Court Determines Worker Was Employee, Awards Punitive Damages

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

Cases in which courts must determine reasonable notice for a dismissed employee are generally straightforward, involving an analysis of certain time-honoured factors in relation to the employee and his or her work. The case before the Supreme Court of British Columbia in Cho v Stonebridge Solutions Inc., 2020 BCSC 1560 involved a unique twist: the court first had to determine whether the plaintiff worker was an employee (as he claimed), or an independent contractor (as the defendant company claimed). The court concluded that, as an employee, the worker was entitled to two months’ reasonable notice.

Background

When he started working for Stonebridge, Harry Cho was in his late 40’s and had about 20 years of sales experience in the financial technology sector. Stonebridge’s sole shareholder, Ms. Cafik, was looking to hire someone with senior management sales experience in the financial technology sector to help her with her start-up company. The company was developing an anti-fraud online payment product. After some back and forth between Ms. Cafik and Mr. Cho, she sent him an email describing his position as a Vice President, stating that the company was open to a contract position with the option to transfer into a salaried position at some point. She offered a very competitive salary and signing bonus, as well as four weeks’ vacation and a budget for various expenses. When they finalized the hiring the following month, Ms. Cafik told Mr. Cho, “Welcome to the team.”

Several times over his five-month stint with the company, Mr. Cho requested a letter of employment setting out the agreed-to terms, but Ms. Cafik demurred. She told Mr. Cho that they could no longer work together. She failed to pay him for the last two weeks he worked.

Issues

There were two issues. First, what was the nature of the parties’ relationship? Second, what amount of general damages was owed?

The court’s analysis

Justice Marzari began by noting the continuum of working relationships, from employee to independent contractor, with dependent contractor falling somewhere in-between. Case law tells us that the following factors help situate a worker on this continuum: a) level of worker control; b) ownership of equipment and tools; c) profit/lost opportunity; and d) business integration. The court found that these factors pointed to an ”employee” characterization. For example, Ms. Cafik consistently directed Mr. Cho’s work. The business provided the computer hardware and software he needed for his job. He was paid a fixed semi-monthly salary and was paid automatically, even while on vacation.

After quickly dispatching an allegation of cause, Justice Marzari determined the issue of general damages. The matter of the unpaid final three weeks of employment would inevitably become a head of damages. As for the reasonable notice period owed to Mr. Cho, the court considered the time-honoured factors from Bardal v Globe & Mail Ltd., 1960 CanLII 294 (ON SC): the level of responsibility of the position, the length of service, the age of the employee and the availability of alternate employment.

Despite the fleeting duration of his employment, Mr. Cho asked for six months’ notice. He argued that his executive, high-level work, his age, his degree of specialization and his significant difficulty in finding alternate work warranted it.

In the absence of an argument from Ms. Cafik on this point, the court set the reasonable notice period at two months. Justice Marzari stated that Mr. Cho’s title of Vice President belied the fact that he had no genuine managerial responsibilities. In her view, the work done by Mr. Cho revealed no great specialization, and there was no evidence that his age was an impediment in his line of work. In addition to these heads of damage, the court awarded damages in lieu of two months’ cellphone allowance.

Most unjust dismissal cases end there, but this case had an unusual twist at the end. The court dealt with the plaintiff’s request for $20,000 in punitive damages based on Stonebridge’s failure to pay him for his last three weeks of work, and its baseless cause allegation at trial. The court awarded $5,000 in punitive damages, stating, “I am not satisfied that the weak allegation of cause, in this case, is grounds for such damages. However, I think it is important that the Court denounce and deter the practice of withholding payment for work performed prior to termination.”

Takeaways

This case offers two primary lessons to employers:

  1. Clearly understand the implications of the type of working relationship between the parties. With legal advice on its particular situation, an employer will know its rights and obligations on a variety of topics from the hiring phase through to retirement or, if necessary, termination. Since the legal ramifications are vastly different, employers (particularly smaller ones) could face impactful consequences if the relationship deteriorates to the point of no return.
  2. Pay employees for their work, even if the post-employment relationship is acrimonious. There is no good reason for not doing so, and as a sign of bad faith, it could well result in a needless avoidable award of punitive damages.

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