Friday, 14 April 2017

When Does the Limitation Period Begin for a Wrongful Dismissal Case in Ontario?

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How long do you have to start a case for wrongful dismissal in Ontario? Perhaps more importantly, when does the limitation period begin to run for a wrongful dismissal action – at the time notice of termination is received or on the last day worked?

That second question, when does the limitation period begin to run , was answered by the Honourable Justice Kirk W. Munroe of the Ontario Superior Court of Justice in the case of Bailey v Milo-Food & Agricultural Infrastructure & Services Inc., 2017 ONSC 1789 (CanLII).

Facts

The decision was rendered following the defendant employer’s motion to dismiss the claim. The defendant employer had argued that the plaintiff employee’s claim for wrongful dismissal damages had been issued after the applicable statute of limitations had expired.

Specifically, on March 18, 2013, the plaintiff was provided with 24 months’ notice of the termination of his employment. His employment was, in fact, terminated on March 22, 2015.

Mr. Bailey did not issue his statement of claim until December 21, 2015. He claimed both wrongful dismissal damages and statutory severance.

Decisions

In dismissing Mr. Bailey’s claims for wrongful dismissal damages, Justice Munroe reasoned as follows:

[44] The leading case in Ontario on the commencement of the limitation period in a wrongful dismissal action is Jones v. Friedman, 2006 CanLII 580 (ON CA) (“Jones (CA)”). In that decision, the Ontario Court of Appeal held at para. 4 as follows:

A limitation period commences when the cause of action arises. In a breach of contract, the cause of action arises when the contract was breached. For the purposes of a wrongful dismissal action, the employment contract is breached when the employer dismisses the employee without reasonable notice.

[45] The court agreed with the motion judge that the limitation period commenced on the notice date and, as support, pointed to the plaintiff’s statement of claim, which pleaded the notice date as the date of dismissal: see Jones (CA), at para. 11.

[46] The trial decision of Horkins J. provides a more fulsome analysis of the issue: see Jones v. Friedman, [2005] O.J. No. 6343 (S.C.) (“Jones (SC)”). Therein the plaintiff was advised on December 12 that his employment would be terminated effective January 31 of the next year. The plaintiff issued his statement of claim on a date which put the commencement of the limitation period at issue: the issuance date was after the limitation period if it began on the notice date, but it was within the limitation period if it began when the employment ended.

[47] After noting the paucity of case law in the area, Horkins J. considered three decisions: Stewart v. Lincoln (County) Board of Education, 1972 CanLII 459 (ON SC); Goodwin v. Oxford (County) Board of Education, 1980 CanLII 1633 (ON SC); and Gallant v. Sudbury (District) Roman Catholic Separate School Board (1985), 1985 CanLII 2248 (ON CA), 56 O.R. (2d) 160 (C.A.).

[48] The Stewart and Goodwin decisions reached opposite conclusions. In Stewart the court held that the cause of action arose with the letter of termination, thereby making that case statute barred. The court in Goodwin disagreed, holding that the limitation period began on the date the employment terminated and not on the notification date, noting that the Board could always rescind the termination up to the date it took effect.

[51] As additional support for this interpretation, Horkins J. cited Justice Graeme Mew’s views in his book, The Law of Limitations, 2d ed. (Markham, Ont: LexisNexis Butterworths, 2004):

A cause of action has accrued and, hence, a limitation period starts to run when all of the elements of a wrong exist, such that an action can be brought. [citation omitted]

Actions for breach of contract … accrue upon the breach, and do not require proof of damage. When a plaintiff’s cause of action arises from breach of contract, it is generally not too difficult to ascertain the starting point for a limitations period as the question of damage does not enter into the formula. Once a competent plaintiff and defendant have been identified and a breach of contract has occurred, time will start to run.

[52] Horkins J. concluded that the limitation period commenced on the date of the notice, when the employment was terminated. The elements of the wrong existed on that day: see Jones (SC), at para. 16.

[53] Later cases have considered the issue. None has concluded that the limitation period begins to run from the last day of employment as opposed to when the notice of termination was given.

[54] In Kirkland v. Lohmann Tierzucht Canada Ltd., 2007 CanLII 19422 (ON SC), Matheson J. quoted both Jones (CA) and David Harris’ loose-leaf volume, Wrongful Dismissal, loose-leaf, vol. 3 (Toronto: Thompson Canada Ltd.), for the proposition that the limitation period begins when the employer gives the employee notice of dismissal, even if the actual termination date is in the future: see Kirkland, at paras. 12-13.

[55] In Dixon v. Hanning House Ltd., 2007 CanLII 54954 (ON SC), Gordon J. agreed with Horkins J. in Jones (SC) that “the limitation period commences on the day notice of termination is provided, not the last day the employee worked,” on the principle that the cause of action arose on the notice date: see Dixon, at paras. 16 & 21.

[56] The comments of Pitt J. in Webster v. Alimore Trading & Manufacturing Co., 2010 ONSC 3854 (CanLII), 84 C.C.E.L. (3d) 144, at para. 12, although made in the context of the discoverability of a claim for wrongful dismissal after actual dismissal, are helpful:

Wrongful dismissal, in my view, raises a particularly difficult issue in the limitation context since it is not a dismissal per se that is actionable but rather dismissal without reasonable notice or salary in lieu of such notice, that is actionable. Accordingly, the limitation period for an action for wrongful dismissal does not necessarily run from the date of actual dismissal. It is activated when the cause of action is discovered – that is, the date that the terminated employee knew or ought to have known that he was discharged without cause and without notice or pay in lieu of notice and that a proceeding would be an appropriate way to get redress.

[57] The case of Zawislak v. Siemens Canada Ltd., 2012 ONSC 1043, dealt with a Rule 20 summary judgment motion to dismiss the plaintiff’s wrongful dismissal claim as being statute barred. In that case, Baltman J. found that “in wrongful dismissal actions, a claim is ‘discovered’ when the employee is given notice of his termination: [citing Jones (CA)]”: see Zawislak, at para. 25. For the notice to commence the limitation period, however, the notice must be clear and unambiguous: see Zawislak, at para. 26, citing Ahmad v. Procter & Gamble Inc., 1991 CanLII 7225 (ON CA).

[58] Treatise opinions reach the same conclusion. In Wrongful Dismissal, at p. 10-32.1, David Harris cites the Court of Appeal’s decision in Jones for the proposition that “[i]n cases of outright dismissal, the limitation clock begins ticking when the employer gives the employee notice of dismissal. This is so even if the actual termination date is in the future.” In The Law on Limitations, 3d ed. (Toronto: LexisNexus Canada, 2016), at p. 316, Justice Graeme Mew cites Jones (CA) for the proposition that “[t]he limitation period commences on the day notice of termination is provided, not the last day the employee worked or was paid.”

[67] The issue to be addressed is straightforward: When does the limitation period begin to run for this wrongful dismissal action – at the time notice of termination was received or on the last day worked?

[68] The parties are in agreement that a two-year limitation period governs, that notice of termination was received by the plaintiff on March 18, 2013, and that the plaintiff’s last day of employment was March 22, 2015. The parties also agree on the key legal issue to be decided: whether the limitation period commenced on the notice date or on the last day of work? My ruling does not depend on the resolution of any factual issue. Thus, a motion to strike in these circumstances, pursuant to r. 21.01(1)(a), is appropriate because it seeks a determination of a question of law that will dispose of all or part of the action.

[69] As reviewed above, the weight of authority holds that the limitation period in a wrongful dismissal case commences on the date of notice of termination, even when the actual end of employment is in the future. Indeed, that is the holding in Jones (CA), which is binding on this court.

With respect to the claim for statutory severance, Justice Munroe’s reasoning was as follows:

[73] With regard to the entitlement to severance pay claim, I reach a similar conclusion but on a statutory basis. Mr. Bailey’s entitlement to severance arose when he was dismissed by the notice of termination received on March 18, 2013: see s. 63(1)(a), Employment Standards Act, s. 63(1)(a). It is on this date that the limitation period for this claim began to run.

[74] I have considered but disagree with the plaintiff’s position that s. 65(1) of the Employment Standards Act indicates the severance date should be at the end of work. Section 65(1) is the calculation section, not the entitlement section. Entitlement is by reason of severance per s. 64(1) and severance is by dismissal per s. 63(1). f

[75] In sum, I find that the wrongful dismissal and severance pay claims arose on March 18, 2013, when the notice of termination was received by Mr. Bailey. The applicable limitation period commenced on this date. Because the statement of claim was filed after the expiry of the limitation period, the claims of wrongful dismissal and severance pay are statute-barred.

Both claims were dismissed, although the Plaintiff’s claims for other forms of relief were permitted to continue.

Commentary

While some may quarrel with the correctness of the decision that a dismissed employee “discovers” that the amount of reasonable notice provided will be insufficient on the day on which notice of termination is provided, such is both the state of the law and a correct approach.

For those wondering why some might disagree with such an approach, recall that the purpose of notice of termination is to enable a dismissed employee to find new employment at no economic loss; it is why we measure reasonable notice in units of time. The most common complaint I receive from suddenly unemployed employees is that they do not know how long it will take them to find new work – what if it takes longer than the amount of notice offered by the employer? That’s a fair question. How does one know how long it will take to find new work until one actually does? The problem is that “reasonable notice” does not address the question of how long it will take to find new work; it answers the question how long it should take the dismissed employee to find new work. In that respect, one can know whether the quantum of “reasonable notice” is sufficient at the time notice is provided. (But see the full comments of Mr. Justice Romain Pitt in Webster v. Almore Trading, 2010 ONSC 3854 (CanLII), about which I blogged in my post How Much Time Do You Have to Start a Lawsuit for Wrongful Dismissal in Ontario? Although Justice Munroe cited much of paragraph 12 of Justice Pitt’s reasons for decision in that case, His Honour omitted the final sentence, which reads, “The date of discovery may be later than the date of dismissal.”)

As to the decision on severance pay, I must respectfully disagree with Justice Munroe.

First, section 65 of the ESA prescribes the amount of severance pay to be paid to the dismissed employee. The calculation of the amount is with reference to the number of months and years of employment the employee has completed. Until the employee completes the notice period, the employment relationship has not been severed and such payment does not become due. That argument is bolstered by both subsection 65(4), which speaks to what happens if notice of termination is not provided, and subsection 11(5) of the ESA, which provides as follows:

If an employee’s employment ends, the employer shall pay any wages [including severance pay] to which the employee is entitled to the employee not later than the later of,

(a) seven days after the employment ends; and

(b) the day that would have been the employee’s next pay day.

The severance payment was not due until at least seven days after the employment ended. An employee will not know that his employer has failed, neglected, or refused to make such a payment until a week following termination. In this respect, if I was acting for the dismissed employee, I would argument that a dismissed employee has two years from the day that is the later of seven days after the employment ends and the day that would have been the employee’s next pay day to commence any claim for unpaid severance.

Takeaways for Employees with Labour Pains

The takeaway for employees with labour pains is that it is important to know how much time you have to start your case. There are deadlines that must be observed and that deadlines can be confusing.

If you are an individual looking for assistance with respect to your wrongful dismissal case, contact the professional, experienced and cost-effective employment lawyers for employees at Ottawa's Kelly Santini LLP would be happy to be of service to you.

Contact Me

To reach the author of this blog, Sean Bawden, email sbawden@kellysantini.com or call 613.238.6321 x260.

Sean P. Bawden is a partner with Kelly Santini LLP, located in Ottawa, Ontario, Canada. He practices in the areas of employment law and civil litigation. He has also taught Trial Advocacy for Paralegals and Small Claims Court Practice at Algonquin College in Ottawa.

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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.

1 comment:

  1. I agree that the severance decision is untenable. Bringing an action seeking payment of severance pay before its statutory 'due date' would be, on its face, premature: No actionable harm has occurred until the employer has failed to pay the severance in accordance with the statute. The clock simply can't start running until that failure - and this would remain true *even if* the notice of termination expressly eschewed any entitlement to severance pay.

    By focusing on when the cause of action could have been 'discovered', without proper analysis of when it *actually arose* (which is a prerequisite to discovery), Justice Munroe almost certainly erred.

    Pay in lieu of notice is more nuanced, but again, I think that more than cursory discussion of discoverability is out of place. Discoverability is a really important concept where the plaintiff might not reasonably know about the claim immediately when it arises, but using the plaintiff's awareness as the litmus test where a plaintiff might *anticipate* a cause of action before it arises (as is certainly the case for the severance issue here) is misleading.

    Rather, the important legal question is about whether or not, within the language of the statute, the "injury, loss or damage had occurred" as of specific dates. In the wrongful dismissal context, I agree with you that that's not going to be assessed on the basis of income loss, but rather on the basis of the concept of 'breach'. Whether the breach occurs when the inadequate notice is *given*, or when the inadequate notice *becomes effective*, imho could easily go either way. The Court in Goodwin looked at whether or not a notice of termination can be rescinded by the employer, found that it could be, and concluded that accordingly the contract could not be regarded as breached until the termination became effective. I agree with the logic - if the notice can be rescinded, the Goodwin court's conclusions follow - and there are a number of cases where termination notices are rescinded, modified, re-issued, etc. (And in many ways, I think that's the cleaner analysis, given that in most cases an employer would likely be able to rely on mitigation if it tried to rescind or extend a notice of termination and the employee insisted on the terms of the original termination notice and sued in breach of contract. I think there are much broader problems with the constructive dismissal and mitigation framework, but that's an even longer discussion.)

    Still, this isn't simple: Imagine a scenario where an employee found a new job to begin the day after the termination notice became effective, and the employer rescinded the notice with inadequate time for the employee to provide his own contractual resignation notice - would that put the employee in a breach of contract if he left for the new job he had accepted in reliance on the termination notice?

    I would look to the mirror image in cases of employee resignation: If I resign, I'm entitled to resile from that resignation unless there's detrimental reliance on the resignation by the employer. Conversely, if the employer seeks to resile from a termination, an employee should be able to say "no" if the employee has already found another job or has otherwise relied upon the termination. But otherwise, the employer is entitled to resile from its termination - which would result in the Goodwin analysis being appropriate: In a scenario where inadequate working notice is revoked prior to becoming effective, it doesn't seem to me that we can say that any cause of action has arisen at all - thus, until the termination becomes effective, the breach of contract has not yet occurred, and is not actionable.

    I can see the other angles, and I don't think that the way that the court went on this issue is unjustifiable...but honestly, I'm always sceptical of any result that says to the employee "You should have sued your employer while still working there."

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