More than $400,000 awarded for pay in lieu of notice, aggravated and punitive damages
The owner of three companies that all employed a worker is jointly liable with his companies for more than $400,000 in damages to the worker for constructive dismissal and bad-faith conduct in laying off the worker, including an attempt to pay the worker illegally.
The companies were located near Fergus, Ont., and were owned by John Walkey. The now-63-year-old worker’s employment began in 1978 with James Wilson and Sons, a feed mill that produced animal feed and oatmeal for human consumption. At the same time, he worked as a farm manager for Walkey’s Riverglen Farms, a farm with various livestock. In 1984, the worker started working for Gary Farms, which had an orchard, and fields for corn, raspberries, and strawberries, as a farm manager. He and his family lived in a house on the property rent-free and he sometimes performed handyman work for the owner.
In 1996, Walkey sold Gary Farms and told the worker that he had to move out within six weeks. The worker was able to find a house, but his salary stayed the same and he had the use of a company truck.
In 2015, the worker hurt his back at work. A doctor told him that he would have to stop heavy lifting, so Walkey hired a student to handle all the heavy lifting at the farms.
In October 2018, the worker asked for a week off the following January, but Walkey told him that he might be laid off. The worker was surprised but, by the end of their conversation, Walkey told him to pretend they hadn’t had the discussion.
The worker frequently worked overtime hours under an agreement with Walkey that he would receive an allowance upon his retirement. Walkey told him that he would be taken care of, “big dollars are coming in the end,” and he would have shares in a sale of Riverglen Farms, which would be worth about $250,000 upon his retirement.
Temporary layoff
On Jan. 22, 2019, the worker was told that he was being laid off. Walkey told him that the layoff was temporary and work was expected to resume around April. However, the worker was asked to help the companies with various tasks over the next few months. The worker kept a diary of his hours and recorded 177 hours worked from January to April 2019, but he wasn’t paid anything.
On May 4, Walkey told the worker that he could come back but still collect employment insurance benefits, as he would be paid in cash. However, he wouldn’t have a student to help with any heavy lifting.
The worker declined the offer because the arrangement was illegal and he wouldn’t be able to do the work without help with heavy lifting. He felt this was a significant change in his employment terms.
The worker also felt that he had been taken advantage of and cut out of the promised retirement allowance. He sued Walkey and the companies for wrongful dismissal, claiming damages of 36 months’ pay in lieu of reasonable notice along with aggravated and punitive damages, saying that he suffered mental distress and lack of self-esteem because of the employers’ actions, and his economic security and stability were irreparably damaged. He had to sell his house, his wife was unable to retire, and he was on medications for anxiety and stress, he said.
None of the companies or Walkey filed a defense, so the trial proceeded as undefended.
Walkey was unable to find alternate employment after his layoff due to his age and back issues.
Constructive dismissal
The Ontario Superior Court of Justice noted that there was no written employment contract, but the worker was employed by Walkey’s companies for 40 years and it was reasonable for the worker to expect that his employment was indefinite.
The court found that the initial layoff in January 2019 was a constructive dismissal, as it wasn’t permitted by the employment contract without an explicit clause allowing it, but the worker decided to continue to perform work. However, Walkey’s later suggestion of the worker receiving pay in cash while continuing to receive employment insurance benefits was an illegal contract of employment, and the removal of someone to perform heavy lifting constituted reduced terms. This indicated that Walkey and his companies didn’t intend to be bound by the terms of the former employment contract and constituted constructive dismissal as of May 4, said the court.
“It was an egregious misstep having the worker work during the temporary layoff period for no pay, calling the employee back to work, and then just changing the terms of the agreement in a pretty heartless way by taking away the accommodation of having a student help with the heavy lifting when the worker hurt his back years earlier on the job,” says employment lawyer Daniel Hassell of Zubas Flett Liberatore LLP in Toronto. “And then trying to enter into an illegal payment structure was extremely inappropriate as well - a long-time employer telling the employee to do something that's illegal, that's a pretty impossible spot for the worker to be placed in.”
As for damages in lieu of notice, the court noted that the worker’s long-term employment – his entire adult working life – age, back issues, and grade 12 education were all factors pointing to a longer notice period. In addition, the worker had a real estate license, a welding certificate, and a license for pesticide application that had all lapsed, so his employment opportunities were limited, the court said.
However, the court found there was no precedent for 36 months’ notice and the traditional maximum was 24 months without exceptional circumstances. As a result, the worker was entitled to 24 months’ pay in lieu of notice, the court said.
Retirement allowance
The court also found that the worker had been told that he would receive a retirement allowance and worked with that expectation. It was also a reason why he worked without pay following his layoff, said the court in finding that the worker was entitled to the retirement bonus he had been promised.
“The determination of the notice period is more of an art, not a science, because it seemed that the circumstances were at least arguably exceptional – the worker’s entire working career with the same employer, a back injury, lapsed licenses,” says Hassell. “Something a little bit higher than 24 months could have been warranted – maybe 26 or 27 months – but perhaps the court took into account the overall award including the retirement allowance.”
A better approach for the employer to the retirement bonus would be an arrangement in writing or some kind of pension plan for the employee setting aside money over the years, rather than a vague promise of a retirement bonus at the end, according to Hassell.
The court also found that the worker was entitled to the 177 hours worked following his layoff.
The court also found that Walkey intended to lay off the worker months earlier, based on his conversation with the worker in October 2018, but he “would not give him the decency of any notice.” He also exploited the worker for free work following the layoff, said the court, adding that Walkey tried to get the worker involved in an illegal pay structure, which was bad faith in the termination that also effectively deprived the worker of his retirement allowance. As a result, the worker was entitled to aggravated damages for the effects of his employers’ conduct and punitive damages for Walkey’s “heartless and cowardly” behaviour towards him.
Bad-faith conduct
It was a big misstep when the employer seemed to hint that he was going to place the employee on layoff a few months before it happened, says Hassell.
“The court decided that there should be aggravated damages because it was apparent that the employer was going to place the employee on a temporary layoff, but didn't have the decency to give any notice,” he says. “Another misstep was just not having an agreement in place that allowed for a temporary layoff in the first place.”
Walkey and his companies were jointly and severally ordered to pay the worker $109,980 – equal to 24 months’ pay in lieu of notice – a $250,000 retirement allowance; $5,000 in unpaid wages; $50,000 in aggravated damages; and $20,000 in punitive damages, for a total of $434,980.
Given the multiple companies for whom the worker worked that were liable for the large damage award, it’s a good idea to have employment agreements in place, even to address basic issues like identifying the employer, according to Hassell.
“Employers should also be careful about not having employees do work for the individual company director that pierce the corporate veil,” he says. “The individual owner lost protections that he could have had if the employment relationship was more clearly defined, so avoid having employees do work that's outside of the scope of the work for the incorporated entity and on a personal level.”
