Court File and Parties
COURT FILE NO.: CV-22-89356
DATE: November 3, 2022
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Paul Summers, Applicant
AND
Oz Optics Limited, Respondent
BEFORE: The Honourable Justice Charles T. Hackland
COUNSEL: Kyle Van Schie, counsel for the Applicant Justin A. Villeneuve, counsel for the Respondent
HEARD: October 18, 2022 (via Zoom in Ottawa)
Reasons for Judgement on an Application
Introduction
[1] This Application, claiming damages for wrongful dismissal, was brought by Paul Summers whose employment was terminated by the Respondent, Oz Optics Limited (sometimes referred to as “the employer”), on February 28, 2022. The Applicant, a senior draftsperson earning $75,000 plus benefits, was 61 years of age and had been with the company for almost 3.5 years when he was terminated. He was terminated summarily, on a not for cause basis, and paid the amounts provided for in his employment agreement. Unfortunately, he remains unemployed some 8 months later.
[2] The parties agree that the record in this proceeding is sufficient for the court to decide the three issues in dispute, which are (1) whether the termination clause in the employment agreement is void and unenforceable for non-compliance with the minimum requirements under the Employment Standards Act, 2000, S.O. 2000, c. 41 (“the ESA”), (2) if the employer is precluded from relying on the employment agreement between the parties, what is the period of common law notice owing to the Applicant, and (3) whether any deductions to the common law notice period are required due to an alleged failure on the part of the Applicant to mitigate his damages by taking reasonable steps to secure new employment.
The Employment Agreement
[3] The employer seeks to rely on an employment agreement signed with the employee on October 15, 2018, when he was first hired by the company. The Applicant contends that the employment agreement is unenforceable because the termination provisions are in contravention of the ESA and therefore constitute an unlawful attempt to contract out of the Applicant’s common law entitlement to common law notice, which arises upon termination of employment. This issue falls to be decided by reference to a recent decision of the Ontario Court of Appeal in the case of Waksdale v. Swegon North America Inc., 2020 ONCA 391(“Waksdale”).
[4] Waksdale requires that the termination provisions of an employment agreement must be looked at as a whole when determining whether they comply with the minimum requirements in the ESA. Accordingly, in the present case, the court must examine the clauses dealing with termination with cause as well as termination without cause, notwithstanding this was a termination without cause. These clauses of the agreement provide as follows:
“(b) Termination by OZ OPTICS without Cause
After you successfully complete the first three (3) months of your employment, your employment may be terminated by OZ OPTICS at any time and for any reason on a without cause basis, upon the provision of notice of termination as is minimally required by the Ontario Employment Standards Act, 2000, as amended from time to time (the “ESA”). At its discretion, OZ OPTICS may give you pay in lieu of notice, or a combination of both working notice and pay in lieu of notice. The notice referenced in the above paragraph is inclusive of all statutory and common law entitlements to notice of termination or payment in lieu of that notice. In addition to the notice and/or payments referred to in the above paragraph, you shall be provided with all your entitlements under the ESA including but not limited to severance pay if you are eligible, as well as any outstanding vacation pay accrued to the end of the statutory notice period required by the ESA. You shall also be entitled to continuation of any benefits to which you are in receipt during the statutory notice period required by the ESA after which all your benefits, if any, will cease.
(c) Termination by OZ OPTICS with Cause
This Agreement may be terminated effective at any time for cause by OZ OPTICS without any notice or pay in lieu of notice, or severance pay, or payment to the Employee whatsoever, except payment of wages and vacation pay earned to the date of termination. Cause includes, but is not limited to, acts of theft, fraud, insubordination, conflict of interest and documented unsatisfactory performance, as well as any violation of Schedules “A”, “B”, and “C” to this Agreement.” (underlining added).
[5] In this employment agreement, the problematic clause is the “with Cause” provision, specifically the wording underlined in the previous subparagraph. This clause allows the employer, when terminating for cause, to make no payments to the employee of severance pay or pay in lieu of notice. The appellate jurisprudence has established that a clause such as this purporting to permit an employer to dismiss an employee for cause without such payments is in contravention of the ESA. Gillese J.A. recently confirmed the required approach in Rahman v. Cannon Design Architecture Inc. 2022 ONCA 451 at para. 30:
This court has repeatedly held that if a termination provision in an employment contract violates the ESA – such as a “no notice if just cause” provision – all the termination provisions in the contract are invalid. See, for example, Waksdale v. Swegon North America Inc., 2020 ONCA 391, 446 D.L.R. (4th) 725, at para. 10, leave to appeal refused, [2020] S.C.C.A. No. 292; Rossman v. Canadian Solar Inc., 2019 ONCA 992, 444 D.L.R. (4th) 131, at para. 18. In Waksdale, as in the present appeal, the employer had not purported to terminate the employee for just cause. However, the just cause provision in the employment contract violated the ESA. The invalidity of the just cause provision rendered the other termination provisions unenforceable: Waksdale, at para. 10.
[6] The ESA does not speak of dismissal for cause and instead utilizes a much narrower statutory concept. Under O. Reg. 288/01 of the ESA, employees are entitled to notice of termination or termination pay as well as severance pay unless one of the enumerated subsections exempts them from such entitlements. Subsection 2(1)(3) of the regulation provides that only the following employees are exempt from receiving notice of termination or termination pay under the ESA:
2(1)(3) An employee who has been guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.
[7] The Applicant correctly argues the decided cases in this province have held that the standard of just cause at common law is distinguishable from the wilful misconduct standard prescribed in the ESA. Wilful misconduct is a higher standard (which has been referred to as “being bad on purpose”) and not all cases of just cause will satisfy the subjective intent that is required to meet this higher standard. The conduct must be “preplanned” and wilful in order to disentitle an employee from their statutory entitlements to termination pay and severance pay. I accept this submission. It is supported by three recent decisions of the Ontario Court of Appeal: Rahman v. Cannon Design Architecture Inc., 2022 ONCA 451 at paras. 27-28; Plester v. Polyone Canada Inc., 2011 ONSC 6068 at paras. 53-56, affirmed by 2013 ONCA 47; and Render v. ThyssenKrupp Elevator (Canada) Limited, 2022 ONCA 310 at paras. 79-80.
[8] As noted previously in Waksdale, a case factually similar to the present case, the court dealt with a situation where a termination with cause provision was void and unenforceable. The court held that all termination provisions in the contract were invalid. This was true even where the employer had not purported to rely upon the offending provision and sought to terminate the employee on a without just cause basis (as in the present case). To the same effect, as noted, is the recent Ontario Court of Appeal decision in Rahman v. Cannon Design Architecture Inc. 2022 ONCA 451 at para. 30.
[9] Other recent Ontario decisions have applied Waksdale by holding that where a ‘for cause’ provision violates the ESA, all termination clauses in the employment contract are void and unenforceable, thereby entitling the employee to full common law notice, see: Sewell v. Provincial Fruit Co. Limited, 2020 ONSC 4406 at paras. 19-20; Tarras v. The Municipal Infrastructure Group Ltd., 2022 ONSC 4522 at paras. 18-34; Perretta v. Rand A Technology Corporation, 2021 ONSC 2111 at paras 43-58; and Ojo v. Crystal Claire Cosmetics Inc., 2021 ONSC 1428 at paras. 11-25.
[10] The Respondent employer asserts that there is no intent in the employment agreement to contract out of the company’s obligations under the ESA. I can not accept that submission. A “for cause” termination provision necessarily captures conduct that is not sufficiently serious to satisfy the ESA criteria for absolving the employer of the obligation to provide the statutorily required notice or payment in lieu of notice, (“…wilful misconduct, disobedience or wilful neglect of duty…”). This was decided in Waksdale and re-iterated recently in Rahman, both decisions of the Court of Appeal which are binding on this court in the present case.
[11] Moreover, the employment agreement in the present case provides: “Cause includes, but is not limited to, acts of theft, fraud, insubordination, conflict of interest and documented unsatisfactory performance, as well as any violation of schedules A,B&C to this agreement.” I observe that documented unsatisfactory performance will not normally amount to cause for summary dismissal. Insubordination may not amount to cause, depending on the circumstances, and “any violation of the schedules” to the employment agreement (e.g., the non-solicitation provisions) are unlikely to amount to cause. And a fortiori, they do not amount to wilful misconduct, disobedience or wilful neglect of duty. Undoubtedly, the employer’s termination for cause provision in this case purports to create a much broader exemption from the obligation to provide notice and severance pay than is permitted by the ESA.
[12] I find that the employment contract is void and unenforceable, as being inconsistent with the requirements of the ESA as discussed above. Accordingly, the termination clause in the employment contract cannot be relied on by the Respondent employer and the Applicant is entitled to full common law notice of termination.
Common Law Notice
[13] It is well settled that in order to calculate the appropriate period of reasonable notice, courts must begin by considering the factors set out in the case of Bardal v. The Globe and Mail Ltd., 1960 CanLII 294 (ONSC), (“the Bardal factors”) at p. 45, which includes consideration of the character of the employment, the length of service of the employee, the age of the employee, and the availability of similar employment, having regard to the experience, training, and qualifications of the employee. These factors must be balanced and the length of notice is ultimately a question of fact, to be determined on a case by case basis.
[14] As noted, at the time of his termination, the Applicant was 61 years of age and had been employed by the Respondent for approximately 3.5 years. He was earning the sum of $71,000 annually, plus benefits. He worked as a senior draftsman, specifically as a mechanical designer, which the parties agree was a highly specialized senior technical position in the fibre optics industry. With respect to education, the Applicant has only completed Grade 8 and obtained a crafting certificate from a technical college. I see no reason to not accept the Applicant’s evidence on cross examination, which was that he faced an uncertain job market in the aftermath of the COVID-19 pandemic and that he faced stiff competition from other candidates for the positions he applied for. He also found that his age was an obstacle for him and was the subject of discussion at some of his interviews.
[15] The Applicant is not bilingual, which can restrict employment opportunities in the Ottawa area. His spouse is employed in this area and relocation is not a preferred option. As there is an issue concerning an alleged failure to mitigate, discussed below, I would note that the employer seems to have done nothing to assist the Applicant in transitioning to new employment. In particular, he was terminated summarily and escorted off the premises in front of other employees. This did not allow the Applicant an opportunity two preplan his job search or to investigate alternative employment in advance of termination. The employer has not provided a letter of reference nor was any assistance offered by way of career transition counseling. The employer has not offered to waive the non-solicitation provision in the employment agreement.
[16] The Applicant's position is that he is entitled to reasonable notice of termination of “at least eight months”, less the amount paid to him on termination ($5,506.87). On the other hand, the employer contends that the common law notice period, if applicable, should be found to be 3-4 months in these circumstances. The parties referred the court to a considerable number of cases. Focusing in on cases in which the employee was age 55 or older with 5 or less years of employment, in technical jobs involving non-cause terminations, courts tended to set 6 months or more as the notice period. In my view, applying the Bardal factors and assessing the Applicant’s situation in all these circumstances, readily justify the imposition of a 6 month notice period. From this would be deducted the payment made to him by the Respondent at the time of termination. The notice calculation needs to include an amount for benefits over the notice period and I accept the Applicant’s estimate of the value of benefits as 10% of salary, as being a standard valuation and there being no alternative figure advanced by the Respondent.
[17] The Applicant earned $528 performing golf course maintenance work, which will not be deducted from the payments in lieu of notice, see Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402 et seq.
The Applicant is Making Reasonable Efforts to Mitigate
[18] The case law is settled that an employer who alleges that a former employee has failed to mitigate his damages has the burden of proof to establish such failure. The employee’s efforts to find new employment need to be reasonable but a standard of perfection is not required. In the present case, the Applicant had detailed his efforts to distribute his resume to some 30 relevant employers in the Ottawa area and his utilization of the on-line job search platform known as ‘Indeed’, as well as his attempts to network with contacts in his field of business. He has attended five employment interviews but received no job offers to date. The employer’s counsel cross examined the Applicant on his affidavit concerning his job search efforts. The employer filed an affidavit from its law clerk identifying some job postings which the law clerk suggested could be job possibilities for the Applicant and it was open to Respondent’s counsel to question the Applicant about these postings.
[19] However, subsequent to the cross-examination, the Respondent served two further affidavits: one from the Applicant’s former manager and a second affidavit from the law clerk. Applicant’s counsel properly objected to these further affidavits on the basis of Rule 39.02(2) which precludes the filing of further affidavits after a party has cross-examined the opposite party. In argument, the Respondent’s counsel sought the court’s leave to admit these two late affidavits and Applicant’s counsel opposed this.
[20] The apparent purpose of the two late filed affidavits was to put before the court more information about job postings that the Applicant could have pursued. This should have been done prior to cross-examining the Applicant when he could have addressed (1) whether some or any of the job postings were appropriate for his experience and skill set and (2) whether he did or did not apply to these positions with the results of his efforts.
[21] I appreciate that prejudice to the Applicant can be mitigated by allowing him to file responding affidavits and by allowing cross-examinations on the additional affidavits. This proceeding, however, was designed as a summary application designed to facilitate a timely and inexpensive adjudication of the issues. I exercise my discretion to strike the affidavit filed by the Applicant’s former manager. With regard to the second affidavit filed by the law clerk, I would allow it to be filed because it identifies relevant employment documentation that the Applicant would have been aware of and which was ultimately of assistance to the court. However, I do not admit paragraph 4 of this affidavit (including Ex: “E”), which consists of more job postings.
[22] Nowhere in the record is there admissible opinion evidence to suggest that the Applicant is not conducting a reasonable search or that any of the job postings the Respondent has placed before the court was necessarily suitable for the Applicant or would likely have resulted in a successful employment application on his part. On the other hand, the record does make clear, as noted previously, that the Respondent has been of no assistance to the Applicant in his re-employment efforts.
[23] I find that the Respondent has not proven that the Applicant has failed to mitigate his damages.
Disposition
[24] The Applicant is awarded damages equivalent to pay in lieu of notice for a period of 6 months plus the value of benefits for that period (at 10%), less payments made by the Respondent at the time of termination (which was $5,506.87). I calculate this amount to be $35,743.13. I invite counsel to review this calculation ($37,500 + $3750 - $5,506.87) and attempt to agree on any necessary revisions. In the event of disagreement, I may be spoken to in the context of settling the order.
[25] If the Applicant is seeking costs of the application, he is to provide the court with a concise written submission, including a bill of costs and copies of any offers to settle within two weeks of the release of these reasons and the Respondent may respond within two weeks of being served with the Applicant’s submission.
Justice Charles T. Hackland
Date: November 3, 2022
COURT FILE NO.: CV-22-89356
DATE: November 3, 2022
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: Paul Summers, Applicant
AND
Oz Optics Limited, Respondent
COUNSEL: Kyle Van Schie, counsel for the Applicant Justin A. Villeneuve, counsel for the Respondent
REASONS FOR JUDGEMENT ON AN APPLICATION
Justice Charles T. Hackland
Released: November 3, 2022