COURT FILE NO.: CV-17-577496 DATE: 2018 0706
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Hugo Raposo, Plaintiff – and – CA Canada Company, Defendant
COUNSEL: Daniel A. Lublin and Simone Ostrowski for the Plaintiff Michael J.W. Round for the Defendant
HEARD: April 20, 2018
REASONS FOR JUDGMENT
Nishikawa J.
Overview
[1] The Plaintiff, Hugo Raposo, brings this motion for summary judgment in his action for wrongful dismissal against the Defendant, CA Canada Company (“CA”).
[2] The issue on this motion is the proper interpretation and enforceability of the termination provisions in the employment agreement, and whether the termination provisions displace the presumption that the Plaintiff is entitled to common law reasonable notice.
[3] For the reasons that follow, I dismiss the Plaintiff’s motion for summary judgment.
Factual Background
The Parties
[4] The Plaintiff, Hugo Raposo, was employed by the Defendant, CA, as a Senior Business Technical Architect. He has a Bachelor’s degree in Computer Science and a Master’s degree in Software Engineering and Artificial Intelligence.
[5] The Defendant is a provider of information technology management software in Canada, and is a subsidiary of a large global company with its headquarters in the United States.
The Offer of Employment
[6] In April 2014, Mr. Raposo submitted an online application for a position with CA.
[7] On July 15, 2014, Mr. Raposo received an email from Michelle Vicari of CA enclosing an offer of employment as a Senior Business Tech Architect (the “Offer Letter”) and the CA Inc. Technologies Employment and Confidentiality Agreement (the “Employment Agreement”). The email message stated: “Accepting this offer indicates that you are accepting the terms of the offer letter as well as the terms of the CA Technologies Employment and Confidentiality Agreement as provided to you.”
[8] Both the email message and the Offer Letter instructed the Plaintiff to “carefully review the terms of the offer letter and the CA Inc. Employment and Confidentiality Agreement.” Mr. Raposo was instructed not to make any changes to the Offer Letter or the Employment Agreement.
[9] The Offer Letter stated that the terms and conditions in the Offer Letter “or identified in the enclosed Schedule, shall apply to your employment at CA along with all other terms and conditions of your employment provided to you by CA.
[10] The Offer Letter stated as follows:
After the successful completion of your probationary period, CA may terminate your employment for any reason whatsoever, by satisfying the notice and severance pay requirements, including the requirements with respect to the continuation of contributions to benefit plans, in the applicable employment standards legislation, unless your termination is for cause. No other notice or severance, whatsoever, either at civil-law, common-law or under statute, shall be payable by CA to you. This provision will continue to be in effect regardless of the duration of your employment and despite any changes that may occur in your compensation, job functions, responsibilities or title, so long as you continue to hold a position with CA or its related companies.
[11] The email message stated that the offer of employment would expire after two business days. Mr. Raposo sent an email message accepting the offer of employment within thirty minutes after he received it.
[12] On the same day that the Offer Letter and the Employment Agreement were sent to Mr. Raposo, CA sent Mr. Raposo another email attaching a document it referred to as “Corporate New Hire Paperwork.” This included a copy of another employment agreement (the “Second Employment Agreement”). The Plaintiff was asked to complete the paperwork and bring it on his first day of work.
The Terms of Employment
[13] Mr. Raposo commenced employment with CA on August 5, 2014. On that day, he executed a copy of the Employment Agreement, which was the same as the agreement that had been emailed to him with the Offer Letter on July 15, 2014. Mr. Raposo acknowledged on cross-examination that this was the only copy of the Employment Agreement that he signed.
[14] The Employment Agreement contains the following term (the “Termination Provision”):
CA Canada may terminate Employee’s employment for any reason whatsoever by satisfying the notice and severance pay requirements contained in the applicable employment standards legislation, unless Employee’s termination is for cause. No other notice or severance whatsoever, either at common-law or under statute, shall be payable by CA Canada to Employee. This provision will continue to be in effect regardless of the duration of Employee’s employment and despite any changes that may occur in Employee’s compensation, job functions, responsibilities or title, so long as Employee continues to hold a position with CA Canada or the Company.
[15] Mr. Raposo’s responsibilities included using his technical knowledge to encourage customers to acquire additional CA software by advising them of the technical merits of that software. He worked in “pre-sales” as part of the sales team. Mr. Raposo’s base salary was $150,000 per year and did not change during his employment with CA. He was entitled to two weeks of paid vacation per year.
The Incentive Compensation Plan
[16] Pursuant to an incentive compensation plan, Mr. Raposo was also eligible to earn commissions of up to a maximum of $160,000 per year. Each year, CA employees who are eligible to earn incentive compensation are provided with the “Incentive Compensation Plan” that will apply for the upcoming fiscal year, and an individual “Compensation Schedule.” The Compensation Schedule advises an employee of their target incentive compensation amount, compensation and quotas for the upcoming year.
[17] The Compensation Schedule specifically states that: “This document is not a contract or guarantee of employment for any period of time and should not be construed as such.” The Compensation Schedule also includes the following language: “All CA employees are employed at will, meaning that either CA or the employee may terminate the employment relationship at any time for any reason…” CA’s position is that this term is intended to refer to employees of CA Inc. in the United States, and not employees of CA Canada.
The Termination
[18] Mr. Raposo’s employment was terminated as part of a restructuring, effective March 31, 2017. At the time of his termination, CA sent a letter setting out the terms of severance that it was offering. This included:
- Pay in lieu of notice, “if applicable” in accordance with local Employment Standards requirements;
- Severance of $11,538.46, provided Mr. Raposo sign a Full and Final Release and Indemnity;
- Participation in company benefit plans to be maintained until April 14, 2017; and
- Payment for accrued but unused vacation days.
[19] Mr. Raposo did not sign the Full and Final Release and, as a result, did not receive the severance payment, which would have been in addition to amounts required under the ESA. On April 13, 2017, CA paid Mr. Raposo $4,668.65 in lieu of notice and $4,151.95 in vacation pay. CA later admitted that its calculations gave rise to a shortfall in vacation pay of $8,284.56. CA has offered to pay the amount to the Plaintiff, but has yet to do so.
[20] On May 15, 2017, CA paid the Plaintiff $35,962.18 in commissions owing to him and vacation pay of $1,438.49 on that amount.
Issues
[21] The Plaintiff’s motion for summary judgment raises the following issues:
(a) Do the applicable termination provisions give rise to an ambiguity, thus rendering them unenforceable?
(b) If the termination provisions are unenforceable, what amount is the Plaintiff entitled to on termination?
Analysis
Principles Applicable to Summary Judgment
[22] Rule 20.04(2)(a) of the Rules of Civil Procedure states that a court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.
[23] The Supreme Court of Canada has held that “summary judgment must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims.” Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 at para. 5. An issue should be resolved on a motion for summary judgment if: (i) the motion affords a process that allows the judge to make the necessary findings of fact, (ii) apply the law to those facts, and (iii) is a proportionate, more expeditious and less expensive process to achieve a just result than going to trial: Hryniak, at para. 49.
[24] On a motion for summary judgment, the judge must first determine whether there is a genuine issue requiring a trial based only on the evidence before him or her, without using the fact-finding powers. If there appears to be a genuine issue requiring a trial, the judge should then determine if the need for a trial can be avoided by using the powers under Rules 20.04(2.1) and (2.2) ( Hryniak, at para. 66).
[25] The court is entitled to assume that the record contains all the evidence that the parties would present if the matter proceeded to trial: Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, at paras 26-27, aff’d 2014 ONCA 878, leave to appeal to SCC refused, [2015] S.C.C.A. No. 97.
[26] In this case, the parties’ dispute relates to the applicability and legal effect of the agreements into which they have entered. The facts are not significantly in dispute, and the parties agree that the summary judgment process allows the court to make the necessary findings of fact and to apply the law to those facts.
Principles Applicable to the Interpretation of Employment Contracts
[27] The parties agree that the principles enunciated by the Supreme Court of Canada in Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986 apply to the interpretation of termination provisions in employment contracts. Employment agreements are to be interpreted having regard to their unique nature, and that work is fundamental to an individual’s identity, self-worth and well-being: Machtinger at 1002.
[28] In Wood v. Deeley, 2017 ONCA 158, 134 O.R. (3d) 481 at para. 28, Laskin J.A. summarized as follows the considerations relevant to the interpretation and enforceability of termination clauses in employment agreements:
- When employment agreements are made, usually employees have less bargaining power than employers. Employees rarely have enough information or leverage to bargain with employers on an equal footing.
- Many employees are likely unfamiliar with the employment standards in the ESA and the obligations the statute imposes on employers. These employees may not seek to challenge unlawful termination clauses.
- The ESA is remedial legislation, intended to protect the interests of employees. Courts should thus favour an interpretation of the ESA that “encourages employers to comply with the minimum requirements of the Act” and “extends its protections to as many employees as possible”, over an interpretation that does not do so.
- Termination clauses should be interpreted in a way that encourages employers to draft agreements that comply with the ESA. If the only consequence employers suffer for drafting a termination clause that fails to comply with the ESA is an order that they comply, then they will have little or no incentive to draft a lawful termination clause at the beginning of the employment relationship.
- A termination clause will rebut the presumption of reasonable notice only if its wording is clear. Employees should know at the beginning of their employment what their entitlement will be at the end of their employment.
- Faced with a termination clause that could reasonably be interpreted in more than one way, courts should prefer the interpretation that gives the greater benefit to the employee.
Wood v. Deeley, at para. 28 (citations omitted).
[29] In Machtinger, at 998, the Supreme Court held that an employee’s common law right to reasonable notice of termination without cause should not be displaced in the absence of clear language to the contrary. The Court of Appeal has similarly held that in order to displace the presumption of reasonable notice, termination clauses must achieve a “high level of clarity.” Ceccol v. Ontario Gymnastics Federation, (2001), 204 D.L.R. (4th) 688 (Ont. C.A.) at para. 45.
[30] The burden of demonstrating that an employment contract displaces the right to reasonable notice is on the party seeking to rely upon it: Machtinger, at p. 998.
What are the Applicable Terms?
[31] In this case, Mr. Raposo’s position is not simply that the Termination Provision in the Employment Agreement is invalid because it is contrary to the ESA. Rather, his position is that when all of the applicable clauses concerning termination are read together, they do not provide the degree of clarity necessary to displace the presumption of reasonable notice under the common law. Specifically, Mr. Raposo argues that the Termination Provision and the language regarding termination in the Offer Letter differ with respect to an employee’s entitlements upon termination. He also points to the Second Employment Agreement and the “at will” language contained in the yearly Compensation Schedule as creating ambiguity as to what terms actually apply to his termination. According to the Plaintiff, the ambiguity created by these multiple provisions must be resolved in his favour.
[32] It is therefore first necessary to determine which agreement, and consequently which termination provision(s) apply in the circumstances. For the reasons that follow, I find that the Offer Letter and the Employment Agreement contain the applicable terms relating to termination.
[33] First, the Offer Letter and Employment Agreement both specifically state that they each contain the terms and conditions of employment. Mr. Raposo accepted the offered terms by email shortly after receiving them. On the first day of his employment, Mr. Raposo signed the Employment Agreement. The Termination Provision in the Employment Agreement stated that it “will continue to be in effect regardless of the duration of Employee’s employment and despite any changes that may occur in Employee’s compensation, job functions, responsibilities, or title, so long as Employee continues to hold a position with CA Canada or the Company.”
[34] Second, the Second Employment Agreement, which was sent to Mr. Raposo as part of the “new employee paperwork,” could not have created any ambiguity with respect to termination because the termination provision in that agreement is the same as the Termination Provision in the Employment Agreement. The Plaintiff’s reliance on the Second Employment Agreement as creating ambiguity is therefore misplaced. While it may have been confusing to provide a different version of the employment agreement, the Second Employment Agreement was never executed or referred to again. Neither party would have understood that they were bound to its terms. Mr. Raposo admitted on cross-examination that he did not notice a difference between the Employment Agreement and the Second Employment Agreement until after his termination.
[35] Third, the Compensation Schedule was not an employment agreement and did not form part of the Employment Agreement. The Compensation Schedule specifically stated that it was “not a contract or guarantee of employment for any period of time and should not be construed as such.” The “at will” language, which CA submits was intended to apply to U.S. employees, appears to have been included to reinforce the idea that the Compensation Schedule was not a guarantee of employment for the upcoming year. This language could not have altered the terms of the Employment Agreement. Any such attempt to amend the Employment Agreement would not have been valid since an employer cannot adversely impact the terms of an employee’s contract of employment without paying consideration: Krishnamoorthy v. Olympus Canada Inc., 2017 ONCA 873 at para. 25.
[36] Mr. Raposo signed a Compensation Schedule on a yearly basis to indicate his understanding of the incentive compensation structure that would apply for the upcoming fiscal year. On cross-examination, Mr. Raposo admitted that he understood that the purpose of the Compensation Schedule was to let him know what he had to do in order to earn commissions, and that he focused on the parts that related to his compensation. He had no recollection of seeing the portions that mentioned “at will” employment until after his termination, and this did not cause him any confusion while he was an employee. Moreover, Mr. Raposo did not make any inquiries about the statement regarding “at will” employment because he had already accepted the position and signed the Employment Agreement. By the time he received the Compensation Schedule, he understood that the terms of his employment had been settled.
[37] The Offer Letter and the Employment Agreement together contain the terms and conditions that apply to the parties’ employment relationship. It is thus the termination provisions contained in those documents that must be considered in determining whether any ambiguity exists and whether the terms are enforceable.
Is the Termination Provision Enforceable?
[38] The Offer Letter specifically references notice and severance requirements in accordance with the ESA, as well as the continued payment of benefits during the notice period. By contrast, the Termination Provision in the Employment Agreement is silent on the issue of benefits during the notice period. The Plaintiff argues that the provisions are inconsistent and therefore ambiguous, and cannot be enforced.
[39] Beginning with the Termination Provision on its own, the enforceability of a termination provision comes down to the language used in the provision. In Machtinger, the Supreme Court held that an employment contract that attempts to contract out of the statutory minimum notice period by providing lesser benefits is void. An employment agreement that incorporates the legislated minimum notice period is valid: Machtinger at 1004.
[40] The Plaintiff relies upon Wood v. Deeley, to argue that the Termination Provision is unenforceable as contrary to the ESA. In that case, the Court of Appeal found that the termination provision excluded payment of benefits during the notice period and was therefore void. The provision at issue specifically stated that the employer “shall not be obliged to make any payments to you other than those provided for in this paragraph.” Wood v. Deeley, at para. 38.
[41] By contrast, in the case of Roden v. Toronto Humane Society (2005), D.L.R. (4th) 89 (Ont. C.A.), even though the provision was silent as to the payment of benefits, the termination provisions were not void. The Court of Appeal found that the without cause provisions referentially incorporated the minimum notice period set out in the ESA. The provision did not attempt to contract out of the requirement to make benefit plan contributions: “Because the contracts are silent about the Society’s obligations in respect of benefit plan contributions, the Society was obliged to – and did – comply with the requirements of the Act in that regard.” Roden v. Toronto Human Society, at para. 62.
[42] Similarly, in Nemeth v. Hatch Ltd., 2018 ONCA 7, 418 D.L.R. (4th) 542 at paras. 15-16, the Court of Appeal found that the silence of a termination clause concerning the employee’s entitlement to severance pay did not denote an intention to contract out of the ESA.
[43] In this case, the Termination Provision refers only to notice and severance and is silent on the matter of benefits. Unlike the provision considered in Wood v. Deeley, the Termination Provision does not exclude payment of benefits during the notice period. As a result, the Termination Provision at issue here is more akin to the termination provisions in Roden v. Toronto Humane Society and Nemeth v. Hatch Ltd., where the employment agreement was silent on the obligation to provide benefits or severance. Because the provision does not exclude payment for benefits, it does not run afoul of the ESA and is valid and enforceable. While an employer’s conduct cannot validate an otherwise unenforceable termination provision, CA advised Mr. Raposo that it would pay for benefits during the notice period, and in fact did so.
[44] Turning next to the alleged inconsistency between the Termination Provision in the Employment Agreement and the terms of the Offer Letter, as noted above, the Offer Letter specifically referred to payment of benefits during the notice period. Because the Termination Provision does not exclude payment for benefits, strictly speaking, it does not conflict with the terms of the Offer Letter. Since CA specifically advised Mr. Raposo that both the Offer Letter and Employment Agreement would govern Mr. Raposo’s employment with CA, the Termination Provision should be interpreted in the context of the Offer Letter. It would be unreasonable to interpret the Employment Agreement, which is silent on the payment of benefits, in a manner that would conflict with the Offer Letter.
[45] Mr. Raposo’s position is that it is equally plausible that the Termination Provision did not intend to provide benefits. However, in the face of an interpretation that would be consistent with the terms of the Offer Letter, and one that would contradict the Offer Letter, the reasonable interpretation is the one that would avoid the contradiction. As noted by Lederer J. in Cook v. Hatch Ltd., 2017 ONSC 47, 40 C.C.E.L. (4th) 296 at para. 25, beginning with the language used by the parties, “[w]e are to look for the true intention of the parties, not to disaggregate the words looking for any ambiguity that can be used to set aside the agreement and, on that basis, apply notice as provided for by the common law….”
[46] Interpreting the Employment Agreement in this manner, I find no ambiguity resulting from the silence of the Termination Provision on benefits: Roden v. Toronto Humane Society, at para. 62.
[47] While the Plaintiff argues that the principle of contra proferentum requires that the provision be interpreted against CA, I have found that the Termination Provision is not ambiguous or inconsistent with the Offer Letter. Since there is no ambiguity giving rise to an alternative interpretation, the principle of contra proferentum does not assist the Plaintiff.
Reasonable Notice
[48] In the event that my conclusion on the enforceability of the Termination Provision is incorrect, and Mr. Raposo is entitled to common law reasonable notice, I include the following analysis of the reasonable notice period.
[49] The parties are not significantly apart on what would constitute reasonable notice in the circumstances. The Plaintiff’s view is that an appropriate notice period would be six months, while the Defendant’s position is that a period of four to five months would be sufficient.
[50] Having regard to the relevant considerations, including Mr. Raposo’s age and skills, his role and responsibilities at CA, the length of his employment, and the availability of comparable or suitable employment, the appropriate reasonable notice period is five months. Mr. Raposo is 39 years of age and was employed by CA for a period of 2 years and eight months as a Senior Business Tech Architect. His responsibilities related to “pre-sales.” He worked primarily from home and had no supervisory authority. Mr. Raposo found alternative employment, albeit at a lower salary, within 4.5 months.
[51] Based on the figures provided by the Plaintiff at the hearing, the amount would be calculated as follows:
Salary and commission (based on 2016 T-4) - $26,430/month RRSP contributions - $312.50/month Benefits - $330.10/month Salary, RRSP and benefits for five months = $135,363.00 Plus outstanding vacation pay of $8,284.56 Minus mitigation income (0.5 months) of $7,608.10 Minus $9,337.31 paid by CA pursuant to the ESA Total = $126,702.15
[52] While CA submits that a lower amount should be used to calculate monthly commissions over the notice period, it has not put forward an alternative means for calculating that amount.
Conclusion
[53] The termination provision in the Offer Letter and the Termination Provision in the Employment Agreement are neither contradictory nor ambiguous, and rebut the presumption of common law reasonable notice. Based on the foregoing, the Plaintiff’s motion for summary judgment is dismissed.
[54] As noted above, CA’s initial calculation of Mr. Raposo’s vacation pay entitlement led to a shortfall of $8,284.56. The Plaintiff has not disputed this amount. As of the date of the hearing, CA had not paid this amount to Mr. Raposo. Mr. Raposo shall have judgment in the amount of $8,284.56. Since this amount was owing to Mr. Raposo from the date of his termination, pre-judgment interest at the applicable rate is to be calculated from that date, and not the date on which CA realized that it had not paid Mr. Raposo the full amount of vacation pay to which he was entitled. CA could have, but failed to, calculate and pay the amount to Mr. Raposo at an earlier date.
Costs
[55] Counsel for the parties each submitted costs outlines at the hearing of the motion. Counsel for the Defendant seeks partial indemnity costs in the amount of $49,167.32, including disbursements and HST. Counsel for the Plaintiff submitted a costs outline for less than half of this amount and for considerably fewer hours.
[56] Pursuant to the Courts of Justice Act, s. 131(1), the Court has broad discretion when determining the issue of costs. The overall objective of fixing costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the circumstances, rather than an amount fixed by actual costs incurred by the successful litigant: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.).
[57] Rule 57.01(1) of the Rules of Civil Procedure sets out the factors to be considered by the Court when determining the issue of costs. The Plaintiff brought a summary judgment motion, which shortened the proceedings, but was unsuccessful. It does not appear that unnecessary procedural steps were taken, and the parties have proceeded in a timely manner to seek a conclusion of the proceeding. While the Plaintiff’s argument was somewhat novel, the legal issues were not particularly complex, and I find the Defendant’s costs to be on the high end.
[58] I have considered the above factors, as well as the principle of proportionality in R. 1.04(1.1) of the Rules of Civil Procedure, while keeping in mind that the court should seek to balance the indemnity principle with the fundamental objective of access to justice.
[59] The Defendant is entitled to its costs of the summary judgment motion on a partial indemnity basis, which I fix in the amount of $35,000.00, including disbursements and HST, payable within 60 days of this order.