Example of Wrongful Dismissal Claim and Severance Package in Ontario: Amerato vs. TST-CF Solutions LP, 2022 ONSC 5339
The world of Canadian employment law can be complex, especially when it comes to termination of employment and wrongful dismissal claims. The case of Amerato vs. TST-CF Solutions LP, 2022 ONSC 5339 serves as a valuable learning tool for both employers and employees. In this Ontario employment law blog post, we delve into the intricacies of a wrongful dismissal severance package case, analyzing key issues like reasonable notice period under common law, the role of disability benefits, and the importance of clear communication during termination.
What Happened in this Case?
This case involves Cassandra Amerato, who sued her former employer, TST-CF Solutions LP (TST), for wrongful dismissal. Amerato claimed that TST terminated her employment without cause and failed to provide reasonable notice (or a fair severance package). She also claimed that she was terminated from her employment because of her disability and was therefore entitled to damages for discrimination (Wilson v. Solis Mexican Foods Inc., [2013] O.J. No. 4271, 2013 ONSC 5799, at para. 56.).
Background
- Amerato was employed by TST for over 16 years as a Customer Service Supervisor.
- In May 2020, TST merged with another company. At that time, she approached TST and asked if her job was safe, and she received assurances that it was.
- In June 2020, Amerato went on short-term disability due to a concussion. By December 2020, she transitioned to long-term disability (LTD) receiving 60% of her salary.
- In January 2021, TST informed Amerato of her job elimination due to a corporate merger and pandemic-related economic downturn.
- TST offered Amerato two options:
- Termination with 17 weeks’ severance pay.
- Demotion to Customer Service Representative at a lower salary.
- Amerato chose to mitigate her damages by accepting the demotion while reserving her right to sue for wrongful dismissal severance package.
- She claimed that it was only after she began collecting LTD benefits that TST chose to terminate her employment. However, she provided no evidence to support her position that she was discriminated against, beyond the temporal connection between the date she began collecting LTD benefits and the termination of her employment.
She was 52 years of age and disabled. The availability of similar employment was limited because of Ms. Amerato’s age and disability. I also take judicial notice of the fact that her ability to obtain alternative employment may have been adversely affected by the restrictions in the economy imposed as a result of the COVID-19 pandemic: Lamontagne v. J.L. Richards & Associates, 2021 OJ No. 1788, 2021 ONSC 2133, at para. 64.
Job Elimination and the Termination Offer
In January 2021, citing a corporate merger and economic downturn linked to the pandemic, TST informed Amerato of her job termination. Presented with two options, Amerato faced a difficult decision. Option one involved a severance package offering 17 weeks’ pay, and the second option was to accept a demotion to a Customer Service Representative role at a lower salary.
Mitigation Strategy and Reservation of Rights
The general rule in Canadian employment law is that a wrongfully dismissed employee is under a duty to mitigate their wrongful dismissal damages. Generally, any income earned by the employee during the notice period is generally treated as mitigation of loss (Michaels v. Red Deer College, 1975 CanLII 15 (SCC) at para. 332).
At the time of the her wrongful dismissal, Amerato was disabled and was unable to work on a full-time basis. As a result, the court found that her ability to secure alternative employment was affected by her age and disability, as well as the restrictions in the economy as a result of the COVID-19 pandemic.
At the time of termination, TST offered Amerato a new role which she refused because it amounted to a demotion. However, in order to reduce the financial impact of her job loss, she agreed to work in that new job without prejudice to her claim for damages for wrongful dismissal and severance package. She also agreed that TST was entitled to a credit for the income she earned during the notice period, but that TST was not entitled to a credit for the LTD benefits.
Short-Term Disability and the Transition to LTD
On June 16, 2020, Ms. Amerato went on short-term disability after suffering a concussion. She was unable to return to work on a full-time basis and in December 2020 she transitioned to long-term disability. At that time of her termination, she was disabled as per the terms of her LTD insurance policy and therefore receiving LTD benefits in the amount of 60% of her salary of $58,904.95.
The premiums for her LTD disability insurance were paid, at least in part, by Amerato herself. As a result, she argued that the LTD disability benefits should not be deducted from the wrongful dismissal damages to which she was entitled.
For its part, TST did not argue that the LTD disability benefits should be deducted from the wrongful dismissal damages. Instead, TST argued that the court should decline to award any damages for reasonable notice at all. To support its argument, the employer stated that Amerato was collecting LTD benefits before and after her termination of employment. The total income she received in income and benefits did not materially change following the termination. Therefore, if she was awarded wrongful dismissal damages for the income and disability benefits she received before the termination, she would have received a windfall.
The court referred the decision in Sylvester v. British Columbia, 1997, 2 SCR 315, which involved an employee who was receiving short term disability benefits at the time of the termination of his employment. The employer offered 12.5 months’ notice and stated that it would top up any short-or long-term disability benefits received during the notice period. The employee sued for wrongful dismissal and sought damages consisting of the salary he would have earned had he worked during the notice period, in addition to the disability benefits. The court stated:
[….]
“An employee who is wrongfully terminated without reasonable notice of termination is entitled to damages for breach of contract. These damages represent the salary the employee would have earned had the employee worked during the notice period, less any amounts credited to mitigation.
[….]
The appellant did not challenge the finding that the respondent was entitled to damages of $102,100, being the salary, he would have earned had he worked during the notice period. This is consistent with the principle that an employee who is wrongfully dismissed without adequate notice of termination is entitled to damages consisting of the salary the employee would have earned had the employee worked during the notice period. The fact that an employee could not have worked during the notice period is irrelevant to the assessment of these damages. They are based on the premise that the employee would have worked during the notice period. Therefore, an employee who is wrongfully dismissed while working and an employee who is wrongfully dismissed while receiving disability benefits are both entitled to damages consisting of the salary the employee would have earned had the employee worked during the notice period; at paras. 1 and 9.”
Therefore, in that case, the employer had set up and fully funded the disability plan. The employee had not made any contributions to the plan. The court held that in those circumstances, the damages for wrongful dismissal severance package are to be reduced by the amount of disability benefits received from the employer during the notice period.
The court also referred to another decision in Sills v. Children’s Aid Society of Belleville (City), Hastings (County) & Trenton (City), 1999 CanLII 14860, the disability insurance was provided pursuant to a private insurance plan for which the employee paid at least a portion of the premiums. The court concluded that because the employee had contributed to the premiums, it can be inferred that the parties did not intend the disability benefits to be deducted from the damages for wrongful dismissal.
“In the case before me, as pointed out above, although I can find nothing that demonstrates clearly what the intention of the parties was as to the entitlement of the employee to receive both disability benefits and damages, I do make a finding that the employee contributed indirectly to the private plan. The disability benefits were earned by the plaintiff as part of her compensation and as part of a trade-off in arriving at benefits and salary. The plaintiff stated this in her evidence, and it stood uncontradicted.
It is my view, because the plaintiff contributed to the disability plan, Sylvester (supra) does not apply in this case, and the disability benefits should not be deducted from the value of any payments the employee was entitled to receive during the notice period: at paras 45, 46.”
In this case, the court found that the uncontradicted evidence was that Amerato paid at least a portion of the premiums for the LTD disability coverage. As such, TST was not entitled to a deduction of the LTD benefits received by Amerato during the notice period.
Furthermore, the court also rejected the employer’s argument that if the LTD disability benefits are not deducted from the damages for wrongful dismissal, Amerato will receive double recovery. In the court’s view, there was no evidence as to whether the LTD carrier will require reimbursement of benefits paid during a period when the employee receives damages for wrongful dismissal. This was an issue as between Amerato and her disability insurer. Regardless, the employer was not entitled to a reduction of its responsibility to pay damages for wrongful dismissal severance package when the employee helped pay some of the premiums for LTD coverage.
Proving Discrimination
The court held that the although Amerato was terminated from her employment within a month of receiving LTD benefits, the temporal connection did not of itself establish discrimination. However, the closeness in time is sufficient to require an explanation from the employer (Mou v. MHPM Project Leaders, 2017 HRTI 246, at para. 35). TST stated that Amerato was terminated because her position was eliminated following the corporate merger that occurred in the spring of 2020, as well as the economic downturn in available work caused by the pandemic. In fact, Amerato conceded that she had no knowledge or information with respect to the impact of the pandemic on TST’s business. Furthermore, there was no evidence of any internal meetings in which Amerato’s disability was specifically detailed and discussed (Wilson v. Solis Mexican Foods Inc., at paras. 9, 67 and 73).
Lessons Learned: Takeaways for Employers and Employees
This case offers valuable takeaways for both employers and employees:
- Clear and unambiguous communication throughout the termination process is crucial to avoid accusations of wrongful dismissal.
- understanding the concept of reasonable notice and its calculation is vital to avoid legal disputes. Factors like the employee’s tenure, age, and disability should be carefully considered.
- when terminating an employee without cause, the employee should be treated with decency, sensitivity and respect, particularly if they are older employees or are disabled at the time of termination (since it may entitled them to other damages, such as bad faith damages or discriminatory damages).
- The courts are unlikely to deduct any LTD benefits from wrongful dismissal damage awards (severance packages), particularly if the employee paid some or all of the LTD premiums.
- In some cases, it may be wise for wrongfully dismissed employees to accept employment with the same employer in order to mitigate while reserving their rights to reject a demotion and sue for wrongful dismissal.
Speak to a Wrongful Dismissal Lawyer
Dealing with a termination of employment, wrongful dismissal claims and negotiating a severance package can be stressful, overwhelming and confusing. If you are an employee needing to consult with an Ontario wrongful dismissal lawyer to review your severance package or a wrongful dismissal claim, to better understand your legal rights as an employee, Bune Law, Toronto Employment Lawyer, can help.