Superior Court of Justice - Ontario

COURT FILE NO.: 1287/17

DATE: 2019/01/21

RE: Ronald Hoekstra, Plaintiff

AND:

Rehability Occupational Therapy Inc., Defendant

BEFORE: Justice A. K. Mitchell

COUNSEL: J. Pinkus, for the Plaintiff

R. Vitols, for the Defendant

HEARD: December 17, 2018

ENDORSEMENT

Overview

[1] The plaintiff, Ronald Hoekstra, moves for leave to amend his claim and seeks summary judgment on the entirety of his amended claim against the defendant, Rehability Occupational Therapy Inc.

[2] Originally this action involved a claim for damages for wrongful dismissal and damages arising from a violation of the plaintiff’s human rights. The plaintiff alleged he was constructively dismissed by the defendant. On consent of the defendant, at the outset of the motion the claim was amended to abandon the claim of constructive dismissal and to plead that the contract of employment had been frustrated by the plaintiff’s lengthy absence from work relating to a chronic medical condition.

[3] The plaintiff seeks payment in lieu of notice and severance pay pursuant to the Employment Standards Act, 2000[^1] (the “ESA”). The plaintiff also seeks punitive and aggravated damages in the amount of $25,000.

[4] The underlying facts are not in dispute. Therefore, the issues may be properly decided without the need for oral evidence, cross-examinations or a trial. The parties consent to a determination of the issues in a summary manner. I find that this case lends itself to summary judgment.

[5] The issues for determination are two-fold:

(a) Was the contract of employment frustrated so as to entitle the plaintiff to the benefits provided under the ESA? and

(b) Does the conduct of the defendant in its dealings with the plaintiff attract an award of aggravated or punitive damages?

Factual Context

[6] The plaintiff is 51 years of age. He suffers from severe esophageal and stomach conditions.

[7] The plaintiff was employed by the defendant as a medical social worker commencing September 7, 2005. Pursuant to a written contract of employment, the defendant agreed to pay to the plaintiff an income of $90,000 per annum.

[8] Due to his medical condition, the plaintiff commenced a short-term medical leave of absence in December 2008. The plaintiff returned to work in September 2009 and worked until May 2012. The plaintiff returned to work in September 2012; however, on October 15, 2012 the plaintiff again took a medical leave of absence intending to return to work on December 3, 2012, which date was later extended to March 5, 2013.

[9] The plaintiff was unable to return to work on March 5, 2013 due to health complications; however, he always intended to return to work once he was medically cleared to do so. While on medical leave, the plaintiff received group benefits. He maintained regular contact with the defendant and continued to attend the defendant’s social events.

[10] On January 18, 2017, the defendant advised all of its employees, including the plaintiff, that it would be changing healthcare providers effective March 1, 2017. The defendant advised the plaintiff that he would not be eligible for benefits with the new healthcare provider; however, could continue to receive benefits through his wife’s benefits. His wife was (and continues to be) an active employee of the defendant.

[11] The plaintiff also maintained and received disability benefits pursuant to a private contract of insurance with RBC Life Insurance Company (“RBC”). On January 26, 2016, the plaintiff’s family physician, Dr. Christian Paradis, completed a physician’s statement on a pre-printed RBC form with respect to the plaintiff’s medical condition. This statement included Dr. Paradis’ opinion as to diagnosis and treatment. With respect to the question: “has your patient shown improvement where gradual or full-time return to work is viable?” Dr. Paradis responded: “no” and stated: “ongoing disability since 2008 unlikely to return to work now.”

[12] Dr. Paradis completed this same form again on January 29, 2017 further to an assessment of the plaintiff he conducted on October 19, 2016. In response to the question: “has your patient shown improvement where gradual or full-time return to work is viable?” Dr. Paradis responded: “no” and stated: “ongoing disability since 2008. Will not return to work”.

[13] On February 8, 2017 the plaintiff inquired of the defendant as to the basis for him no longer being eligible to receive group benefits directly as an employee of the defendant and indicated he had a desire and intended to return to work. In response, the defendant advised that it took the position the contract of employment had been frustrated and no amount was therefore payable to the plaintiff.

[14] On February 21, 2017 the defendant reiterated its position that the plaintiff’s employment had been frustrated. It stated: “an employer is not expected to keep someone on benefits indefinitely even when they are off on disability as legally there becomes a frustration of contract…”.

[15] The following day, the plaintiff emailed the defendant and, accepting that his employment was at an end due to his ongoing medical issues, he requested payment of his termination entitlements.

[16] Correspondence continued to be exchanged between the plaintiff and the defendant.

[17] On June 1, 2017, the plaintiff commenced this action for damages for wrongful dismissal, violation of his human rights and punitive and aggravated damages.

[18] On July 27, 2017 counsel for the defendant advised counsel for the plaintiff in part that: “it is abundantly clear that the contract of employment had been clearly frustrated well prior to Mr. Hoekstra’s allegations of constructive dismissal in June of this year.” In this same correspondence, the defendant advised that it was prepared to offer the plaintiff’s job back effective immediately.

[19] The plaintiff did not accept the defendant’s offer of re-employment.

[20] Pursuant to his reply and defence to counterclaim issued September 1, 2017, the plaintiff pleaded that, at a minimum, he was entitled to receive termination and severance pay pursuant to the ESA arising from the frustration of his employment contract.

[21] To date, the defendant has not paid any termination amounts to the plaintiff pursuant to the ESA or otherwise.

Analysis

Frustration of Contract

[22] Under regulation 288/01 of the ESA, where a contract of employment is frustrated due to illness, the employer remains obligated to pay the employee’s minimum termination pay and severance pay as of the date of frustration.[^2]

[23] Despite the position taken in correspondence and its pleading as outlined above, the defendant now denies that the plaintiff’s employment was frustrated. The defendant takes the position there is insufficient medical evidence to support a finding of frustration or, alternatively, that frustration of contract requires an act of the employer.

[24] I will deal first with the issue of whether frustration of contract requires an act of an employer. The defendant employer in Drimba Estate v. Dick Engineering Inc.[^3] took a similar position arguing that the ESA contemplated termination of employment resulting from a unilateral initiative of the employer. That is, so long as the parties intended for the plaintiff’s employment to continue, it could not be concluded that the contract of employment had been frustrated by illness.

[25] In Drimba the plaintiff suffered from a debilitating and ultimately fatal illness. The court held that given the severity of the plaintiff’s illness it was highly unlikely he would ever return to his employment notwithstanding his employer’s offer to keep his position open should he recover. The court held that at some point prior to the plaintiff’s death his contract of employment had become frustrated, thus, entitling him to termination pay and severance pay under the ESA. It is important to note that the plaintiff’s death did not trigger frustration of the employment contract.

[26] I am in agreement with the reasoning of the court in Drimba.

[27] Frustration of contract occurs as a matter of law. Once circumstances exist that have the effect of frustrating the terms of a contract, the contract is deemed terminated. In my view, neither party to the contract must take any steps to effect that result. This is particularly so in the case of frustration due to illness or injury which is presumptively beyond the control of both the employee and the employer.

[28] A contract of employment is frustrated when “there is no reasonable likelihood of the employee being able to return to work within a reasonable time.”[^4] The fact that a party to the employment contract takes the position that the contract has been frustrated, whether in support or defence of a claim, does not have the effect of deeming a contract frustrated.

[29] A contextual analysis must be undertaken to determine whether the contract of employment between the plaintiff and the defendant has been frustrated. As was noted in Edmonton (City) v. ATU, Local 569[^5] at para. 148:

A contextual analysis means that determining “permanent” or “non- permanent” is not a mere accounting exercise in order to determine whether the length of an illness surpasses a particular numerical threshold. It is interesting to note that in the common law employment world, the Ontario Court of Justice found in Fraser v. UBS Global Asset Management, 2011 ONSC 5448 (Ont. S. C.J) that a three-and-a-half-year absence was sufficiently permanent to frustrate a contract, whereas a five-year absence was found to be temporary in Naccarato v. Costco Wholesale Canada Ltd. 2000 ONSC 2651 (Ont. S.C.J.).

[30] In this case, the plaintiff had not performed any of his employment duties subsequent to October 2012. As noted in Edmonton (City of), simply because the plaintiff has been on prolonged medical leave does not, in itself, amount to frustration of the employment contract. Here, there is evidence that the plaintiff’s medical condition (disability) had morphed from being temporary to being a permanent condition rendering him incapable of performing his employment duties.

[31] On October 19, 2016, the plaintiff was assessed by his family physician who formed the opinion that no longer was the plaintiff’s return to work simply unlikely rather Dr. Paradis was of the definitive view that the plaintiff would not be returning to work due to his medical condition. As of October 19, 2016 there was no reasonable likelihood of the plaintiff being able to return to work within a reasonable time.

[32] I am satisfied on a balance of probabilities that the employment contract between the plaintiff and the defendant was frustrated on October 19, 2016.

[33] The plaintiff is entitled to termination pay pursuant to the provisions of the ESA calculated based on an income of $90,000 per annum, as provided for in his employment contract, for the period of employment commencing September 7, 2005 and ending October 19, 2016. The employment contract is the best available evidence of the plaintiff’s income in the absence of evidence of the plaintiff’s actual income as at the date of frustration.

[34] The defendant has an annual payroll of greater than $2.5 million and the plaintiff was employed for a period greater than five years. The plaintiff is therefore entitled to severance pay pursuant to the provisions of the ESA.

[35] The defendant continued to make contributions towards the plaintiff’s benefits from October 19, 2016 until March 1, 2017 in full compliance with its obligations pursuant to subsection 60(1) (c) of the ESA. Moreover, since the date of frustration the plaintiff has received and continues to receive disability benefits. Therefore, the plaintiff is not entitled to damages under the ESA for loss of benefits.

Entitlement to Aggravated or Punitive Damages

[36] The plaintiff seeks an award of aggravated or punitive damages in the amount of $25,000 claiming the defendant forced the plaintiff to commence this action and withheld minimum statutory benefits payable to the plaintiff pursuant to the ESA, commenced a vexatious counterclaim which it ultimately abandoned despite having recognized that the plaintiff’s employment was frustrated and extended a “sham” offer of employment after this action was commenced.

[37] The test for an award of punitive damages in a wrongful dismissal action requires the plaintiff to prove that the advertent wrongful acts of the defendant are so malicious and outrageous that they are deserving of punishment on their own.[^6]

[38] The plaintiff relies on the decision in Morrison v. Ergo Industrial Seating Systems Inc.[^7] wherein the court held that intentionally withholding payment of an employee’s minimum entitlements under the ESA, particularly when it is obvious that such monies would be owing to that employee and that employee is vulnerable, are grounds for an award of punitive damages.

[39] The plaintiff also points to an award of punitive damages made in Altman v. Steve’s Music Stores Inc.[^8] where the defendant refused to pay the plaintiff her statutory termination pay until she brought an application for summary judgment.

[40] I am not satisfied on the evidence that the conduct of the defendant is so egregious and offensive so as to warrant an award of aggravated or punitive damages. The defendant advanced a position in this litigation which was neither high-handed nor malicious. In Altman the plaintiff who was suffering from cancer was fired by the defendant and not paid back wages in addition to her statutory entitlement under the ESA. In Morrison the defendant alleged cause for termination without justification and refused payment of the minimum statutory entitlements despite knowing the plaintiff was in dire financial straits. Punitive damages were awarded in Morrison following a trial on a full evidentiary record. The factual matrices in Altman and Morrison are clearly distinguishable from the present case.

[41] Here, the parties maintained a positive relationship. In an email dated February 21, 2017 the defendant described the plaintiff as a “valued” employee. There is no evidence that the defendant’s offer of employment made after the action was commenced was a sham or not genuine. The offer was consistent with the defendant’s position that it never intended to terminate the plaintiff’s employment and was also consistent with the plaintiff’s stated desire to one day return to work.

[42] The catalyst for the issues between the parties stemmed from the innocuous communication from the defendant advising the plaintiff of the change in its disability benefits carrier. The change in carrier was not designed or intended to harm the plaintiff let alone bring about a termination of the plaintiff’s employment. On his own accord, the plaintiff interpreted his ineligibility under the new benefits plan as a constructive dismissal - a position he later abandoned.

[43] The plaintiff is not in dire financial straits and has received disability benefits uninterrupted throughout his period of employment with the defendant which continue to this day through his wife’s employment with the defendant. I suspect that had there been no change in the defendant’s healthcare benefits provider in March 2017, the parties would have been content to allow the plaintiff to continue receiving benefits as an employee of the defendant and neither party would have pursued litigation and, specifically, the issue of frustration of the plaintiff’s employment contract.

Disposition

[44] Summary judgment is hereby granted. The defendant shall pay to the plaintiff severance and termination pay to which he is entitled under the ESA. This is not a proper case for the payment of aggravated or punitive damages and none are awarded.

Costs

[45] The plaintiff was ultimately successful on his amended claim for termination and severance pay although unsuccessful with respect to his claim for aggravated or punitive damages. Based on his success, the plaintiff is entitled to his reasonable costs of the action on a partial indemnity basis.

[46] The plaintiff claims partial indemnity costs of the action, including the motion, in the amount of $17,534.56 inclusive of disbursements and HST. By comparison, the defendant filed a bill of costs claiming partial indemnity costs of the action in the amount of $30,372.26 inclusive of disbursements and HST.

[47] It was reasonable for the defendant to have defended this claim and advanced a counter claim when faced with the untenable constructive dismissal claim advanced by the plaintiff at first instance. The defendant did not conduct itself in a manner entitling the plaintiff to an enhanced costs award when it refused to concede the issue of frustration. The plaintiff was required to prove that the contract was frustrated in order to avail itself of the benefits accruing under the ESA and succeed on its motion for summary judgment.

[48] Having regard to the plaintiff’s untenable original claim arising from his alleged constructive dismissal and the lack of success on his claim for aggravated and punitive damages, I find that the plaintiff is entitled to his costs of the action in the amount of $15,000 inclusive of fees, disbursements and HST.

“Justice A.K. Mitchell”

Justice A. K. Mitchell

Date: January 21, 2019

[^1]: S.O. 2000, c. 41.

[^2]: Ss. 57, 60, 61, 63, 64 and 65. O. Reg. 288/01, ss. 2(3) and 9(2)(b).

[^3]: 2015 ONSC 2843.

[^4]: Fraser v. UBS Global Asset Management, 2011 ONSC 5448 at para. 3.

[^5]: 2017 ABQB 59.

[^6]: Honda Canada Inc. v. Keays, 2008 SCC 39.

[^7]: 2016 ONSC 6725.

[^8]: 2011 ONSC 1480.