Beyond the "Bare Minimum Route" with Long-Term Employees

Davis LLP Employment & Labour Bulletin


In Brito v. Canac Kitchens, Justice Echlin of the Ontario Superior Court of Justice has made clearer the lengths to which an employer may have to go to make "whole" an employee who is terminated without cause.

In this case, a 55 year old employee, Luis Romero Olguin, was dismissed without cause and without notice from Canac Kitchens ("Canac") after nearly 24 years of service. At the time of the termination, Canac Kitchen provided with only the 8 weeks statutory termination pay and 23.79 weeks' severance pay to which he was entitled under the Ontario Employment Standards Act, 2000 (the "ESA"). Canac also complied with the ESA and provided Olguin with 8 weeks' of benefits continuation, including disability benefits coverage. In essence, it appears that Canac was counting on Olguin finding alternate employment and thus mitigating any common law damages he might also have claimed.

And at first, it must have seemed to Canac that its gamble had paid off. Olguin did find alternate employment within weeks of leaving Canac, at Cartier Kitchens. Unfortunately, Cartier Kitchens did not provide disability benefits.

After having worked for Cartier Kitchens for almost 16 months,. Olguin was diagnosed with cancer. He subsequently sued Canac for wrongful dismissal, and his claim for damages included damages for disability benefits he would have been eligible to receive under Canac's disability plans during the common law reasonable notice period.

Justice Echlin found that Olguin would have been entitled to a common law reasonable notice of 22 months. And because Olguin would have been eligible for disability benefits, including long term disability benefits, under the terms of the Canac plans, Justice Echlin found that Olguin was entitled to damages in the amount of the LTD benefits Olguin would have received under the LTD policy until he reached age 65. In essence, Justice Echlin upheld the "make whole" standard and found that Canac had to make Olguin "whole" by providing him with the monetary equivalent of disability benefits he would have been entitled to receive if he had remained employed by Canac for the entire 22 month notice period. In its defence, Canac argued that Olguin should have mitigated his damages by purchasing replacement disability coverage. Justice Echlin rejected this argument. Nor was Justice Echlin persuaded by Canac's argument that the terms of its LTD policy did not permit Canac to maintain Olguin on the LTD plan for 22 months after the termination of his employment. In the result, Justice Echlin ordered Canac to pay Olguin almost $200,000 in damages for lost LTD benefits.

Justice Echlin also found that Canac intentionally gambled on the fact that Olguin would find a new job to mitigate damages and would obtain an insurance coverage to deal with his disability. Justice Echlin found that Canac "chose to go the bare minimum route" by intentionally providing only the statutory "minimums in pay and benefits" to a long-term employee and to then hope for the best. In response to Canac's perceived "hardball" approach, Justice Echlin awarded "ancillary" damages to Olguin due to Canac's "cavalier, harsh, malicious, reckless, outrageous and high-handed treatment" of Olguin.

What's An Employer to Do?

Brito v. Canac Kitchens serves as a dramatic reminder to employers that in Ontario, at least, the Court will apply the "make whole" principle to employees terminated without cause and without common law notice to which they are entitled. When terminating an employee entitled to common law notice-particularly a long-service employee-an employer should give careful thought to offering a separation package in exchange for a full and final release from the employee. The employer should also attempt to maintain the employee on the employer's benefit plans, including disability and group life insurance, while negotiating a separation package with the employee. Finally, the employer should not assume that the risk of liability disappears simply because the terminated employee has secured alternate employment.

While Brito v. Canac Kitchens is a decision of the Ontario court, employers in other common law provinces should expect that employee-side counsel will seek to rely on this case when asserting claims for damages for wrongfully dismissed employees.

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