COURT FILE NO.: CV-13-495082
DATE: 2021-10-14
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
VINAY NAGPAL
Plaintiff
– and –
IBM CANADA LTD.
Defendant
Michael N. Freeman for the Plaintiff
Jennifer Dolman for the Defendant
HEARD: October 12, 2021
SCHABAS J.
ENDORSEMENT
[1] On July 30, 2019, I dismissed a summary judgment motion in this matter brought by the defendant IBM Canada Ltd. (“IBM”). IBM had sought a dismissal of the action on the grounds that the plaintiff, Vinay Nagpal, had either resigned or abandoned his employment, or that the plaintiff’s illness and refusal or inability to return to work frustrated the contract of employment. The plaintiff did not object to IBM’s use of Rule 20 seeking summary judgment. Further, IBM agreed that if I was to dismiss its motion then it would be open to me to conclude that Mr. Nagpal had been wrongfully dismissed and to grant summary judgment in his favour, which was in fact my conclusion. See my Reasons for Judgment in Nagpal v. IBM Canada Ltd., 2019 ONSC 4547 (“Reasons”).
[2] IBM’s appeal of my decision was dismissed by the Court of Appeal on April 30, 2021: see Nagpal v. IBM Canada Ltd., 2021 ONCA 274. Accordingly, the matter has now come back to me to address damages. The parties agree that I should address the claims on the written record now before me.
[3] The issues are as follows:
(a) What damages should be paid to the plaintiff in lieu of reasonable notice?
(b) What is the plaintiff’s entitlement to collateral benefits?
(c) Is the plaintiff entitled to aggravated and punitive damages?
Factual background
[4] The facts of this matter are set out in my Reasons released on July 30, 2019. There has been a small amount of additional evidence provided on this motion to fix damages, including some further internal IBM communications, and post-termination conduct. I address the new evidence, to the extent necessary, in dealing with the issues below.
Reasonable notice
[5] There is no dispute that Mr. Nagpal is entitled to pay in lieu of reasonable notice; the only issue is quantum. Counsel for the plaintiff argues that he should receive 24 months salary, which is at the highest end of the range absent exceptional circumstances.[^1] IBM argues that 18 months is appropriate.
[6] Mr. Nagpal was employed by IBM for over 24 years at the time of his termination in September 2013. He was almost 48 years old and his salary was $124,000.00 per year. Mr. Nagpal held a senior management position at Band 9 of 10 Bands. Above Band 10 were executive level positions. He led software development teams and supervised approximately 15 people. Until January 2013, Mr. Nagpal had always received positive performance evaluations and had often received a year-end bonus of $5,000.00.
[7] The factors for determining reasonable notice, or pay in lieu, were set out long ago in Bardal v. Globe and Mail Ltd. (1960), 1960 294 (ON SC), 24 DLR (2d) 140 (Ont. H.C.) at p. 145:
There can be no catalogue laid down as to what is reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant.
[8] Each case turns on its facts; however, absent exceptional circumstances which were not advanced by the plaintiff, 24 months is generally regarded as the upper limit of reasonable notice. Further, although the plaintiff pleaded that it relied on the factors in Wallace v. United Grain Growers Ltd., 1997 332 (SCC), [1997] 3 S.C.R. 701, which would permit consideration of employer misconduct in increasing damages, that position is now attenuated by the decision in Honda Canada Inc. v. Keays, 2008 SCC 39, [2008] 2 S.C.R. 362. As the Court of Appeal stated in Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619, at paras. 49 -51:
The appellant says that the trial judge in this case erred in principle when he extended the notice period from 12 months to 15 months as a result of its conduct in Lin’s termination, but without a finding of bad faith.
I disagree.
First, it would not have been open to the trial judge to impose a Wallace “bump up”, by extending the period of reasonable notice even if he had found bad faith. While the majority in Wallace took this approach, in Honda, the Supreme Court observed that the correct approach is no longer to extend the notice period, but to award actual damages for bad faith conduct causing mental distress: at para. 59. Alternatively, punitive damages would be available for employer misconduct where the employer’s conduct is an actionable wrong, and so malicious and outrageous that it is deserving of punishment: Honda, at para. 62.
[9] In determining reasonable notice, cases involving the same defendant can provide “useful guidance”: see Keenan v. Canac Kitchens Ltd., 2016 ONCA 79 at para. 34. In this regard, the defendant relies on two IBM cases – Quinn v. IBM Canada Ltd. (unreported, November 28, 2016, Court File No. CV-16-552858), and Waterman v IBM Canada Ltd., 2010 BCSC 376, aff'd 2011 BCCA 337, aff'd 2013 SCC 70.[^2]
[10] Quinn and Waterman both involved employees who were older than Mr. Nagpal and had longer years of service with IBM. Both Mr. Quinn and Mr. Waterman were Band 7 employees whose jobs were technical and neither had managerial functions, which begin at the Band 8 level. In each case, the court found that 20 months notice was appropriate.
[11] The parties cite a number of other cases to support their positions on the period of reasonable notice.
[12] Lowndes v. Summit Ford Sales Ltd. (2006), 2006 14 (ON CA), highlighted that what constitutes reasonable notice is “case specific” in which “trial judges must ‘weigh and balance a catalogue of relevant factors’; and that ‘there is no one ‘right’ figure for reasonable notice’.” In that case, the Court of Appeal found a 24 month notice period, which was the high end of the range, was appropriate for a 59 year old long term senior employee at a car dealership. Other, more recent, Court of Appeal cases support the “case specific” approach: Strudwick v. Applied Consumer & Clinical Evaluations Inc., 2016 ONCA 520 at para. 42; Dawe v. The Equitable Life Insurance Company of Canada, 2019 ONCA 512 at para. 33.
[13] In Dawe, the Court of Appeal reduced a 30 month award to 24 months for a 62 year old insurance salesman with 30 years service. Trotter J.A. stated at para. 42: “I agree with the motion judge that Mr. Dawe’s circumstances – including his senior position, career-long years of service at the same company, age at the time of termination, and his difficulty in finding new employment – warranted a substantial notice period.” In Strudwick, the plaintiff had almost 16 years of service and was 56 years old at the time of termination from a relatively low-level clerical position. The Court of Appeal agreed that the motion judge’s award of 20 months was within the acceptable range.
[14] In Arnone v. Best Theratronics Ltd., 2015 ONCA 63, the plaintiff was 53 years old when dismissed after 31 years with the company. He supervised about 8 employees. The Court of Appeal agreed that a notice period of 22 months “fell within an acceptable range…for employees in similar circumstances.” (para. 19)
[15] The plaintiff also cites an IBM case, Leeming v. IBM Canada Ltd., 2015 ONSC 1447, in which a 60 year old employee with 8 years of service was awarded reasonable notice of 10 months. The decision does not indicate her Band level, but given the salary and description of her functions, Ms. Leeming seemed to be in a similar position to Mr. Nagpal.
[16] An issue raised by the plaintiff in this case was Mr. Nagpal’s ill health and his inability to mitigate. However, as McLachlin J. (as she then was) stated long ago in Nicholls v. Richmond (1984), 1984 828 (BC SC), 52 BCLR 302 at 26-29, in a frequently quoted passage, the period of notice “should depend on the reasonable expectations of the parties at the time the contract was made.” See also, e.g., Peterko v. Centric Health Corporation, 2019 ONSC 1068 at paras. 49 -51. Thus, it is argued with some force that Mr. Nagpal’s ill health should not be considered in the determination of reasonable notice.
[17] In Peterko at para 45, however, it was also observed that “it is generally accepted that a longer period of time will be required for an older employee to find comparable employment. In support of that proposition, the court cited McKinney v. University of Guelph 1990 60 (SCC), [1990] 3 S.C.R. 229, at para. 92:
Barring specific skills, it is generally known that persons over 45 have more difficulty finding work than others. They do not have the flexibility of the young, a disadvantage often accentuated by the fact that the latter are frequently more recently trained in the more modern skills. Their difficulty is also influenced by the fact that many in that age range are paid more and will generally serve a shorter period of employment than the young, a factor that is affected not only by the desire of many older people to retire but by retirement policies both in the private and public sectors.
[18] I have considered the Bardal factors, recognizing that no one factor should be given disproportionate weight. I have also considered the cases cited above, including the IBM cases, the more compelling of which is Leeming as it involved an employee somewhat comparable to Mr. Nagpal, albeit older and with fewer years of service. I have also had regard to the objective of awarding a period of reasonable notice that Mr. Nagpal would have reasonably needed to support himself until he found a new job (see Strudwick at paras. 45 – 46), recognizing that the upper limit is 24 months.
[19] Mr. Nagpal was a senior employee with managerial functions. He was, as his counsel stated, a “lifer” at IBM. Although not as old as the plaintiffs in the cases cited, he was at an age where finding new, comparable employment is challenging. As I am not to consider his health to extend the notice period, or provide a “bump up” related to conduct of the defendant, I decline to go to the maximum of 24 months; however, the 18 months suggested by IBM is too low. In my view, a notice period of 22 months is appropriate.
[20] At the time of his termination, Mr. Nagpal was earning $124,000.00 per year or, as calculated by the defendant, $10,352.00 per month. Accordingly, Mr. Nagpal shall be awarded $227,150.00, reflecting 22 months salary.
Collateral Benefits
[21] The defendant agrees that Mr. Nagpal is entitled to receive the value of his medical and dental benefits at a rate of $136.40 per month for a total of $3,000.80. The defendant also agrees that Mr. Nagpal should receive an additional 6% of his salary for the notice period, or $620.00 per month, reflecting what would have been contributed to his pension if his employment had continued. For 22 months, the pension amount totals $13,640.00.
[22] However, Mr. Nagpal also seeks payment of a $5,000.00 per year bonus for the notice period, on the grounds that he had received bonuses in that amount in several of his prior years of employment with IBM. His counsel quite sensibly did not seek a bonus for 2012, prior to his termination, as that was not part of this action.
[23] The entitlement to a bonus was recently addressed by the Supreme Court of Canada in Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26, confirming the approach taken by the Ontario Court of Appeal in Taggart v. Canada Life Assurance Co. (2006), 50 C.C.P.B. 163 and Paquette v. TeraGo Networks Inc., 2016 ONCA 618, 352 O.A.C. 1. In Matthews, Kasirer J. agreed, at paras. 52-53, that the appropriate approach was to first consider whether, “but for the termination, the employee would have been entitled to the bonus during the reasonable notice period.” This involves considering whether the bonus was “an integral part of his compensation package”: Singer v. Nordstrong Equipment Limited, 2018 ONCA 364. Secondly, “courts should ‘determine whether there is something in the bonus plan that would specifically remove the [employee’s] common law entitlement’.” Quoting Paquette at para. 31, the question “is not whether the contract or plan is ambiguous, but whether the wording of the plan unambiguously alters or removes the [employee’s] common law rights.”
[24] In Matthews, the plaintiff had a contractual entitlement to a bonus under the employer’s long-term incentive plan. In Mr. Nagpal’s case, in contrast, while there is a bonus policy, the decision to pay a bonus is discretionary. This was also the case in Paquette and Singer, however, in each of those cases there was evidence of an expectation of a bonus supported by specific evidence of past payments: see, e.g., Paquette at para. 49; Singer at paras. 10 -14.
[25] In this case, I have very little evidence about past bonus payments. Mr. Nagpal’s affidavit does not address it, nor does he address receipt of bonuses in his affidavit or his pleading. In these circumstances, I lack an evidentiary basis to conclude that Mr. Nagpal would have been entitled to receive a bonus in 2013 and 2014.
[26] In light of this finding, it is not necessary for me to address IBM’s argument that Mr. Nagpal was not entitled to the bonus because he was not employed at the end of each calendar year in which the period of reasonable notice fell – 2013 and 2014. However, I doubt the correctness of this proposition as it is inconsistent with the principle that damages should reflect what the employee would have received had he or she been employed during the notice period: see, e.g., . Taggart at para. 16; Paquette at paras. 22 -29, and 47. As van Rensburg J.A. stated in Paquette at para. 16:
The basic principle in awarding damages for wrongful dismissal is that the terminated employee is entitled to compensation for all losses arising from the employer’s breach of contract in failing to give proper notice. The damages award should place the employee in the same financial position he or she would have been in had such notice been given: Sylvester v. British Columbia, 1997 353 (SCC), [1997] 2 S.C.R. 315, at para. 1. In other words, in determining damages for wrongful dismissal, the court will typically include all of the compensation and benefits that the employee would have earned during the notice period: Davidson v. Allelix Inc. (1991), 1991 7091 (ON CA), 7 O.R. (3d) 581 (C.A.), at para. 21.
[27] Mr. Nagpal’s claim for a contribution towards the purchase of IBM stock, which was a benefit available to employees, also lacks an evidentiary basis on which to make any order or award.
[28] Mr. Nagpal also seeks special expenses of approximately $10,000.00 – a claim that is not particularized, dealing with medical and legal expenses following his termination. Medical expenses will be compensated by way of the payment of the value of benefits for the notice period. Legal expenses should be addressed as costs in due course.
[29] Although raised in the plaintiff’s factum, Mr. Nagpal did not pursue arguments that he was entitled to additional STD benefits.
[30] At the hearing of this matter, counsel for Mr. Nagpal also sought an additional 4% of his salary for vacation pay, a claim I do not accept as he is receiving pay in lieu of reasonable notice, and in lieu of working and taking vacations, or not.
Aggravated and punitive damages
[31] The plaintiff seeks an award of “moral”, or aggravated, damages for the manner in which Mr. Nagpal was treated by IBM, and to reflect the stress, anxiety and psychological toll that this took on him. As put in Honda at para. 59:
[I]f the employee can prove that the manner of dismissal caused mental distress that was in the contemplation of the parties, those damages will be awarded not through an arbitrary extension of the notice period, but through an award that reflects the actual damages. Examples of conduct in dismissal resulting in compensable damages are attacking the employee’s reputation by declarations made at the time of dismissal, misrepresentation regarding the reason for the decision, or dismissal meant to deprive the employee of a pension benefit or other right…
[32] Earlier, at para. 57 of Honda, citing Wallace, the Supreme Court stated that “[d]amages resulting from the manner of dismissal must then be available only if they result from the circumstances described in Wallace, namely where the employer engages in conduct during the course of dismissal that is ‘unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive’.”
[33] The manner, or course, of dismissal has been interpreted broadly to permit consideration of “a period of conduct that is not confined to the exact moment of termination itself”: Matthews at para 40. As the Court of Appeal put it in Doyle v. Zochem, 2017 ONCA 130, at para. 13:
The factors relevant to an award of moral damages are not limited to the examples in Honda, at para. 59 and Wallace, at paras. 98, 101. Nor, is the time frame limited to the moment of dismissal. Pre and post termination conduct may be considered in an award for moral damages, so long as it is “a component of the manner of dismissal”: Gismondi v. Toronto (City), 2003 52143 (ON CA), 64 O.R. (3d) 688 (C.A.), at para. 23, leave to appeal to S.C.C. refused [2003] S.C.C.A. No. 312; Ball, at § 22:20.19(1.1), p. 22-50.
[34] Although aggravated damages were not specifically pleaded, IBM did not assert any prejudice in responding to this claim, of which it has been aware for some time: see, e.g., my Endorsement of December 21, 2020: Nagpal v. IBM Canada Ltd., 2020 ONSC 8004.
[35] On the record before me there was no dishonesty by IBM or misrepresentations made to Mr. Nagpal. However, as I stated in my Reasons, IBM ought to have done more to address Mr. Nagpal’s situation leading up to his dismissal. As disclosed on this motion, IBM was a co-administrator of the STD policy with Manulife. It had the power to override a Manulife decision. Despite clear indications to Mr. Nagpal’s superior, Mr. Simpson, that Mr. Nagpal was suffering psychological distress before he went on leave due to workplace challenges, and after he left based on the reports from Manulife, IBM simply followed the letter of the policy without making inquiries. When Mr. Nagpal’s lawyer wrote to IBM to attempt to address the situation, he received no reply; instead, Mr. Nagpal, who was known to be ill, received an ultimatum. While I cannot find that IBM wanted to get rid of Mr. Nagpal, IBM was unduly insensitive to him, a long-term, committed and senior employee who was unwell. Evidence produced on this motion shows that Mr. Nagpal’s mental condition continued to decline in 2013 and following his termination, all of which was reasonably foreseeable to IBM. This foreseeable harm went well beyond the “normal distress and hurt feelings resulting from dismissal”: Honda at para. 56.
[36] Having said the above, as Mr. Nagpal’s counsel frankly conceded, IBM’s treatment of Mr. Nagpal does not rise to the level of misconduct or insensitivity seen in several of the cases cited by him, such as Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419, Strudwick v. Applied Consumer & Clinical Evaluations Inc., 2016 ONCA 520, Galea v. Wal-Mart Canada Corp., 2017 ONSC 245, Colistro v. Tbaytel, 2019 ONCA, Doyle v. Zochem Inc., 2017 ONCA 130 and Humphrey v. Mene, 2021 ONSC 2539. These cases resulted in aggravated, or moral, damage awards ranging from $50,000.00 to $200,000.00.
[37] In my view, having regard to the insensitivity shown to Mr. Nagpal and its impact upon him, an award of $40,000.00 in aggravated damages is appropriate.
[38] Turning to punitive damages, while IBM was “unduly insensitive” towards Mr. Nagpal, its conduct was not so “malicious, oppressive and high-handed” that it would fall into the exceptional category of cases warranting punishment: Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 SCR 595 at para. 36; Lin v. Ontario Teachers' Pension Plan at para. 51. In any event, to the extent that the plaintiff submitted that punitive damages would be appropriate to send a message to IBM that its conduct was wrong, that is to some extent achieved, in the circumstances of this case, by the award of aggravated damages.
Pre-judgment interest
[39] The plaintiff submits that I should adjust upward the pre-judgment interest rate for the damages to be awarded. Counsel notes that the rate at the time of Mr. Nagpal’s termination was 1.5%. He requests that I fix a rate of between 3% and 5% based on the conduct of the defendant in lengthening the litigation, so that interest would be in the range of $25,000.00 to $30,000.00. While I have the discretion to do so under s. 130 of the Courts of Justice Act, RSO 1990, c. C.43, I have no evidentiary basis to make such an adjustment, nor can I reliably do so on the submissions of counsel. Indeed, when pressed, even counsel for Mr. Nagpal could not point to any significant way in which the litigation had been lengthened which might justify an increase in the interest rate. In any event, even at the rate of 1.5% the accumulated interest over 8 years is in the range of $30,000.00.
Conclusion
[40] In accordance with my conclusions above, I fix damages as follows:
(i) IBM shall pay Mr. Nagpal his salary for 22 months in lieu of notice in the amount of $10,352.00 per month, for a total of $227,150.00;
(ii) IBM shall pay Mr. Nagpal $3,000.80 on account of medical and dental benefits ($136.40 per month x 22 months);
(iii) IBM shall pay Mr. Nagpal $13,640.00, representing pension contributions of 6% of his salary paid in lieu of notice ($620.00 x 22 months);
(iv) IBM shall pay Mr. Nagpal $40,000.00 in aggravated damages;
(v) There shall be pre-judgment interest from the date this action was commenced on December 14, 2013 until today’s date, at the rate of 1.5%; and
(vi) There shall be post-judgment interest at the rate set in accordance with the Courts of Justice Act.
[41] Should the parties be unable to agree on costs, the plaintiff may provide me with brief written submissions within 30 days of the release of these reasons, and the defendant may respond in brief submissions 14 days after the receipt of the plaintiff’s submissions.
Paul B. Schabas J.
Date: October 14, 2021
[^1]: The plaintiff’s factum sought a notice period greater than 24 months, but this was not pursued at the hearing.
[^2]: The appeals in Waterman dealt with collateral benefits and whether the plaintiff’s pension payments should be deducted from his damages.