Recent decision in Ontario highlights importance of responding to threat of litigation
A recent decision of the Ontario Superior Court of Justice reinforces the importance of defending a lawsuit and retaining counsel.
The alternative, as set out in Ofori v. BCG Logistics (2000) Ltd., 2022 ONSC 4562, is a default judgment against you as an employer.
Your company has dismissed an employee, without notice of its intention to dismiss, and without paying the employee’s statutory or common law entitlements.
The employee hired a lawyer, who sent your company a demand letter, which your company ignored. The employee started litigation by issuing a statement of claim against your company. Your company ignored all communications from the former employee’s lawyer, including multiple requests for confirmation of whether your company would accept service of the statement of claim — or who could do so on its behalf. One morning, a copy of the statement of claim was found nailed to the front door of your company’s facility (a court has actually ordered this: West v. Mex Precision Wire Corporation, 2018 ONSC 6572).
Your company continued to ignore the matter. The thinking, internally, was that the employee would eventually give up in the absence of a response or, in the worst case scenario, a court would provide the employee with a nominal amount. At no point was a lawyer consulted.
The employee persisted, serving your company with materials for a default judgment against it — ignored. The employee obtained a judgment and a court order against the company to pay an amount of reasonable notice, plus the employee’s costs of the action — also ignored. Then, one day, your company’s credit included a notation that a writ of seizure and sale had been placed on its facility, which, with a little review, it determined could not be removed without payment of the judgment. All of this took place over the course of several years.
It was only at this point that your company realized its refusal to participate in the legal process could have actual consequences.
The judgment in Ofori
Ofori is an example of where having counsel — or participating in the process — could have impacted the outcome. Ofori involved the wrongful dismissal of a 35-year-old employee who over 11 years of service had risen to a managerial role. The employer did not defend the action and the matter proceeded via default judgment in writing.
In Ofori, the court assessed the employee’s entitlement to reasonable notice at common law based on its assessment of the:
- character of the employment
- length of service
- age of the employee
- availability of similar employment having regard to the experience, training, and qualifications of the employee.
Based on its assessment, the court arrived at a figure of 13 months of reasonable notice and awarded this amount along with the employee’s claimed amount of a bonus. The court ordered that the award of reasonable notice be reduced by the employee’s mitigation income during the notice period. The court accepted the employee’s calculation of mitigation income — but did not review the employee’s mitigation efforts.
The (potential) impact of counsel
Even if the employer was not able to contest whether the employee’s employment was terminated without reasonable notice, retaining counsel and participating in the litigation process could have made several significant differences in the outcome of the matter.
First, the employer could have provided some input into the court’s assessment of the employee’s entitlement to reasonable notice and possibly had this amount reduced. The employee had worked for the employer for 11 years and was 35 years old at the time of dismissal. While, based on these factors, an award of 13 months’ notice is not unreasonable, it is on the higher end of the scale.
Had the employer retained counsel specializing in employment law, it may have been able to present a basis for a lower award by directing the court’s attention to cases with similar criteria where a lower amount of reasonable notice had been awarded.
Secondly, the employer could have contested the employee’s mitigation efforts, and possibly had the amount of reasonable notice reduced. The court in Ofori noted that the employee had been unable to mitigate his losses by finding suitable reemployment at the time of trial, despite nearly three years passing between the date of his dismissal and the trial.
Had the employer been represented by counsel or participated in the matter, it would have been able to review and contest the employee’s mitigation evidence, and again, possibly have the amount of notice reduced. The court will reduce an award of reasonable notice where an employee has failed to make a reasonable attempt to mitigate their losses. A 35-year-old being incapable of finding suitable employment for three years without explanation is suspicious. Counsel could have argued the employee failed to make a reasonable effort to find work — possibly leading to a reduction in the notice awarded.
In Ofori, the judgment referred to the employer claiming it had closed and there were no assets available to pay any judgment. However, in the event this was not accurate and was instead a negotiating tactic, it would now have to contend with a published judgment and a significant order to pay.
As soon as litigation is commenced or threatened, it is wise to retain counsel. That way, you can properly understand the risks, potential costs, and also the strategies that you can adopt. Ideally, you should consult with an employment lawyer before dismissing an employee, as we can help you to minimize the risk of a claim. If a court action has been commenced, the worst thing you can do is simply ignore it.
The lesson in Ofori and its countless predecessors is to not ignore a matter and to take an active role in the process. Whether a party participates in the process or not, the process continues. The only way to have an impact on the outcome is to be a part of it.