Sept 2022 Charity & NFP Law Update
CERB Payments Not Always Deducted from Damages for Wrongful Dismissal in Ontario
“Where an employment agreement is not consistent with the [Employment Standards Act, 2000], it becomes invalid irrespective of the actual arrangements made with an employee on termination, and the terminated employee becomes entitled to common-law damages.”
Justice Carole J. Brown (Brown J) stated this principle of employment law in an August 10, 2022 Superior Court of Ontario judgment, Henderson v Slavkin et al., which found the termination clause in the parties’ employment contract was unenforceable as a consequence of other provisions that were not in compliance with the Employment Standards Act, 2000 (ESA). Brown J ordered the defendant employers to pay wrongful dismissal damages to the plaintiff employee based on the common-law right of reasonable notice. The parties had agreed prior to the hearing on a common-law reasonable notice period of 18 months, if the court ruled the employee was wrongfully dismissed.
The defendants argued that the plaintiff’s payments from the Canada Emergency Response Benefit (CERB), paid during the COVID-19 pandemic, should reduce her damages. However, Brown J held that CERB payments would not be deducted. Employers of charities and not-for-profits should be aware of the requirements for employment contracts with legally enforceable termination clauses if they seek to limit their employees’ rights to reasonable notice, or pay in lieu of such notice.
The plaintiff, Rose Henderson, commenced employment at the oral surgeon office of Drs. Slavkin and Kellner, in 1990. As the surgeons neared retirement in 2015, they offered revised employment contracts to their employees, including Ms. Henderson, who signed the new agreement (the “Employment Contract”). Dr. Slavkin later retired effective August 26, 2019. The defendants convened a meeting on November 1, 2019 to advise that Dr. Kellner would be retiring in March 2020 and “provided to all staff, including the plaintiff, confirmation in writing of the termination of their employment effective April 30, 2020.” The Employment Contract included a Termination Clause in paragraph 13, a Conflict of Interest Clause in paragraph 18, and a Confidential Information Clause in paragraph 19. Ms. Henderson argued that these three paragraphs were unenforceable and contravened the ESA and therefore that she was entitled to common-law reasonable notice.
The defendants argued that the impugned paragraphs were ESA-compliant and that they afforded sufficient notice according to the ESA minimums. While Brown J found the Termination Clause itself compliant with the ESA, the other two clauses in paragraphs 18 and 19 were not. As a result, the Employment Contract was invalid, and the Termination Clause unenforceable. Ms. Henderson therefore was entitled to her common law rights of 18 months’ reasonable notice, with wrongful dismissal damages as payment in lieu.
During the 18-month reasonable notice period in 2020, Ms. Henderson received approximately $10,000 in CERB payments from the federal government. The defendants argued this amount should be deducted from the wrongful dismissal damages, or else Ms. Henderson would be paid more than if she had not been terminated, creating a “compensable advantage”. While recognizing other case law in Ontario and other provinces that deducts CERB from such damages, Brown J distinguished this case, because Ms. Henderson did not cease working due to COVID-19, as her November 1, 2019 notice of termination predated the pandemic, and therefore there was a “real risk that she will be required to repay it, in due course.” Ms. Henderson “should not have to bear the risk of not being made whole,” Brown J ruled, “especially at her advancing age and after being a loyal and dedicated employee for 30 years — a length of service reflected in the 18-month notice period agreed to by the parties.”