THE EMPLOYERS' EDGE
No Gracias: Ontario Superior Court Justice Awards 5-Month Employee 3-Months Reasonable Notice
Recently in Gracias v Dr David Walt Dentistry, 2022 ONSC 2967 (“Gracias”) Justice Perell delivered a disappointing decision for employers. The plaintiff was awarded three-months reasonable notice despite only working with the employer for five months and receiving $16,000 worth of CERB. There are three main aspects of this case that employers can draw serious takeaways from: the CERB deductions; the reasonable notice period; and the mitigation fraud claim.
CERB deductions are not settled law
In deciding not to deduct CERB payments, Justice Perell relied heavily on the reasoning of three past decisions (one of which we wrote about here). The decision is nonetheless surprising considering that there are multiple precedent CERB cases which determined that the payments should be deducted in accordance with a foundational principle of contract law – that a plaintiff is to be put in the same position they would have been in if the contract had been performed and not a better position. Additionally perplexing is that a decision cited for declining to deduct CERB payments was recently overturned for exactly that reason. However, Justice Perell does not offer any insight into why CERB payments are not deductible in this matter. This should put employers on notice that in spite of several precedents asserting that CERB payments should be deducted from wrongful dismissal awards, the law on CERB payments is not completely settled. If an employee was dismissed during the CERB period, there is a risk they may not have to deduct any CERB payments received from a damage award.
Properly drafted employment contracts are vital to limiting reasonable notice
While equally as disappointing for employers, it is at least ascertainable how a five-month employee could be awarded a three-month reasonable notice period. The plaintiff did have an employment contract with the defendant that attempted to limit her reasonable notice entitlements under the common law. However, similar to Waksdale v Swegon North America Inc., 2020 ONCA 391, Justice Perell found that the “for cause” clause was invalid, and therefore the entire termination clause was invalid. The clause was invalid as it would deny the plaintiff any notice under the Employment Standards Act, 2000 (the “ESA”) for conduct that may not amount to willful misconduct, which is the benchmark set by the ESA. Once the termination clause was considered invalid, the reasonable notice entitlements were no longer limited to the ESA. Justice Perell awarded a three-month notice period under the common law based on the pandemic’s detrimental effect on the plaintiff in finding a new position. Employers should be warned to review their employment contracts to ensure that they adequately contract out of the common law in order to avoid potential egregious damage awards.
Litigation is an onerous process
During the trial, the defendant alleged that the plaintiff falsified mitigation evidence with fabricated records of her internet job applications. To advance the claim, the defendant retained an expert forensic examiner. In their report, the expert found anomalies and questioned the authenticity of 86 of the 89 emails submitted by the plaintiff from Indeed.com. Further, nine more separate emails submitted by the plaintiff raised serious doubt of authenticity. In response, the plaintiff’s evidence was that she genuinely made job applications and that she could not explain any anomalies discovered by the expert. Justice Perell found the plaintiffs evidence to be more plausible. It is likely the fees for advancing the mitigation fraud argument cost the employer more than the claim itself. This is an important lesson to employers that a well-drafted reliable employment contract can prevent high-cost litigation. If the termination clause was enforceable, the reasonable notice period would have been limited to the ESA and the entire mitigation fraud claim could have likely been avoided.
Employers should invest in their employment contracts as a pre-emptive measure to avoid similar situations to Gracias. Contact the team at CCPartners to assist you in drafting a reliable employment contract or for support in any of your other employment law needs.
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