Aug 4, 2020

COURT OF APPEAL SUMMARIES (July 27-31, 2020)

Manthadi v. ASCO Manufacturing, 2020 ONCA 485 (CanLII)

[Doherty, Juriansz and Paciocco JJ.A.]

Counsel:

John S. Contini, for the appellant

Jonathan Pinkus, for the respondent

Keywords: Contracts, Employment, Wrongful Dismissal, Successor Employers, Civil Procedure, Simplified Procedure, Summary Judgment, Employment Standards Act, 2000, S.O. 2000, c. 41, s. 9(1) Rules of Civil Procedure, Rule 76, Bardal v. The Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.), Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, rev’d on other grounds, 2014 SCC 7, Singh v. Concept Plastics Limited, 2016 ONCA 815, Hryniak v. Mauldin, 2014 SCC 7, Howard v. Benson Group Inc. (The Benson Group Inc.), 2016 ONCA 256, leave to appeal refused, [2016] S.C.C.A. No. 240, Ceccol v. Ontario Gymnastic Federation (2001), 55 O.R. (3d) 614 (C.A.), Addison v. M. Loeb Ltd. (1986), 25 D.L.R. (4th) 151 (Ont. C.A.), Sorel v. Tomenson Saunders Whitehead Ltd. (1987), 39 D.L.R. (4th) 460 (B.C.C.A.), Debenham v. CSI-Maximus (2003), 26 C.C.E.L. (3d) 32 (Ont. C.A.), Minott v. O’Shanter Development Co. (1999), 168 D.L.R. (4th) 270 (Ont. C.A.), Love v. Acuity Investment Management Inc., 2011 ONCA 130, leave to appeal refused, [2011] S.C.C.A. No. 170,

Facts:

The respondent was initially employed on February 7, 1981, by one of the third parties to this action, 63732 Ontario Limited (“637”). On or about November 2, 2017, the appellant purchased the assets of 637 along with the business name “ASCO”. The respondent worked for ASCO for approximately one month when she was placed on layoff on December 13, 2017, and never recalled. She sued ASCO for wrongful dismissal under the simplified procedure, and ASCO brought a third party claim against 637.

In the Agreement of Purchase and Sale (APS) between the appellant and 637, the appellant obtained a warranty from 637 stating, among other things, that 637 had provided notice of termination and paid severance to all its employees. 637 also agreed to indemnify the appellant against all claims arising from a breach of its warranties.

The respondent’s evidence was that 637 presented her with a Settlement and Release Agreement (SRA), and advised her that the business was being sold and she would be offered continued employment with the appellant. In the Settlement and Release Agreement, the respondent acknowledged receiving written notice her employment would terminate on November 24, 2017, and that she would be paid $5,900 “representing 8 weeks gross compensation in full satisfaction of all claims … including all severance pay, termination pay or other compensation howsoever arising”. She released 637 from all liability “in connection with the Employee’s employment with 637, including without limitation the cessation of such employment.”

The respondent was one of twenty of 637’s employees who were employed by the appellant. The terms of her employment with the appellant and the capacity in which she was employed by the appellant are disputed. The appellant’s position was that it hired the respondent, along with nineteen other 637 employees for general labour work to pack and unpack the purchased assets for the move to the appellant’s place of business. The appellant also says it “did not assume the continuity of 637’s employees” or “recognize 637’s employees’ prior years of service rendered with 637.” The respondent said she was offered and accepted employment by the appellant on an indefinite basis. She stated she understood that the appellant would recognize her years of service with 637 and that she continued to work as a welder without interruption. However, she agreed that she assisted the appellant with moving the purchased assets to a new location from December 4, 2017, onward until she was laid off.

On these facts, the motion judge granted the respondent’s motion for summary judgment. She held that the respondent “had been continually employed from 1981 to 2017, a period of 36 years”, concluded that the proper notice period was 20 months, and awarded the respondent $66,391.40 for damages for wrongful dismissal plus $11,958.96 for costs.

Issues:

1. Was summary judgment appropriate?

2. Did the motion judge err in holding that the respondent was entitled to damages in lieu of reasonable notice of termination?

3. Did the motion judge err in assessing the quantum of damages in lieu of reasonable notice?

Holding:

Appeal allowed.

Reasoning:

1. No. In Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, rev’d on other grounds, 2014 SCC 7, a five-judge panel of the Court indicated, while a motion for summary judgment could be appropriate in some Rule 76 proceedings, such cases would be exceptional. This was for two reasons. First, it will often be more efficient to simply proceed to a summary trial as contemplated by the Rules. The simplified procedure rules are designed to get the parties to trial with a minimum of delay and costs. One of the key objectives of the simplified procedure rules is to limit the extent of pretrial proceedings. Discovery is restricted and cross-examination on affidavits and examinations of witnesses on motions are not allowed. The summary trial procedure is designed to reduce the length of the trial. A judge faced with a contested motion for summary judgment in a simplified procedure action will need to assess whether entertaining the motion is consistent with the efficiency rationale reflected in the simplified procedures. While the Supreme Court’s foundational summary judgment decision in Hryniak v. Mauldin, 2014 SCC 7, did not specifically address how summary judgment applies in a simplified procedure case, the Supreme Court did affirm that the motion judge must assess, among other things, “the relative efficiencies of proceeding by way of summary judgment, as opposed to trial” and the impact of summary judgment on the litigation as a whole when determining whether it is in the interests of justice to exercise their fact-finding powers and grant summary judgment:

Second, the simplified procedure rules, which are designed to allow the matter to be determined in an expedited fashion, also constrain the parties’ ability to marshal evidence on a summary judgment motion and meet their obligation to put their best foot forward. In this case, the appellant submitted it was hampered because it could not cross-examine the respondent on her affidavit supporting the motion and did not have the evidence of the third party, 637. The respondent countered with the argument that the appellant could have examined the respondent and the third parties for discovery (though the parties had initially agreed to proceed without discoveries). These submissions illustrated that summary judgment motions should be discouraged where they would simply require the parties to prepare for and deal with additional procedures, expending resources and time that would have enabled them to proceed to a summary trial. As the Court observed in Combined Air, “the inappropriate use of Rule 20 has the perverse effect of creating delays and wasting costs associated with preparing for, arguing and deciding a motion for summary judgment, only to see the matter sent on for trial.” The risk of this perverse consequence is greater in simplified procedure cases. The motion judge in this case did find that the motion for summary judgment was “the most proportionate, most expeditious, and least expensive method of adjudication of the issues”. But apart from expressing that conclusion, the bulk of her analysis was directed to her ability to decide the issues. She held that she was able to decide the issues because she took the view that the matters in dispute were not material. However, the factual disputes that the motion judge could not and did not resolve on the record before her were genuine issues requiring a trial. This was a case in which the parties had agreed to proceed without any discoveries but where cross-examination on the general assertions in both parties’ affidavits was necessary to resolve the competing evidence. Allowing the matter to proceed to a summary trial would have ensured a fair and just determination on the merits while also disposing of the third party claim.

2. Yes. This was an issue requiring a trial. While the common law implies a term in contracts of indefinite employment requiring an employer to provide reasonable notice upon terminating an employee without cause, there is no such implied term in fixed term employment contracts. In this case, the motion judge did not resolve the dispute about the basis on which the appellant hired the respondent. The appellant’s argument that it hired the respondent on a temporary basis for the specific task of moving the equipment amounted to a claim she was a fixed term employee, which, if accepted at trial, could support finding she was not entitled to notice of termination from the appellant at common law.

Fixed term employment may be defined not only by a definite period of time, but also by the duration of a specific task, or by reference to the happening of a specified event. A fixed term employee who is terminated before the end of the term is entitled to payment of their wages to the end of the term, absent agreement otherwise. An employer is not required to provide notice of termination at common law when the term expires, since the employment agreement simply terminates in accordance with the contract. On the other hand, if it is found that appellant hired the respondent on an indefinite basis, she would be entitled to reasonable notice and it would be necessary to assess the period of notice the appellant was required to provide. The motion judge proceeded on the view that the common law supported the same “concept of continuous employment” as did s. 9(1) of the ESA. This explains why she found it unnecessary to resolve the disputes between the parties. The fact that the respondent, an employee of the vendor of a business, was employed by the purchaser of the business was sufficient to establish she was continuously employed and entitled to reasonable notice from the appellant. The motion judge reasoned she had all the facts necessary to find the notice period. A sharp distinction must be drawn between termination of employment by a successor employer under the ESA and under the common law. While the ESA is clear that the employment of employees of the vendor of a business who are employed by the purchaser is deemed not to be terminated for the purposes of the ESA, the common law is equally clear that such employees are terminated (by constructive dismissal) when their employer sells the business and there is a change in the identity of the employer. At common law, since a contract of personal services cannot be assigned to a new employer without the consent of the parties, the sale of the business, if it results in the change of the legal identity of the employer, constitutes a constructive termination of the employment. If the employee is offered and accepts employment by his new employer, a new contract of employment is entered into. In this case, no matter what is made of the SRA, the respondent’s employment by 637 was terminated when 637 sold its assets and business name to the appellant. Accordingly, it was necessary to make findings about the nature of the new employment agreement between the respondent and the appellant.

Once the employee accepts employment with the new employer, thereby establishing a new contract, he will probably "mitigate himself right out of his cause of action" against his former employer. If he fails to accept the new job and it is in all respects fundamentally the same as his old one, he is likely precluded by the doctrine of mitigation from recovering any loss sustained on the constructive termination on the basis that such loss could reasonably have been avoided. The unfortunate employee is caught in a bind and will inevitably suffer at least the loss of his perhaps lengthy service with the former employer. If, on the other hand, the new employer declines to employ the individual, the termination becomes express rather than constructive and the former employer will remain liable for any properly recoverable damage sustained by the employee. Thus, long-term employees, who are employed by the purchaser of their employer’s business, have little prospect of obtaining damages for the termination of their employment. Damages aside, people need jobs. Employees terminated by the sale of a business often have no realistic option other than to accept the offer of a new contract of employment with the purchaser if such is offered. If they are subsequently terminated by the purchaser, the new start date of their term of service weighs in favour of a shorter notice period than had the business not been sold. Addison resolves this predicament by giving “some recognition” to the period of employment with the predecessor employer when determining the length of the notice period unless there is “an express understanding to the contrary”. It does so by attaching appropriate weight to the employee’s “experience”, one of the factors in the generally accepted formulation for the determination of reasonable notice.

Addison remains the law in Ontario. In Ontario, reasonable notice is determined by applying the usual Bardal factors considering all the circumstances of the particular case and appropriately weighing the experience a long-time employee brings to the purchaser. The application of the Bardal factors is well able to deal with a successor employer situation fairly. The length of service factor should not dominate the application of the Bardal factors. The so-called “rule of thumb” by which the starting point in determining reasonable notice would be to allow one month of notice for each year of service and then make adjustments for the particular circumstances of the case was not warranted in principle nor supported by authority. The rule of thumb approach “risks overemphasizing one of the Bardal factors, ‘length of service’, at the expense of the others” and it gives “unnecessary prominence to length of service.”

At trial, the burden will be on the appellant to establish “unambiguously” that the respondent was a fixed term employee, engaged as a general labourer for the specific task of moving the purchased equipment. If the appellant fails to prove this, it will bear the burden of displacing the presumption that the respondent’s prior service with 637 should be recognized in the assessment of reasonable notice. It would be the task of the trial judge to assess the reasonable notice required on a consideration of all the particular circumstances, attaching sufficient weight to the respondent’s prior experience, to arrive at a remedy that is fair to both parties.

3. Yes. The motion judge erred in finding that the SRA was not relevant. While the SRA was redundant in terminating the respondent’s employment with 637 (since the common law implied termination on the sale of the business), and the SRA did not preclude a claim by the respondent against the appellant (which was not a party to the SRA), the SRA was relevant in other ways. The payment made to the respondent under the SRA was relevant to determining to the length of notice period assessed against the appellant. The SRA was also part of the factual matrix and relevant to the respondent’s understanding of how she would be treated on the sale of the business. The fact that the amount of the payment under the SRA was less than the notice a long-term employee might have expected could support the inference that the respondent understood she would be employed by the appellant on an indefinite basis, and that she would successfully mitigate all of the damages from her termination by 637.