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Family Feud Gets Downright Nasty (and...

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Written by Michael J Weiler, It will come as no surprise that I remain interested in ca...

Article
Business
Employment Law and Human Rights

Written by Michael J WeilerIt will come as no surprise that I remain interested in cases that deal with doing business with family and friends where the relationship breaks down and the parties end up in court. A recent decision of Madame Justice Burke reminds us just how far these disputes can go and how expensive they can be to the losing party.Michael Price (“MP”) was employed in Vancouver for 19 years by a # company (“481”) operating a hair loss clinic and sale of products and services to remediate hair loss. MP was a 20% shareholder. David Robson (“DR”) lived in Ontario and was a 74% shareholder. MP and DR were close friends but had a falling out. MP claimed he was constructively dismissed in June 2013. He sued 481, DR and his family members as well as a second # company, (“857”), which he alleged had improperly taken over the business of 481.The opening comments of Justice Burke set the stage:This high-conflict case arises out of the breakdown of a 20-year friendship and business relationship between Michael Price (“Mr. Price”) and Farrukh David Robson (“Mr. Robson”).[2] In addition to their business and personal relationships, both Mr. Price and Mr. Robson suffer from significant life‑altering illnesses. The emotion engendered as a result of these factors led to a difficult and “hotly disputed” trial; particularly the factual matrix. Both sides accused the other of lies and fabrications. Within this context, the factual reality must be distilled.DR had been very involved in the business of 481 but he was diagnosed with renal failure in the late 1990s and had been on regular dialysis since late 2007. In 2011 the relationship between MP and DR became strained, caused in part by allegations that DR had improperly used 481’s bank account rendering it almost insolvent, and there was a serious problem with the supply of a product. MP decided to sever his relationship with DR and made an offer to purchase DR’s shares and pay a small fee for use of the business name “Micron”. DR viewed the offer to purchase as a “terrible offer” and the accusations began to fly back and forth.On December 27th, 2012 MP was diagnosed with stage four colorectal cancer and began treatment. He had a 12-year-old son who was severely disabled causing his wife to work only part-time. The parties attempted to buy each other out but those discussions and emails became very acrimonious and accusatory. DR’s family became involved. DR implemented a new commission structure and made other changes that reduced MP’s compensation. They reduced and cancelled benefits when MP was most in need.During negotiations MP sent an email to DR in April 2013 stating in part:David,Your offer’s in the garbage where it belongs…..Although I’m not on dialysis life support, stage 4 metastatic cancer is in many ways a more serious life-threatening matter. My oncologist told me to reduce/eliminate my stress. I acknowledge that my disclosure of this to you could easily result in your becoming even more predatorial towards me, and this would tell me that you no longer care whether I live, or whether I die.MP underwent surgery on May 31st, 2013 and remained in hospital until June 8th, 2013. On June 10th, 2013 DR replaced MP with Mr Akhtar as manager of the clinic while MP was absent from work recovering from surgery. MP sued for constructive dismissal as well as a number of other claims. He sued not only 481 but also 857 and the personal defendants:In July 2013, the defendant 8577935 Canada Corporation (“857”) was incorporated. It is alleged that 481 has ceased doing business and its assets have been transferred to 857, a business run by the personal defendants or by some of them. This is alleged to have occurred without proper authority or justification.[10] It is also alleged the defendants discontinued payment of Mr. Price’s salary and benefits (including medical, dental, extended health benefits, and more) at a time when he was most in need. Accordingly, it is alleged the personal and corporate defendants engaged in conduct that amounts to bad faith and unfair dealing; and were deceitful, negligent, oppressive and unduly insensitive in the matter of Mr. Price’s discharge.[11] Mr. Price claims the personal defendants are the alter egos of the corporations and the corporate veil separating the corporations and the personal defendants should be pierced. Essentially, he claims the personal defendants gutted 481 and transferred its business and assets to 857, all in order to deprive him of an ability to recover on any judgment against 481 by hiding its assets in 857.The court found that DR was not a credible witness and preferred the evidence of MP to that of DR.The court held that MP was constructively dismissed. 481 and DR made many serious allegations of cause including misappropriation of funds which were found to be totally without merit:Overall, I conclude as was the case in MacDonald v. Newfoundland (Canada Games Park Commission), [1986] N.J. No. 335 (D.C.), the plethora of allegations against Mr. Price are an attempt to disguise the real reason why Mr. Price was fired. This was likely his discovery of financial improprieties. Mr. Robson sought to grasp at straws to establish some sort of grounds to justify Mr. Price’s dismissal. The evidence simply does not establish any of the accusations.Turning to the question of notice the court concluded that given MP’s age (47), years of service (20) and his senior management position reasonable notice was 20 months with damages calculated on MP’s monthly salary and commissions calculated at $6,480. It rejected the claim that MP had failed to mitigate his damages and awarded $24,145 with respect to expenses associated with mitigation.The court also awarded $50,000 for aggravated damages based in part on the unfounded allegations of dishonesty and the fact that DR knew of the seriousness of MP’s cancer and treatment despite his denials. The $50,000 is a substantial award for MP as it is likely tax-free. The court held however that punitive damages were not warranted although this was a close call. The Court stated:It is not without some hesitation that I do not find that punitive or exemplary damages are appropriate. An employer’s conduct must be extreme in order to attract punitive or exemplary damages: Kelly v. Norsemont Mining Inc., 2013 BCSC 147. Although Mr. Robson acted in a blameworthy manner, I do not classify his conduct as extreme due to the responsive nature of some of Mr. Price’s emails.These awards are very significant but what really caught my attention about this case is the fact that further damages were awarded against the individual defendants.First the court found that it could lift the corporate veil in this case to assess personal liability against DR and his family. 857 was found to have been set up to receive the assets of 481. DR used 481’s bank account as his personal account and as an account for other businesses, “essentially co-mingling funds and assets.” The revenues of 481 as well as its clientele and assets were transferred to 857 with the intention of removing them from MP’s reach which intentions were found to be “wrongful, or even fraudulent and is an additional reason to lift the veil here.” It found that 481, 857 and DR were all liable to pay those damages associated with the wrongful dismissal.MP alleged breach of fiduciary duties and civil conspiracy. The court found that the personal defendants were jointly and severally liable for the tort of civil conspiracy and awarded MP $100,000 in compensatory damages.MP’s claims for relief as a shareholder were dismissed as he had not brought a derivative action nor an oppression claim under the Corporations Act.Finally the court did not make a final order on costs. One would assume MP will seek Special Costs representing full indemnity for his legal fees—given the 31 days of trial one can assume those costs would in the lower to middle 6 figure range.LESSONS LEARNEDMy dad used to say be very careful when you do business with family and friends—at some point the two relationships may come in conflict and both will suffer. In this case MP and DR and their respective families were at one point “close friends”. Yet despite that friendship the bond that kept them together broke apart at a time in each of their lives that they suffered from serious illnesses. This is not the way their relationships, both business and personal, should have ended.

6-Day Trial Results in Damage Award o...

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Written by Michael J Weiler, Jennifer Cottrill worked as a skincare therapist for 11 ye...

Article
Business
Employment Law and Human Rights

Written by Michael J WeilerJennifer Cottrill worked as a skincare therapist for 11 years. She was a single mom who was terminated when she was 32 years old.The Plaintiff signed an employment contract that limited her notice period to that under the Employment Standards Act, namely 8 weeks’ severance.The Defendant argued it had just cause to terminate Ms. Cottrill due to her incompetence. The court held that there was no just cause for termination. The employer unreasonably sought to hold the plaintiff to performance standards it had not previously required. It found the evidence of the employer to be vague allegations that the plaintiff was complacent and had a poor attitude. Among other things there had not been sufficient warnings or an explanation as to why her attitude was deficient.The employer argued that it had given 3 months’ notice but the court rejected that argument and held that notice was deficient as it was not unequivocal. However the court held that her damages were, in any event, limited to the employment contract, namely 8 weeks’ severance pay under the E. S. Act. The court rejected the plaintiff’s argument that the contract was signed after the plaintiff had started work and therefore failed for lack of legal consideration. The case provides a thorough examination of the law in this area of employment contracts.Finally the court awarded $15,000 for aggravated damages. The court found that the employer had terminated the employee unfairly. She had been given a warning letter and had been promised that if her employment improved in 2 of the 3 months she could retain her position. However, having done just that she was still terminated. The employer had breached its duty of good faith in the manner in which they dismissed the plaintiff. The termination and actions of the employer had a profound impact on the employee. The court held:[137] […] I am satisfied that the lack of good faith and unfairness exhibited by the company in the manner of dismissal caused emotional distress to the plaintiff that was well beyond the distress from the fact of the dismissal.Finally the court rejected the claim for punitive damages. It held that the conduct of the employer was not “harsh, vindictive, reprehensible and malicious”. Further there was no additional misconduct by the employer distinct from the misconduct that gave rise to the aggravated damage award.Although the plaintiff was partially successful one has to wonder if it was all worthwhile given the costs and stress of a 6-day trial and the public exposure of the workplace issues that led to her dismissal. At the same time the employer might have considered simply terminating her without cause in a fair manner and simply relied on the written contract.June 9, 2017Cottrill v. Utopia Day Spas and Salons Ltd. 2017 BCSC 704

Troubling Decision of the Court of Ap...

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Written by Michael J Weiler, Cary Feldstein was a talented software engineer who was...

Article
Business
Employment Law and Human Rights

Written by Michael J WeilerCary Feldstein was a talented software engineer who was given working notice of termination in 2012 by his then-employer MacDonald, Dettwiler (“MDA”). He had lots of opportunities to find alternate work as the judge found it was a “hot market” for software engineers although he only received two interviews despite sending out resumes to 20 prospective employers. Mr. Feldstein suffered from cystic fibrosis (“CF”), a chronic degenerative disease that primarily affects the lungs. Mr. Feldstein applied for and obtained employment with 364 Northern Development Corp (“364”). Mr. Feldstein claimed that he told the Chief Information Officer (“CIO”) in a private conversation during his second interview that he had CF and he was therefore concerned about LTD coverage. The CIO denied that Mr. Feldstein disclosed his CF and stated that Mr. Feldstein did not ask for a summary of the plan. Mr. Feldstein asked for a copy of the summary of the plan which subsequently was provided by the CIO.Mr. Feldstein alleged that the negligent representation was made in a subsequent telephone call on April 13 2012. Mr. Feldstein alleged that he asked the CIO about the restriction of LTD to $1,000 per month related to “Proof of Good Health”. He claimed he was told by the CIO that it related to the 3-month waiting period without illness which, if achieved, would have satisfied the “proof of good health” requirement. Mr. Feldstein said he took that statement to mean if he worked 3 months without illness he would then qualify for full LTD benefits of $4,677 per month and not be restricted to the $1,000. Of critical importance was the evidence of the CIO who denied making the impugned statement, denied he spoke about LTD with Mr. Feldstein and stated he never made any statement about “proof of good health”.Mr. Feldstein signed a written employment agreement that contained a clause stating he could participate in rights and benefits under the various programs including disability. It did NOT contain the caveat found in many precedents that all rights and obligations are governed by the terms of the policies. The employment agreement also contained an “Entire Agreement” clause that stated the contract superseded all prior communications, representations and understandings “with respect to the subject matter hereof”. Mr. Feldstein obtained legal advice before signing the employment agreement. He commenced work with 364 on April 30th, 2012.In May 2013 Mr. Feldstein suffered a severe decline in lung functioning related to his CS. He was given three months' working notice of termination in November 2013. He applied for and received LTD benefits in February 2014. However much to Mr. Feldstein’s surprise he was limited to $1,000 per month because he had not completed a medical questionnaire when he initially enrolled in the benefit plan. The questionnaire was required to establish “proof of good health”. In late November 2014 he underwent a successful double lung transplant and he was told by his doctors that he could seek alternate employment at the end of 2015.TRIAL JUDGEMr. Feldstein commenced an action for negligent misrepresentation. The trial judge accepted the evidence of Mr. Feldstein over that of the CIO, found that the impugned statement had been made, held that the impugned statement meant that Mr. Feldstein would satisfy the “proof of good health” condition and therefore he would be entitled to full LTD coverage if he worked 3 months without illness. She awarded damages based on 40 months of lost LTD benefits of $83,000 (based on the $3,083.43 he would have received under MDA’s benefits plan minus the monthly amount he was receiving in CPP benefits). She also awarded a further $10,000 for aggravated damages based on the mental distress suffered by Mr. Feldstein. She held that the contract did not preclude the tort claim for negligent misrepresentation. It appears that she did not consider the specific terms of the Entire Agreement clause. She also held that damages were reasonably foreseeable notwithstanding the 2-year delay.COURT OF APPEALThe Court of Appeal upheld the trial judge’s decision on the finding of negligent misrepresentation and the award of $83,000 damages. However it overturned the award for $10,000 for aggravated damages. As success was split it held each party must bear its own costs of the appeal.(a) Negligent MisrepresentationOn the key issue of negligent misrepresentation, both the BCCA at paragraph [29] and the trial judge at paragraph [65] analyzed and applied the criteria outlined by the Supreme Court of Canada in Queen v Cognos [1993] 1 S.C.R. 87. The criteria are:1) Is there a duty of care based on a “special relationship” between the representor and representee?2) Is the representation in question inaccurate, untrue, or misleading?3) Did the representor act negligently in making that representation?4) Did the representee rely, in a reasonable manner, on that representation?5) Did the representee incur damages as a result of that reliance?In her decision the trial judge followed by saying:[66] As the misrepresentation resulted in the parties entering into a contract, I must also consider whether any express terms of that contract operate so as to prevent the plaintiff from pursuing an action in tort: Cognos, at para. 39.It is important for employers to read the trial and court of appeal decisions in their entirety to get a full appreciation of the risks and the impact on your business practices in hiring employees especially those with disabilities. I will only summarize the key findings.The BCCA upheld the trial judge’s finding that there clearly was a duty of care where “an employer [is] making representations to a prospective employee in the course of pre‑employment discussions”.The BCCA upheld the trial judge’s finding that the impugned statement was inaccurate, untrue, or misleading even though it was merely implied. The trial judge held:[73] As held by Iacobucci J. in Cognos, an implied representation may properly give rise to an action for negligent misrepresentation. The plaintiff’s claim will not fail merely because it relies on an inference drawn from a representation made by the defendant. Rather, the question is whether a reasonable person in the circumstances of the plaintiff would have drawn that same inference (Cognos, at paras. 74-77). In much the same way, the court in Spinks found that the failure to divulge material information may in certain circumstances be equally as misleading as the provision of misinformation (para. 14).[74] In my view, it is more likely than not that a reasonable person in the circumstances of Mr. Feldstein would have believed, as a result of the impugned statement, that LTD benefits would be available upon completion of three months continuous work at 364, without the need for the completion of a medical questionnaire or exam.[75] I accept Mr. Feldstein’s evidence that Mr. Nizker made the impugned statement in response to the plaintiff’s inquiry about what “Proof of Good Health” meant in the context of the LTD plan. In that circumstance, the most prominent, likely, and reasonable inference to be drawn from the impugned statement is that LTD coverage is contingent merely upon completion of the three-month probationary period. It was misleading and inaccurate to represent the LTD eligibility requirements as was done in the impugned statement, particularly given the omission of additional, more stringent, criteria inconsistent with the thrust of Mr. Nizker’s representation.[76] I, therefore, conclude that the impugned statement was inaccurate, untrue, and misleading.The BCCA rejected 364’s argument that the statement was not inaccurate:[62] I would not give effect to these arguments. The impugned statement by Mr. Nizker was not true and accurate. He was asked what “proof of good health” meant in relation to LTD coverage. He responded that “proof of good health” was synonymous with the three-month waiting period that new employees had to complete before benefits came into effect. That is clearly inaccurate and misleading. “Proof of good health” had nothing to do with the three-month waiting period. It was a specific requirement for obtaining “approval” for full LTD coverage. The fact that Mr. Feldstein became eligible for some LTD coverage after three months of continuous work does not make the impugned statement true.In respect of the third criteria it held that the CIO’s conduct fell below the requisite standard of care. These findings are particularly important for HR managers to understand in the context of their obligations in the hiring process:[65] Appellate courts must accord great deference to a trial court’s negligence findings, absent an incorrect statement of the applicable legal standard: Housen v. Nikolaisen, 2002 SCC 33 at paras. 29-31. I see no reason to interfere with the judge’s finding on this point. The judge found that Mr. Nizker was aware of Mr. Feldstein’s cystic fibrosis condition. She found that Mr. Feldstein asked Mr. Nizker about employee benefits after the second interview on April 12, 2012, e-mailed Mr. Nizker later that day asking to be provided with a brochure detailing 364’s benefits plan so that he could compare it to his current plan at MDA, and then asked Mr. Nizker about “proof of good health” in relation to LTD coverage during their telephone conversation on April 13. It was open to the trial judge to come to these factual findings on the evidence before her. As I read the judge’s reasons at para. 79, she is referring to the “repeated inquiries” Mr. Feldstein made about employee benefits in general. But even if 364 is correct in its assertion that the trial judge erred in fact by proceeding on the footing that Mr. Feldstein made repeated inquiries in relation to his eligibility for LTD benefits, I would not be inclined to regard the error as “overriding”. Specifically, I am not persuaded that the factual error relied on by 364 could have had a material bearing on the judge’s resolution of this branch of the test.[66] Further, it was not disputed that Mr. Nizker was in charge of 364’s hiring process for software engineers during this time. He was the point of contact for potential employees seeking information about 364’s benefits package. As the trial judge found, Mr. Nizker took no steps to verify the accuracy of the information he provided to Mr. Feldstein regarding the LTD benefits that would be available to him if he accepted 364’s offer of employment, failed to accurately define what “proof of good health” meant in relation to Mr. Feldstein’s inquiry, and failed to mention or provide Mr. Feldstein with the medical questionnaire Sun Life required to approve him for LTD coverage in excess of $1,000 per month. Mr. Nizker’s duty of care with respect to representations made during pre-contractual negotiations included not only a duty to be honest in making those representations, but also to exercise reasonable care in ensuring that the representations made were accurate and not misleading. I think it clear that Mr. Nizker was operating under an honest but mistaken belief as to the circumstances that would trigger Mr. Feldstein’s entitlement to full LTD benefits. The representations Mr. Nizker made to Mr. Feldstein were, as the judge found, inaccurate and misleading. In all the circumstances, it was open to the judge to conclude that Mr. Nizker did not exercise reasonable care when he made the impugned statement. [emphasis added]It is interesting that the courts accepted that the CIO was under an honest but mistaken belief when he made the comments given the fact he denied the specific impugned comments had even been made.The BCCA upheld the trial judge’s decision that Mr. Feldstein reasonably relied on the representations. 364 made what I thought were fairly compelling arguments in this regard including:[67] 364 argues that Mr. Feldstein’s reliance on the impugned statement was not reasonable given that Mr. Nizker made it in response to an imprecise question and in the context of a brief phone call. 364 says that, having regard to the importance of the issue to Mr. Feldstein, it was unreasonable for him to rely on the impugned statement without further clarification or follow-up. 364 also submits that the judge erred in finding that it was reasonable for Mr. Feldstein to believe that Mr. Nizker could provide accurate information about employee benefits given than Mr. Nizker was the Chief Information Officer of a tech company who had no specialized knowledge of insurance benefits. Further, 364 says that Mr. Nizker did not have a financial interest in hiring Mr. Feldstein and did not make the impugned statement in the course of conducting 364’s business because 364 is not an insurance provider, nor does it sell disability insurance.However, the BCCA said that there was no error in the trial judge’s analysis or findings of fact.Finally the BCCA upheld the trial judge’s finding that Mr. Feldstein’s reliance resulted in damages that were foreseeable. For example, it held it was open to the trial judge to find that Mr. Feldstein would have obtained employment as a software engineer with benefits similar or better than he enjoyed at MDA especially given her finding that this was a “hot market” and Mr. Feldstein was an excellent and qualified employee. This is somewhat curious since Mr. Feldstein was only offered two interviews despite sending out resumes to 20 employers. Further the fact that the damages occurred two years after the misrepresentation was made did not mean the damages were not reasonably foreseeable. How long would a delay have to be to preclude a finding of liability? The BCCA leaves that question open noting that negligent misrepresentation claims in the context of pre-contractual discussions may involve “long-term detrimental reliance” and although “[t]ime may well be a factor when assessing reasonable foreseeability […] it is not determinative”. The question was whether 364 should have foreseen a “real risk”, and the BCCA accepted the trial judge’s conclusion that Mr. Nizker should have.The BCCA also upheld the trial judge’s conclusion that the Entire Agreement clause did not preclude the tort action for negligent misrepresentation. It appears from my reading of the trial judge’s decision that she did not consider this clause specifically. The BCCA held that while it is possible for an employer to exclude such liability, the language in 364’s contract did not do so:[57] As this Court noted in Taurus, determining whether parties to a contract have chosen to exclude tort liability through an entire agreement clause “is not easily answered” (at para. 58). The analysis is case-specific and courts have considered a number of factors, including: whether the representation at issue becomes an express term of the contract (Cognos); whether the parties to the contract are commercially sophisticated actors (Taurus); whether the contract is a standard form contract (Zippy Print); whether the defendant drew the plaintiff’s attention to the exclusion clause (Betker v. Williams, [1991] B.C.J. No. 3724 (C.A.)); and whether the misrepresentation was so substantive that it went to the plaintiff’s basic purpose for entering the contract (Betker).[58] The judge, who was clearly alive to the governing principles, found that the entire agreement clause did not exclude tort liability for Mr. Nizker’s misrepresentation because there was no express term in the contract which created a specific duty that was co-extensive with the duty of care created by Mr. Nizker’s misrepresentation. In other words, the subject matter of the impugned statement – how “proof of good health” was related to the eligibility requirements for full LTD coverage – did not become an express term of the contract. Section 4.02 of the contract merely confirmed that Mr. Feldstein would be entitled to participate in any benefits plan that was available to 364’s employees.(b) Aggravated DamagesThe BCCA overturned the award of $10,000 for aggravated damages. It noted the claim here was in tort not contract so the fact that Mr. Feldstein suffered mental distress did not mean he was entitled to aggravated damages:[88] While I have no doubt that Mr. Feldstein suffered mental distress due to the negligent misrepresentation, the judge did not find that any of 364’s representatives acted in a high-handed, dishonest or morally reprehensible way. Assuming, without deciding the issue, that an award of aggravated damages could be made in the context of a negligent misrepresentation case, I am nevertheless of the view that some form of offensive conduct by the defendant is a necessary prerequisite to the granting of such relief. In my respectful view, there is no basis in the factual findings made by the trial judge for an aggravated damages award. Accordingly, I would strike out that part of the award.TAKEAWAYSFor those readers who have made it this far I apologize for the length of this article. But the reasons of both the trial judge and the court of appeal are hard to summarize.This case raises serious issues for employers especially those who do not have expertise in hiring. Of great concern is the fact that the CIO denied the statements were made in the first place. In the absence of a written representation the issue of credibility is key. Here the trial was held over 3 years after the fact. There was nothing in writing that confirmed the statements made. In fact when Mr. Feldstein raised the issue of coverage with the CEO in October 2013 he wrote in an email that “I am worried that I somehow majorly messed up or I misunderstood the details of the plan and I’m ineligible for coverage”. However at trial he testified he meant to write “we somehow majorly messed up..” [emphasis added] His explanation at trial was that he was simply being “polite or diplomatic” as he wished to avoid an accusatory tone in dealing with the CEO. He made no reference to the alleged negligent misrepresentation which was critical to his claim. It is curious to me that Mr. Feldstein’s recollections were accepted over that of the CIO given what I would think is a very heavy onus on him to prove the statements. Further Mr. Feldstein signed a detailed employment contract with the advice of his lawyer yet he did not ask for clarification of what the requirements for LTD were. The CIO operated in the mind of the courts in an honest but mistaken belief so why was his evidence rejected? One can appreciate the dilemma employers face when employees make these claims many years after their hiring, especially in light of the Entire Contract clause.Further I simply do not understand the BCCA’s finding that the Entire Agreement clause did not preclude liability here. Granted the benefits clause may have been drafted more tightly (my standard agreement makes it clear that the terms and conditions of the benefits are governed by the policies in place and that the employer is not a self-insurer) but on the whole, it seems to me the parties did address this very claim in the Entire Agreement clause. It speaks of representations yet does not apply to these representations? It might have been interesting to hear what legal advice was given to Mr. Feldstein on this particular point assuming 364 could have successfully argued that privilege was waived.But the biggest concern I have with this decision is the potential liability an employer could have faced based solely on a vague comment in a one on one conversation many years prior. Mr. Feldstein was 37 years old. What if the negligent representation precluded him from full LTD benefits to age 65 and the damages were not capped at 40 months? Further if LTD benefits are paid for by the employee then they are paid tax-free thus potentially increasing damages (this latter point does not appear to have been considered by the court).What to do?First be very careful in what is said and done at the hiring stage. Do not make any representations on benefits and place the onus on the employee to make their own decisions in that regard. Perhaps make notes of these meetings and have two employees attend all interviews. And if in doubt send a self-serving email.Secondly tighten up the contractual language to specifically exclude any claims for negligent misrepresentations.Feldstein v. 364 Northern Development Corporation 2016 BCSC 108; 2017 BCCA 174

Small Claims Jurisdiction Increases

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Written by Michael J Weiler, Small claims jurisdiction increases to $35,000 and smalle...

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Business
Business Litigation & Disputes

Written by Michael J Weiler

Small claims jurisdiction increases to $35,000 and smaller cases move to Civil Resolution Tribunal (CRT)

Important changes to the Small Claims court became effective June 1st, 2017.First the monetary jurisdiction of the Small Claims Court increases from $25,000 to $35,000. This change has been considered for a number of years and the government had originally considered a move to $50,000. Whether further increases to the monetary jurisdiction will be made remains to be seen. While the change seems fairly minor, the fact is employers may well find that they are subject to more litigation in wrongful dismissal and related actions. In many cases employees can claim aggravated or punitive damages related to their dismissal. Those damages will not normally be taxable thus increasing the value of the claim beyond $35,000.At the same time disputes involving up to $5,000 will be now be resolved through the new Civil Resolution Tribunal rather than the Provincial Court. The CRT is an online tribunal that will offer dispute resolution services.If you have any questions regarding these changes please consult the Provincial Court of British Columbia website. http://www.provincialcourt.bc.ca/types-of-cases/small-claims-matters

Big Mac Gets Big Slap by Ontario Cour...

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Written by Michael J Weiler, The Ontario Court of Appeal has upheld a trial judge’s awa...

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Business
Employment Law and Human Rights

Written by Michael J WeilerThe Ontario Court of Appeal has upheld a trial judge’s award of $104,000 based on a notice period of 20 months for a long-serving McDonald’s restaurant manager.Esther Brake worked at various McDonald’s restaurants for more than 25 years. She joined the Defendant employer organization in Ottawa in 1999. She was terminated on August 2nd, 2012. At the time of hiring the employer gave her a letter confirming her service credit which stated, inter alia, that she was “…credited with 7 years of Full Time service as of 1999”.Ms. Brake was, it appears from the record, an excellent employee. However in the last few years of her employment she was given less favourable evaluations. She was transferred to a very poor performing store and then placed on a McDonald’s progressive discipline program known as GAP. The trial judge found that the GAP program was arbitrary and that McDonald’s had unfairly assessed Ms. Brake’s performance. McDonald’s claimed Ms. Brake had failed the GAP program and gave her a choice between a demotion to First Assistant or termination. Her salary would remain the same but her benefits would be “meaningful inferior”. She refused the demotion and sued for constructive dismissal. The trial judge was very critical of McDonald’s application of the GAP program to Ms. Brake. He held that any difficulties in Ms. Brake’s performance did not “amount to anything close to gross or serious incompetence and stressed that, by the end of the GAP program, Ms. Brake had met [McDonald’s] ‘new and improved’ standards” and that “she was trending upward at an extraordinary degree when the decision to demote her was put on the table.”The Court of Appeal upheld the trial judge’s decision that Ms. Brake had been constructively dismissed when McDonald’s offered her a non-supervisory position with inferior benefits. She did not accept the demotion. The case provides a very thorough examination of what constitutes a constructive dismissal and applies the analysis of the Supreme Court of Canada decision in the recent decision in Potter v New Brunswick Legal Aid. The Court of Appeal noted that if the employer was in fact arguing it had cause to dismiss Ms. Brake it did not have cause as the trial judge’s findings of fact were a complete answer to that assertion.The court also considered McDonald’s argument that Ms. Brake failed to mitigate by not accepting the demoted position. She would have had to work under a younger man whom she had trained and found that embarrassing and humiliating. The court found that a reasonable person in Ms. Brake’s position would not have been expected to have accepted the demotion to First Assistant.In terms of what was reasonable notice the court upheld the trial judge’s assessment that 20 months was reasonable. One key factor was Ms. Brake’s length of service. McDonald’s argued that its recognition of her prior service with other McDonald’s restaurants was limited to benefits. The court disagreed noting that although the letter of service credit referenced benefits it also suggested that service was to be recognized for all purposes. Simply put McDonald’s had not clearly limited the recognition of service as it now argued. Yet another example of an employer failing to “say what you mean and mean what you say”.Finally the case provides a lengthy discussion of mitigation. It concluded for example that EI payments are not to be deducted. It also held that income earned during the statutory notice period was not subject to mitigation and therefore any income she earned in that period was not to be deducted.What is most important about the decision on mitigation is how the court treated income earned by Ms. Brake during the 20 month notice period but outside the statutory notice period. The majority of the Court of Appeal held that since Ms. Brake had worked at Sobey’s to supplement her income while working at McDonald’s any income earned was not to be deducted. The majority left open for another day the question as to when “supplementary employment income rises to a level that it (or a portion of it) should be considered as a substitute for the amounts that would have been earned under the original contract” of employment and therefore should be deducted.What is very interesting is the concurring decision of Feldman J.A. He held that the income Ms. Brake earned in the cashier position at Home Depot was not to be deducted. He stated:It follows, in my view, that where a wrongfully dismissed employee is effectively forced to accept a much inferior position because no comparable position is available, the amount she earns in that position is not mitigation of damages and need not be deducted from the amount the employer must pay.This finding seems to me to be questionable and appears to run contrary to other authority. In my view while an employee may not have to accept the inferior position, when she does the earnings should be deducted.The Appeal was dismissed with costs assessed at $19,500 which might well have been less than her actual legal fees to defend the appeal.Brake v PJ-M2R Restaurant Inc., 2017 ONCA 402 (CannLII)

NDP + Greens = Labour Code Changes

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Written by Michael J Weiler, British Columbia is known for its wild swings in labour le...

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Business
Employment Law and Human Rights

Written by Michael J WeilerBritish Columbia is known for its wild swings in labour legislation. In 1992 when the NDP formed government 40+ changes were introduced to the Labour Relations Code (“Code”) most of which were in favour of unions. Not surprisingly union density rose dramatically as the balance of power was heavily tipped in favour of unions. When the Liberals regained power in 2002 they introduced changes to the Code to restore that balance. The most significant change involved a return to a mandatory vote in certification applications. Prior to that a union could be certified based solely on signed membership cards with no vote if it signed up 55% of the employees in the bargaining unit. In addition the Liberals expanded employer free speech allowing employers to express their views on unionization. Unions and employees were protected as the Code required that a secret ballot vote must be held within 10 days of the application for certification. Not surprisingly unions would often file applications for certification at 4 pm on a Friday thus giving them a further head start.In 2013 I assumed as many did an NDP victory and therefore wrote about the potential changes to the Code: NDP will not say What Changes will be made to the Labour Code. All of those comments were rendered moot by the stunning Liberal victory and therefore no changes were made to the Code.Although the NDP platform is somewhat silent on labour law reform John Horgan made it clear to the editorial board of the Sun and Province on May 1st, 2017 that he would introduce changes to the Code that would eliminate the secret ballot vote and he would also strike a review group to consider other unspecified changes to the Code.With the marriage of the NDP and the Green party on May 29th, 2017 employers need to consider what changes might occur to the Code and how they might protect their operations.In my view, a return to a card-based system and the elimination of the secret ballot vote is the low hanging fruit both the Greens and the NDP will be glad to harvest. Given their anti-resource development stances, such changes will reward their union constituency who might be concerned about the potential loss of high paying union jobs on resource development projects. Given the in-kind donations of the United Steelworkers to the NDP campaign, it would be normal to expect significant changes from an NDP led government in favour of unions.What can Employers do? One way employers might defeat a certification application is to ensure that they have a fully integrated workplace so that a union cannot cherry-pick a small group of employees and then use that as a springboard to unionize the remaining employees. A union does not have to organize the most appropriate bargaining unit (i.e. all employees) but only “an” appropriate bargaining unit. The Labour Relations Board (“LRB”) applies various tests to see if there is a reasonable defensible boundary around the bargaining unit sought. One of the key tests is whether the functional integration between the employees in the group sought to be included and those excluded from the application is such that the unit is not appropriate.All Care Canada (Sidney) Inc. v BCGEU BCLRB No. B83/2017 A recent decision of the LRB provides a good example of where various factors including functional integration will defeat a certification application. In All Care Canada (Sidney) Inc. v BCGEU BCLRB No. B83/2017 the employer operated a private pay long-term seniors’ care home. The Union applied for certification of 79 out of 119 employees based primarily on the extent of their organizing drive versus what would be an appropriate bargaining unit. Payroll and budgeting were administered by a single management team; benefits and compensation were common. The housekeepers frequently navigated the hallways and dining rooms and were found to “often interact with the other staff”. There were a number of other common features applied universally to all employees. There was an overlap of certain duties.The LRB dismissed the union certification application. It considered the 4 factors from the seminal decision of IML to determine if the bargaining unit was appropriate. It found there was no rational defensible line around the proposed unit in terms of skills, interests, duties and working conditions. Given the employer’s horizontal organization the second factor of the physical and administrative structure of the Employer went against the application. All employees worked in the same building and there was no geographical separation between the employees in the unit sought and the rest of the employees that could create a separate community of interest so this third factor went against the proposed unit. Finally, there was significant functional integration given the overlapping and shared duties among employees inside and outside the proposed unit.The LRB concluded:When all of the community of interest factors are considered, none of the factors favours the proposed bargaining unit. I find that the unit applied for is not appropriate for collective bargaining. The scenario of employees inside and outside of the Union’s proposed unit working side-by-side on the same neighbourhood teams with shared and overlapping duties raises the danger of industrial instability and unduly complicated administration of the bargaining unit. These concerns outweigh the consideration of access to collective bargaining in this case.This case is a good template to follow in organizing your workplace to make it harder for a union to certify a group of your employees. In my view, this case is significant as it was authored by Bruce Wilkins, a very senior member of the LRB and the Associate Chair Adjudication.Labour reform in CanadaThere is a trend these days in Canada for labour reform in favour of unions. The Federal Liberal government as one of its first orders of business reversed significant labour legislation introduced by the Conservatives. Alberta under an NDP government has introduced changes. Most significantly, the Ontario Liberal government commissioned a report on changes to the employment standards and labour legislation. On May 23, 2017, the Final Report was issued including 173 recommendations over its 420 pages. The Report recommended that the secret ballot be preserved but recommended additional provisions that would make it easier for unions to certify, including permitting a union to obtain employee lists and contact information if it has the support of 20% of employees in the appropriate bargaining unit: see “Wynne to announce worker legislation” Globe & Mail Tuesday, May 30th, 2017.If the right for employees to decide whether to unionize through a secret ballot vote is taken away then your workplace is likely more vulnerable to unionization. If you think a review of your organization would be useful I would be pleased to meet with your management team.

Notice Periods Roundup for 2017

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Written by Michael J Weiler, The most common question from clients with respect to term...

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Business
Employment Law and Human Rights

Written by Michael J WeilerThe most common question from clients with respect to terminations without cause and without notice in the absence of an enforceable employment agreement is “How Much Notice?” Courts will look at four key elements to determine how much is reasonable notice: age, length of service, position and the availability of similar employment having regard to the employee’s skills and qualifications. The court will often look at economic circumstances but will not give that factor undue weight. The highest period of notice, subject to a few exceptions, is 24 months. Please bear in mind that each case will be decided on its own facts and there is no litmus test. Further, the amount of notice will not always equal the damage award as the employee must mitigate her damages and must also prove her loss (e.g. lost benefits or bonuses).The following cases from this past year will give you some idea of the courts’ present thinking on the matter. These can be very important factors in each case, especially dealing with senior executives whose compensation can often exceed $20,000 per month.Case NameEmployee PositionIncomeAgePeriod of EmploymentNotice PeriodLy v Interior HealthManager of team$97,00038 2 months3 monthsRam v Burger KingCook$21,0005524 years12 monthsPrice v 481530 BC LtdManager hair loss clinic and 20% owner$77,000 (commission and salary)4720 years20 monthsWood v Fred Deeley Imports LtdSales/event planner (not managerial)$100,000488 years9 monthsSollows v Albion FisheriesSenior manager$160,000 plus bonus602 years 9 months10 monthsBuchanan v IntrojunctionSenior software engineer$125,000 plus bonus/stock27None [1]6 weeksSletmoen v NafcoMachine operator$66,5005218 years16 monthsMudrovcic v Engenuity ManufacturingResponsible position$81,0004819 years21 monthsNogueira v Second CupManager$125,000478.5 months4 monthsEnsign v Price’s Alarm SystemMedical Alert advisor/salesman$30,000 (salary plus commissions)6312 years12 months[1] An offer of employment was rescinded 2 weeks after being made and prior to employment commencing.

Employer Fails to Provide Just Cause

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Written by Michael J Weiler, Once again, "close but no cigar Maureen Stock, a single mo...

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Business
Employment Law and Human Rights

Written by Michael J Weiler

Once again, "close but no cigar"

Maureen Stock, a single mother, worked for Oak Bay Marina for 20 years as a sales agent. She was dismissed on August 5, 2015 with cause. The employer alleged she had engaged in improper conduct by “marking” guest reservations as her own when, in fact, she had not made contact with the guests. The matter was set for a 5-day trial. The defendant brought a summary trial application based on affidavit and discovery evidence to have the action dismissed. The plaintiff in turn brought an application for judgment for wrongful dismissal. The Court held that it could decide the matter on a summary trial despite conflicting affidavits or conflicting evidence because in this case the Court was able to make the necessary findings of fact.Ms. Stock was an excellent employee with a proven track record as a sales agent. The employer had a policy against “marking” reservations. It noted in 2006 that “marking of guest files is not acceptable”. In 2012 it sent an email to employees noting instances where past guests of departed sales agents were “marked” as contacted even though no contact was made. The email stated “This is unacceptable behaviour in that it erodes the trust that is in place around how your guests are dealt with and serviced. Being negligent in honouring this policy can unfortunately result in disciplinary action.” (emphasis added).Ms. Stock was found to have accessed guest bookings and noted them as her own. Her explanation was that she often intended to contact the guest to see if she could upsell them on services. However, there were many occasions where she did not, in fact, contact them.The Court found that, although Ms. Stock had engaged in inappropriate conduct, the misconduct was not sufficient to justify termination for cause.The Court provided a very thorough updated summary of the law on just cause which we reproduce in its entirety (paras. 58-64):[58] The basic principles for determining whether an employer is justified in dismissing an employee on the grounds of dishonesty are well-established, and not in dispute. They are set out in McKinley v. BC Tel 2001 SCC 38, the leading case, and conveniently summarized in Roe v British Columbia Ferry Services Ltd., 2015 BCCA 1 (at paras. 26 and following) and also in Lau v Royal Bank of Canada 2015 BCSC 1639 (at paras. 141 and following), among other cases.[59] In McKinley, at para. 49, the Court set out a two-part test. The court must determine: (i) whether the evidence establishes the employee’s deceitful (dishonest) conduct on a balance of probabilities; and (ii) if so, whether the nature and degree of the dishonesty warrant the employee’s dismissal. Both parts of the test involve factual inquiries.[60] In particular, the test requires an assessment of whether the employee’s misconduct gave rise to a breakdown in the employment relationship justifying dismissal, or whether the misconduct could be reconciled with sustaining the employment relationship by imposing a more “proportionate” disciplinary response (McKinley, at paras. 48, 53 and 57). A “contextual approach” governs the assessment of the alleged misconduct at this stage of the test (McKinley, at para. 51). That assessment includes a consideration of the nature and seriousness of the dishonesty, the surrounding circumstances in which the dishonest conduct occurred, the nature of the particular employment contract, and the position of the employee (McKinley, at paras. 48-57). The ultimate question to be decided is whether the employee’s misconduct “was such that the employment relationship could no longer viably subsist” (McKinley, at para. 29).[61] Mr. Justice Iacobucci, writing for the Court in McKinley, summarized the contextual approach to the assessment of whether the employee’s dishonesty gives rise to a breakdown of the employment relationship as follows:[48] . . . I am of the view that whether an employer is justified in dismissing an employee on the grounds of dishonesty is a question that requires an assessment of the context of the alleged misconduct. More specifically, the test is whether the employee’s dishonesty gave rise to a breakdown in the employment relationship. This test can be expressed in different ways. One could say, for example, that just cause for dismissal exists where the dishonesty violates an essential condition of the employment contract, breaches the faith inherent to the work relationship, or is fundamentally or directly inconsistent with the employee’s obligations to his or her employer.[49] In accordance with this test, a trial judge must instruct the jury to determine: (1) whether the evidence established the employee’s deceitful conduct on a balance of probabilities; and (2) if so, whether the nature and degree of the dishonesty warranted dismissal. . . .. . .[51] . . . I conclude that a contextual approach to assessing whether an employee’s dishonesty provides just cause for dismissal emerges from the case law on point. In certain contexts, applying this approach might lead to a strict outcome. Where theft, misappropriation or serious fraud is found, the decisions considered here establish that cause for termination exists. . . . This principle necessarily rests on an examination of the nature and circumstances of the misconduct. Absent such an analysis, it would be impossible for a court to conclude that the dishonesty was severely fraudulent in nature and thus, that it sufficed to justify dismissal without notice.[62] Mr. Justice Iacobucci continued (beginning at para. 53):[53] Underlying the approach I propose is the principle of proportionality. An effective balance must be struck between the severity of an employee’s misconduct and the sanction imposed. The importance of this balance is better understood by considering the sense of identity and self-worth individuals frequently derive from their employment . . . . . .[56] . . . Absent an analysis of the surrounding circumstances of the alleged misconduct, its level of seriousness, and the extent to which it impacted upon the employment relationship, dismissal on a ground as morally disreputable as “dishonesty” might well have an overly harsh and far-reaching impact for employees. In addition, allowing termination for cause wherever an employee’s conduct can be labelled “dishonest” would further unjustly augment the power employers wield within the employment relationship.[57] Based on the foregoing considerations, I favour an analytical framework that examines each case on its own particular facts and circumstances, and considers the nature and seriousness of the dishonesty in order to assess whether it is reconcilable with sustaining the employment relationship. Such an approach mitigates the possibility that an employee will be unduly punished by the strict application of an unequivocal rule that equates all forms of dishonest behaviour with just cause for dismissal. At the same time, it would properly emphasize that dishonesty going to the core of the employment relationship carries the potential to warrant dismissal for just cause.[63] The trial judge is not obligated to formally balance the length and quality of service with the nature and severity of the misconduct in determining whether there was just cause to dismiss, although it may be appropriate on the facts of a particular case to engage in just such an analysis. The framework adopted by the Court in McKinley focuses on the nature and severity of the misconduct in relation to its impact on the employment relationship; it is not a balancing exercise between the value of the employment to the individual and the severity of the misconduct. See Lau, at para. 145 (citing Steel v Coast Capital Savings Credit Union 2015 BCCA 127, at paras. 28-29).[64] The standard of proof is on a balance of probabilities. The court must scrutinize all of the evidence with care, and the evidence must be sufficiently clear, convincing and cogent to satisfy the burden of proof. See Lau, at para. 146 (citing F.H. v McDougall, 2008 SCC 53, at paras. 46 and 49).*************************The Court held the first part of the test had been met (at para. 71):However, I find that Ms. Stock’s ultimate intention was to claim credit for the guest bookings she accessed, and I find that her conduct amounted to “marking,” as described in Oak Bay’s policy and in Mr. Watling’s evidence. Her conduct was wrongful, and I find that Oak Bay has established the first part of the two-part test described in McKinley.But, (at paras. 74 and 75), the Court held that Oak Bay had not satisfied the second part of the test; it had not established that immediate termination was justified:Ms. Stock’s position within Oak Bay is distinguishable from that of the plaintiff in Roe v British Columbia Ferry Services Ltd., 2015 BCCA 1, relied on by Oak Bay. Instead, Ms. Stock’s situation warranted a more proportionate disciplinary response, taking into account Ms. Stock’s age, her long employment history with Oak Bay, her unblemished record, the fact that she received no benefit from marking the guest records and the lack of any clear warning about the consequences of marking. In my view, her misconduct does not rise to the level of “serious fraud” or “severely fraudulent,” as those terms are used in McKinley. While Oak Bay argues that it should not be required to monitor an employee for potential dishonesty, in my opinion, having regard to the principles stated in McKinley referred to above and Mr. Watling’s evidence that monitoring was available, the appropriate sanction in the circumstances was to give Ms. Stock a strong and final warning, that any further misconduct would result in her immediate dismissal.I find, therefore, that Oak Bay has failed to demonstrate that it had just cause for dismissal. It follows that Ms. Stock is entitled to damages for wrongful dismissal.“Mike what’s an employer to do?”There are two options.First, an employer may apply “progressive discipline” suggested in this case that would include, at a minimum, a strong written warning where further misconduct will result in termination for cause. That delays the inevitable termination for cause. It also is no guarantee that subsequent misconduct will constitute cause. And, of course, failure to act might send the wrong signal to other employees.A second alternative is to have a proper, legally enforceable, written employment agreement that minimizes the damages from a dismissal. The Supreme Court of Canada has said that employers can contract to limit an employee’s rights on termination to the minimum standards under the Employment Standards Act — basically one week of notice or pay in lieu for each year of service up to a maximum of 8 weeks. This advice is not new — I have suggested this many times over the years in our publications and at our seminars. Here, there was no written contract in place and Ms. Stock claimed she was entitled to 20 months’ notice; the employer could have limited its exposure to 8 weeks' wages. The legal fees incurred in defending a wrongful dismissal action would eat up that severance payment in short order.Stock v Oak Bay Marina Ltd., 2017 BCSC 359

Think You Have a Deal? Get It In Writ...

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In the case of 0827857 B.C. Ltd. v. DNR Towing Inc. 2020 BCSC 717, the purchaser was se...

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Business Litigation & Disputes, Firm News

Travis W. Brine recently successfully defended a breach of contract claim arising from an alleged agreement to purchase our clients’ business and property.  

In the case of 0827857 B.C. Ltd. v. DNR Towing Inc. 2020 BCSC 717, the purchaser was seeking the remedy of specific performance based on its assertion that the parties had reached a verbal agreement on all of the essential terms for the sale of the business.  Our clients disputed that a final agreement had ever been reached and argued in any event that such an agreement to be enforceable was required to be in writing and signed by the parties.  

In dismissing the purchaser’s claim, Mr. Justice Ehrcke, ruled that the issue was not whether the purchaser subjectively thought there was a legally binding oral contract but rather whether a reasonable objective observer considering all the circumstances would have understood that the parties intended to be legally bound prior to the signing of a written contract.  On the basis of the evidence, Mr. Justice Ehrcke held that a reasonable objective observer would conclude that the parties did not intend to be legally bound until they had signed a written contract.  

In addition, Mr. Justice Ehrcke dismissed the purchaser’s claim on the basis that the transaction involved a sale of real property and as a result the contract had to be in writing and signed pursuant to section 59 (3) of the Law and Equity Act.  The court rejected the purchaser’s argument that exceptions in the Law and Equity Act applied to his case.  As a result, the court dismissed the purchaser’s claim against our clients in its entirety.

Contact Travis Brine with any legal questions - see Profile here