



COURT OF APPEAL FOR ONTARIO

CITATION:  Michela v. St. Thomas of Villanova Catholic
    School, 2015 ONCA 801

DATE: 20151123

DOCKET: C59979

Hoy A.C.J.O., Epstein and Huscroft JJ.A.

BETWEEN

Domenica Michela, Sergio Gomes and Catherine Carnovale

Plaintiffs

(Appellants/Respondents by way of cross-appeal)

and

St. Thomas of Villanova Catholic School

Defendant

(Respondent/Appellant by way of cross-appeal)

Michael D. Wright and Stephen Moreau, for the appellants/respondents
    by way of cross-appeal

Ian B. St. John and Jeffrey Rochwerg, for the respondent/appellant
    by way of cross-appeal

Heard: July 6, 2015

On appeal from the summary judgment of Justice Thomas R.
    Lederer of the Superior Court of Justice, dated January 7, 2015, with reasons
    reported at 2015 ONSC 15
, 2015 C.L.L.C. 210-020, and on
    cross-appeal from the costs decision dated February 20, 2015, with reasons
    reported at 2015 ONSC 1145
.

Huscroft J.A.:

[1]

Are an employers financial circumstances a relevant consideration in determining
    the period of reasonable notice to which a wrongfully dismissed employee is
    entitled? This is the question raised by this appeal.

[2]

The appellant school teachers appeal from the January 7, 2015 summary judgment
    in their wrongful dismissal action against the respondent private school. The
    motion judge found they were wrongfully dismissed and awarded pay in lieu of the
    six months notice he found they should have received. He determined this
    notice period after taking into account the respondents financial circumstances,
    which had the effect of reducing the reasonable notice period from twelve
    months to six. The appellants seek to vary the damage award by substituting a
    twelve-month notice period.

[3]

The respondent accepts the motion judges finding that the appellants
    were wrongfully dismissed and accepts the six-month notice period. However, the
    respondent seeks leave to cross-appeal the motion judges costs award, dated
    February 20, 2015, on the basis that the appellants failed to accept a
    settlement offer greater than the damages they were awarded on summary judgment.

[4]

For the reasons that follow, I would allow the appeal and deny leave to cross-appeal
    the costs award.

Background

[5]

The respondent employed the appellants on a series of one-year contracts.
    Gomes was employed for thirteen years (including three leaves of absence);
    Michela for eleven years (including one leave of absence); and Carnovale for eight
    years. Each of the appellants received a letter from the respondent dated May 31,
    2013 informing them that their contracts would not be renewed because enrolment
    for the upcoming academic year was expected to be lower. The letters stated
    that the appellants would be informed if the schools position changed prior to
    the end of the school year. Michela and Carnovale received a second termination
    letter dated June 27, 2013. Gomes received an e-mail from the respondent on
    June 30, 2013 stating that the respondent was not in a position to offer him a position
    at that time.

[6]

The appellants commenced an action for wrongful dismissal. The parties
    agreed to proceed with a motion for summary judgment.

[7]

The respondent argued that the appellants were not entitled to notice
    because they were employed pursuant to fixed-term contracts. However, the
    motion judge found that the appellants were employed for indefinite periods and
    were entitled to reasonable notice. The respondent did not cross-appeal this
    finding. The motion judge rejected the appellants submission that the notice
    period began to run on September 1, 2013. He found that the notice period for
    Gomes began to run on June 30, 2013 and that the notice periods for Michela and
    Carnovale began to run on June 28, 2013.

[8]

The motion judge reduced the twelve-month notice period proposed by the
    appellants to six months after taking into account the respondents financial
    position and the availability of alternative teaching positions. He reasoned as
    follows, at para. 100:

I find that the notice period proposed is too long. I point
    out that, if notice for 12 months is reasonable, the School will have to pay
    the same amount for these teachers as if they had remained on staff for the
    year that was upcoming. Assuming that the other two teachers who were
    terminated maintained the same rights, it is not difficult to see that the
    School would be unable to reduce its prospective deficit by terminating staff
    it did not need. The law does not ignore the dilemma of the employer. The
    teachers should be taken to understand this aspect of their employment and, in
    this case, were made aware of the concern. In this situation, I reduce the
    claim for notice by half, to six months.

[9]

The motion judge rejected the respondents argument that the appellants should
    be required to pay costs pursuant to r. 49.10 of the
Rules of Civil
    Procedure
, R.R.O. 1990, Reg. 194 because they recovered less than the
    respondent had offered them to settle the matter. He found that the respondents
    settlement offer was a global offer and that each of the plaintiffs had
    different claims. It was not possible to say that the result obtained on the
    motion was less than the settlement offer because it was not clear how the
    offer would have been divided among the appellants.

[10]

The
    motion judge found that the respondent lost the issues fundamental to the
    proceeding (the term of the contracts and whether the appellants had mitigated)
    and criticized the respondent for using its superior power to complicate and
    lengthen the proceedings in pursuit of its interests. He awarded the appellants
    $42,000 in costs on a partial indemnity basis.

Issues on appeal

[11]

The
    appellants raise three issues on appeal. First, they say the motion judge erred
    in law in relying on the respondents alleged financial difficulties to reduce
    the notice period. Second, the motion judge erred in law in presuming that there
    may be positions the appellants could secure six months following their
    termination. Third, the motion judge made a palpable and overriding error of
    fact in finding that enrolment issues constituted a financial problem permitting
    a reduction in the notice period to six months.

Analysis

Are an employers financial circumstances a relevant consideration
    in determining the period of reasonable notice to which a wrongfully dismissed
    employee is entitled
?

[12]

The
    nature and purpose of notice are well established. Although employees may be
    dismissed without cause,
employment contracts for an
    indefinite period require the employer, absent express contractual language to
    the contrary, to give reasonable notice of an intention to terminate the
    contract if the dismissal is without cause:
Machtinger v. HOJ
    Industries Ltd.
, [1992] 1 S.C.R. 986.
Reasonable
    notice allows employees a reasonable period of time to find replacement work.
    Damages for dismissal without reasonable notice are designed to compensate
    employees for the losses incurred during the period of reasonable notice  the
    amount of wages and benefits that they would have earned had they been
    permitted to serve out the notice period: see
Arnone v. Best Theratronics
    Ltd.
, 2015 ONCA 63,
329 O.A.C. 284,
at para. 16,
    leave to appeal refused, [2015] S.C.C.A. No. 140;
Taggart v. Canada Life
    Assurance Co.
(2006), 50 C.C.P.B. 163 (Ont. C.A.), at para. 13; and
Sylvester
    v. British Columbia
, [1997] 2 S.C.R. 315, at para. 1
.

[13]

The
    calculation of the notice period is a fact-specific exercise. The relevant
    factors are set out in
Bardal

v. The Globe & Mail Ltd.
(1960), 24 D.L.R. (2d) 140 (Ont. H.C.), at p. 145, and focus on the
    circumstances of the employee: the character of their employment, their length
    of service, their age, and the availability of similar employment, having
    regard to their experience, training, and qualifications.

[14]

The
    motion judge emphasized the character of the employment in determining that
    the twelve-month notice period sought by the appellants should be reduced to
    six. He reasoned as follows, at paras. 89 and 90:

It should be self-evident that, by its nature, the School could
    not provide the security of employment offered by larger, more established and
    better-funded institutions. The teachers must be taken to have understood the
    circumstances of their employer. Every year, they had to wait until June before
    the School could be sure of its requirements for the upcoming year

The three teachers cannot be taken to have been unaware of the
    circumstances of the School. Whatever their rights to notice, it must be
    understood that they worked there understanding its circumstances. This cannot
    be ignored in assessing what is reasonable notice. It is an aspect of the
    character of the employment as referred to in
Bardal v. Globe & Mail
    Ltd
... These are facts that are particular to this case.

[15]

In
    my view, the motion judge erred in considering an employers financial circumstances
    as part of the character of the employment.

[16]

The
    character of the employment refers to the nature of the position that had been held
    by the employee  the level of responsibility, expertise, and so on. Historically,
    courts have drawn a distinction between management and non-management employees
    in determining notice, and have assumed that the former may require more time
    to find similar employment than the latter. This court has questioned the
    validity of this assumption and suggested that the character of the employment
    is a factor of declining relative importance:
Di
    Tomaso v. Crown Metal Packaging Canada LP
, 2011
    ONCA 469, 337 D.L.R. (4th) 679, at paras. 27-28.

[17]

It
    is not necessary to address this issue for the purposes of this case. It
    suffices to say that the character of the employment, like the other
Bardal
factors, is concerned with the circumstances of the wrongfully dismissed
    employee. It is not concerned with the circumstances of the employer. An
    employers financial circumstances may well be the
reason
for
    terminating a contract of employment  the event that gives rise to the
    employees right to reasonable notice. But an employers financial circumstances
    are not relevant to the determination of reasonable notice in a particular case:
    they justify neither a reduction in the notice period in bad times nor an
    increase when times are good.

[18]

The
    confusion in this area stems from
Bohemier v. Storwal International Inc
.
    (1982), 40 O.R. (2d) 264 (H.C.), cited by the motion judge, at para. 91, to
    support the proposition that [u]ncertainty, especially where an employee knows
    that there are financial concerns, can be a factor in reducing the length of
    notice that might otherwise be reasonable The motion judge quoted the
    following passage found at p. 268 of
Bohemier
:

An employee may be dismissed either on reasonable notice or by
    payment in lieu of notice. The latter alternative is almost invariably selected
    because, for obvious reasons, it is not helpful to a business to continue to
    employ a person who has received notice of dismissal. Payment in lieu of notice
    involves a cost to the employer for which there is no corresponding production
    or benefit. In my view, there is a need to preserve the ability of an employer
    to function in an unfavourable economic climate. He must, if he finds it
    necessary, be able to reduce his work force at a reasonable cost.

[19]

However,
    the key sentence in
Bohemier
 not quoted by the motion judge 
    follows on from the passage quoted above, at p. 268:

It seems to me that
when employment is unavailable due to
    general economic conditions
, there has to be some limit on the period of
    notice to be given to discharged employees even if they are unable to secure
    similar employment within the notice period. [Emphasis added.]

[20]

Bohemier
does not hold, and this court has never held, that an employers financial
    difficulties justify a reduction in the notice period. It does no more than to
    hold that difficulty in securing replacement employment should not have the
    effect of increasing the notice period unreasonably. That is what this court should
    be taken to have meant when, in its brief endorsement in
Bohemier
, it
    said that the lower court judge was right to tak[e] into account economic
    factors when considering the case for each of the parties: (1983), 44 O.R.
    (2d) 361, at p. 362, leave to appeal to SCC refused,
[1984]
    S.C.C.A. No. 343
.

[21]

Nevertheless,
    it is clear that
Bohemier
has caused some confusion in wrongful
    dismissal litigation. Most recently, it was relied on in
Gristey v. Emke
    Schaab Climatecare Inc
., 2014 ONSC 1798, 2014 C.L.L.C. 210-028, in
    reducing an employees notice period by one-third as a result of the relatively
    poor state of the market and the financial health of the employer.

[22]

It
    is important to emphasize, then, that an employers poor economic circumstances
    do not justify a reduction of the notice period to which an employee is
    otherwise entitled having regard to the
Bardal
factors. See
Anderson
    v. Haakon Industries (Canada) Ltd
. (1987), 48 D.L.R. (4th) 235 (B.C.C.A.),
    at pp. 238-41 (Lambert J.A.), pp. 243-44 (Wallace J.A.);
Farquhar v. Butler
    Bros. Supplies Ltd
. (1988), 23 B.C.L.R. (2d) 89 (C.A.), at pp. 92-93; and
Sifton
    v. Wheaton Pontiac Buick GMC (Nanaimo) Ltd
., 2010 BCCA 541, 12 B.C.L.R.
    (5th) 90, at paras. 34-35, 47-50.

[23]

Thus,
    even assuming that the respondent was suffering financial difficulties when it
    dismissed the appellants, the motion judge erred in concluding that the period of
    notice to which the appellants were entitled should be reduced as a result. That
    conclusion is neither required by the case law nor consistent with the nature
    and purpose of an employees right to notice.

[24]

Given
    this conclusion, there is no need to address the third issue raised by the
    appellants.

The relevance
    of alternative teaching positions

[25]

The
    motion judge did not base his decision to reduce the appellants notice periods
    solely on the financial position of the respondent. He stated, at para. 100:

I do this, in part, in recognition that six months would take
    the teachers to the Christmas season; that is the end of the first term. It
    seems reasonable to presume that, if there is a moment in the course of the
    school year where teaching positions may become available, it would be during
    this holiday period.

[26]

The
    appellants argue that the motion judge erred in law by buttressing his decision
    to reduce the notice period with the presumption that teaching positions may
    become available in the Christmas holiday period. The respondent argues that the
    motion judge was entitled to conclude there was evidence that similar
    employment was available.

[27]

There
    is no evidentiary basis for the motion judges presumption concerning the
    future availability of teaching positions. It is a matter of speculation and is
    inconsistent with his conclusion that the appellants took all reasonable steps
    to mitigate their damages. It does not support the decision to reduce the
    notice period.

Conclusion

[28]

I
    would allow the appeal and increase the period of reasonable notice to twelve
    months  the starting point adopted by the motion judge  subject to the
    reductions set out by the motion judge in para. 135 of his decision.

[29]

This
    conclusion obviates the need to address the respondents cross-appeal, as the
    quantum of damages to which the appellants are entitled is significantly greater
    than the amount of the respondents r. 49.10 offer, quite apart from the issue
    surrounding the division of the settlement offer among the three appellants.

[30]

I
    would deny leave to cross-appeal the costs decision of the motion judge.

Costs

[31]

The
    parties requested that this court deal with the costs on the motion rather than
    remit the matter to the motion judge.

[32]

The
    motion judge awarded the appellants $42,000 in costs on the basis that they
    were not entirely successful. This was a reduction of the partial indemnity
    costs sought of $68,573.42, an amount based on rates and hours the respondent
    conceded to be appropriate. Given the appellants success on the appeal, I see
    no reason to discount the appellants costs on the motion. Accordingly, I would
    award costs of the motion to the appellants in the amount of $68,573.42,inclusive
    of taxes and disbursements.

[33]

By
    agreement of the parties, costs for the appeal are set at $10,000, inclusive.

Released:  November 23, 2015
    AH

Grant
    Huscroft J.A

I
    agree Alexandra Hoy A.C.J.O.

I
    agree Gloria Epstein J.A.


