Eligibility for Full Pension is Not a Relevant Factor in Calculating Termination Notice Entitlement: Ontario Court of Appeal Rules

In Arnone v Best Theratronics Ltd, 2015 ONCA 63 [Arnone], the Ontario Court of Appeal revisited the issue of damages calculation in wrongful dismissal cases. The decision confirms that courts must continue to apply the analysis from Bardal v The Globe and Mail, 24 DLR (2d) 140 (Ont HC) [Bardal] to determine what constitutes reasonable notice of termination. However, the decision clarifies that the Bardal approach does not include a consideration of the time between the date of dismissal and the point at which the employee would be eligible for a full pension. In other words, eligibility for a full pension is not a factor in determining the duration of a reasonable notice period. Arnone case also ascertains that offers to settle are an important factor in determining costs awards and their quantum. Failure to consider settlement offers constitutes a palpable error; a lower court’s determination of costs in such instances will most likely be set aside on appeal.

The Court of Appeal also confirmed that a straightforward claim for wrongful dismissal without cause is ordinarily amenable to a summary judgment motion. The Court also reaffirmed a continued stance of deference to lower court decisions on the issues involving notice calculation, contract interpretation, and the exercise of powers by a motion judge under Rule 20 of the Rules of Civil Procedure, RRO 1990, Reg 194. The Court noted that lower court decisions will attract deference unless the motion judge erred in law or committed a palpable and overriding error.

Facts

Matthew Arnone (“Arnone”) worked as a Supervisor at Best Theratronics Ltd (“Best Theratronics”) for 31 years before he was terminated without cause. At the time of his termination, Arnone was 53 years old. Best Theratronics paid Arnone a severance and termination pay in accordance with the minimum standards requirement under the Employment Standards Act, 2002, SO 2000, c 41 [ESA]. Subsequently, Arnone commenced a wrongful dismissal action and moved for summary judgment.

Summary Judgment

Arnone’s motion for summary judgment was granted. In calculating the period of reasonable notice, the motion judge took into account the time when Arnone would have been eligible for unreduced pension entitlement under the Best Theratronics’ retirement policy. Accordingly, the motion judge ruled the termination notice period should run from the time of termination until the time Arnone qualified for unreduced pension entitlement, less the amount Best Theratronics paid him to satisfy the ESA requirements.

In addition the motion judge ordered Best Theratronics to pay the following damages: (i) damages for the loss of an unreduced pension; (ii) a retirement allowance equal to 30 weeks of pay, as derived from the terms of the employment contract; and (iii) partial indemnity costs in the amount of $52,280.09.

Best Theratronics appealed, claiming that the motion judge erred in principle by granting the motion for summary judgment. Specifically, Best Theratronics argued that a genuine issue for trial existed regarding the character of Arnone’s employment. Best Theratronics contended that there was a clear conflict of evidence about the role (managerial or supervisory) performed by Arnone prior to the termination of his employment, and argued that the motion judge simply had swept aside the conflicting evidence without analysis. Consequently, Best Theratronics sought to set aside the summary judgment order and secure, instead, a dismissal of Arnone’s claim.

Arnone cross-appealed, seeking to increase both the damages and costs awards.

Court of Appeal Ruling and Analysis

Standard of Review: was there a genuine issue for trial?

In applying the standard of review, the Court of Appeal noted that whether or not there exists a genuine issue requiring trial is a question of mixed fact and law. The Court followed the Supreme Court of Canada guidelines in Hryniak v Mauldin, [2014] 1 SCR 87: “Unless there is an extricable error in principle, the lower court’s finding of mixed fact and law should not be overturned, absent palpable an overriding error.” Thus, the review was conducted on reasonableness standard.

Character of Employment

The Court of Appeal upheld the motion judge’s ruling that no genuine issue requiring trial existed concerning the character of employment. The Court noted that Arnone conceded, for the purpose of the summary judgment motion, that he was a supervisor, not a manager. In addition, when deciding on the issue pertaining the character of employment, the motion judge considered the different characterizations of Arnone’s responsibilities advanced by Best Theratronics, and concluded that the characterizations constituted “subtle distinctions” and would not affect minimum entitlements to the period of reasonable notice. Finally, regarding Best Theratronics submissions about conflicting evidence, the Court noted that the motion judge had considered the cross-examinations of both parties in determining whether he could make the necessary findings of fact, which led him to the conclusion that summary judgement was an appropriate manner for disposition of the case.

In passing, the Court stated that a straightforward claim for wrongful dismissal without cause is ordinarily amenable to a Rule 20 summary judgment motion.

Calculation of reasonable notice entitlement

While deferring to the motion judge’s determination regarding the genuine issue for trial, the Court of Appeal found that the motion judge erred in principle when calculating the reasonable notice entitlement. Specifically, the Court determined that the notice period should end when Arnone became eligible for an unreduced pension upon early retirement under Best Theratronics’ defined pension plan.

The Court of Appeal noted that that calculating the period of reasonable notice by reference to the amount of time required to “bridge” the dismissed employee to his date of eligibility for a full pension does not accord with the Bardal analysis.

The Court of Appeal reaffirmed the rule set out by the Supreme Court of Canada in Honda Canada Inc v Keays, [2008] 2 SCR 362, that is, damages for wrongful dismissal operate to compensate an employee for the employer’s breach of the implied obligation in the employment contract to give reasonable notice of an intention to terminate the relationship in the absence of just cause. Damages are confined to the loss suffered as a result of the employer’s failure to give proper notice, measured by the loss of wages and salary, and other benefits that would have been earned during the reasonable notice period. The Court also remarked that the motion judge erred in law by failing to deduct the income earned by Arnone form his new employment during the claimed notice period. The order was varied accordingly.

Nevertheless, the Court upheld the motion judge’s alternative finding that, absent the pension eligibility cutout date, the notice period would amount to 22 months. The court followed the rule set out in Minott v O’Shanter Development Co, [1999] 42 OR (3d) 321 (ON CA), that appellate courts are not justified in interfering with lower courts’ findings of reasonable notice period, unless the figure arrived at is outside of the acceptable range, and the trial judge made an unreasonable finding of fact or erred in principle. The Court also accepted Arnon’s submission that based on numerous cases an acceptable range of reasonable notice for supervisors of a similar age and length of service is 19-28 months.

Loss of Pension Benefits During Notice Period

Regarding the damages for the loss of pension benefits, the Court of Appeal held that terminated employees are entitled to claim damages for the loss of pension benefits that would have accrued had the employee worked until the end of the notice period, barring any contractual limitations. The Court upheld the motion judge’s award of damages for the loss of pension benefits that Arnone would have earned during the notice period.

Costs

Finally, the decision reinforced the well-accepted principle that settlement proposals should be carefully considered by the parties before the issue goes to trial. The Court set aside the motion judge’s cost award solely based on the motion judge’s failure to consider the settlement offers made by Arnon to Best Theratronics. The issue of costs was remitted back to the motion judge for re-determination.