Ristanovic v. Corma Inc.
COURT FILE NO.: CV-20-00640028-0000 & CV-20-00640671-0000
DATE: 2021-05-06
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: MILAN RISTANOVIC, Plaintiff (Moving Party)
AND:
CORMA INC., Defendant
AND RE: ELIYAHU ASAFOV, Plaintiff (Moving party)
AND
CORMA INC., Defendant (Responding Party)
BEFORE: S.F. Dunphy J.
COUNSEL: Jordan Reiner, for the Plaintiff (Moving party) Milan Ristanovic and Plaintiff (Moving party) Eliyahu Asafov D. Barry Prentice, for the Defendant (Responding Party)
HEARD at Toronto: May 4, 2021
REASONS FOR DECISION
[1] These two wrongful dismissal cases raise the common question of whether the defendant/employer was justified in laying off 17% of its workforce (including the two plaintiffs in these cases) in the early stages of the pandemic. For the reasons that follow, I find that the circumstances of these cases do not justify the suggested implied term of the oral contract of employment binding these two plaintiffs to their common employer. The plaintiffs were constructively dismissed when they were laid off by their employer are entitled to damages in lieu of the reasonable notice that their employer did not provide them.
[2] I heard these two summary judgment motions together. The issues raised in both wrongful dismissal actions are substantially identical and the factual distinctions between the cases very minor even if there are two separate court file numbers to be kept track of. Counsel for the plaintiffs and the common employer/defendant were the same. I am issuing this single set of reasons applicable to both cases.
[3] During the course of the hearing, I decided to divide this hearing into two parts: the first dealing with the question of liability and notice period, the second hearing (to be held on June 4, 2021) will deal with question of mitigation of damages and the final quantification of damages. The reason for the two-part hearing was that the defendant Corma has now decided to recall both plaintiffs to work. In the case of Mr. Ristanovic, it appears that his job responsibilities may be altered somewhat but his pay will not be affected. There were some issues to be overcome regarding this development, not the least of which was that it was occurring more or less in real time during the hearing, there was (at least initially) some question as to what if any strings were attached and there was no evidence of any of this properly before me. Counsel were unable in the time available to arrive at agreed facts sufficient to enable me to complete the motion that day. I decided to have the parties complete their argument on the questions of liability and the notice period and leave to a subsequent hearing the question of mitigation at which point I expect the evidentiary record regarding the recall to work to be assembled and able to be reviewed and dealt with.
[4] At the conclusion of this first portion of the hearing, I advised the parties of my finding that the defendant had terminated the employment of both plaintiffs without providing reasonable notice and that I would supply my reasons for that finding along with my finding on the applicable period of reasonable notice in these reasons.
Background facts
[5] Corma is a manufacturer of corrugated tubing employing approximately 100 people in Concord, Ontario. Corma depends upon China for certain key supplies and also relies upon overseas markets for 95% of its business. In late 2019 and early 2020, the outbreak of the Covid epidemic in China significantly disrupted Corma’s ability to carry on business as its supply chain was disrupted by the shut-downs in that country. Corma ultimately suffered a catastrophic decline in its revenues of about 40%.
[6] On January 31, 2020, Corma advised the plaintiff Milan Ristanovic that he was to be laid off effective February 3, 2020. The plaintiff Mr. Asafov received a similar letter dated February 18, 2020 informing him of his layoff effective the next day.
[7] In both cases, the employees were advised to apply for EI benefits and Records of Employment were sent to Service Canada. The letters promised to continue paying premiums for health, dental and life insurance benefits and this was in fact done.
[8] The reasons given for the layoffs were the same in both cases. The layoffs were attributed to “a delay with a number of orders we had expected due to the unstable political climate” resulting in a shortfall in revenues. The estimated duration of the layoffs was also the same. Recall would occur when it is “financially feasible to bring you back to work full time” but “[i]n any event your time on lay-off will not exceed 35 weeks”.
[9] Neither Mr. Ristanovic nor Mr. Asafov had ever been subject to lay-off in the past and there is no relevant history of Corma laying off its employees more generally either. Approximately 17% of Corma’s workforce was laid off at or about the same time as the two plaintiffs were laid off. The lay-off was unilateral in the case of both plaintiffs in that neither of them consented to it.
[10] Mr. Ristanovic is 67 years old. He was employed by Corma as a machine assembler since 1992. Mr. Asafov was employed as a Plating Room Operator. He is slightly younger than Mr. Ristanovic (62 years of age when laid off) and had slightly more seniority (30 years). They both worked 40 hours per week and received four weeks of paid vacation. Their annual income in the year prior to being laid off was $67,309 in the case of Mr. Ristanovic and $47,081 in the case of Mr. Asafov.
[11] Both plaintiffs retained counsel shortly after receipt of their lay-off notices and advised the defendant that they were electing to treat their lay-off as a constructive dismissal.
[12] Although the lay-off notices indicated that the lay-offs would not exceed 35 weeks, neither of the plaintiffs were recalled within 35 weeks as indicated. Neither plaintiff has managed to find employment since the lay-off notices went into effect. As indicated, the defendant has now indicated that it is able to recall both of them to full-time employment as soon as practicable. The impact of that offer, the details of it and the subject to of mitigation generally will be dealt with when this hearing resumes on June 4, 2021.
Issues to be decided
[13] There was agreement on both sides that it was appropriate to resolve both of these cases through summary judgment. I have found no need to make any findings of credibility or otherwise to make use of the enhanced fact-finding powers in rule 20.04(2.1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 to resolve the issues before me – at least in this first phase of the hearing. I have also examined the evidence placed before me by the parties and concur with the views of both counsel that the issues to be resolved in this case may appropriately be dealt with by way of summary judgment.
[14] The issues to be resolved on this first phase of the hearing are as follows:
a. Were the plaintiffs entitled treat their lay-off as a unilateral change in the conditions of their employment amounting to a constructive dismissal in the circumstances of this case?
b. If so, what is the period of reasonable notice?
Analysis and discussion
(a) Were the plaintiffs entitled to treat their lay-off as a unilateral change in the conditions of their employment amounting to a constructive dismissal in the circumstances of this case?
[15] The plaintiffs submitted that absent an agreement to the contrary – and there is no such agreement here – the unilateral action of an employer in laying off an employee represents a material change in the terms of employment that amounts to constructive dismissal. The cases of Elsegood v. Cambridge Spring Service (2001) Ltd., 2011 ONCA 831 and Style v. Carlingview Airport Inn, 1996 CarswellOnt 779 (Ont. C.A.) were cited in support of this proposition. The plaintiffs also submitted that the question is rendered moot by reason of the duration of the lay-off having exceeded 35 weeks at which point s. of s. 56 of the Employment Standards Act, 2000, S.O. 2000, c. 41 deems a lay-off to be a termination of employment.
[16] The defendant took no serious issue with the foregoing summary of the law. Instead, the defendant urged me to find that there is an implied term in the contract of employment of both plaintiffs authorizing the employer to lay off an employee as was done here when faced with the extraordinary circumstance of a global pandemic. I was urged to give consider the admonition of the Court of Appeal in Mifsud v. MacMillan Bathurst Inc., 1989 ONCA concerning implied terms in a contract of employment. In Mifsud, McKinlay J.A. said that when “there is no written contract it is necessary first to determine what terms are implied in the specific contract involved, and those terms are not those which the court considers reasonable, but rather what the parties would have agreed to when forming the contract, had they turned their minds to the type of situation which later transpired” (at para. 18). Mr. Prentice forcefully urged me to find that the pandemic is a once in a lifetime occurrence. Had the parties turned their mind to it when the contract was first entered into, they would reasonably have agreed to permit a temporary lay-off to safeguard the ability of the employer to re-hire them when the situation improved.
[17] It might be noted that only a few lines below the foregoing passage from Mifsud that I was urged to consider, McKinlay J.A. also cautioned that the exercise of implying terms into an unwritten employment agreement should not be undertaken to impose upon the parties the Court’s view of a “reasonable and just” contract. The exercise is one of determining the objective terms of the contract the parties entered actually entered into.
[18] In effect, the defendant is asking me to imply into a contract of employment a form of force majeure clause. I am mindful of the need to decide only those matters that require a decision in this or any other case. On the facts of this case, I don’t think that the question of an implied “global pandemic” exception to the well-settled law prohibiting non-consensual lay-offs properly arises. I reach this conclusion for two reasons.
[19] First, the lay-offs in this case arose significantly before the facts had evolved to the point of a global pandemic impacting our entire Province or country. The lay-off letters sent did not, in fact, purport to justify the lay-offs of either plaintiff on the basis of an emergency that was global in scope impacting all sectors of the economy. The defendant itself told the plaintiffs in writing that they were being laid off because of “political instability” and a fall-off in orders. These circumstances were only beginning to produce impacts in Canada even if they were nevertheless having an out-sized impact on the defendant’s business. Over the coming weeks and months, the situation in China that side-swiped the defendant’s business in late 2019 and early 2020 morphed into a global phenomenon affecting businesses and employment the world over. There were no lock-down orders in effect in Ontario at the time the plaintiffs were laid off. The plaintiff was not prohibited from operating and the plaintiffs were not forbidden from coming to work.
[20] Without employing hindsight, there is little to distinguish the situation as regards Corma in late January/early February 2020 from any other adverse situation that might commonly affect a business, even to the extent of causing 40% of its revenues to dry up. A retailer may find business impacted by a big-box store opening a block away; a manufacturer may find the market flooded with imports as a result of a change in tariffs or a free-trade agreement. Insolvency, recessions or the evolution of the competitive marketplace have never justified unilateral lay-offs under our law.
[21] Whether it may be reasonable to imply some kind of a force majeure clause in the case of a business prohibited from operating or placed under severe and unforeseen operational limitations by government action is something that I do not need to determine here on these facts. The circumstances existing when these plaintiffs were laid off do not reasonably lead to the conclusion that the parties would have mutually agreed to allow an indefinite lay-off with minimal compensation to be imposed upon employees had they but turned their mind to the prospect of their employer suffering headwinds – even material headwinds – in the operation of their business due to events abroad over which the employees have no control nor ability to provide for.
[22] Second, even if it were reasonable to imply a “global pandemic” term into the employment agreement – and I express no opinion on the matter in light of my conclusion that the question does not arise in this case – no such implied term can override the express provisions of s. 56 of the ESA which deems a lay-off longer than 35 weeks to be a termination of employment. It is not open to the parties to contract out of the minimum standards of the ESA whether by an express term of their agreement or by an implied term.
[23] Both plaintiffs were laid off for a period of longer than 35 weeks in fact. Indeed, by the time of hearing, their laid-off status had persisted for more than a year without recall. The conclusion that their employment was terminated by the defendant in fact is mandatory.
[24] I find that the plaintiffs employment was in fact terminated without providing reasonable notice. It makes no difference whether this is characterized as constructive dismissal by reason of the unilateral change of the terms of employment when the lay-off went into effect or deemed termination by operation of s. 56 of the ESA. The result is the same. However, to the extent it is relevant, I find the plaintiffs succeed on both grounds. I cannot find the suggested term was a reasonably implied one when the contract of employment was entered into and the lay-offs were not temporary in fact having extended longer than 35 weeks.
(b) What is the period of reasonable notice?
[25] There is no question that the unwritten agreements governing the employment of both plaintiffs contained an implied term that their employment would not be terminated except on reasonable notice.
[26] The plaintiffs take the position that they are entitled to reasonable notice of between 22 and 24 months. In support of this claim, the plaintiffs urge me to take account of their age (62 and 66 years at the time of termination of Mr. Asafov and Mr. Ristanovic respectively), their lengthy period of service (just over 30 years and just under 28 years), the difficulties faced by people in their age bracket in securing alternative employment and, of course, the additional obstacles posed by lock-downs and the pandemic.
[27] The following precedents among others were cited to me by the plaintiffs:
a. Di Tomaso v. Crown Metal Packaging Canada LP, 2011 ONCA 469. The Court of Appeal described the 22 months awarded to a mechanic and press-maintainer who was 62 years of age with 33 years of employment as being “within the upper end of the range”, reiterating the Court’s rejection of any suggestion that there is a cap on notice for unskilled employees;
b. Visaggio v. Joynt-Dent Inc., 2018 ONSC 1911. A 57-year old dental hygienist with over 33 years of experience and earning $59,000 was found to be entitled to 24 months.
c. McLean v Dynacast Ltd., 2019 ONSC 7146. Smith J. found that a technician earning $66,000 per year in a non-managerial role with 34 years’ service was entitled to 28 months’ notice.
[28] The defendant generally agreed that a period of reasonable notice in the range of 18-22 months but urged me to reduce this by reason of mitigation related issues (those will be dealt with in the next phase of this hearing), the impact of the pandemic upon the defendant’s business, the benefits received from the government and the maintenance of benefits by the defendant during the period of lay-off.
[29] Fixing a period of reasonable notice is always a difficult process. The economic circumstances prevailing at the time of the termination were – and remain – difficult. Both plaintiffs work in the manufacturing sector, a sector of the Ontario economy that has had some headwinds in recent history even before the pandemic. I have no reason to believe that their skills are not reasonably transportable between different types of manufacturing operations but I cannot infer from that the market for their services is particularly buoyant. While I have not yet heard detailed argument on the topic of mitigation, the record does indicate to me that both plaintiffs have been at least reasonably active in seeking employment notwithstanding the on-again, off-again state of lockdown. These circumstances as well as the others referred to (age, years of service) all tend to nudge the notice period towards the upper end of the applicable range.
[30] In my view, counsel have collectively described both the lower (18 months) and upper end (24 months) of the range given the age and years of service of both plaintiffs. While it is tempting to accede to the defendant’s suggestion that if the prevailing economic circumstances may operate to lengthen notice from the perspective of the terminated employee it should also serve to curtail it from the perspective of the employer who is also blameless and is being hard hit, that is not an analysis that I think can fairly be applied. Ability to pay as a criterion for fixing damages is a slippery slope to engage upon and I do not intend to do so here.
[31] The simple fact of the matter is that both plaintiffs – while nearing the end of their working lives – remain ready, willing and able to work and I have no reason to conclude that they would not have worked (or would not still work) well beyond the upper end of the notice period under discussion. Their loss of opportunity to earn income and possibly to save for their retirement or pursue any other financial goal is real. While our span of years on this earth has always been finite, workers in their sixties are that much closer to the end of the supply of labour they have to offer the marketplace, labour which they exchange to provide for their families, their own retirement or to meet their goals in life. I am satisfied that 22 months’ notice – or pay in lieu thereof – represents a reasonable application of the Bardal factors here. I would not make any material distinction between the entitlement in terms of months’ notice as between the two plaintiffs. Both have many, many years of service to their credit, having devoted the greatest part of their working lives to this employer.
[32] I acknowledge that Mr. Asafov claims entitlement to a length of service bonus over and above pay in lieu of notice. That issue will be dealt with in the next phase of the hearing when mitigation will be reviewed and a final judgment calculated building upon the determinations I have made here.
Disposition
[33] Accordingly, both motions for summary judgment will be granted. I find that both plaintiffs were dismissed from their employment on February 3, 2020 (in the case of Mr. Ristanovic) and February 19, 2020 (in the case of Mr. Asafov) without reasonable notice. I further find that reasonable notice in both cases ought to have been 22 months.
S.F. Dunphy J.
Date: May 6, 2021