Law Times

Law Times • December 10, 2018 Page 7 www.lawtimesnews.com Dismissed employee's entitlement to bonus BY NIKOLAY Y. CHSHERBININ A n employee's employment is terminated when they are dis- missed without cause, not when the notice period ends. The date of an employee's dismissal is, thus, a ques- tion of fact. When an employer dismisses an employee without cause and without proper notice, this constitutes a wrongful dismissal, and any payment in lieu of no- tice is intended to compensate for the em- ployer's breach of the employment con- tract. In general, damages for wrongful dismissal are designed to ref lect the total compensation the employee would have earned during the proper notice period. In Evans v. Paradigm Capital Inc., 2018 ONCA 952, the Court of Appeal for On- tario considered whether an employee is entitled to a shareholders' bonus, despite being subject to divestment of shares on dismissal. It resolved that pursuant to the shareholders' agreement, the employee ceased to be a shareholder upon the ter- mination of her employment and was no longer entitled to the shareholders' bonus during the reasonable notice period. In Evans, on Jan. 16, 2009, Paradigm Capital Inc., an independent, employee- owned institutional investment dealer, constructively dismissed Fabiene Evans, who was employed as an institutional eq- uity salesperson. The trial judge awarded Evans 11 months' pay in lieu of notice. This amounted to $240,313.79 in dam- ages, which was comprised of Evans' base salary ($75,000), performance bonus and a shareholders' bonus ($79,792.58), being dividends to which she was entitled as an equity stakeholder in Paradigm. Evans appealed on the basis that the trial judge erred, inter alia, in calculating her performance bonus entitlement based on her last percentage allotment, rather than a three-year his- toric average of her perfor- mance bonus, which resulted in her bonus being lower. Par- adigm cross-appealed on the basis that the trial judge erred, inter alia, in awarding Evans damages related to the share- holders' bonus, even though her equity interest in the com- pany had been redeemed fol- lowing her dismissal in accordance with the shareholders' agreement. The Court of Appeal dismissed Evans' appeal with an apt reminder that "although it may sometimes be appropriate to calcu- late damages based on an average of earn- ings, there is no requirement to do so." In response to Paradigm's cross-ap- peal, Evans argued that the trial judge correctly found that her right to receive the shareholders' bonus was an integral part of her overall compensation. Given that payment in lieu of notice is intended to compensate for breach of the employ- ment contract, Evans argued that she should be entitled to all losses arising from Paradigm's wrongful termination during the notice period. Paradigm re- sponded that dividends can be claimed only by shareholders. Pursuant to the terms of its shareholder's agreement, Evans ceased to be a shareholder upon the termination of her employment and Paradigm redeemed her shares and de- bentures pursuant to the deemed transfer notice provided for in that agreement. At trial, the judge found that Evans' interest in the eq- uity and the right to receive an annual shareholders' bo- nus was vested on acquisition of the shares and debentures, subject to divestment on her leaving Paradigm. Accord- ingly, this fact distinguished her interest from the contin- gent interests described in the stock option bonus cases that the judge cited in support of his conclusion. However, in the Court of Appeal's view, there was no relevant distinction for the purposes of this case. Relying on its earlier judgment in Love v. Acuity Investment Management Inc., 2011 ONCA 130, the Court of Appeal re- minded that an employee's employment is terminated when she is dismissed without cause, not when the notice period ends. Evans' employment was terminated when she was dismissed without notice; that is, when she was constructively dismissed. Pursuant to the terms of the shareholders' agreement, Evans was required to tender her shares for redemption on dismissal, being a fact that the trial judge failed to heed. Once the dismissal occurred, Ev- ans was no longer entitled to receive the shareholders' bonus. The Court of Ap- peal explained that, if it were otherwise, Evans would have received both the re- turn of her share capital upon dismissal and the dividends she would have earned had she retained the shares and her capital remained at risk in Paradigm for the du- ration of the 11 months' reasonable notice period. Consequently, the Court of Ap- peal granted the cross-appeal in part and deducted $79,792.58 from Evans' dam- ages. The Court of Appeal declined Para- digm's invitation to substitute the judge's award of 11 months' notice with six to eight months' notice. It is trite law that an appellate court would not interfere with a trial judge's decision on the appropriate notice period unless it falls outside an ac- ceptable range as determined by similar cases. Evans reaffirms that courts will scru- tinize the wording of an applicable equi- ty-granting agreement as part of their as- sessment of an employee's entitlements at dismissal. If, on a fair reading, the word- ing of such an agreement is unambiguous, the employee will be bound by its terms. Failure to give effect to the terms of such an agreement is reviewable. These types of agreements may differentiate between the triggering events, such as: termination for death, permanent and total disability, retirement, resignation and dismissal for any other reason. Absent language that defines the triggering event, the parties will be presumed to contemplate a trig- gering action that complies with the law, which will likely keep the dismissed em- ployee's rights alive until the end of the reasonable notice period required for lawful dismissal. Hence, the focus of the scrutiny will be on the wording of the triggering event and its trigger date. LT uNikolay Chsherbinin is an employment and immigration lawyer and author of The Law of Inducement in Canadian Employment Law. He can be reached at 416-907-2587 or by visiting nclaw.ca. Make the simplified rules meaningful BY RONALD BOHM For Law Times R ule 76 of the Rules of Civil Procedure was introduced to impose a mandatory simpli- fied process for actions of comparatively mod- est monetary value, which exceed the jurisdic- tion of Small Claims Court. Initially, the monetary limit was $25,000. As the monetary jurisdiction of the Small Claims Court increased over time to $10,000 and then to $25,000, the monetary limits of the simpli- fied procedure were similarly increased to $50,000 and then to the current limit of $100,000. Since the Supreme Court of Canada's ruling in R. v. Jordan, the Superior Court has struggled to abide by mandated timelines so that those accused of criminal offences would not have their cases stayed as a result of unacceptable delay. By the estimates of many, our current Superior Court Civil Jury lists are comprised mostly of soft tissue/chronic pain and similar motor vehicle accident injury claims. While in theory, such claims would be ideally suited to a simplified process, the Rules of Civil Procedure set out in Rule 76, in prac- tice, have not been utilized. The reasons are multiple. The most significant factors include the ability of ei- ther party to file a Jury Notice, the unrestricted length of the trial presentation, including numbers of experts, and costs. Once a jury is involved, even a relatively straightforward motor vehicle injury case needs three to four weeks to complete. Affidavit evidence is not uti- lized to replace evidence in chief and experts' reports are not filed. Make the simplified rules meaningful. If we want to decrease the backlog in our courts, free up scarce and valuable judicial and court resources, and, at the same time, actually enhance the public's access to justice. Giving real meaning to the simplified proce- dure can accomplish all three. First, get rid of juries. Citizens of our province are being taken advantage of when they are asked to per- form their important and sacred roles as jurors by be- ing asked to adjudicate over a modest soft tissue in- jury claim, as opposed to a trial for a murder, or, say, a paraplegic injury. Is it any wonder that jurors angered by this abuse take it out on all trial participants to the greater prejudice of plaintiffs? To affect this change, s. 108 of the Courts of Justice Act should be amended to exclude Rule 76 actions from being tried by a jury, as is currently the case with Small Claims Court actions. Jury trials have become overly complex and lengthy, in part because of the legislative requirements in motor vehicle accident cases to establish threshold injuries. Nev- ertheless, with a concerted effort and equal rules applying to both sides, fairness can be achieved without all of the current and elaborate forensic mechanisms of the cur- rent trial process. One week should be enough to try any case where the monetary value has a set limit. That limit should increase to at least $200,000 and be indexed, given that the current deductible applied to motor vehicle acci- dent claims is approaching $40,000 and is indexed. Evidence in chief should be filed by affidavit with witnesses presented for cross-examination and re-ex- amination. It is suggested that each party be at liberty to use their share of the allotted time in any manner they see fit and that limits on examination or cross- examination of any one witness is inappropriate. If a party wishes to use half its time cross-examining one witness, so be it. The number of expert witnesses for each side would be restricted to three, barring truly exceptional circum- stances. Costs would be restricted to a maximum of $50,000 and disbursements to $25,000. Cost sanctions will continue to apply, such that any judgment awarded within the simplified procedure limits, where the pro- cess has not been used, will result in the plaintiff not recovering costs, unless the court finds it was reasonable for the plaintiff to have commenced or continued the action under the ordinary procedure. Great effort has been made by certain members of the judiciary, Rules Committee, Bench and Bar Com- mittees and organizations such as the Ontario Trial Lawyers Association to make these proposed changes a reality. In a rare and encouraging effort of co-oper- ation, both the plaintiff 's bar, the defence bar and the insurance industry have given some form of support to these changes in our system. It is now up to the provin- cial Ministry of the Attorney General and our new pro- vincial government to consider these proposals that are being put before it. Early indications suggest that these proposals are being received in a favourable manner. Should our new government proceed with these new changes, it will be a victory for all stakeholders. Given our massive provincial deficit and the strains on our judicial and court resources brought about by the Jordan decision and our growing population, it is unreasonable to expect that more dollars and more re- sources will be allocated as the sole solution to our cur- rent access-to-justice challenges. As the Supreme Court of Canada declared in the Hryniak decision, we can no longer expect the full forensic mechanisms of a trial to adjudicate every civil dispute. It would be unreasonable to expect all of the processes, procedures and safeguards for all cases, even those of comparatively modest value. If enacted, these proposed changes will bring about real and lasting benefit by helping to address delays and en- hancing access to justice for many. It will provide fair and timely adjudication, the costs of which are propor- tionate to the matters at issue. Bring them on. LT uRonald Bohm is senior litigation counsel at SBMB Law and a dual certified specialist in civil litigation and health law. He is also president of the Ontario Trial Lawyers Association. u SPEAKER'S CORNER COMMENT Labour Pains Nikolay Y. Chsherbinin

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