Unjust Termination Case Proves Costly for Employer

Written by Daniel Standing LL.B., Editor, First Reference

In Liebreich v Farmers of North America, 2019 BCSC 1074 (CanLII), the plaintiff brought an action for wrongful dismissal against her former employer and a group of entities she claimed were jointly and severally liable. The court was required to first conclude that the plaintiff was a dependant contractor, and that several of the entities were jointly and severally liable. In addition to having to pay reasonable notice to the plaintiff, the employer’s blameworthy conduct in carrying out the termination led to an award of punitive and special damages.

Background

At the time of trial, Ms. Liebreich was 52 years old. When she started working with the defendants (collectively known as Farmers of North America, or “FNA”) in 2002, she was a part-time independent contractor. Over time, her hours increased to full-time and she became more integrated in FNA’s operation, answering only to Mr. Mann, the sole shareholder and director of FNA. Over her tenure with FNA, Ms. Liebreich held many different positions, and her salary was paid by FNA although she recorded hours of work at other entities related to FNA who then forwarded that information to FNA. On many occasions, Ms. Liebreich was the public face of FNA, and her performance was exemplary: she received performance bonuses every year from 2006 to 2014, when they were unilaterally removed.

When FNA began to suffer financial setbacks, sometimes Ms. Liebreich would find herself made part-time, or her invoice for services left unpaid. This caused friction in her relationship with Mr. Mann, who, in 2015 wanted to make changes to Ms. Liebreich’s compensation by insisting that she become an employee. She eventually reluctantly signed a contract, under which FNA agreed to pay her outstanding amounts owing to her. She was also given an employee handbook at that time.

In 2016, the relationship devolved further when Ms. Liebreich perceived Mr. Mann to further attempt to reduce her compensation by asking her to take a part-time contract, and because of a dispute between the two over Ms. Liebreich’s taking of pre-approved vacation that summer. Mr. Mann saw it as Ms. Liebreich abandoning her position which led to him cutting off her access to email and not answering her phone calls. On August 4, Ms. Liebreich received two termination letters signed by Mr. Mann-one from FNA, and the other from a related entity. Cause for termination was alleged to be based on breach of duty, serious wilful misconduct and unsatisfactory performance. Ms. Liebreich found new employment 8.5 months after her dismissal.

Employment status: Dependent contractor

Madam Justice Russell began her analysis by considering the plaintiff’s employment status during the 2002-2015 period. Ms. Liebreich was an employee as of 2015, having signed an employment contract. The court noted the existence of an “intermediate” category of employment whereby the classic employer-employee relationship does not exist but where a term of reasonable notice of termination can still be implied. Workers in this category are “dependent contractors.” In determining the nature of the work relationship, cases have established a variety of relevant factors which can be distilled into an overarching “four-fold test” including the level of worker control, the ownership of equipment and tools, the opportunity for profit or loss and the degree of the worker’s integration in the business. The central question in this analysis is “whether the person who has been engaged to perform the services is performing them as a person in business on their own account.” Justice Russell’s analysis of the pertinent facts in this case led her to the conclusion that Ms. Liebreich “was either an employee, or a dependent contractor very near the employee end of the continuum during the 2002-2015 period.” As such, she was entitled to have her reasonable notice period calculated based on the entire length of her employment, subject to whether she was dismissed for cause.

Just cause for termination

The court began its analysis of this point by stating the application of the fundamental principle of proportionality: Since dismissal is the “capital punishment” for workplace offences, the punishment must meet the crime. The defendants alleged a litany of grounds for just cause, including breach of a duty of loyalty, misuse of confidential information, conflict of interest, threatening to commence a vexatious legal proceeding, taking unapproved holiday leave, falsifying reports, disrespectful and insubordinate communication with management, among others. Left with only the evidence of the plaintiff, which the court found to be credible and reliable, the court concluded that the allegations of cause were wholly unsubstantiated.

Appropriate notice period

Justice Russell stated that since dependent contractors are entitled to reasonable notice of the termination of their contract, the four “Bardal factors” govern the determination of what constitutes a reasonable notice period. These factors include the character of the work, the length of service, the age of the plaintiff and the availability of similar work, having regard to the experience, training and qualifications of the plaintiff. Rejecting the notion that dependent contractors are entitled to “somewhat less” notice than employees, the court considered the plaintiff’s request for notice in the range of 15-18 months. Comparing the facts in the cases cited by the plaintiff to the facts before her, Justice Russell determined that a notice period of 15 months was appropriate. In addition, the plaintiff was entitled to special damages of $1,500 to cover the expenses she incurred in her job search efforts, and various unpaid employment-related entitlements including vacation pay, pay for days worked which were improperly deducted, executive days off, commission earnings and RRSP employer contributions totalling $97,650.00.

Punitive damages

Since the plaintiff claimed punitive damages, the court was required to consider whether the defendant’s conduct was reprehensible, vindictive, malicious, harsh or otherwise egregiously objectionable so as to warrant a rare and exceptional award of damages to further the goals of retribution, deterrence or denunciation.

Justice Russell agreed with the plaintiff that various aspects of Mr. Mann’s conduct warranted an award of punitive damages. Specifically, the defendants maintained their position of just cause through the trial without any evidence to support it, just to avoid paying reasonable notice. When it was clear that Mr. Mann’s allegation of abandonment of position would be insufficient, he tried to cobble together allegations which were completely fabricated, and for which Ms. Liebreich had been given no warnings or opportunity to address prior to her dismissal. After distinguishing the present facts from those of other more egregious cases, Justice Russell concluded that an award of $15,000 in punitive damages was appropriate and proportionate to Mr. Mann’s conduct on behalf of FNA, and met the goals of retribution, deterrence and denunciation.

Joint and severally liability

The court referred to the various named defendants in this action collectively as FNA, but was required to determine which of them were jointly and severally liable to the plaintiff as common employers. This determination considers whether there is a sufficient degree of relationship between the corporate entities, on the rationale that there is no reason why they should not all be treated as one for liability purposes. On the facts of this case, throughout her time with FNA, Ms. Liebreich worked for many different entities that traded under separate names from FNA. Mr. Mann was, at all material times, the sole director, officer, shareholder and directing mind of several of these entities. This, together with the plaintiff’s evidence of her invoices and integrated work with these companies was sufficient for the court to deem them to be common employers in addition to FNA. They were therefore found jointly and severally liable to the plaintiff. For other entities, however, there was a “distinct lack of common enterprise,” precluding a similar finding of liability in relation to them.

Special costs

Mr. Mann’s conduct during the course of the litigation itself, including at trial, drew the ire of the judge and prompted her to address it at the beginning of the written decision where she outlined his recalcitrant conduct and the various delays he caused to the trial process. Noting that the purpose of special costs is to deter and punish reprehensible conduct in the course of litigation, and that special costs should not overlap with punitive damages, the court determined that Mr. Mann’s actions demonstrated misconduct that deserved rebuke. Mr. Mann’s actions caused unnecessary delays and put the plaintiff to considerable extra and unnecessary expense. He made three improper adjournment applications which wasted court time, and attended court late on many occasions. Justice Russell determined that Mr. Mann pursued a meritless claim without regard to the truth, making improper serious allegations and made the resolution of the issue far more difficult than it should have been. As such, she found that an award of special damages was justified, which she assessed at $1,500. All told, the plaintiff was entitled to the total amount of $184,983.33.

Takeaways for employers

This case provides many valuable lessons for employers. The high costs of litigation coupled with the potential awards of punitive and special damages can be likely avoided by an employer who severs ties with an unwanted employee by paying him or her the equivalent of a reasonable notice period where just cause does not exist. In borderline cases of just cause, employers should take caution not to cobble together or manufacture just cause, as doing so likely exposes them to liability for punitive damages. In this case, the litigant’s exceptional behaviour led to an award of special damages against the defendants, but it serves as a useful reminder to all litigants that blameworthy conduct in the course of litigation will likely serve to increase the already high costs for all involved.

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