Sudden pay cut, dismissal leads to aggravated and punitive damages

Ontario company cut pay, tried to change employment relationship and then fired employee

Sudden pay cut, dismissal leads to aggravated and punitive damages

An Ontario company must pay nearly $150,000 to a former employee of five years after it tried unilaterally to reduce her pay and change the employment relationship before firing her without notice.

Dr. Adrienne Halupa, 45, was hired by SAGE Medica — a Toronto-based medical communications agency serving health-care and pharmaceutical customers — in March 2014 to provide medical communications services. Three years later, she became the head of SAGE Medica’s medical writing department, supervising a team of 12 medical writers.

In April 2018, SAGE Medica’s owner and director, Paul Borlinha, incorporated another company called SAGE Renegade and started redirecting much of SAGE Medica’s business to it. He told customers it was an “internal expansion” and “rebranding” of SAGE Medica’s business.

Nothing initially changed for Dr. Halupa, as her job duties and company equipment continued as before. She continued to be paid by SAGE Medica until November 2018, when SAGE Renegade started issuing her pay cheques instead.

Salary, hours reduced
On Feb. 1, 2019, Borlinha informed Dr. Halupa that, on Feb. 15, her salary would be reduced by nearly 14 per cent and her position would be changed to “four days per week or 80 per cent capacity.” This would be in effect until April 30 “in hopes that SAGE can bring you up to 100 per cent capacity” at that time. Brolinha also said they would review the arrangement in one month’s time but reassured her that she would be an important part of the rebranded organization and she was “lucky” to have been “chosen” to continue with SAGE Renegade.

This reduction in Dr. Halupa’s hours and salary came after nearly a year of frequently being paid late — usually between nine and 56 days late. This turned out to be a harbinger of things to come for Dr. Halupa, as when the calendar turned to Feb. 15 no pay was forthcoming from SAGE Renegade. Instead, Borlinha provided her with a record of employment (ROE) indicating termination from SAGE Medica on that date.

Borlinha then gave Dr. Halupa an invoice for services she was to provide to SAGE Renegade over the next two months, at which point the company would pay her. The conditions of employment and job duties remained the same.

Dr. Halupa continued to work under the terms of the invoice until April 10, when Borlinha advised her that April 15 would be her last day of work. She didn’t receive a formal termination letter or additional pay in lieu of notice.

Dr. Halupa filed a claim for wrongful termination seeking compensation for lost wages, pay in lieu of notice, vacation pay and damages for bad-faith conduct by SAGE Medica, SAGE Renegade and Borlinha. She reported that she felt betrayed and manipulated, leading to nightmares, anxiety and depression.

The court first addressed the issue of Dr. Halupa’s period of employment. Despite the fact that the source of Dr. Halupa’s pay cheques changed, the court found that SAGE Medica and SAGE Renegade were common employers for her. Both corporations were controlled by Borlinha and Dr. Halupa’s job duties and terms of employment remained the same. In addition, the movement of business from SAGE Medica to SAGE Renegade was presented to customers as rebranding and an internal move, so Dr. Halupa’s employment was continuous between them and essentially an unbroken employment relationship, the court said.

In addition, the court found that the issuance of an ROE and then an invoice for future services on Feb. 1, 2019 was an attempt to “recharacterize Dr. Halupa’s employment as an independent contractor relationship.” However, there was no real termination of her full-time employment and her service time went to April 15.

Common employers
Since Dr. Halupa’s service with both SAGE companies was uninterrupted and there was no cause for her termination, the court determined she was wrongfully dismissed and entitled to damages representing pay in lieu of notice. It considered her specialized duties with SAGE and the fact she supervised a team of staff, as well as the fact she was “highly-educational and in a specialized field” — noting that she had been unable to find similar employment more than two months after her termination — and her relatively short five years of service. The court concluded that Dr. Halupa was entitled to eight months’ notice of termination.

The court also found that the two companies treated Dr. Halupa “in an unduly insensitive manner in a myriad of ways leading up to her termination, including: missing or late pay cheques; trying to reduce her salary and hours; filing an ROE without explanation and expecting her to still work; trying to unilaterally change the employment relationship without notice; terminating her employment without notice after reassuring her that her job was safe.” This warranted aggravated and punitive damages, said the court.

The court also noted that SAGE Renegade told Dr. Halupa that it would be reducing her salary effective April 15, but it failed to pay her on that date and terminated her employment instead. As a result, her salary for the purposes of calculating reasonable notice damages should be her regular salary before the April 1 notification, said the court.

As for liability, the court determined that Borlinha personally shared liability for damages with the two companies, as he was not just implicated but responsible for the bad-faith conduct in the manner of Dr. Halupa’s dismissal. Borlinha also benefitted personally from mistreating her, as trying to reduce her pay and not providing her with notice or pay in lieu of notice helped his companies, of which he was the sole director.

SAGE Medica, SAGE Renegade and Paul Borlinha were jointly ordered to pay Dr. Halupa eight months’ salary in lieu of reasonable notice of dismissal, unpaid wages for the two weeks in February for which she wasn’t paid plus vacation pay, aggravated damages of $30,000, punitive damages of $25,000 and legal costs. The total award owing to Dr. Halupa was $147,399.30.

 

For more information, see:
• Halupa v. Sagemedica Inc., 2019 ONSC 7411 (Ont. S.C.J.).

Latest stories