NEWMARKET COURT FILE NO.: CV-14-119132-00

DATE: 20190809

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Ferenc Marschall Plaintiff

– and –

Marel Contractors Defendant

Alfred S. Schorr, for the Plaintiff

Mark Veneziano, for the Defendant

Heard: May 15, 2019

REASONS FOR DECISION

DE SA J.:

Employment History and Dismissal

[1] The Defendant, Marel Contractors (“Marel”), is the largest drywall contractor in the GTA. At all material times the Plaintiff, Ferenc (Frank) Marschall, worked for the Defendant and its predecessors since 1981 save only for the years 2001 through to 2009.

[2] From 1988 through to 2001 the Plaintiff worked for the Defendant and its predecessors in connection with the construction of primarily residential high rise apartments. When he became a foreman, he had to quit the union as he was considered “management”.

[3] In 2001, the Plaintiff decided he would go out on his own. He tried to do his own business, but it did not work out. In 2008, he returned to work for the Defendant as a Boardman (drywall installer). Alex Muzzo, the owner of Marel, asked if he would be a foreman again. From 2009 through to 2014 he resumed his duties as a foreman for various constructions projects of the Defendant.

[4] In early 2014, the business was turned over by Alex Muzzo to his two sons (Michael and Elliot Muzzo). On or about the 14th of April 2014, the Plaintiff was summarily dismissed.

[5] At the time of his dismissal the Plaintiff directly supervised in excess of 100 employees.

Nature of the Employment Relationship

[6] At all material times, the Plaintiff acted exclusively for the Defendant under the Defendant’s direct supervision using the Defendant’s tools and vehicles and being provided with health benefits.

[7] The Plaintiff was provided a truck, cell phone, and transponder. He was given health benefits all paid for directly by the Defendant. He would receive 2 extra weeks of pay if he did not take holidays.

[8] The Plaintiff would work for set pay, regardless of the number of projects or the hours worked. It was understood that the Plaintiff would be let go (dismissed) if he tried to work for someone else. He did not share in the profits or losses of the projects he worked on.

[9] During the period from 2009 to 2014 the Plaintiff was paid $2,140 per week without any source deductions and an annual bonus the last of which was in 2013. The Plaintiff could not recall the exact amount of his bonus in his evidence. However, the Statement of Claim identifies this bonus as $7,200.

Actions of the Plaintiff after Dismissal

[10] The Plaintiff made no further efforts to obtain employment in the industry. He is now 66 years old. At the time, he believed that his age and his relationship with Marel would have made it difficult to get other similar positions in the industry. This was his experience when he left Marel in 2001.

[11] Instead, the Plaintiff decided that he would try and be an addiction counsellor. He took classes for 9 months. He then performed as an addiction counsellor for a year. He ended up taking a position as a truck driver with similar pay in 2016.

[12] In 2014, the Plaintiff made income of $23,610. In 2015, his income was $11,200.

Position of the Parties

[13] The Plaintiff takes the position that at all material times he was an employee, alternatively he was a dependant contractor. Accordingly, he was entitled to reasonable notice or salary in lieu of notice of 18-24 months together with the value of the health benefits and bonuses.

[14] Marel takes the position that the Plaintiff was an independent contractor. He was paid a fixed amount and collected GST. He could also work for others as long as it did not interfere with their employment. He was not entitled to notice.

[15] If the court was to find the Plaintiff to be an employee or “dependent contractor”, Marel argues that the proper notice should be 5 months less 2-3 months for a failure to mitigate.

Analysis

Was the Plaintiff an Employee or an Independent Contractor?

[16] Where an individual is providing services pursuant to an agreement, the fact that the individual is paid through his or her corporation is not determinative of whether an employment relationship exists with the individual. See Kordish v. Innotech Multimedia Corp. (1998), 46 C.C.E.L. (2d) 318 (Ont. Ct. J. (Gen. Div.)), aff’d [2000] O.J. No. 2557 (C.A.). Braiden v. La-Z-Boy Canada Limited, 2008 ONCA 464 at para. 30-31: McKee v. Reid's Heritage Homes Ltd., 2009 ONCA 916 at para. 29.

[17] In 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59, [2001] 2 S.C.R. 983 at para. 47, the Supreme Court of Canada stated that there is no one conclusive test that can be universally applied to determine whether a person is an employee or independent contractor. However, it went on to set out what it considered to be a persuasive approach to the issue:

The central question is whether the person who has been engaged to perform the services is performing them as a person in business on his own account. In making this determination, the level of control the employer has over the worker’s activities will always be a factor. However, other factors to consider include whether the worker provides his or her own equipment, whether the worker hires his or her own helpers, the financial risk taken by the worker, the degree of responsibility for investment and management held by the worker, and the worker’s opportunity for profit in the performance of his or her tasks.

[18] In Belton v. Liberty Insurance Co. of Canada (2004), 2004 6668 (ON CA), the Court of Appeal made clear that a statement in an agreement that purports to establish the nature of the relationship is not determinative of the issue. In reaching that conclusion, Juriansz J.A, writing on behalf of the court, considered five principles which had been modelled on the considerations set forth in the above quotation from Sagaz:[4]

Relying on Doyle v. London Life Insurance Co. (1985), 1985 301 (BC CA), 23 D.L.R. (4th) 443 (B.C.C.A.), leave to appeal to S.C.C. refused, [1986] S.C.C.A. No. 73, 64 N.R. 318n, the trial judge identified the following principles to distinguish independent contractors from employees when considering the status of a commissioned agent:

1. Whether or not the agent was limited exclusively to the service of the principal;

2. Whether or not the agent is subject to the control of the principal, not only as to the product sold, but also as to when, where and how it is sold;

3. Whether or not the agent has an investment or interest in what are characterized as the “tools” relating to his service;

4. Whether or not the agent has undertaken any risk in the business sense or, alternatively, has any expectation of profit associated with the delivery of his service as distinct from a fixed commission;

5. Whether or not the activity of the agent is part of the business organization of the principal for which he works. In other words, whose business is it? [Emphasis added.]

[19] As explained in Braiden v. La-Z-Boy Canada Ltd. (2008), in many ways, the question posed at the end of the fifth principle -- whose business is it? -- lies at the heart of the matter. Was the individual carrying on business for him or herself or was the individual carrying on the business of the organization from which he or she was receiving compensation?

[20] In this case, it seems quite clear that the Plaintiff was an “employee” and/or a “dependent contractor”. While the relationship was structured differently for the purposes of taxation and benefits, the circumstances make clear that this was not meaningfully different than any other employer-employee relationship. I do not accept the Defendant’s position that the Plaintiff could have easily worked for other employers. The nature of his employment with the Defendant, and his consistent work responsibilities, prevented this.

[21] Moreover, it is clear that the projects belonged to the Defendant, not the Plaintiff. The Plaintiff was essentially salaried, and was paid the same regardless of the number of projects. The assessment looks to the actual nature of the “employment” relationship, not the relationship as structured between the parties for other purposes.

[22] In my view, the Plaintiff was an employee. Accordingly, I find the Plaintiff was entitled to reasonable notice.

What is Reasonable Notice in the Circumstances?

[23] Damages for wrongful dismissal are designed to compensate the employee for the breach by the employer of the implied term in the employment contract to provide reasonable notice of termination. An employee, when dismissed without cause, is entitled to be placed in the same position he or she would have been in had he or she been given the appropriate notice by the employer.

[24] The damages are assessed by calculating the salary the employee would have received had he or she worked during the notice period, notwithstanding that the employee may, in fact, have been prevented from doing so. The damages are based on the premise that the employee would have worked during the notice period. Sylvester v. British Columbia, 1997 353 (SCC), [1997] 2 S.C.R. 315.

[25] As explained in Wallace v. United Grain Growers Ltd., [1997] 3 SCR 701, 1997 332 (SCC), at para. 66-70:

In the event that an employee is wrongfully dismissed, the measure of damages for wrongful dismissal is the salary that the employee would have earned had the employee worked during the period of notice to which he or she was entitled: Sylvester v. British Columbia, 1997 353 (SCC), [1997] 2 S.C.R. 315. The fact that this sum is awarded as damages at trial in no way alters the fundamental character of the money. An award of damages in a wrongful dismissal action is in reality the wages that the employer ought to have paid the employee either over the course of the period of reasonable notice or as pay in lieu of notice.

[26] While the calculation is hardly a fixed formula, the courts have generally held that the determination of an employee’s notice period is determined by a consideration of the following factors:

1. the position the employee held;
2. the employee’s length of service with the employer;
3. the employee’s age; and,
4. the availability of comparable employment.

See Bardal v. Globe & Mail Ltd., (1960) 1960 294 (ON SC), 24 D.L.R. (2d) 140 (Ont. H.C.)

[27] The notice includes the entire compensation package including benefits and vacation pay. Monies received by an employee from the Canada Employment Insurance Commission (formerly Unemployment Insurance Commission) are not deducted from the payment in lieu of notice of termination that the employer is required to provide the employee. As stated by the Supreme Court of Canada in Jack Cewe Ltd. v. Jorgenson, [1980] 1 SCR 812, 1980 177 (SCC):

Turning now to the unemployment insurance benefits, I find the Company’s contention untenable. The payment of unemployment insurance contributions by the employer was an obligation incurred by reason of the respondent’s employment, therefore, to the extent that the payment of those contributions resulted in the provision of unemployment benefits, these are a consequence of the contract of employment and, consequently, cannot be deducted from damages for wrongful dismissal. …

See also IBM Canada Ltd. v. Waterman, 2013 SCC 70, at para. 51.

[28] The fact that the Plaintiff worked for the Defendant some years earlier is not materially relevant. In my view, the relevant “length” of service for the calculation of notice, in my view, should be the period between 2009 and 2014.

[29] Given the Plaintiff’s age, length of service, the position held, and the availability of comparable employment, a reasonable period of notice would be 6 months. Any bonus and benefits would be added to this amount.

[30] The Defendant takes the position that any period of notice should be reduced given the Plaintiff’s failure to mitigate. The Plaintiff made no efforts to obtain comparable employment. The Defendant takes the position that there was a lot of work in high rise construction at the time. It would have been easy to find related work. According to the Defendant, at the time Marel was having problems finding Boardmen and foremen. Any notice given should be reduced accordingly.

[31] The onus rests with the company to show that the employee did not make efforts to find alternate employment. The principal of mitigation in employment law is aptly summarized in Somir v. Canac Kitchens, a Division of Kohler Canada Co., 2006 42369 (ON SC), 2006 Carswell Ont. 8108 (ONSC), at para. 58:

The onus rests on the defendant to show either that the plaintiff “found, or by the exercise of proper industry in the search, could have procured other employment of an approximately similar kind reasonably adapted to his abilities” (citation omitted). The defendant must establish that the plaintiff’s conduct in seeking to find alternative employment was unreasonable in all respects.

See also Chaffee v. Columbia Dodge (1967) Ltd., 2000 BCSC 310, at para. 32.

[32] While I have considered the evidence from the Defendant on the facility to obtain alternate employment in calculating the reasonable notice period, in my view, the Defendant has failed to establish that the Plaintiff did not make adequate efforts to mitigate.

Disposition

[33] In the circumstances I will order damages in the amount $62,780 as follows: 26 weeks (52 weeks in a year): $2,140 x 26 = $55,640 + 1 week vacation $2,140 + $5,000 bonus.

[34] I will receive costs submissions from the Plaintiff within three weeks of this decision. The Defendant will have one week thereafter to respond.

Justice C.F. de Sa

Released: August 9, 2019