Monday, 17 June 2019

When Too Many Principles Converge: The Decision in Ariss v. NORR Limited Architects

What happens when ambiguous facts get resolved via summary judgment and then appealed? One gets decisions like Ariss v. NORR Limited Architects & Engineers, 2019 ONCA 449, which unfortunately add more confusion to the law of termination than clarity.

Facts

The facts of the case were very succinctly distilled by Justice Roberts. She wrote, at issue on this appeal is the enforceability of terms that purport to waive an employee’s years of service, his presumptive right to reasonable notice under the common law, and his full entitlement to termination and severance pay under the Employment Standards Act, 2000, S.O. 2000, c. 41 (“ESA”).

The appellant, John David Ariss, was dismissed without cause from his part-time employment with the respondent, NORR Limited Architects and Engineers (“NORR”). Relying on the terms of a written employment agreement that purported to waive Mr. Ariss’ years of service and his entitlement to common law notice, on terminating his employment not for cause, NORR paid him the minimum entitlements to statutory notice and did not provide him with any severance pay.

Mr. Ariss brought an action against NORR for wrongful dismissal damages based on the common law principle of reasonable notice.

The motion judge, the Honourable Justice Sylvia Corthorn of the Superior Court of Justice, on summary judgment, determined that Mr. Ariss had not waived his years of service and that he was entitled to termination and severance pay under the ESA based on all his years of service. However, Justice Corthorn also found that Mr. Ariss was bound by his earlier 2006 waiver of his common law entitlement to reasonable notice. As a result, Mr. Ariss’ damages stemming from his dismissal from employment without cause were accordingly limited to his termination and severance entitlements under the ESA.

Mr. Ariss appealed from the order of the motion judge on the ground that she erred in finding that he had waived his entitlement to reasonable notice at common law under an unenforceable agreement.

For employment-law buffs, the chronology of events is actually quite interesting:

In February 1986, Mr. Ariss, who is a professional architect in the Kingston region, commenced full-time employment as an architect with Dominik Thompson Mallette, Architects and Engineers Inc. (“DTM”).

In November 2002, DTM sold its business to NORR. Immediately following the sale, Mr. Ariss was employed by NORR.

There are three stages in Mr. Ariss’ employment relationship with NORR that were germane to the appeal and that form the factual matrix of the motion judge’s determination of the governing terms of Mr. Ariss’ employment.

On September 6, 2002, DTM advised Mr. Ariss that his employment would be terminated because of the sale of its business to NORR. On the same day, September 6, 2002, NORR provided Mr. Ariss with an offer of employment. Mr. Ariss signed that offer of employment on September 18, 2002. The offer letter did not contain any termination provisions. However, in signing the agreement, Mr. Ariss acknowledged in writing that he had read, understood and accepted the offer of employment “including the provisions specified in the Conditions of Work and Group Benefits for Pay Code 4 attached and forming part of this letter of offer.”

Pay Code 4 contains NORR’s termination policy that purported to limit its employees’ notice and severance entitlements to the minimum statutory provisions under the ESA. Included in Pay Code 4 is a chart of the periods of employment and corresponding notice periods stipulated under s. 57 the ESA and an express reference to payment of severance in accordance with s. 64 of the ESA.

The next development in the employment relationship occurred in June 2006. At Mr. Ariss’ request, NORR permitted Mr. Ariss to increase his hours of work from 35 to 40 hours per week. His base salary rose to $87,110 to reflect this change. On June 27, 2006, Mr. Ariss signed NORR’s June 21, 2006 letter and acknowledged the amendments to his employment agreement, including the “new Conditions of Work and Group Benefits under Pay Code 3”. There was no dispute that Pay Code 3 was attached to the June 21st letter; Mr. Ariss initialed all four pages of the Pay Code 3 document.

Under “Termination Policy”, Pay Code 3 provided that in the case of termination of employment without cause, notice of termination would be provided in accordance with the ESA:

[NORR] will provide notice of termination in writing to the employee in accordance with the Ontario Employment Standards Act. The Employment Standards Act provides one week for every year of service to a maximum of 8 weeks.

As under Pay Code 4, Pay Code 3 set out a chart of the periods of employment and corresponding notice periods stipulated under the ESA. Pay Code 3 also provided for severance pay in accordance with the ESA.

Mr. Ariss agreed that he had read and understood Pay Code 3, including the waiver of his common law notice entitlement to reasonable notice of dismissal. There was no suggestion that the increase in his work hours to a 40-hour week and his augmented remuneration were inadequate consideration for the waiver of his common law notice entitlements.

The third and final evolution of Mr. Ariss’ employment with NORR, which gives rise to the parties’ dispute, took place in 2013. Starting in early 2013, Mr. Ariss raised with NORR the possibility of transitioning from full-time to part-time hours. This request became the subject of negotiation for several months, which was documented in a series of emails and letters between the parties. Finally, in July 2013, Mr. Ariss secured NORR’s agreement to reduce his hours from full-time to part-time employment. Mr. Ariss started working under the part-time arrangement with proportionately reduced compensation on or around July 15, 2013; on this date, discussions about the specific terms of the part-time work arrangement were still ongoing.

NORR was not prepared to agree to Mr. Ariss’ transition from full-time to part-time employment unless he resigned from his employment, entered into a new employment agreement, waived his years of service, limited his notice entitlement to the date of the signing of the new agreement, and forewent any accrued entitlement to severance pay for his past years of service with NORR. NORR made clear, through a series of emails and voicemails, that Mr. Ariss’ resignation and acceptance of new terms of employment were non-negotiable if he wanted to secure part-time hours.

After having obtained legal advice, on July 17, 2013, Mr. Ariss sent the following written acknowledgement of the agreement between the parties:

Please accept this letter as notice of my wishes to reduce my work week and resign from my full time position as Senior Architect from the NORR Kingston office. This is conditional on acceptance of a new offer of employment for part time hours, conditions which have been discussed with and agreed to by Brian Gerstmar.

I understand that the new employment terms will be in accordance with the Employment Standards Act of Ontario. Termination, notice and severance for my past employment will not form part of the new terms of employment. [Emphasis added.]

On July 31, 2013, Mr. Ariss signed NORR’s “Offer of Casual Employment”. Although his hours decreased to 24 hours per week, his position and duties as Senior Architect to the Kingston office did not change. His remuneration also remained essentially unchanged: his compensation was adjusted to $55.40 per hour, which included 11.8% for vacation and statutory holiday pay, and his $330 monthly car allowance; his pension and health benefits stayed the same.

Attached to the July 24th offer letter were “Conditions of Work and Group Benefits”. Under “Termination”, the attachment simply stated: “As per letter of offer”. The offer letter set out the following termination provisions:

Either party may terminate this agreement by providing the minimum notice required under the Employment Standards Act of Ontario.

There was no mention in the offer letter of any severance pay obligation or entitlement upon termination from employment.

On January 26, 2016, NORR terminated Mr. Ariss’ employment effective February 19, 2016. NORR gave him 3.5 weeks’ notice of termination based on his service from July 2013, and offered to continue Mr. Ariss’ benefits for a period of two weeks following the effective date of termination. NORR did not provide Mr. Ariss with severance pay on termination.

Decision of the Ontario Superior Court

Justice Corthorn found that at the time of his termination from employment with NORR, Mr. Ariss had been continuously employed since February 1986 and that there had been no interruption in his continuity of service.

Applying s. 9(1) of the ESA, Justice Corthorn found that Mr. Ariss’ employment was not terminated during the 2002 asset sale from DTM to NORR and that it continued with NORR for the purpose of any subsequent calculation of his length of employment and his entitlements under the ESA. As a result, the motion judge determined that Mr. Ariss was continuously employed with NORR for a period of about 30 years as at the date of his termination from employment. While at issue on the motion, NORR did not contest those findings on appeal.

Justice Corthorn rejected that Mr. Ariss had resigned from his employment because such a resignation would represent “an entirely artificial attempt to create an interruption in employment when in fact there was none”. Rather, the motion judge found Mr. Ariss had transitioned from full-time employment to part-time employment. She rejected NORR’s position that Mr. Ariss had acted in bad faith in signing the 2013 agreement on the basis that he had been provided with legal advice and believed that the requirement he resign in exchange for continued employment on a part-time basis was unenforceable.

In Justice Corthorn’s view, these “events in 2013” amounted to an amendment of the existing terms of his employment, which included the 2006 waiver and termination provisions.

With respect to the latter, the motion judge concluded that Mr. Ariss had waived his entitlement to common law notice in 2006 when his hours and remuneration increased, and that the historical termination provision from the 2006 agreement continued to apply in 2013 when he changed to part-time hours. Referencing the 2006 termination provision, she concluded:

I am, in any event, satisfied that even when the termination clause is viewed in isolation of the surrounding circumstances over time, it is sufficiently clear to rebut the presumption of entitlement to notice in accordance with the common law. The termination provision is explanatory; it sets out in chart form the number of weeks’ notice of termination to which employees are entitled based on their years of service. There is no ambiguity in the wording of the termination provision.

Issues on Appeal

As framed by the Court of Appeal for Ontario, the issues on appeal were:

  1. Did the motion judge err in finding that “the events in 2013” served to amend his 2006 agreement of employment such that he was still bound by his 2006 waiver of his common law reasonable notice entitlement?
  2. If so, was there consideration for the new terms?

Decision

In some incredibly confusing reasons for decision, Justice Lois Roberts wrote the following:

[31] Mr. Ariss submits that the motion judge erred in failing to consider the effect of the illegal resignation and waiver of years of service on the validity of the termination clause in the 2013 agreement. Specifically, Mr. Ariss argues she erred in failing to determine that the termination provisions of the 2013 agreement were void because of their infringement of the ESA with the result that Mr. Ariss’ presumptive right to common law reasonable notice was not rebutted.

[32] I would not give effect to these submissions. In my view, they ignore the motion judge’s findings that were available to her to make.

[33] The motion judge correctly found ineffective the attempt by the purported resignation to break Mr. Ariss’ years of continuous service in order to limit his entitlement to termination pay and obviate his right to severance pay as an employee of more than 5 years. She concluded that neither Mr. Ariss nor NORR intended him to resign from his employment. As she determined, Mr. Ariss’ employment was continuous in accordance with s. 9(1) of the ESA because NORR continued to employ Mr. Ariss following its purchase of DTM’s business in 2002.

[34] I agree that Mr. Ariss’ purported resignation and waiver of his accumulated years of service represented an illegal attempt, contrary to s. 5(1) of the ESA, to contract out of the ESA. However, as I shall explain, the illegality of these terms does not affect the correctness of the motion judge’s decision.

[35] Section 5(1) of the ESA provides as follows:

Subject to subsection (2), no employer or agent of an employer and no employee or agent of an employee shall contract out of or waive an employment standard and any such contracting out or waiver is void.

[37] Section 9(1) of the ESA reads:

If an employer sells a business or a part of a business and the purchaser employs an employee of the seller, the employment of the employee shall be deemed not to have been terminated or severed for the purposes of this Act and his or her employment with the seller shall be deemed to have been employment with the purchaser for the purpose of any subsequent calculation of the employee’s length or period of employment.

[38] The purpose of s. 9(1) of the ESA is to protect minimum statutory entitlements related to the length of employment, such as notice and severance, where the purchaser of a business, or part of a business, continues to employ the employees of the vendor post-acquisition. As a result, s. 5(1) invalidates any purported contracting out or waiver of s. 9(1).

[39] However, the motion judge’s determination that the resignation and waiver were ineffective does not invalidate the parties’ performance of the new terms of Mr. Ariss’ part-time employment. There was no new written contract of employment because the resignation was ineffective and Mr. Ariss’ employment continued. The effect of the parties’ performance of the 2013 terms served, as the motion judge found, to amend the existing employment agreement, as it then stood, to provide for Mr. Ariss’ requested change from full-time to part-time employment. The extant terms included the 2006 termination clause and waiver of entitlement to common law reasonable notice.

[40] It is well-established that absent clear rebuttal, employment agreements contain an implied term that employees are entitled to reasonable notice of termination. However, there is no dispute that the 2006 waiver of Mr. Ariss’ common law entitlement to reasonable notice was clear and unequivocal. The motion judge correctly found that there was no change to this term by “the events in 2013”. As she concluded, Mr. Ariss “fully understood, both when working full-time and when working part-time, that his entitlements on termination would be in accordance with the ESA”.

[41] The motion judge findings were open to her. I see no error that would justify appellate intervention. I would therefore not give effect to this ground of appeal.

Commentary

I confess to being incredibly confused by this decision. When I wrote about the decision of the Superior Court, in my post Everything New is Old Again: Continuity of Employment in an Asset Sale at Common Law, I understood the case to be one concerning the sale of DTM to NORR and the effect of section 9.

However, reading the decision of the Court of Appeal, one quickly realizes that this case had nothing to do with the sale of business in 2002, and everything to do with the purported resignation in 2013. At best, an analysis of what happened in 2006 would be necessary, given the court’s finding that the dispositive termination clause resided in that agreement, but who gives a fig about section 9? (Other than for calculating his severance entitlement.)

With the utmost of respect to Justice Roberts, I find her reasoning in paragraph 33 of her reasons for decision terribly confusing. She wrote:

[Justice Corthorn] concluded that neither Mr. Ariss nor NORR intended him to resign from his employment. As she determined, Mr. Ariss’ employment was continuous in accordance with s. 9(1) of the ESA because NORR continued to employ Mr. Ariss following its purchase of DTM’s business in 2002.

To me, those two ideas are no way related and should not appear in the same paragraph. The purported resignation happened in 2013. The sale happened in 2002. Again, why are we linking those two things together?

In my opinion, Mr. Ariss did intend to resign. And, if he didn’t intend to “resign”, then he certainly intended to terminate the 2006 agreement. That should have been the finding of fact by the motion judge.

Then, the purported waiver, in 2013, of any entitlement to severance, ought to have been found to illegal, given the application of section 5 of the ESA, and the fact that when counting years of service, you count all years of service, regardless of when they are worked. Section 9 was immaterial to this analysis, because by 2013, Mr. Arris had already worked for NORR itself for more than five years. One could have relied on those sections of the ESA and not section 9.

In my opinion, the 2006 agreement had been terminated – at the employer’s insistence and the employee’s agreement. The termination clause within the 2006 was therefore dead and buried. The termination clause in the 2013 agreement, which was a new agreement, was illegal, and therefore Mr. Ariss should have received pay in lieu of reasonable notice.

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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.

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