Robinson was a seasoned, valued and experienced manager who had significant responsibilities. She was also dedicated to the company and anticipating a long career with it.
[22] The years 2013 through 2015 were a period of significant change for Heinz Canada. In June 2013 its U.S. parent, Heinz Foods, was acquired by new owners. In November 2013 Heinz Canada announced that it was closing the Leamington facility where the plaintiff worked, effective June 2014.
[23] The day following the announcement of the closure of Leamington, Ms. Robinson was approached by Mr. Wollaston, who asked if she was prepared to continue her career with the company at its headquarters in Toronto, where Mr. Wollaston worked.
[24] A potential move to Toronto represented a difficult decision for Ms. Robinson. She was a long-time resident of southwestern Ontario. She and her husband had a family, with a daughter still in school, and deep roots in the community. Following considerable reflection, she decided to accept the position that was offered to her, as Senior Manager, Accounting – Canada, continuing to report to Mr. Wollaston.
[25] Among the factors Ms. Robinson took into account in deciding to accept the new position and relocate to Toronto was the opportunity to serve as the Canadian Lead for Zero Based Budgetting (“ZBB”) a new budgeting method that was introduced at Heinz following the 2013 change in ownership. In this function she would liaise with and receive exposure to more senior managers in the U.S. and attend meetings at the U.S. headquarters of Heinz with others responsible for ZBB. She considered this an important advancement and responsibility, given the significance of ZBB in the new era at Heinz. Mr. Wollaston’s formal announcement of her new job expressly mentioned that “[a]s part of her new role, Karen is the ZBB Lead for Canada”. In addition to this added responsibility, the new job came with an increase in salary and represented an opportunity for genuine career growth, new professional accomplishment, and a long-term, enhanced professional future.
[26] Effective June 2014, Ms. Robinson transferred to Heinz Canada’s head office in Toronto as Senior Manager, Accounting. She continued to report to Mr. Wollaston as the Controller. In this new position, her duties included:
(a) acting as key liaison between Procurement, Traffic Production, Research, Agriculture, and I.S. departments with the Finance department;
(b) approving journals and verifying interface journals to assist in the accounts payable and consolidation process;
(c) co-ordinating closing processes with Toronto Finance department;
(d) prescribing specifications for the development/upgrades of all systems that affect inventory, general ledger, accounts payable, payroll/pension and benefits and fixed assets;
(e) maintaining system configuration in SAP for inventory management.
(f) approving account reconciliation and sub-ledger reconciliation of the General Ledger;
(g) preparing, reviewing and approving department budgets/actual/forecast;
(h) overseeing inventory reporting, cycle counting, inventory adjustments, fixed asset reporting, freight expense reporting, accounts payable processing; and payroll and benefit functions;
(i) acting as ZBB lead for Heinz Canada;
(j) managing SOX compliance for Heinz Canada; and
(k) management of six direct reports.
In effect, Ms. Robinson’s duties and responsibilities in her new position included leading or managing important accounting, tax and compliance procedures on a national level, acting as a key internal and external liaison, and prescribing specifications for the development and upgrading of certain essential company systems.
[27] In the spring of 2015 the new owners of Heinz Foods announced a merger with Kraft Foods, another very large U.S. based food conglomerate. The merger between Heinz and Kraft took effect on July 1, 2015. It created a new, even larger enterprise, known internationally as Kraft Heinz.
[28] Subsequent to July 1, 2015, the process of integrating the management of the Canadian operations of the two enterprises began. Soon thereafter, a series of unilateral changes were made to Ms. Robinson’s job, reducing her responsibilities significantly.
[29] The first such change was the removal from Ms. Robinson’s portfolio of duties, of all responsibility for payroll, a function she had supervised for more than a dozen years. Within two weeks after the Kraft-Heinz merger became effective, she was orally informed by Mr. Wollaston that this function would now be under the umbrella of the Human Resources department. Despite being the Senior Manager, Accounting, she was excluded from any discussion about the changeover to the Kraft payroll system and from any strategic planning regarding payroll, a function she had performed for years.
[30] As well, the individual who worked on payroll issues under Ms. Robinson’s supervision was transferred to Human Resources without advance warning or discussion. That individual had reported to Ms. Robinson and worked under her direct supervision since 2002. Mr. Wollaston told Ms. Robinson that the individual would henceforth report to a new Director of Human Resources.
[31] Ms. Robinson estimated that these changes amounted to a reduction in her workload and responsibilities of approximately 20% and I accept her evidence on this point. She testified that she felt this change amounted to a “big knock to her career”. Soon thereafter, she sent an email to a Heinz personnel director in which she objected “to having responsibility removed without warning or my agreement”. She included in that message an internet link to a commentary about constructive dismissal. Apart from a perfunctory reply asking her if she would like to sit down for a chat, there was no formal response and no follow-up from the employer.
[32] On August 20, 2015, Ms. Robinson discovered that she was no longer the ZBB Lead for Canada, as she had formerly been. In a brief email that day, and with no explanation, Mr. Wollaston informed her that another individual had “moved into the ZBB lead role” and was attending meetings down in Chicago “getting some initial training”. This was the first mention of this change to Ms. Robinson.
[33] In the past, the ZBB process had consumed a significant portion of her working time (approximately 20% overall) and the majority of her time at that time of year. It came as quite a surprise to learn that she no longer had this function, one that had been assigned to her as part of her move to Toronto and one that had played a significant role in inducing her to make the move. She was told that when the new ZBB Lead returned from Chicago, he would "provide more guidance on next steps”. In effect, she was told that someone new was performing an important function that was previously hers, and she would be subject to his direction.
[34] I acknowledge that in their testimony Ms. Robinson and Mr. Wollaston described her ZBB functions and responsibilities differently. For the reasons previously set out, I prefer and accept her evidence on this subject.
[35] After she learned about the new ZBB Lead, Ms. Robinson sent an email to Mr. Wollaston, stating: “It feels like some people know what they will be doing and others keep getting stuff removed with no answers. It’s becoming very frustrating and downgrading”.
[36] In response, Mr. Wollaston wrote as follows: “There is still a lot of fluidity in roles and responsibilities. I ask you to keep focused and positive. I know that we will have a role in ZBB – we just don’t know what yet.”
[37] Ms. Robinson responded by email to Mr. Wollaston, as follows:
I am only seeing stuff being taken away from me at this point. In the last few weeks, payroll, now ZBB, what’s next? Just how silo’d will this end up. I don’t think I can handle being saddled with some small role. I’m sorry, I try to be positive but right now I don’t see where I will end up in a role I will [sic] that won’t be saddled down to one little thing.”
There is no evidence of any written response from Mr. Wollaston.
[38] Another change was announced around the same time, in relation to Ms. Robinson’s responsibilities concerning the defendant’s accounts payable function. Previously she had reported to Mr. Wollaston concerning this aspect of the operation. She was informed that she would now have a dual reporting relationship: to Mr. Wollaston in part and to an individual named Ram Gummadi, who was also a senior manager, of equivalent rank to Ms. Robinson. She testified that a higher reporting relationship reflects one’s importance in an organization. Since 2002, she had been reporting to the company’s Controller, Mr. Wollaston, only, as a result of this change she felt further demoted and degraded.
[39] Ms. Robinson’s concerns and dismay were heightened when she met with Mr. Gummadi and his manager to discuss the transfer of the accounts payable function. She was told that the new merged enterprise was going to follow the Kraft accounts payable model, by outsourcing this function. When she asked what was going to happen to her given these changes, she was told that “we don’t have any plans”. Thus, Ms. Robinson was told by a senior manager in the newly-merged enterprise that it had no plans for her. Neither Mr. Gummadi nor his manager provided evidence to rebut her description of this meeting. In effect, it meant the end of her responsibility for accounts payable and the supervision of the several individuals who reported to her as part of this job function.
[40] Ms. Robinson summed up her reaction to these various developments in her email to Mr. Wollaston informing him of her decision to resign, as follows:
When I spoke with [Mr. Gummadi’s manager] this week he certainly implied there is no guaranteed future after the sap merger. The way these terminations and restructure that isn’t really a restructure have occurred it has left me feeling like a name in a box. just [sic] another number that doesn’t matter.
[41] Two further events served as catalysts for Ms. Robinson’s decision to leave her employment with the defendant. One was the announcement that the staff at the old Heinz Canada Toronto headquarters was being relocated. This would have the effect of almost doubling her daily commuting time from her new home in Mississauga.
[42] The second was a serendipitous inquiry received by the plaintiff regarding a job opportunity elsewhere. According to Ms. Robinson (who was not challenged on this point) on August 26, 2015, she received “out of the blue” a LinkedIn request from a company that was seeking a new Accounting Manager for its operations in southwestern Ontario. Despite the fact that she had not been looking for a new job, the offer came at a time when her future at Heinz was in doubt.
[43] Given the numerous adverse developments she was encountering in her employment with the defendant, Ms. Robinson decided to explore this opportunity. She concluded that she would accept it and resign her position with the defendant on the basis that she had been constructively dismissed.
[44] Ms. Robinson informed Mr. Wollaston of her decision via email on September 3, 2015. She formalized her resignation by letter dated September 8, 2015, setting out full details of the grounds for her decision that she had been constructively dismissed. Out of loyalty to the defendant, she provided sufficient notice of her departure to allow for a smooth transition of her remaining duties. Her final day of work was September 25, 2015. She requested a severance package. The defendant did not provide one. This lawsuit followed.
Issues and Analysis
[45] As mentioned previously, there are three remaining issues for me to decide. I turn to them now.
Issue 1 - Was Ms. Robinson constructively dismissed?
[46] The concept of constructive dismissal is founded on the general principle that where one party to a contract demonstrates an intention no longer to be bound by it, that party is committing a fundamental breach of the contract that results in its termination. The question to be asked in cases of alleged repudiation is “whether the acts and conduct of the party evince an intention no longer to be bound by the contract”. In such circumstances the employee may consider himself or herself constructively dismissed and may claim damages from the employer in lieu of reasonable notice: see Farber v. Royal Trust Co., [1997] 1 S.C.R. 846, 1997 CanLII 387 (SCC), (at para. 33).
[47] In Potter v. New Brunswick Legal Aid Services Commission, [2015] 1 S.C.R. 500, 2015 SCC 10 the Supreme Court of Canada revisited the law of constructive dismissal. While affirming the principles set out in Farber, the Court clarified that there are two branches that may lead to a finding of constructive dismissal, writing (at paras. 34 and following):
[34] The first branch of the test for constructive dismissal, the one that requires a review of specific terms of the contract, has two steps: first, the employer’s unilateral change must be found to constitute a breach of the employment contract and, second, if it does constitute such a breach, it must be found to substantially alter an essential term of the contract….
[39] Once it has been objectively established that a breach has occurred, the court must turn to the second step of the analysis and ask whether, “at the time the [breach occurred], a reasonable person in the same situation as the employee would have felt that the essential terms of the employment contract were being substantially changed” (Farber, at para. 26). A breach that is minor in that it could not be perceived as having substantially changed an essential term of the contract does not amount to constructive dismissal.
[40] The kinds of changes that meet these criteria will depend on the facts of the case being considered, so “one cannot generalize”: Sproat, at p. 5-6.5. In each case, determining whether an employee has been constructively dismissed is a “highly fact-driven exercise” in which the court must determine whether the changes are reasonable and whether they are within the scope of the employee’s job description or employment contract: R. S. Echlin and J. M. Fantini, Quitting for Good Reason: The Law of Constructive Dismissal in Canada (2001), at pp. 4-5. Although the test for constructive dismissal does not vary depending on the nature of the alleged breach, how it is applied will nevertheless reflect the distinct factual circumstances of each claim.
[42] The second branch of the test for constructive dismissal necessarily requires a different approach. In cases in which this branch of the test applies, constructive dismissal consists of conduct that, when viewed in the light of all the circumstances, would lead a reasonable person to conclude that the employer no longer intended to be bound by the terms of the contract. The employee is not required to point to an actual specific substantial change in compensation, work assignments, or so on, that on its own constitutes a substantial breach. The focus is on whether a course of conduct pursued by the employer “evince[s] an intention no longer to be bound by the contract”: Rubel Bronze, at p. 322. A course of conduct that does evince such an intention amounts cumulatively to an actual breach….
[48] For the reasons that follow, I conclude that, applying either branch of the test, the plaintiff was constructively dismissed by the defendant.
[49] At the first step of the analysis for Branch One, I am required to determine, on an objective standard, whether the employer unilaterally changed the contract of employment. I have previously described in detail the nature and terms of the plaintiff’s employment as Senior Manager, Accounting – Canada. In the immediate wake of the Kraft-Heinz merger, the defendant made the following changes to the plaintiff’s employment:
a. It reassigned of all of the plaintiff’s payroll-related functions to the Human Resources department on a permanent basis and eliminating her direct report of the payroll team.
b. It removed the plaintiff’s title and all associated responsibilities as the ZBB Lead for the company in Canada.
c. It further demoted the plaintiff’s position within the defendant’s corporate hierarchy by requiring her to report to an employee of equivalent rank for all accounts payable related functions, in place of the Controller of the company.
d. It informed her that it planned to outsource the company’s accounts payable functions, and shut down the department, which as a necessary result would eliminate all of the Plaintiff’s accounts payable functions in the near future.
e. In the face of these various changes to her senior responsibilities, it advised the plaintiff that it “[didn’t] have any plans” for her.
[50] These various functions were fundamental to the role the plaintiff agreed to perform for the defendant when she accepted the position as Senior Manager, Accounting in 2014. In effect, as part of its restructuring, the defendant unilaterally changed the job the plaintiff was hired to perform by removing many of the plaintiff’s job functions. In my view, this conduct constituted a breach of the employment contract.
[51] Turning to the second step of the analysis, I must ask whether a reasonable person in the same situation as the plaintiff would have felt that the essential terms of the employment contract were being substantially changed. In my view, a reasonable person would not view these changes as minor. Much of what brought the plaintiff to accept the offer to move to Toronto to head office, and additional responsibilities she had discharged in the course of her long-term career with the defendant, were taken away from her. The deletion of so many important aspects of the plaintiff’s job duties could only be seen be as substantially changing the essential terms of her contract of employment. An employer has an obligation to convey its proposal regarding changes clearly to the employee. Where it fails to consult with the employee in this manner, leading to uncertainty as to the implications of the proposed changes, it alone must bear the consequences. Schumacher v. Toronto Dominion Bank, 1997 CanLII 12329 (ON SC) (at para. 164). Plainly, the defendant failed in this obligation.
[52] I therefore conclude, on Branch One of the test, that the defendant’s actions amounted to constructive dismissal.
[53] Turning to Branch Two of the test, the question is whether the employer’s conduct, viewed in the light of all the circumstances, would lead a reasonable person to conclude that the employer no longer intended to be bound by the terms of the contract. Put another way, did the employer evince an intention no longer to be bound by the contract?
[54] Here, the employer was engaged in a broad and extensive restructuring of its newly-merged operations. It plainly had different ideas about how the responsibilities previously assigned to the plaintiff would be discharged in the new enterprise. Although it had previously contracted with the plaintiff for her to perform those functions, its post-merger plans did not include the plaintiff for many of those responsibilities. Indeed, at one point a senior manager told the plaintiff that it “[didn’t] have any plans” for her.
[55] These facts leave me with no doubt that the defendant made it plain to the plaintiff that it no longer intended to be bound by their employment contract. When changes had been made to the plaintiff’s duties and responsibilities on occasion in the past, as she was promoted into a number of different roles, it was the expectation, and in fact the consistent practice of the parties to negotiate applicable terms in a new employment contract to reflect those changes. When she came to Toronto, she signed on for specific responsibilities, with specific authority and reporting responsibilities and a certain place in the corporate hierarchy. The defendant’s conduct made it clear that she would henceforth no longer enjoy the promised status for which the parties had contracted. By doing so, the employer evinced an intention no longer to be bound by the contract.
[56] I therefore conclude, on Branch Two of the test, that the defendant’s actions amounted to constructive dismissal.
[57] The answer to Issue 1 is therefore: “Yes.”
Issue 2 - If Ms. Robinson was dismissed, when calculating her damages what treatment should be given to any sums awarded to her on account of statutory entitlements under the ESA, and any mitigation income earned by her during her ESA severance pay period?
[58] For the reasons stated above, I find that the plaintiff was dismissed by the defendant. The parties have agreed that 15 months is the appropriate notice period to be used to calculate the plaintiff’s common law damages.
[59] The parties also agree that, if Ms. Robinson is found to have been wrongfully dismissed (as I have found), quite apart from her common law damages, she is entitled to the termination and severance payments provided by the ESA. Pursuant to s. 54 and s. 61(1)(a), because the employer gave no advance notice of termination, Ms. Robinson is entitled to receive a termination payment based on her length of service. In this case, based on s. 57(h), the termination payment due to Ms. Robinson is to be calculated based on eight weeks’ pay.
[60] Section 64 of the ESA also requires an employer to pay severance pay. Under s. 65(1), the amount due is calculated by multiplying the employee’s regular wages for a regular work week by the following sum:
(a) the number of years of employment the employee has completed; plus
(b) the number of months of employment not included in clause (a) that the employee has completed, divided by 12.
[61] The parties disagree slightly as to the length of the plaintiff’s employment to be used for purposes of calculating her severance pay entitlement under the ESA. That disagreement appears to be based on a difference of view as to the effective date of Ms. Robinson’s termination. The plaintiff uses September 25, 2015 – the date of her final day at Heinz - which accords to severance pay of 15.83 weeks.In its “Mitigation Chart” the defendant calculates 15.79 weeks, which means it used a term of 15 years and 9.5 months, which in turn means the defendant used September 8, 2015 – the date of the plaintiff’s letter advising that she considered she had been constructively dismissed - as the date of termination. In view of the minor significance of this difference and for the sake of simplicity in calculation, I would round the number to 15.8 weeks.
[62] Therefore, by reason of her constructive dismissal by the defendant, Ms. Robinson is entitled under the ESA to be paid an amount equal to a total of 23.8 weeks’ income on account of statutory termination pay and severance pay.
[63] The parties further agree that an employee who is entitled to ESA termination and severance payments is not required to deduct income earned post-termination from those entitlements. ESA entitlements are minimum payments that cannot be reduced. This is the meaning of the rule that “ESA entitlements are not subject to mitigation” common to the cases in this area: see Boland v. APV Canada Inc. (2005), 2005 CanLII 3384 (ON SCDC), 250 D.L.R. (4th) 376, at para. 23. Thus in this respect, ESA payments are unlike common law damages, which are subject to reduction by post-termination income from replacement employment.
[64] The parties disagree, however, whether a plaintiff/employee must apply against his/her common law damages all mitigation income earned during the complete period of reasonable notice, or whether that reduction is restricted to mitigation income earned by the employee subsequent to the expiry of the period of statutory entitlements under the ESA. In other words, must an employee give credit to the employer for all mitigation income earned during the entire common law notice period or is employee’s obligation to do so limited to income earned during the common law notice period after the expiration of the statutory entitlement payments under the ESA?
[65] To put the issue into real terms, Ms. Robinson began to earn income from her new job immediately after her constructive dismissal. That income does not reduce her entitlement to the ESA termination and severance payments due to her. Her replacement income does, however, offset her common law damage award, which is based on her reduced income at her new job over the common law notice period. The question is whether all of her post-dismissal income should be deducted from her common law damage award or only that portion earned after her ESA entitlements period ended (i.e. subsequent to 23.8 weeks after September 25, 2015).
[66] As a general rule, ‘[a]n employee who is dismissed without reasonable notice is entitled to damages for breach of contract based on the employment income the employee would have earned during the reasonable notice period, less any amounts received in mitigation of loss during the notice period.” See: Brake v. PJ-2MR Restaurant Inc., 2017 ONCA 402 (at para. 96).
[67] The defendant submits that all income received by the plaintiff from her new job must be credited against her common law damage claim. It argues that, while the statutory payments may not be subject to reduction by mitigation, the standard approach of reducing a dismissed employee’s common law damages by all mitigation income earned during the common law notice period should be followed here. In support of its position the defendant cites Boland, at para. 25, where the following statement appears: “[a]ny claim for failure to provide notice in excess of the ESA entitlements is a claim for damages and is subject to the mitigation principle”.
[68] The plaintiff relies on the more recent decision of the Court of Appeal in Brake. In that case, the Court expressly addressed the topic of the treatment of employment income earned during the statutory entitlement period. Gillese J.A. held that employment income earned during the statutory entitlement period is not subject to deduction as mitigation income.
[69] Brake was a wrongful dismissal case in which the trial judge had made a global damage award, encompassing both the plaintiff’s ESA entitlements and her common law damages. He awarded damages based on what the plaintiff’s remuneration would have been over the common law notice period, but made it clear that the damages award was inclusive of plaintiff’s statutory entitlements. On appeal, the Court expressly addressed the topic of what portion of the replacement income the employee received during the common law notice period should be deducted from the damages award.
[70] After reviewing the analysis of the Divisional Court in Boland, Gillese J.A. unequivocally stated: “any employment income that [the plaintiff] earned during her statutory entitlement period is not deductible as mitigation income”. (para. 118). She went on to state that “[s]ince the employment income that [the plaintiff] earned during her statutory entitlement period is not deductible from the damages award, the trial judge ought to have determined her statutory entitlement period and identified which items of employment income were attributable to that period and which were attributable to the Balance of the Notice Period”. (para. 119). The only reason for imposing this requirement is the acknowledged different treatment applied to mitigation income earned during the ESA statutory entitlement period and that earned during the remainder of the common law notice period. Thus it is plain that the Court was addressing the very issue before me.
[71] Indeed, after defining termination and severance pay under the ESA as “statutory entitlements”, Gillese J.A. addressed the topic head-on as follows (in para. 111):
Statutory entitlements are not damages. Ms. Brake was entitled to receive her statutory entitlements even if she secured a new full-time job the day after the Appellant terminated her employment. Therefore, the income that Ms. Brake earned during her statutory entitlement period is not subject to deduction as “mitigation income”.
The foregoing statement makes it plain that no mitigation income received in relation to the periods represented by both termination and severance pay under the ESA is deductible from the plaintiff’s overall award.
[72] This aspect of the decision of the Court of Appeal in Brake is consistent with at least two earlier trial decisions, Moldovanyi v. Kohler Ltd., 2009 CanLII 7094 (ON SC) and Olivares v. Canac Kitchens, 2012 ONSC 284. It appears at odds with at least one other trial decision, Yanez v. Canac Kitchens (2004), 2004 CanLII 48176 (ON SC), 45 CCEL (3d) 7 (ON SC). All these case predate Brake. The above-quoted comments by Gillese J.A. are binding on me and, in my view, are dispositive of this issue.
[73] Therefore, when calculating Ms. Robinson’s damage award on account of common law notice, no mitigation income earned by her during the 23.8 weeks immediately following her dismissal on September 30, 2015, may be deducted.
Issue 3 - What damages are recoverable by Ms. Robinson on account of mitigation expenses?
[74] When Ms. Robinson concluded that she had been constructively dismissed, she faced the same obligation as any innocent party in a breach of contract situation: the duty to take all reasonable steps to mitigate her loss. In the case of an employee who has been wrongfully dismissed, the terminated employee is required to mitigate their damages by seeking and accepting reasonable alternative or replacement employment. In the present case, Ms. Robinson mitigated her damages by accepting a job in southwestern Ontario at a reduced income.
[75] In addition to her lost income claim, Ms. Robinson seeks reimbursement for various expenses that she says she incurred in order to transition to her new employment. In effect, she seeks her “costs of mitigation”. This topic is discussed in Hon. Mr. Justice Randall Scott Echlin and Christine M. Tomlinson, For Better or for Worse – A Practical Guide to Canadian Employment Law, 3rd ed. (Toronto; Canada Law Book, 2011) at p. 261 as follows:
A dismissed employee may be entitled to claim from the employer reasonable out-of-pocket expenses incurred while fulfilling the duty to mitigate and seeking out and accepting alternate employment. These costs are considered to be expenses incurred in the mitigation of damages and are the responsibility of the employer.
The authors go on to note (at p. 262) as follows:
As part of the job search expense reimbursement requirement, employers have been required to compensate employees for moving to a new location to accept other employment, where the relocation is reasonable and/or resulted in a new job. In other cases, courts have viewed this claim as damage which would have been sustained even if proper notice had been given and have refused to make such an award. In addition, it has yet to be resolved whether the dismissed employee is entitled to damages in the amount of the real estate agents fees on the selling of the employee's old house, legal fees in relation to the employees purchase of a new house and any loss sustained in the disposition of the property, where relocation is required to fulfil the employee's duty to mitigate.
[76] In my view, the weight of authority in Ontario supports recovery of real estate commission, moving expenses and legal fees incurred by an employee as a result of wrongful dismissal: see Earl v Northern Purification Services (Eastern) Limited, [1980] O.J. No. 160 (at paras. 16 and 17) (H. C. J.); Hayden v. Richards-Wilcox of Canada Ltd., [1985] O.J. No. 2835 (D.C.O.). Moreover, it is broadly accepted that that “an employee who is wrongfully dismissed is entitled to recover the value of all losses from the failure to have been given reasonable notice of the termination of his or her employment”: Paquette v. TeraGo Networks Inc., 2015 ONSC 4189, at para. 36 and Adjemian v. Brook Crompton North America, [2008] O.J. No. 2238, at para. 24.
[77] Additionally, in the present case the plaintiff was induced to move to Toronto to continue her employment on terms that I have found the defendant subsequently breached. I conclude that it was reasonably foreseeable that if the defendant breached their contract, the plaintiff's damages would include the cost of relocating to a residence proximate to her new place of employment. That is precisely what occurred here.
[78] As well, the timing of the sale of the house in Mississauga was directly tied to the plaintiff’s mitigation efforts. By accepting the new job as she did, the plaintiff substantially mitigated her damages. She reduced the defendant's exposure to a significant damage claim founded on lost income. To do so, however, she was forced to relocate. In my view, it would be inequitable to allow the defendant to benefit from the plaintiff’s mitigation efforts while at the same time denying her reimbursement for all costs she incurred to achieve that positive outcome. I therefore conclude that the defendant should reimburse her for all reasonable expenses incurred in mitigating.
[79] Before turning to a specific enumeration of those expenses, I will address one other argument advanced by the defendant. When she accepted the position at the Toronto office, the plaintiff and her husband sold their house in southwestern Ontario. They moved to Mississauga and purchased a house there. After she was constructively dismissed, the plaintiff and her husband moved back to southwestern Ontario and purchased a house there, although for a period of time they owned two residences and she commuted on weekends. As well, the house in Mississauga was sold at a price higher than the price paid by the plaintiff to purchase it.
[80] On these facts, the defendant argues that the plaintiff's capital gain on the Mississauga house completely eliminated any expenses incurred due to the movement back to southwestern Ontario. The question to be addressed, therefore is whether the capital gain from the sale of the Mississauga home should be applied to offset expenses related to the plaintiff’s move back to southwestern Ontario. This issue has been addressed in several cases, including the following.
[81] In Dunning v. Royal Bank, 1996 CanLII 8159 (Ont. Sup. Ct.), Kiteley J. dealt with this same argument from the defendant. In Dunning the plaintiff worked at the Chicago location of the defendant bank. His employer informed him he would be relocated to Canada, and as a result, he sold his home in Chicago, and rented a unit there until before moving to Victoria. His employment was then terminated. The court at para. 68 awarded him damages for rental fees in Chicago and for his moving costs from Chicago to Victoria.
[82] Kiteley J. held that an offset of the capital gains on the sale as against expenses related to the plaintiff’s move was not appropriate, stating as follows (at para. 101):
Just as the gain and the tax arising from it is the property of and responsibility of the employee, so is the profit. It would be unreasonable to expect an employee to be accountable for the profit. Consequently, I do not allow an offset for the profit on the sale of the home.
[83] By contrast, in Geluch v. Rosedale Golf Assn. (2004), 2004 CanLII 14566 (ON SC), 32 CCEL (3d) 177 (Ont. Sup. Ct.), Himel J. analyzed the plaintiff’s claim for mitigation expenses, including moving costs and capital gains earned on the sale of his home and held (at para. 204) that the “expenses related to the sale of his Toronto house should be offset against any capital gains he made in that regard”. For the reasons that follow, I prefer the approach followed by Kiteley J.
[84] Firstly, as I have noted, Ms. Robinson was induced to move to Toronto to continue her employment. She sold her previous residence and bought in Mississauga. She testified that she made several improvements to the Mississauga house, which would enhance its resale value. This means that the increased value of the Mississauga house was at least in part due to the value of the improvements made. To credit the defendant with the value of those improvements would be unfair to the plaintiff.
[85] Further, there was a general rise in real estate values, which affected not just the sale price of the Mississauga house, but also the purchase price of the house that the plaintiff bought when she moved back to southwestern Ontario. In my view it would be unfair to allow the defendant to benefit from the increase in value of the Mississauga house, but to force the plaintiff to bear the burden of the increase in price of the replacement house.
[86] I therefore do not accept that the plaintiff benefited by way of a profit on the sale of the Mississauga house. It follows that the defendant is not entitled to credit against the plaintiff’s mitigation expenses on this account.
[87] Turning to the specific mitigation expenses incurred, they may be summarized into three categories: (1) expenses on the sale of the house in Mississauga; (2) expenses on purchasing the house in southwestern Ontario; and (3) expenses incurred during the transitional period while the plaintiff was employed and staying in southwestern Ontario, before she sold the house in Mississauga and purchased the new house in southwestern Ontario and moving costs. I will deal with each of these claims separately.
(1) Expenses on sale
[88] The plaintiff sold her Mississauga house effective December 15, 2015. Her new house purchase closed on November 15, 2015. For one month she owned two residences. I calculate the extra expenses for the Mississauga house for that one month overlap to be approximately $338.00.
[89] On the sale of the Mississauga house the plaintiff incurred real estate commission and listing costs of $30,478.29. She also incurred a mortgage pre-payment penalty of $1,841.86, mortgage discharge fees of $374.72 and legal fees of $977.45.
[90] The plaintiff’s total mitigation expenses arising from the sale of the Mississauga house are therefore $34,010.32.
(2) Expenses on purchase
[91] Several of the expenses claimed are estimates only. Based on the information provided, I would allow the plaintiff mitigation expenses in the total amount of $3,500.00 for land transfer taxes, legal fees and related expenses incurred on the acquisition of the new house.
(3) Moving and transitional expenses
[92] These costs represent the expenses incurred by the plaintiff as a result of commuting back and forth to Mississauga while working at her new job, meals and living expenses while there, and costs of moving the plaintiff’s goods to her new residence. Once again, the plaintiff provided only estimates for most of these expenses. I would allow the total sum of $7,500.00 on this account.
(4) Summary of mitigation expenses allowed
[93] The plaintiff’s mitigation expenses thus total $45,010.32. I order the defendant to pay that sum as additional damages.
Conclusion and Disposition
[94] For the foregoing reasons, I conclude and declare as follows:
(a) the plaintiff was wrongfully dismissed by the defendant as a result of her constructive dismissal;
(b) the plaintiff is entitled to a termination payment under the ESA to be calculated based on eight weeks’ pay;
(c) the plaintiff is entitled to a severance payment under the ESA to be calculated based on 15.8 weeks’ pay;
(d) the plaintiff is entitled to a common law damage award based on a calculation that subtracts her replacement income, from her projected income with the defendant, over a 15 month notice period (less 23.8 weeks on account of her ESA entitlements), provided that no mitigation income earned by her during the 23.8 weeks immediately following her dismissal on September 25, 2015, may be deducted; and
(e) the plaintiff is entitled to be paid mitigation expenses in the total amount of $45,010.32; and
(f) the plaintiff is entitled to pre-judgment interest on the above sums.
[95] If the parties encounter any difficulty in calculating and agreeing on the amounts to be paid by the defendant to the plaintiff, they may request a telephone conference with me to discuss those issues.
[96] In relation to costs, I encourage the parties to reach agreement. Should they be unable to do so, I direct as follows:
(a) The plaintiff shall serve her Bill of Costs on the defendant, accompanied by written submissions, within 30 days of the release of these reasons.
(b) The defendant shall serve its response on the plaintiff within 20 days thereafter. I expressly invite the defendant to submit the Bill of Costs it would have presented had it been successful at trial.
(c) The plaintiff may, but is not obliged to, serve a reply within 10 days thereafter.
(d) In all cases, the written submissions shall be limited to three double-spaced pages, plus Bills of Costs.
(e) I direct counsel for the plaintiff to collect copies of all parties' submissions and arrange to have that package delivered to me in care of Judges' Administration, Room 170 at 361 University as soon as the final exchange of materials has been completed. To be clear, no costs submissions should be filed individually: rather, counsel for the plaintiff will assemble a single package for delivery as described above.
___________________________ Stinson J.
Released: June 4, 2018
COURT FILE NO.: CV-15-538549
DATE: 20180604
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
karen robinson
Plaintiff
– and –
h. j. heinz company of canada lp
Defendant
REASONS FOR JUDGMENT
Stinson J.
Released: June 4, 2018