Court File and Parties

COURT FILE NO.: CV-19-00625331 DATE: 20210226 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: PATRICK OJO Plaintiff – and – CRYSTAL CLAIRE COSMETICS INC. Defendant

Counsel: Kevin Wisnicki, lawyer for the plaintiff Marc W. Kitay, lawyer for the defendant

HEARD: February 22, 2021

Endorsement

DIAMOND J.:

Overview

[1] After interviewing with the defendant’s Director of Operations and Human Resources Manager in late August 2018, the plaintiff received an offer to come work for the defendant as its Warehouse Manager. The plaintiff accepted the defendant’s offer and commenced his new employment on or about September 25, 2018.

[2] After being initially provided by the defendant with an Employment Agreement (the “agreement”), the plaintiff signed the agreement approximately one week later on September 26, 2018.

[3] On July 15, 2019, the defendant terminated the plaintiff’s employment without cause. Relying upon the agreement’s termination clause, the defendant paid the plaintiff statutory minimums of one week’s salary in lieu of notice and benefits continuation under the Employment Standards Act, 2000, S.O. 2000, C.41 (the “Act”).

[4] The plaintiff ultimately secured new employment with a company known as Nudestix Inc. on October 17, 2019 as its Global Operation/Supply Chain Manager.

[5] In this proceeding, there are four outstanding issues to be decided:

• Issue #1 Is the termination clause in the agreement enforceable?
• Issue #2 If the termination clause is not enforceable, what is the reasonable notice due and owing to the plaintiff?
• Issue #3 Should the plaintiff’s damages be reduced due to a failure to mitigate?
• Issue #4 Is the plaintiff entitled to a pro-rated bonus payment?

[6] Both parties submit that the most efficient course of action is to have the above issues determined by way of motion for summary judgment. I agree. The relevant documentary evidence does not appear to be in dispute, and on the evidentiary record before me I am confident that I can find the necessary facts and apply the relevant law to the evidence. It is therefore in the interest of affordable and proportionate justice to proceed and dispose of this proceeding by way of summary judgment.

[7] I shall now address each issue in turn.

Issue #1 Is the termination clause in the agreement enforceable?

[8] Clause 7 of the agreement specifically provides as follows:

“Termination

Crystal Claire maintains the right to terminate your employment at any time and without notice or payment in lieu of thereof, if you engage in conduct which constitutes just cause for summary dismissal.

In the absence of just cause, Crystal Claire may terminate your employment at any other time and for any reason upon providing you with either advance notice and/or applicable payments equivalent to the minimum applicable entitlements contained within the ESA, as amended. For greater certainty, Crystal Claire’s maximum liability to you for common law notice, termination pay, severance pay, or payment in lieu of notice shall be limited to the payment of the amounts specified in the ESA.”

[9] In support of his contention that the termination clause is unenforceable, the plaintiff advances two arguments:

• The “just cause for summary dismissal” paragraph contravenes the Act as dismissal for cause is insufficient to absolve the defendant of its obligation to provide the plaintiff with reasonable notice of termination; and,
• The termination clause does not allow for the continuation of the plaintiff’s benefits during any notice period as required by the Act.

[10] In response, the defendant submits that (a) the termination clause’s choice of language (“just cause for summary dismissal”) does not derogate from the Act’s requirements, and (b) the words used in the termination clause (“minimum applicable entitlements contained within the ESA”) comply with the defendant’s statutory obligations under the Act.

[11] For the following reasons, I agree with the plaintiff and find that the termination clause does not comply with the provisions of the Act, is thus unenforceable, and does not limit the plaintiff’s right to common law reasonable notice.

[12] While the plaintiff would be successful on Issue #1 if either of his arguments succeeded, I find that both of his arguments are correct. As held by the Court of Appeal in Waksdale v. Swegon North America Inc. 2020 ONCA 391, “while courts will permit an employer to enforce a rights-restricting contract, they will not enforce termination provisions that are in whole or in part illegal.”

[13] Section 2(1)(3) of the Act’s Regulation 288/01 provides that notice or payment in lieu of termination is not due to employees who have been “guilty of wilful misconduct, disobedience or wilful neglectful duty that is not trivial and has not been condoned by the employer.”

[14] In the within proceeding, the termination clause permits the defendant to avoid providing notice or payment in lieu thereof if an employee “engages in conduct which constitutes just cause for summary dismissal.” The governing jurisprudence is clear that a finding of “just cause” can be made on a lesser standard than “wilful misconduct or disobedience.” It is entirely possible for an employer to establish “just cause for termination” without satisfying the Act’s clear threshold of “wilful misconduct or disobedience.” As held by Justice Haines in Oosterbosch v. Fag Aerospace 2011 ONSC 1538:

“It is my opinion that the plaintiff demonstrated a sustained course of casual and careless conduct that was inconsistent with the continuation of his employment but I do not accept the defendant’s submission that his conduct was wilful.

All of the leaders who testified indicated that the plaintiff was an experienced, competent machine operator with an apparent attitude problem but none suggested his misconduct was intentional. Haynes did believe the plaintiff was reckless and counsel for the defendant submits that recklessness should be equated to wilful misconduct.

A person is reckless when he engages in conduct without regard for the outcome or consequences. Notwithstanding the number of infractions recorded I do not see that the conduct of the plaintiff rises to that level. He was undoubtedly careless and the persistence of that carelessness justified his dismissal. I would not, however, characterize his offending behaviour as ‘wilful misconduct, disobedience or wilful neglect of duty’ that would disentitle him to receipt of termination and severance payments under the provisions of the Employment Standards Act, 2000.”

[15] The defendant argues that the wording “just cause for summary dismissal” is sufficient to save the termination clause as not breaching the provisions of the Act. I do not agree. The defendant submits that the choice of words “for summary dismissal” clearly implies that an employee can be terminated “on the spot with no notice or payment in lieu thereof owing” and thus incorporates the standard of wilful misconduct or disobedience. I cannot agree with such an interpretation. Actions done in a summary manner are indeed typically carried out quickly and efficiently (such as, ironically, a motion for summary judgment as opposed to a trial). However, the potential speed and manner of an employee’s dismissal does not necessarily lead to a conclusion that the employee was guilty of wilful misconduct or disobedience.

[16] The defendant is the drafter of the agreement, and thus had the opportunity to ensure that provisions of its termination clause properly delineated the threshold of “wilful misconduct or disobedience” to justify non-payment of notice. The termination clause expressly fails to do so, and I am not prepared to accept one of several potential implied interpretations to render the termination clause enforceable.

[17] A very similar “just cause” termination clause was found to violate the Act in Sewell v. Provincial Fruit Co. Limited 2020 ONSC 4406. In that case, the Court held as follows:

“Second, applying Waksdale, I find that the ‘Termination for Just Cause’ provision of the contract was illegal insofar as it contracted around the ESA requirement to provide notice except in cases where an employee engaged in ‘willful misconduct.’ Based on the Court of Appeal’s reasoning, I must read the contract as a whole and set it aside if one or more of the terms are illegal, even if the offending term is not at issue in the instant case.”

[18] As stated above, a finding that the “just cause for summary dismissal” clause violates the Act is sufficient to render the entire termination clause unenforceable, and provides the plaintiff with the right to claim reasonable notice or payment in lieu thereof. However, for completeness of the record I will now address the plaintiff’s second argument.

[19] The defendant argues that the Act does not require an employer to “continue” benefits, as certain employers would logically subcontract benefit coverage to third party insurers, and therefore such payment obligations could be out of the employer’s control.

[20] Section 61(1) of the Act states that upon termination, in addition to giving notice or pay in lieu thereof to an employee, the employer must “continue to make whatever benefit plan contributions would be required to be made in order to maintain the benefits to which the employee would have been entitled had he/she continued to be employed during the period of notice that he/she would otherwise have been entitled to receive.”

[21] The plaintiff argues that the termination clause is silent with respect to the defendant’s obligation to continue payment of the plaintiff’s benefits during the notice period. Relying on the Court of Appeal for Ontario’s decision in Wood v. Fred Deeley Imports Ltd. 2017 ONCA 158, the plaintiff argues that any termination clause which excludes the continuation of benefits during the notice period is in breach of the Act and therefore unenforceable.

[22] The defendant relies on the decision of Justice Monahan in Burton v. Aronovitch McCauley Rollo LLP 2018 ONSC 3018 in which the court was faced with the following termination clause:

“AMR may, at its sole discretion, terminate your employment without cause (a ‘Non-Cause Termination”’. In the event of a Non-Cause Termination, AMR shall provide you with severance pay in accordance with the Employment Standards Act, as amended, and any successor legislation, if so required as at the time of a Non-Cause Termination; and

Notwithstanding the foregoing, and for greater certainty, if the amounts which you would receive upon a Non-Cause Termination, as set out above, are less than the amounts to which you would be entitled under the Employment Standards Act, as amended or any successor legislation, then you shall be entitled to notice, severance pay, and any other payment required by the relevant legislation in force as at the time of the termination.”

[23] Justice Monahan held that the chosen wording (“any other payment required by the relevant legislation”) contemplated the continuation of benefits, and thus the termination clause before him complied with the Act.

[24] In my view, the Burton decision is distinguishable. I agree with the plaintiff that the termination clause in this proceeding requires the defendant to pay the plaintiff his minimum termination pay, but not the obligation to continue paying the plaintiff the value of his benefits during the minimum notice period required by the Act. The termination clause, at best, allows the defendant to provide the plaintiff with payments equivalent to the minimum applicable entitlements under the Act.

[25] Accordingly, the answer to Issue #1 is “no” and the plaintiff is entitled to his common-law reasonable notice.

Issue #2: If the termination clause is not enforceable, what is the reasonable notice due and owing to the plaintiff?

[26] Given that the termination clause is unenforceable, the Court must determine the appropriate length of reasonable notice due to the plaintiff. I am guided by the traditional criteria set forth in Bardal v. Globe & Mail, which includes the plaintiff’s age, length of service, character of employment and the availability of similar employment with regard to his experience, training and qualification.

[27] As required by the jurisprudence, the Court’s task of assessing reasonable notice is to be carried out in a holistic manner, as no one Bardal factor is to be given disproportionate weight over another factor.

[28] As at termination, the plaintiff was 52 years of age. While the defendant quarrelled with the plaintiff’s characterization of his employment being managerial in nature, the terms of the agreement explicitly set out the plaintiff’s duties as Warehouse Manager which included:

• overseeing day to day operations
• managing three supervisors and approximately 29 other employees
• directing, retaining and recruiting warehouse personnel; and,
• designing and implementing lien manufacturing contents for the movement of goods within the warehouse.

[29] In my view, the plaintiff’s employment was senior in nature. As a Warehouse Manager, the plaintiff earned an annual salary in the amount of $80,000.00 together with comprehensive health and dental benefits and RRSP matching contributions of 2% of his base salary.

[30] It has been consistently held that the assessment of reasonable notice is an art and not a science. Both parties have provided me with a wide range of caselaw, including cases which allow the Court to take unprecedented economic downturns in the assessment of reasonable notice.

[31] The plaintiff submits that a reasonable notice period would be six months, while the defendant argues that, at most, the plaintiff will be entitled to one to three months’ reasonable notice.

[32] The plaintiff’s age and position warrant consideration, as does his relatively short length of service. Having reviewed the relevant jurisprudence, and having considered the traditional Bardal criteria, in my view the appropriate reasonable notice period for the plaintiff is three months.

[33] In addition to the defendant owing the plaintiff three months’ salary (less any payments made by the defendant to date and subject to mitigation concerns dealt with below), I accept the plaintiff’s calculations with respect to damages in lieu of benefits he ought to have received during the three month notice period. Based upon the plaintiff’s pay stubs, the value of the defendant’s contribution to his benefits was $271.18 per month, and therefore the plaintiff is owed three months’ salary plus the value of (a) his benefits and RRSP contributions over that three month period.

Issue #3 Should the plaintiff’s damages be reduced due to a failure to mitigate?

[34] Once terminated, the plaintiff was under a legal obligation to make reasonable efforts to mitigate his loss of income. While a failure to discharge that duty can lead to a reduction of the plaintiff’s reasonable notice period, the onus to establish that the plaintiff failed to take reasonable steps to find a comparable position lies squarely upon the defendant.

[35] On the record before me, it is clear that the plaintiff made diligent efforts to seek out new employment post-termination. He applied for numerous positions, and attended several interviews before finally securing alternative employment in mid-October 2019.

[36] The defendant argues that the plaintiff acted unreasonably when he rejected an offer made to him by Magna Inc. The Magna offer was for the position of Material Supervisor, with a salary of approximately $80,000.00 - $85,000.00 commencing on or about September 2, 2019. According to the plaintiff, the position was more supervisory in nature and not managerial, and working at Magna would have increased his commute by more than double as he resides in Ajax, Ontario while the Magna building is located in Concord, Ontario.

[37] The defendant points out that on the plaintiff’s cross-examination, he never mentioned the increased commute as a reason for turning down the Magna opportunity. The plaintiff did list the commute as a reason in his answers to undertaking delivered thereafter.

[38] The plaintiff gave additional evidence that he was hoping to secure employment which would come with an increased salary. When he accepted the Nudestix offer of employment, he achieved his goal as he now earns an annual salary of $95,000.00 plus benefits.

[39] In my view, I do not find that the defendant has discharged its onus to prove that the plaintiff failed to mitigate. While it is arguable that the Magna position was comparable in some respects, it appears that the position was more supervisory in nature, and the increased commute is a factor which the plaintiff was permitted to take into account. It is not as if the plaintiff sat idly by and ignored his obligations to seek alternative employment. When he received the Magna offer, and some other positive feedback from other potential employers, he was intent upon trying to secure the best potential position going forward. While that position did come with some risk (i.e. had he waited a longer period of time before landing on a new employment opportunity), in the end the plaintiff was able to secure alternative employment approximately three months after termination, which in my view was the reasonable notice period in any event.

[40] Accordingly, the answer to Issue #3 is “no”.

Issue #4: Is the plaintiff entitled to a pro-rated bonus payment?

[41] There is nothing in the agreement which entitles the plaintiff to any bonus payment, discretionary or otherwise. The plaintiff’s claim in this regard is based upon his own evidence that his manager advised him in a conversation that the plaintiff was entitled to a $10,000.00 annual bonus based upon a performance target aimed at improving inventory tracking in the warehouse. The plaintiff submits that he not only met the target but surpassed it, and as such he is entitled to a pro-rated bonus payment.

[42] The plaintiff’s manager denies any such conversation occurred, and denies the plaintiff is entitled to any bonus payment.

[43] The plaintiff argues that the documentary evidence available from the defendant shows that he worked diligently on improving the inventory tracking in order to obtain the bonus. The problem I have with this argument is that he was already under a contractual obligation to carry out that very task under the terms of the agreement, as it was explicitly listed in his duties and responsibilities. In other words, there does not appear to be any legal consideration for the alleged bonus entitlement.

[44] There is no corollary evidence supporting the plaintiff’s version of events, and I am not satisfied that the Court should employ its additional fact-finding powers by way of a mini-trial. As the plaintiff is deemed to have put his “best foot forward”, I find that he has failed to discharge his onus of proof.

[45] The answer to Issue #4 is therefore “no”.

Costs

[46] In my view, it is arguable that success has been divided. If the parties take a different view, absent an agreement on the costs of this motion and the action, they may exchange written costs submissions (totaling no more than five pages including a Costs Outline) in accordance with the following schedule:

(a) the plaintiff shall serve and file his costs submissions within ten business days of the release of this Endorsement; and

(b) the defendant shall serve and file its responding costs submissions within 10 business days with the receipt of the plaintiff’s costs submissions.

Diamond J. Released: February 26, 2021