February 24, 2017
In a recent case, a Judge of the Ontario Superior Court of Justice outlined the appropriate procedure to be used where summary judgment is awarded to a Plaintiff seeking a notice period which would not expire until after the summary judgment motion.
The Plaintiff, a 54 year old Project Manager and Senior Water Resources Engineer, was employed for 17 years before being terminated without cause. The issues for the motion, which was heard almost six months after the termination, were whether the termination provision in the Plaintiff’s employment contract was enforceable; the appropriate notice period and the value of the Plaintiff’s employment benefits. The Judge found that the issues were appropriate for a summary judgment motion and ultimately held that the Defendant had repudiated the Employment Agreement. As a consequence, the Judge found that the Plaintiff was entitled to common law notice. However, as the common law notice period awarded of 18 months had not yet been exhausted, a lump sum payment of damages would have the effect of removing the Plaintiff’s obligation to mitigate.
The parties agreed to follow the approach taken in Markoulakis v. SNC-Lavalin Inc., 2015 ONSC 1081 (Ont. S.C.J.), being the Continuing Payment Approach. The Judge therefore ordered that in addition to being subject to a deduction for termination payments made by the Defendant up to the time of the motion, the notice award was also subject to the Plaintiff’s continuing duty to mitigate and a deduction in the monthly payments to be made by the Defendant for any earnings from employment or business. Further, the Judge ordered that if there was any challenge by the Defendant as to the Plaintiff’s mitigation efforts or re-employment earnings, such that it ceased the monthly payments, there should be a procedure determined by the parties to resolve the dispute. The Judge remained seized of any future proceedings in the matter in the event of any future issues.
The method chosen by the parties in this case to address the future notice period was to continue the notice payments, (and presumably benefits), on a monthly basis. This was in the alternative to the Trust Approach, whereby the plaintiff receives a lump sum award but it is impressed with a trust to repay amounts to the Defendant to account for any future mitigation (as in Correa v. Dow Jones Markets Canada Inc. (1997), 35 O.R. (3d) 126 (O.C.J.) and Cronk v. Canadian General Insurance Co. (1995), 25 O.R. (3d) 505 (Ont.C.A.)), the Partial Summary Judgment Approach, whereby partial judgment is awarded for the portion of the notice period up to the time of the motion then the Plaintiff returns to court at the end of the notice period to determine the balance owing, less mitigation, or the Contingency Approach, whereby the Plaintiff’s common law notice period is discounted to take into account the likelihood of future mitigation.
It appears however, that the parties did not make any submissions regarding the specifics of the process, which resulted in the Judge allowing for the potential unilateral cessation of payments by the Defendant in the event of a dispute relating to mitigation or calculations and further, the Judge remaining seized to address ongoing disputes, rather than an arbitrator being appointed or some other mechanism to deal with disputed matters on a more expeditious basis than the Court process.
It is noteworthy that the Judge’s procedural ruling allowing the potential for the unilateral suspension of payments is inconsistent both with the Markoulakis decision and with the 2009 Report of the Ontario Bar Association Task Force on Wrongful Dismissal which, while recommending the Continuing Payment Approach taken in this case, also provided that the Defendant employer could not unilaterally suspend payments prior to returning to the Court to seek an amended Order.
It remains to be seen whether the Continuing Payment Approach outlined in this case becomes the universal standard for summary judgment motions heard prior to the expiry of the notice period and whether this Approach will have a material impact upon the pre-litigation negotiations between an employer and a terminated employee who desires a free and clear lump sum payment for RRSP tax sheltering purposes, or otherwise.
Holmes v. Hatch Ltd., 2017 ONSC 379 (Ont. S.C.J.)