COURT FILE NO.: CV-20-00641245-00CP
DATE: 20210609
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: ANNA BROWN, Plaintiff
AND:
PROCOM CONSULTANTS GROUP LTD., Defendant
BEFORE: Justice Glustein
COUNSEL: Andrew H. Monkhouse, Alexandra Monkhouse, and Lexa Cutler, for the plaintiff
Jeffrey E. Goodman and Elisha C. Jamieson-Davies, for the defendant
HEARD: May 26, 2021
REASONS FOR DECISION
Nature of motion and overview
[1] The plaintiff, Ms. Anna Brown (Brown), brings this motion seeking an order substituting herself with Ms. Rosalind Gaskin (Gaskin) as the representative plaintiff in this proposed class action.
[2] Brown alleges that the defendant Procom Consultants Group Ltd. (Procom) mischaracterized the prospective class members as independent contractors when they ought to have been classified as employees and, as such, the class members are entitled to minimum employment standards under the Employment Standards Act, 2000, S.O. 2000, c. 41 (ESA), including vacation pay, public holiday and premium pay, and overtime pay.
[3] Procom submits that:
(i) The Plaintiff’s motion for substitution should not be permitted because (a) Gaskin does not have a viable claim since it is allegedly statute-barred and (b) Gaskin’s interests are not aligned with the prospective class since Gaskin was allegedly only prepared to work as an independent contractor for Procom based on recent discussions between Gaskin (who was seeking to work at Procom) and Ms. Wendy Kennah (Kennah), Vice President, National Recruiting, at Procom; and
(ii) The class action must be dismissed if Gaskin cannot be substituted as a representative plaintiff.
[4] Brown submits that:
(i) Gaskin has a viable claim since (a) there is evidence that she reasonably could not have discovered her claim until 2020 when she spoke with legal counsel and discovered that she had been mischaracterized as an independent contractor; and (b) in any event, discoverability is not relevant to vacation pay since it is allegedly held in trust by the employer;
(ii) The evidence does not establish that Gaskin only wanted to be employed as an independent contractor. In any event, such a factor would not be a basis to deny substitution as a representative plaintiff; and
(iii) The appropriate relief if Gaskin cannot be substituted as a representative plaintiff is not to dismiss the class action, but instead to provide additional time to find a new representative plaintiff “with instructions from [the court] regarding the qualities of such a representative”.
[5] For the reasons that follow, I agree with Brown and order the substitution of Gaskin as representative plaintiff. The statement of claim shall be amended to reflect the substitution and to plead the allegations relevant to discoverability as set out by Gaskin in her affidavit in support of the present motion.
Analysis
The test for substitution of a representative plaintiff
[6] Both parties agree that the applicable test to determine the appropriateness of substituting a representative plaintiff is set out by Winkler J. (as he then was) in Logan v. Canada (Minister of Health), [2003] O.J. No. 418, 36 C.P.C. (5th) 176 (S.C.J.).
[7] In Logan, Winkler J. addressed the factors relevant to a motion to withdraw a named representative plaintiff and substitute another proposed representative plaintiff. He held, at paras. 7 and 8:
Considerations such as whether the class proceeding has been commenced for an improper purpose, whether there is a viable replacement so that putative class members will not be prejudiced, the question of prejudice to the defendant, whether the proposed replacement is prepared to accept the exposure to costs consequences and other pertinent facts will all bear on the ultimate decision as to whether to grant the motion for withdrawal …
With respect to the two new proposed representative plaintiffs, Drady and Taylor, they have persuaded me that they have a tenable claim at law. As a result, the motion to add them as representative plaintiffs is granted.
[8] In the present case, Procom does not submit that Brown’s proposed withdrawal is improper. Brown had an individual claim against Procom as well as a class action; she settled those claims and signed a release accordingly.
[9] Consequently, the only factors at issue on the present substitution motion are whether (i) Gaskin has a tenable claim given Procom’s limitations defence and (ii) Gaskin’s interests are not aligned with the prospective class based on Gaskin’s recent job search and her alleged discussions with Kennah.
[10] I address each of these issues below.
Issue 1: Does Gaskin have a tenable claim given Procom’s limitations defence?
(a) The applicable law
1. The test to establish a tenable claim
[11] I first address the threshold that applies to determine whether a claim is “tenable” when a party is proposed to be added or substituted as a representative plaintiff under Rule 5.04(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
[12] In Sera GmbH v. Sera Aquaristik Canada Ltd., [2009] O.J. No. 3676 (Mast.), at para. 9, I set out the applicable test as follows, citing Master Sandler in Panalpina Inc. v. Sharma, [1988] O.J. No. 1401 (Mast.):
I wish to make it clear that a master still has jurisdiction under rule 25.11 to strike out a pleading or a part of a pleading which contains an “untenable plea” but it is essential to understand what is meant by “untenable”. An untenable plea is one that is clearly impossible of success at law, that has no legal potential whatsoever, that is clearly unviable or unachievable at law, or, to use the words of rule 20, that raises no genuine issue of law, in which case, the plea is an “untenable plea” and is thus “frivolous or vexatious” or “an abuse of the process of the court”. On the other hand, if it can be said that the plea is legally plausible, possibly capable of success, arguably maintainable, legally credible, legally promising, viable, feasible, or conceivable, has legal potential, or is within the bounds of legal possibility, and is not excluded by law, then such plea is not an untenable plea, and a master would not have jurisdiction to strike it out. [Emphasis added.]
[13] Evidence is admissible on a Rule 5.04 motion: Prendergast v. CHV Hydraulics, a Division of UAP Inc., (2002), [2002] O.T.C. 319 (S.C.J.), at para. 11. However, evidence is not required, since the court must assume that the facts pleaded in the claim are true (unless patently ridiculous or incapable of proof): Williams v. Pintar, 2014 ONSC 1606 (Mast.), at para. 19.
2. General principles applicable to limitation periods
[14] Procom relies on the following general principles applicable to limitation periods:
(i) A claimant is presumed to have known the matters referred to in s. 5(1)(a) of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, on the day the act or omission took place unless the contrary is proved: Limitations Act, s. 5(2);
(ii) The burden is on the plaintiff to prove that her claim is not statute-barred since she is the one seeking an exemption from the normal operation of the statute: Shukster v. Young, 2012 ONSC 4807, at para. 19;
(iii) A limitation period runs when the plaintiff has, or ought to have, knowledge of a potential claim, i.e. when the plaintiff knows enough facts to base a cause of action against the defendant: Fehr v. Sun Life Assurance Company of Canada, 2018 ONCA 718, at para. 146;
(iv) Error or ignorance of (a) the law or (b) the legal consequences of the facts does not postpone the running of the limitation period if the plaintiff knows or ought to know the existence of the material facts which are the elements of the cause of action: Fehr, at para. 146; and
(v) In wrongful dismissal actions, the limitation period begins to run when an employee is dismissed without reasonable notice: Jones v. Friedman (2006), 2006 CanLII 580 (ON CA), 206 O.A.C. 214 (C.A.), at para. 4.
3. The law on discoverability in relation to a claim for vacation pay
[15] The law is settled that a claim for vacation pay is not discoverable simply because vacation pay was not paid when due, but is instead discoverable when the employee knew or ought to have known that the employee was entitled to vacation pay. This issue was reviewed by the court in Evangelista v. Number 7 Sales Ltd., 2008 ONCA 599.
[16] In Evangelista, the respondent employee had not been paid public holiday or vacation pay since 1996, but the trial judge held that the limitation period did not run until the employee became aware of his entitlement, which arose when the employer first paid vacation pay to the employee in December 2003. O’Connor A.C.J.O. held, at paras. 45 and 46:
As to the Limitations Act, 2002, the appellant first paid the respondent vacation pay in December 2003. The trial judge accepted the respondent’s evidence that he was not aware of his entitlement to vacation or public holiday pay before that time. The trial judge held that the respondent’s lack of awareness as to his entitlement went to the issue of discoverability. As a result, the respondent's action, which was commenced in July 2004, was well within the two year limitation period in the Limitations Act, 2002.
I see no basis to interfere with the trial judge’s conclusion that the respondent’s entitlement to public holiday and vacation pay should not be reduced on the basis of the operation of a limitation period.
4. The law on discoverability in relation to employee misclassification claims
[17] The parties provided no authority where a court determined a limitation period on the merits in an employee misclassification claim. However, courts have relied on a similar analysis to that of the court in Evangelista, and held that, if the employer allegedly misrepresented independent contractor status to the employee, there is no basis at the certification stage (or on a motion to determine a common issue) to limit ESA entitlement claims for employee misclassification to two years prior to the issuance of the statement of claim.
[18] In Omarali v. Just Energy Group Inc., 2016 ONSC 4094, leave to appeal ref’d 2016 ONSC 7096 (Div. Ct.), Belobaba J. dismissed, at para. 65, the submission of the defendants to restrict the class to those persons employed as of May 4, 2013, two years before the statement of claim was issued on May 4, 2015.
[19] Belobaba J. held that representations of the employer as to independent contractor status could extend discoverability. He stated, at paras. 66-67 (footnotes omitted):
I am not persuaded that the class should be narrowed at this stage of the proceeding. The defendants may well prevail on the limitations point but more evidence on the issue of reasonable discoverability is needed, particularly where the defendants themselves were continually representing to the sales agents through words and actions (e.g. pay slips) that they were ICs and not employees. On these facts, I prefer to follow the case law as summarized in the leading text on class actions, that “the limitations issue should not be resolved on a pleadings motion or on a motion for certification.”
The better approach, in my view, is to allow the defendants to add the limitations question as a common issue and I have done so herein. On the defendants’ motion, I have added Common Issue 15 to deal with the limitations argument. [Emphasis added.]
[20] The Divisional Court refused to grant leave to appeal. At para. 6, Swinton J. approved Belobaba J.’s approach, noting that “... [i]t was reasonable to leave the issues of time bars and discoverability to be determined later on the merits, rather than to determine these issues on a certification motion, which is procedural in nature.”
[21] In Fresco v. Canadian Imperial Bank of Commerce, 2020 ONSC 6098 (presently under appeal), Belobaba J. heard a motion by the defendant bank for a class-wide limitations order barring all claims arising before the applicable provincial limitations laws: at paras. 2, 7-9. The class, as certified by the Court of Appeal (whose reasons permitted the defendants to raise any limitations defences), included class members from a period that began on February 1, 1993 and ended on June 18, 2009. The class encompassed approximately 31,000 class members over a national class, many of whom had claims for periods well beyond the expiry of the applicable provincial limitations period: at para. 10.
[22] The plaintiff made a “cross-request” asking that “the bank’s limitation defence is rebutted in its entirety on a class-wide basis”: at para. 55.
[23] Belobaba J. dismissed both requests. Belobaba J. rejected the bank’s position that a class-wide determination could be made that the claims for ESA entitlements were statute-barred for all claims prior to the applicable provincial limitation laws. He held that there was both evidence of (i) power imbalance and (ii) reasonable reliance on “the bank’s repeated misrepresentations” that the employees were independent contractors. With respect to the reliance issue, Belobaba J. held, at para. 39 (footnote omitted):
The evidence about the power imbalance in the workplace and the employee’s fear of reprisal if they took legal action reinforces the second reason: that in these circumstances it was reasonable for at least some (and perhaps many) of the class members to rely on the bank’s representations about the legality of the its [sic] overtime policy. The law is clear that resort to legal action may be inappropriate in cases where the plaintiff is reasonably relying on the superior knowledge of the defendant. [Emphasis added.]
[24] Belobaba J. rejected the bank’s submission that employees necessarily had the ability to self-determine whether they were misclassified as independent contractors. He held, at paras. 43-46 (footnotes omitted):
Counsel for the defendant bank now suggest that even though a multi-billion-dollar financial institution with an able legal staff may have misinterpreted the requirements of federal labour law, that class members should have known better — because hard copies of the Canada Labour Code’s overtime provisions had been posted in every branch.
This cannot be a serious submission. But if it is, I can do no better that to repeat the gist of what Laskin J.A. said in response to a similar submission in Ferrara v. Lorenzetti, Wolfe Barristers and Solicitors — that it lay ill in the mouth of the defendant lawyer to say that although he had maintained throughout that he made no error, the client should have known that he did.
The interpretation of the Canada Labour Code’s overtime provisions is not, as they say, rocket science, but it does have its challenges. The correct interpretation is not self-evident and requires some thought and perhaps some knowledge of federal employment law. Mistakes can be made. Recall that the respected judge who dismissed the certification motion in 2009 concluded that the CIBC overtime policies “were not illegal.” And, as this court has found, the defendant bank itself and in particular its trained legal staff “dropped the ball” in fashioning its own interpretation. Even so, says the bank, the employee class members should have known better and should have known better on a class-wide basis. Again, this cannot be a serious submission.
It is true that, over the years, dozens of class member employees complained in employee surveys about the fact that overtime was not being paid. But it is important to pause and ask the following. Do these employee complaints show that these class members fully understood federal labour law and knew that taking legal action was appropriate at a much earlier time but unreasonably delayed in doing so? Or, do the complaints show that the writer may have reasonably accepted the bank’s representations that the overtime system was legal and was simply asking that the system be reformed. … [Emphasis added.]
(b) Application of the law to the facts of the present case
[25] Procom submits that it is “clearly impossible” and not “within the bounds of legal possibility” that Gaskin’s personal claim can succeed. Procom submits that on the pleadings and evidence before the court, it is clear that Gaskin’s claim is statute-barred.
[26] I do not agree.
[27] The evidence before the court is not contested. In her cross-examination and affidavit, Gaskin acknowledged that she knew the following alleged facts when she was working for Procom and was assigned to the Ministry of Transportation (MOT):
(i) she was treated as an independent contractor, not an employee;
(ii) she did not have the ability to work for other clients during the contract;
(iii) she was told when and where to perform her work duties;
(iv) she was required to obey direction from her superiors and to conform with MOT’s policies;
(v) she had standard hours of work;
(vi) she worked side-by-side with MOT employees;
(vii) she did not receive public holiday or premium pay;
(viii) she did not receive vacation pay; and
(ix) she had colleagues who were sometimes required or allowed to work in excess of the ESA overtime threshold without overtime pay.
[28] Procom submits that, based on the above facts, it is clear that the claim is statute-barred because “Gaskin discovered her claim at the latest in November 2015 when she ceased her placement with [MOT] ….”
[29] However, it is not settled law that a “reasonable” worker is required to investigate his or her legal status in order to discover that the worker has been misclassified as an independent contractor. Based on the case law set out above, it is arguable that an employer’s representation that the worker is an independent contractor is sufficient to delay discoverability until the worker can reasonably know that he or she has been misclassified.
[30] In Evangelista, the Court of Appeal delayed discoverability until the employee knew that he was entitled to vacation pay. The court did not find that a reasonable employee would have conducted his or her own investigation to determine legal entitlement to vacation pay.
[31] The effect of the decision in Evangelista is that knowledge that an employee is entitled to vacation pay under the ESA is a “material fact” necessary for discoverability to run, and not a “legal consequence” of knowledge that the employee did not receive vacation pay.
[32] Similarly, the decisions in both Fresco and Omarali provide for the delay of discoverability in circumstances where the employer represents that the worker is an independent contractor.
[33] In Fresco, the court refused to order a class-wide limitation period based on requiring an employee to self-determine employment status arising from his or her working conditions. The court was strongly critical of a position that would require workers to self-determine their employment status, when the issue was a complex legal analysis that was not obvious even to the defendant bank, who made representations as to “the legality of … its overtime policy”.
[34] In Omarali, the court refused to limit the class to claims within the limitation period, “where the defendants themselves were continually representing to the sales agents through words and actions (e.g. pay slips) that they were ICs and not employees”: at para. 66.
[35] Consequently, there is case law that supports Brown’s submission that the worker is not required to conduct independent research as to employment status when the employer represents that the worker is an independent contractor and provides no ESA entitlements in a manner consistent with that representation.
[36] In the present case, Gaskin would have been aware of all of the facts set out at para. 27 above and relied upon by Procom, which she fairly acknowledged in her affidavit and cross-examination. However, Gaskin’s uncontested affidavit is that she relied on Procom’s representations about her independent contractor status. She states:
I relied in good faith on Procom to correctly inform me, properly classify me under Ontario employment legislation and to pay me my statutory entitlements. I was unaware while working for Procom, or afterwards, that I was an employee and was therefore entitled to Overtime Pay, Vacation Pay, Public Holiday Pay, and Premium Pay.
I did not become aware that I was eligible, as an employee, for Overtime Pay, Vacation Pay, Public Holiday Pay, and Premium Pay because of Procom’s continued misrepresentation regarding my status and entitlement to such pay. I only became aware in 2020 that I may have a claim after speaking with legal counsel, the content of the conversation is privileged and I do not waive the privilege.
[37] In her cross-examination, Gaskin was not questioned as to (i) when she discovered that she had allegedly been misclassified or (ii) her alleged reliance on Procom’s classification of her employment status as an independent contractor. Her answers to the factual questions that she did not receive ESA entitlements were fully consistent with her subsequent answers to undertakings which acknowledged those answers and were also consistent with her affidavit evidence of reliance on Procom, her lack of knowledge that she was (allegedly) an employee and entitled to ESA entitlements, and her discovery of that entitlement in 2020 upon discussions with legal counsel.
[38] Consequently, on the basis of the evidence before the court, Gaskin has a tenable claim.
(c) The decision in Chen
[39] As an alternative argument, Gaskin submits that even if the court held that her claim was statute-barred, she would still have a tenable claim based on the decision of the Ontario Labour Relations Board in Weiliang Chen v. CE Innovations Ltd. and Director of Employment Standards, 2019 CanLII 80994 (Ont. L.R.B.).
[40] Section 40 of the ESA provides that:
(1) Every employer shall be deemed to hold vacation pay accruing due to an employee in trust for the employee whether or not the employer has kept the amount for it separate and apart.
(2) An amount equal to vacation pay becomes a lien and charge upon the assets of the employer that in the ordinary course of business would be entered in books of account, even if it is not entered in the books of account.
[41] In Chen, at para. 15, the Board held that vacation pay owing more than two years outside the ESA limitation period could still be paid to the employee. The Board relied on s. 40 of the ESA and held that it “does not provide for the discharge of the lien it creates on any basis other than the payment to the employee of accrued vacation pay”. [Emphasis added.]
[42] Brown submits that if accrued vacation pay is held in trust, then the claim for vacation pay is tenable since a breach of trust for the purposes of the Limitations Act occurs when the trustee states that it will not be paying out the amounts held in trust: Simpson v. Bridgewater Bank, 2012 ONSC 714, at para. 51.
[43] Procom submits that Chen “arose outside of the civil context, involved a different limitations period, and is non-binding upon this court”. Procom submits that (i) the trust under s. 40 can only apply to “accruing” and not “accrued” vacation pay, and (ii) even if the trust applied to accrued vacation pay, “it still would not change or displace the running of the limitation period in the Limitations Act, 2002 in this claim” since “[a]ll the trust does is give priority of vacation pay claims over the claims of most other creditors of the employer, including many secured creditors … [and] does not protect these monies indefinitely, such that a worker could wait years and years to make a claim”.
[44] Since I have found that Gaskin has a tenable claim for ESA entitlements based on the discoverability principle, I make no finding as to whether Brown has a tenable claim under s. 40 (which in any event may only be limited to vacation pay).
Issue 2: Should substitution be denied based on Gaskin’s attempt to obtain work with Procom?
(a) The relevant evidence
[45] Procom filed affidavit evidence from Kennah that:
(i) Since August 2020, when Gaskin became involved in the present action, she “applied to four (4) incorporated independent contractor positions and one (1) employment position using Procom’s website”;
(ii) Gaskin “also advised me in or around December 2020 that she wanted me to provide her with all available opportunities”;
(iii) On February 17, 2021, Kennah “emailed Gaskin to advise her of an opportunity at Sun Life for a six-month contract starting March 1, 2021”. Kennah asked Gaskin “if she was interested in the role and, if so, what rate she was looking for and how she would like to engage - as an incorporated independent contractor, a sole proprietor, or a temporary employee of Procom who is then assigned to Sun Life”;
(iv) Gaskin responded by email later that day stating that she is “incorporated”, which Kennah “understood to mean, based on my experience, that she wanted to engage as an incorporated independent contractor”. Following that email, Kennah spoke with Gaskin who advised that “she wanted to carry out the engagement as an incorporated independent contractor”;
(v) “In response, I asked her how we could proceed with working with her in that status given the class action and her earlier allegation contained in her affidavit that Procom had misclassified her as an independent contractor when she believed that she was truly an employee”;
(vi) Later that day, Gaskin advised Kennah that Gaskin had spoken with her counsel and that even though her counsel had advised her to ask Procom to direct whether she was engaged as an employee or independent contractor, Gaskin was prepared to accept a position as an employee because she was “just looking for a job”; and
(vii) After further discussions, Kennah advised Gaskin that Procom was only prepared to offer Gaskin a position as an employee. However, Gaskin declined the offer.
[46] Gaskin denied the allegations at subparagraphs (iv) to (vi) above with a general statement that “the details regarding my emails or conversations with Ms. Kennah [as set out at paras. 9 to 15 of the Kennah affidavit] do not truly or accurately set out the statements between us or my intention”.
[47] Gaskin stated that since Kennah only contacted her one week after the court issued a timetable for the present motion, Gaskin believed that Kennah “appears to have offered me a potential position with Procom with an alternate motive” and that “[i]t appears to me that Ms. Kennah attempted to obtain information covered by solicitor-client privilege relating to the current proceedings”.
[48] In her cross-examination, Gaskin’s evidence (consistent with Kennah’s evidence at para. 45(vi) above), is that when she sought employment with Procom, “I’m not differentiating at that point, an employee versus whatever. A job is a job. At the end of the day, you know, I’m looking for a job. So, I’m not going to classify whether it’s T4 [employee] versus Inc. [independent contractor] at that point, honestly”.
[49] The above evidence does not support a finding that Gaskin’s interests are not aligned with the class. The uncontested evidence is that Gaskin was looking for a job and sought work with Procom. The issue of how Procom chose to offer the position or why Gaskin refused the position does not prevent Gaskin from being substituted as a representative plaintiff, since it is not “clearly impossible” that she could adequately represent the interests of the class, regardless of how she was prepared to accept a job in 2021.
Order and costs
[50] For the above reasons, I grant the motion and order that Gaskin be substituted for Brown as the representative plaintiff in the proposed class action. Gaskin shall amend the statement of claim to reflect the substitution and to plead the allegations relevant to discoverability as set out by Gaskin in her affidavit in support of the present motion.
[51] Counsel agreed that costs of this motion should be in the cause of the certification motion. I agree that this is an appropriate disposition of costs and I so order.
GLUSTEIN J.
Date: 20210609
COURT FILE NO.: CV-20-00641245-00CP
DATE: 20210609
ONTARIO
SUPERIOR COURT OF JUSTICE
ANNA BROWN
Plaintiff
AND:
PROCOM CONSULTANTS GROUP LTD.
Defendant
REASONS FOR DECISION
Glustein J.
Released: June 9, 2021