In August, Justice Belobaba handed down his decision in Johar v. Best Buy Canada Ltd., 2016 ONSC 5287. [http://www.canlii.org/en/on/onsc/doc/2016/2016onsc5287/2016onsc5287.html]. This judgment serves as a stark reminder to employers: if you assert just cause for terminating an employee when no cause exists, you may ultimately end up on the hook for a longer notice period.
The plaintiff, Raj Johar, had been working as a repair technician in Best Buy’s Distribution Centre for ten years when he was fired “for cause” in December 2014. The employer claimed just cause for termination on the basis that Johar was purchasing large volumes of cell phones from the company’s auction website, which the employer suspected he was reselling for profit. Upon investigation, the employer also found that the defendant had placed three ads in a community newspaper that offered in-home electronic repair services.
Mr. Johar moved for summary judgment on his claim for wrongful dismissal. The facts were set out in two evidentiary affidavits filed by the parties. The plaintiff cross-examined on the defendant’s affidavit but the defendant chose not to cross-examine the plaintiff.
Based on this evidence, Justice Belobaba found that the employer failed to establish either a conflict of interest or dishonesty on the evidence before him and, as such, the plaintiff was wrongfully dismissed. He described firing or terminating an employee for cause as the “capital punishment” of employment law, and ultimately awarded Johar a longer notice period in part because he had been terminated for cause. Justice Belobaba found that the plaintiff’s age and the fact that he was dismissed or cause and without a letter of reference justified a notice period “at the outer end” of what is reasonable to “reflect the additional challenge of finding replacement employment.” The plaintiff was awarded 11 months of notice.
This case also serves as a reminder to plaintiff’s counsel that, after the Supreme Court’s decision in Hryniak v. Mauldin [link to previous blog posts about this case], summary judgment or summary adjudication can be a successful way of resolving a wrongful dismissal claim and may be “ a proportionate, more expeditious and less expensive means to achieve a just result.”
A recent decision of the Ontario Superior Court has indicated that employers may in breach of their contractual duty of good faith if they fail to provide employees with due process rights in workplace investigations.
The recent decision in Joshi v National Bank of Canada, 2016 ONSC 3510 Justice Diamond refused to strike out portions of a statement of claim that alleged, among other things, that the National Bank of Canada breached its duty of good faith to Mr. Joshi because it did not notify him of any investigation into any allegation or any kind of misconduct while he was an employee.
Mr. Joshi had voluntarily resigned from the National Bank of Canada. In fact, Mr. Joshi only found out about the allegations of misconduct after he commenced employment with the Bank of Montreal and discovered that the National Bank of Canada had added his name to a crime prevention database intended for banks to report individuals found guilty of serious banking crimes. In addition, the National Bank of Canada had made representations to other banks, including the Bank of Montreal, about the allegations against Mr. Joshi. As a result of these acts, Mr. Joshi alleged that his subsequent employment with the Bank of Montreal was terminated early.
In dismissing the National Bank of Canada’s motion to strike in respect of Mr. Joshi’s claim of a breach of the duty of good faith, Justice Diamond stated that at a minimum, there exists an implied contractual obligation to afford employees who are the subject of an investigation of misconduct the opportunity to respond or refute the allegations of misconduct. Failing to provide the opportunity to respond “could qualify as a breach of the duty of good faith” (paragraph 27). If the National Bank of Canada had commenced an investigation prior to Mr. Joshi’s resignation, Justice Diamond opined that the facts, as pleaded, could support a claim for the breach of a duty of good faith. Justice Diamond further stated that the National Bank of Canada’s subsequent actions – including adding Mr. Joshi to a crime prevention database and making representations to other banks – “would be premised upon a potential breach of the duty of good faith and carried out in furtherance of that alleged breach” (paragraph 27).
Outside of the statutory context (i.e. the Human Rights Code) it is still unclear to what extent and whether employers will be held to account for their conduct in workplace investigations. Justice Diamond does not conclusively opine on whether the duty of good faith extends to workplace investigations, but he certainly opens the door to this type of claim. The Joshi decision is a good reminder to employers and their counsel that the standards for workplace investigations are still being delineated and best practices should always be employed, which means that the accused should always be notified of the alleged misconduct and should always be given an opportunity to respond to allegations made against them.
While the standard of proof in criminal law is to establish facts beyond a reasonable doubt, civil courts and administrative tribunals generally require that claims be proven on a balance of probabilities. Thanks to a recent decision of the Ontario Court of Appeal, we now know that the standard of proof in police discipline hearings lies somewhere in between.
Subsection 84(1) of the Police Services Act provides that “misconduct” as defined under the Act “is proved on clear and convincing evidence”. The Court of Appeal’s unanimous decision in Jacobs v. Ottawa (Police Service) [link: http://www.canlii.org/en/on/onca/doc/2016/2016onca345/2016onca345.pdf], specifies that “clear and convincing evidence” mandates a standard of proof that lies somewhere between a balance of probabilities and proof beyond a reasonable doubt.
Overturning the lower court’s decision, Justice Hourigan wrote that the Division Court erred in declining to follow the Supreme Court’s decision in Penner v. Niagara (Regional Police Board) [link: https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/12962/index.do] that acknowledged this third standard of proof in police disciplinary hearings. In Penner, the Supreme Court wrote:
“because the PSA requires that misconduct by a police officer be ‘proved on clear and convincing evidence’, it follows that such a conclusion might, depending upon the nature of the factual findings, properly preclude relitigation of the issue of liability in a civil action where the balance of probabilities — a lower standard of proof — would apply. However, this cannot be said in the case of an acquittal. The prosecutor’s failure to prove the charges by “clear and convincing evidence” does not necessarily mean that those same allegations could not be established on a balance of probabilities. Given the different standards of proof, there would have been no reason for a complainant to expect that issue estoppel would apply if the officers were acquitted.” [emphasis added]
Justice Hourigan concluded, “In my view, we are bound by the Supreme Court’s statement in Penner that the standard of proof in PSA hearings is a higher standard of clear and convincing evidence and not a balance of probabilities.”
This higher standard of evidence will likely make it more difficult for prosecutors in police disciplinary hearings to prove that officers have engaged in professional misconduct. However, the precise meaning of “clear and convincing evidence” has yet to be determined. Neither the Court of Appeal nor the Supreme Court has provided any guidance on the content of this third standard of proof. It also remains to be seen whether similar intermediate standards of proof will become more common before other administrative tribunals.
Andrew Wray is a panelist at the Law Society of Upper Canada’s 4th Annual Human Rights Summit on November 30, 2015. Andrew is presenting a paper entitled “Under the Microscope: Judicial Review of Human Rights Decisions”, co-authored with Niiti Simmonds and Dina Awad of Pinto Wray James LLP.
The Ontario Superior Court’s recent decision in Antunes v Limen Structures Ltd is an important caution to employers who embellish the attributes of their company or a particular position when courting future employees. This decision makes clear that the general duty of honesty in contractual performance can impact an employer’s liability for compensation in lieu of reasonable notice upon termination.
The plaintiff, John Antunes started working as a Senior Vice President of Operations/Concrete Forming with the defendant, Limen Structures Ltd (“Limen”), on May 28, 2012. After just over five months, and without prior notice, Mr. Antunes was terminated without cause on November 9, 2012.
Mr. Antunes’ employment agreement provided that he would be compensated with a starting salary of $150,000 per year, which was to increase to $200,000 after his first year of employment. In addition, he was to receive 5% of Limen’s shares, with the potential for another 5% of the shares of Limen’s Residential Division within a year of the commencement of his employment. Lastly, the employment agreement provided for up to 12 months’ pay in lieu of notice for termination.
At the date of his termination, no shares had been issued to Mr. Antunes.
Prior to signing the employment agreement, Mr. Antunes discussed the terms of his employment with Mr. Lima during numerous phone calls and two in-person meetings. During these discussions, Mr. Lima advised Mr. Antunes that the company, in his opinion, was worth $10 million. Mr. Antunes relied on Mr. Lima’s representation, along with the promise of company shares, when he agreed to sign an employment agreement with Limen on May 28, 2012.
At trial, Mr. Antunes testified that shortly after starting at Limen, he realized that the company was not worth $10 million. Limen did not call Mr. Lima, or any other witness at trial. Given that he was as a material witness with direct and relevant knowledge of the value of the company and the negotiation of Mr. Antunes’ employment agreement, Justice Brown drew an adverse inference from Mr. Lima’s failure to testify.
Ultimately, Justice Brown awarded Mr. Antunes 8 months’ reasonable notice. In determining the amount of reasonable notice owing to Mr. Antunes, Justice Brown applied the well-established factors for determining the reasonable notice period as set out Bardal v Globe & Mail Ltd (1960), 23 DLR (2) 140; namely the character of the employment (project manager in construction with supervisory responsibilities), Mr. Antunes’ length of service (5 months and 11 days), his age (50 years old) and the availability of similar employment, having regard to Mr. Antunes’ experience, training and qualifications.
Justice Brown also considered the impact of Mr. Antunes’ allegation of inducement, which she quickly dismissed, and Limen’s bad faith in terminating Mr. Antunes (of which there were ample facts to support). Of particular note, however is her consideration of general duty of honesty in contractual performance.
In relying on the Supreme Court’s recent decision in Bhasin v Hrynew, Justice Brown states that parties must be able to rely on a minimum standard of honesty from their contracting partner in relation to performing the contract as a reassurance that if the contract does not work out, they will have a fair opportunity to protect their interests (Bhasin v Hrynew, 2014 SCC 71 at paragraph 86). Justice Brown finds that Limen failed to act honestly in the performance of its contractual obligations when:
The above misrepresentations, which Mr. Antunes relied on in accepting the offer of employment, were central to Justice Brown’s determination of an eight month reasonable notice period.
Interestingly, Justice Brown determines that Mr. Antunes is entitled to the 8 months’ reasonable notice under his employment agreement as well as at common law. Although she concludes that the contractual entitlement to eight months reasonable is justified on “the plain wording of the contractual provision, [Limen’s] failure to act in good faith vis-à-vis the employment contract and the misrepresentations on which [Mr. Antunes] relied, and on the adverse inference … drawn against [Limen]”(see paragraph 74) she seems to apply the same Bardal analysis as applicable at common law.
In Limen’s case, Mr. Lima’s embellishments cost them 8 months’ salary in addition to $500,000 for Limen’s failure to issue Limen shares to Mr. Antunes as per the terms of the employment agreement. Justice Brown accepted the uncontroverted evidence that Mr. Lima told Mr. Antunes the shares were worth about $500,000 and concluded that Mr. Antunes “is to be put in a position commensurate with his expectations arising from the contract and from Mr. Lima’s representations to him.”
While it is of no surprise that employer conduct at termination can impact the reasonable notice period, this decision serves as a warning to employers who over-sell the benefits of their offer to potential employment candidates. Where such embellishments are relied on in accepting an offer of employment, they may translate into greater employer liability post-termination.