Employment and Labour Lawyers for Management

On January 1, 2010 the rules governing civil actions in Ontario are to undergo sweeping changes. One notable change is the expansion of the small claims court jurisdiction from $10,000 to $25,000. The changes are supposed to improve access to justice and reduce the cost of litigation for all parties.

Initial opinions from employment counsel acting for both employers and employees have suggested the changes could lead to an increase in litigation. A recent decision at the Ontario Superior Court of Justice suggests the increase may be more conservative - and for unexpected reasons.

The new rules add a concept of “proportionality” to the provisions that guide judges’ assessments of what amount of costs should be awarded to a successful party in litigation. Parties often decide whether or not to bring a claim, or whether to settle instead of going to trial, based upon their estimations as to the potential costs they may be awarded (or that may be awarded against them). This is especially the case in claims of $50,000 or less, where legal costs can often rival the claim if the trial is lengthy or complex.

Pitney Bowes of Canada v. Noia, 2009 CanLII 63372 (ON S.C.) sheds some light on how this new concept of proportionality may be implemented. The Plaintiff claimed almost $23,500, but obtained judgement for only $13,400. The trial lasted two days. The Plaintiff’s lawyer had 16 years experience and claimed 62 hours were spent overall on the file. With legal fees and disbursements at partial indemnity (meaning typically around 40% of actual costs) that added up to $13,340 in costs claimed.

Applying the concept of “proportionality” as if the new rules were in place, the Court awarded only $1,600 for costs and disbursements. The Court found that the number of hours claimed was excessive and disproportionate to the complexity and value of the claim. However, certainly the decision cannot be taken to mean that a two-day trial could be tried for $1,600 in legal fees and disbursements.

The silver lining for employers: Employees may think twice before going to trial with the prospect of recovering so little in costs that they end up in the hole to their lawyer even in victory.

Jeremy Schwartz - jschwartz@sbhlawyers.com

In a case that can only be described as a cautionary tale, an employer was ordered to pay 5 months pay in lieu of notice to an employee to whom it had intended to pay only 3 weeks ESA termination pay.  This case should serve as a reminder to employers to carefully review termination letters before they go to employees.
 
In Stowar v. Telehop Communications Inc., an employer mistakenly provided an employee with an offer of 5 months pay in lieu of notice in a termination letter, instead of the 3 weeks of ESA termination pay it had intended to provide.  The letter was poorly worded, and did not establish a possible demarcation between ESA termination pay and pay in lieu of notice at common law.
 
The court ruled that, once signed, the termination letter constituted a valid and binding contract that the employee could enforce against the employer. 
 
The lesson: when drafting termination letters, make sure you get it right the first time.
 
To view the entire case, visit the following link:
 
http://www.canlii.org/en/on/onsc/doc/2009/2009canlii32253/2009canlii32253.html
 
Jeremy D. Schwartz - jschwartz@sbhlawyers.com