Three Days of Work, Three Months of Pay: Dalton v. Fraser Valley Fire Protection Ltd.

Employers should expect to provide some compensation to employees they terminate without cause. The amount of compensation depends on a number of factors, such as the nature of the employment, the availability of similar employment, the age of the employee, and the amount of time the employee spent working for the employer. These factors are not always given equal weight. The relatively recent case of Dalton v. Fraser Valley Fire Protection Ltd. is a good example of this, where the weight given to the employee’s age far outweighed that given to their extremely short length of service.

What Happened?

This case involved an action for wrongful dismissal brought by an employee, Mr. Dalton, against his former employer, Fraser Valley Fire Protection Ltd. Interestingly, Mr. Dalton had only worked with this employer for three days prior to his dismissal. One would expect that an employee who has worked for such a short period of time would not be entitled to much notice, and typically this would be true. However, Mr. Dalton was also of a rather senior age, being 67 years old at the time of his termination.

Mr. Dalton’s age was a significant factor in this case. In assessing what amount of notice would be reasonable, the trial judge stated:

“Age is a factor that bears so importantly upon the prospects for other similar employment and employers who terminate the employment of older employees must appreciate the difficulty that is thrust upon older employees who are on the receiving end of a wrongful dismissal.”

Consequently, the trial judge noted that the consequences of terminating Mr. Dalton without notice were more severe than they would have been for many other employees. With this in mind, the trial judge concluded that three months’ notice was appropriate and awarded Mr. Dalton $11,440, plus costs. Not so bad for only three days of work!

The Duty to Warn

This case was also interesting because it reinforced the idea that employers should give their employees warnings, and then an opportunity to improve their behavior, before making the decision to terminate them without notice. There were undoubtedly many issues with Mr. Dalton’s work. Mr. Dalton was allegedly unproductive, uncooperative, and argumentative. The employer certainly had good reason to be concerned. However, the trial judge noted, quite instructively, that:

“Where there is an accumulation of a number of minor failings on the part of the employee, there is generally a duty on the employer to warn the employee. The employer must treat its employee fairly and with good faith, and must disclose to the employee the errors she or he is making, and give the employee an opportunity to correct the errant behaviour.”

The employer gave Mr. Dalton no such warning and no such opportunity to improve, instead opting to fire him sooner rather than later. This was a costly mistake. Had Mr. Dalton been warned that his performance and behavior was unacceptable, the employer may have been justified in terminating him without notice if he nevertheless continued with his substandard performance and behavior. As the employer gave no such warning, they were unable to terminate him without notice, ultimately resulting in the trial judge’s award of three months’ notice.

What Makes a Manager? Saunders v WestJet, an Alberta Partnership

Ms. Saunders was an agency sales representative with WestJet, her employer. She was terminated from this position on July 29, 2019. Following her termination, Ms. Saunders filed a complaint of unjust dismissal under section 240(1) of the Canada Labour Code (the “Code”). A finding that Ms. Saunders was unjustly dismissed under the Code would entitle her to reinstatement with back pay.

WestJet, however, objected to her complaint on the grounds that she was a manager. If true, this would be fatal to her case. This is because section 167(3) of the Code excludes employees who are managers from making use of the unjust dismissal provisions. If Ms. Saunders was truly a manager, she would be unable to bring her unjust dismissal complaint.

The problem, however, is that the term “manager” is not defined by the Code. The term has instead been defined over time by the jurisprudence of courts and adjudicators. How have they interpreted the meaning of “manager” for the purposes of the Code?

What Makes a Manager?

In determining whether somebody is a manager, courts and adjudicators have adopted a case-by-case approach which examines the specific context of the workplace and the nature of the work the employee actually performed. The employee’s title (i.e. “business development manager”) or rank within the employer’s organization is not determinative. This means that having the official title of “Manager” does not automatically make one a manager under the Code.

The term “manager” has been interpreted very narrowly so that the protections of the Code’s unjust dismissal provisions are applicable to as many employees as possible. This narrow interpretation reflects Parliament’s intent to extend the rights and standards enumerated in the Code to a broad range of employees.

In practice, the term “manager” is generally defined as an individual who acts as an administrator with the power of independent action, autonomy and discretion. To be a manager, the person must have the ability and authority to direct the work and make administrative decisions. According to the Federal Court, the “fundamental test” is whether the individual had significant autonomy, discretion, and authority in the conduct of the employer’s business. The Federal Court endorsed the following list of factors and guiding principles which should be considered in determining manager status:

“Guiding principles

the term “manager” has a narrow meaning;
the nature of the work actually performed must be examined;
the administrative element of the position in issue must be present;
the term “manager” is administrative rather than operational in nature;
the position can include managers at the upper or lower end of the management chain;
impressions and perception of the position by others as being part of management is insufficient;
title or place in the management chain in not determinative;
only exercising some managerial functions without authority is insufficient;
merely a conduit for higher body who is actual decision-maker or makes recommendation to higher body who approves or disapproves is insufficient.

Elements considered essential for a finding of “manager”

power to act and perform duties independently;
is part of management;
primary responsibility is to manage;
power or authority to hire, supervise, and otherwise be in charge of employees, including power to discipline and dismiss;
evidence of firing and disciplining must be proven;
responsibility for employer’s operations and managerial attributes required for that purpose, i.e., accountability for management functions;
sufficient or independent decision-making authority, though not absolute, and a certain measure of discretion;
authority to make final decisions of significance.” (emphasis added)

Was Ms. Saunders a Manager?
The adjudicator in Ms. Saunders’ case was tasked with deciding whether or not Ms. Saunders was a manager under the Code pursuant to the above jurisprudential tests and definitions. The burden rested on the employer WestJet to show that she was a manager and thus exempt from the unjust dismissal provisions.

Ultimately, the adjudicator found that Ms. Saunders was not a manager.

How did the adjudicator reach this decision?
The adjudicator focused on the nature of the work and duties performed by Ms. Saunders rather than her title or rank in the employer’s organization (the correct approach, as title and rank are not determinative of manager status). Ms. Saunders’ “primary responsibilities” included making sales calls and visiting traveling agencies to promote WestJet’s services. She represented WestJet at tradeshows and conferences and communicated marketing and sales initiatives. Significantly, she did not have any authority to hire, fire, discipline, promote, or determine compensation of any other employees, nor did she have any supervisory duties.

Employees who occupy a purely operational role within the organization are not “managers” under the Code. It is necessary that the employee have administrative functions, such as hiring and firing and promoting and budgeting. Ms. Saunders had none of these administrative functions – her role was purely operational. As a result, Ms. Saunders could not be a manager under the Code.

Taking into account all prior jurisprudence, this appears to have been the right decision. It has been positively relied on in subsequent decisions of the Canada Industrial Relations Board and will likely continue to prove influential in future manager cases.

CERB Continuing to be Deducted from Wrongful Dismissal Damages (Or Not?)

I wrote a blog post this past August discussing the potential impact of Canada Emergency Response Benefit (CERB) payments on wrongful dismissal damages. We looked specifically at the British Columbia Supreme Court’s decision in Hogan v 1187938 B.C. Ltd (“Hogan”), where Justice Gerow decided that CERB payments were deductible from wrongful dismissal damages. The rationale was that allowing the dismissed employee to be compensated for the reasonable notice period while simultaneously retaining the CERB payments they received but would not have been entitled to had they not been termination would amount to a “compensating advantage issue”. Effectively, this would compensate the employee for income he did not lose and would place the employee in a better position than he would have been in had he not been dismissed at all.

A Conflicting Approach: Not Deducting CERB Payments

As it turns out, this decision has not been universally adopted. For instance, in Snider v. Reotech Construction Ltd. (“Snider”), Justice Alexander of the British Columbia Provincial Court decided not to deduct CERB payments from the awarded wrongful dismissal damages based on the premise that the employee might have to repay the CERB payments in the same way one would repay EI benefits. Furthermore, allowing CERB payments to be deducted from wrongful dismissal damages only helps employers who already have other programs in place to assist them. It is better for the employee to receive the windfall avoided in Hogan than it is for the employer to be bailed out by the taxpayer-funded CERB payments through a reduced damages award.

With such conflicting approaches to the issue, it is hard to know which, if any, is “correct”. However, a more recent decision of the British Columbia Supreme Court appears to favour the approach in Hogan and may be of some guidance moving forward.

***Yates v. Langley Motor Sport Centre Ltd.: Affirming Hogan***

This was a case about an employee who, after only working 8.5 months with her employer, was temporarily laid off in response to the COVID-19 pandemic. After her temporary layoff expired, she was deemed to have been terminated on the day the layoff began. After considering all the facts, including the employee’s age (30) and relatively short length of service, the trial judge awarded the employee with 5 months’ compensation.

However, the evidence showed that the employee had already received $12,000 in CERB payments after her termination. The maximum monthly amount of CERB the employee could receive was $2,000 a month. The trial judge was therefore tasked with deciding whether $10,000 (i.e. 5 months’ worth of CERB payments) should be deducted from the wrongful dismissal damages. Whether or not the amount gets deducted depends on whether the trial judge adopts the reasoning in Hogan (i.e. avoiding the compensating advantage issue) or the reasoning in Snider (i.e. not using taxpayer money to bail out employers).

Ultimately, the trial judge opted to deduct the $10,000 in CERB payments from the award of wrongful dismissal damages. The trial judge found that the $10,000 would not have been paid to the employee had she not been terminated. Furthermore, the trial judge found that CERB payments were intended by the Government of Canada to indemnify employees for the loss of regular salary resulting from their employer’s breach of the employment contract (i.e. terminating the employee). Taken together, these two characteristics would make CERB payments “collateral benefits” as that term was described by the Supreme Court of Canada in IBM Canada Limited v. Waterman and would therefore justify their deduction from wrongful dismissal damages. Finally, contrary to what was argued in Snider, the trial judge found no basis upon which to conclude that the employee would be required to repay the CERB benefits if she obtained an award of wrongful dismissal damages.

As a result, the $10,000 received by the employee in the form of CERB payments was deducted from the award of wrongful dismissal damages.

Moving Forward

It appears as though there is not yet a consensus in the jurisprudence on the topic of CERB payments in the context of wrongful dismissal damages. Without any binding authority weighing in, we may continue to see inconsistent judgements being reached on the topic. We will have to wait and see whether the need arises for a Court of Appeal to weigh in.

The Necessity of Consideration – Matijczak v. Homewood Health Inc.

This recent decision of the British Columbia Supreme Court touches on a fundamental principle of contract law: that a contract is not enforceable unless consideration (i.e. something of value, including promises to do something) has been given in exchange. Where there is an agreement between two parties and one of those parties is offering nothing to the other, then there is no enforceable agreement. In Matijczak v. Homewood Health Inc. (“Matijczak”), the issue was whether or not amendments to an employment contract made without consideration could be enforceable against the employee.

The Contracts

Ms. Matijczak was an employee of Homehood Health Inc. until her termination in 2020. She signed her first contract with Homewood in 2008. This contract provided Ms. Matijczak with pay at a rate of $60 per hour.
In 2012, Ms. Matijczak was told that she would be required to sign a new contract. This new contract provided Ms. Matijczak with pay at a rate of $50 per hour. Ms. Matijczak signed.

Then, in 2015, Ms. Matijczak was required to sign a second new contract. She signed this one, as well. She received no legal advice and was given no opportunity to negotiate the terms of the agreement. She was not even directed to the change the new contract made, which was actually quite significant. This new contract purported to take away Ms. Matijczak’s right to litigate matters related to her employment in British Columbia, instead requiring her to do so in Ontrio. Homewood argued that consideration was provided for this new contract because it enabled Ms. Matijczak to provide new services at a potentially higher pay rate.

Given the above, was there consideration sufficient to make the 2015 contract enforceable?

The Enforceability of the Contracts

Ms. Matijczak argued that the 2015 contract failed to provide sufficient consideration to support its amendments. Ultimately, the trial judge agreed, noting that the law in British Columbia requires consideration where an employer seeks to impose an amended employment contract with significant changes which are detrimental to the employee. The trial judge further noted that this principle is especially important in the employment law context given the typical inequality of bargaining power that exists between an employer and employee. This is further exacerbated in circumstances where the contract at issue involves an amendment to a pre-existing agreement. In that context, the employee is likely already dependent on the pay from their continued employment and is therefore more vulnerable. The trial judge further suggested that:

“… where the employer imposes an amended agreement on the employee, detrimental to the employee, without providing any actual benefit to the employee in the amended contract, the amendment likely does not reflect a true mutual bargain between them.”

There was no doubt, therefore, that Homewood was required to offer consideration to make their 2015 contract enforceable. They argued that they had. Unfortunately, the trial judge disagreed again. The fact that Ms. Matijczak could have potentially earned higher pay by providing the new services allowed under the 2015 contract, Homewood offered no actual promise that Ms. Matijczak would ever be assigned to this additional work and therefore no promise that she would ever earn any additional pay – there was only the possibility for this to happen, but no guarantee. This is not enough. As a result, the 2015 contract was unenforceable

Takeaway for Employers

This case stands as a reminder to employers that, when having employees sign an updated or amended contract, adequate consideration must be given in order to make that contract and its amendments enforceable. That fresh consideration must be more than the mere possibility that something new might be provided to the employee.