Royal Bank of Canada’s Deductions of $1,000 per Pay Cheque from Long Term Employee – Constructive Dismissal

DD v. Royal Bank Of Canada

(Complaint Of Unjust Dismissal Under Iii Of The Canada Labour Code)

Arbitrator: Richard Coleman

For The Employer: Norene Novakowski

For The Complainant: Ib Petersen

Dates Of Hearing: June 20, 21, 22, Aug. 16, 17, 2017

Date Of Award: November 17, 2017

 

These proceedings concern a complaint of unjust dismissal filed by Ms. DD, who alleges that she was constructively dismissed when the Bank began recovering what it maintains are overpayments in wages in the amount of $54,332.01, by removing $1000 from each of the Complainant’s bi-weekly paycheques which would normally have amounted to approximately $1,600 net/$2,493.15 gross. Deductions began in April 2016, were suspended for a period she was on sick leave, and then resumed. She left the Bank’s employ on June 30, 2016 taking what amounted to an early retirement. It is her position that the amounts deducted from each of her pay cheques were sufficiently large to make continued work for the Bank financially and mentally untenable, thereby forcing her to resign to access her pension to ensure a living income. It is also her position that the deductions were illegal in any case, in the sense that she disagrees that the monies represent overpayments, and she did not authorize any such deductions. She also claims that even if there are legitimate overpayments, any such amounts dating from 2012 and earlier cannot be recovered. She seeks damages for lost income, reduced pension benefits, and mental distress.

 

The Bank maintains that the monies it sought, and continues to seek through the courts in parallel proceedings, represent overpayments of wages pursuant to the Complainant’s employment contract with the Bank, which they argue they are entitled to recover without prior authorization, according to sec. 254(1) of the Canada Labour Code which provides for recovery of overpayments at 254(1)(d) as a ground for deduction separate and distinct from “(c) amounts authorized in writing by the employee”. They also argue that they were willing to entertain alternate repayment arrangements, but the Complainant declined to provide any alternatives.

 

By way of general background, the Complainant was 58 years of age at the time she left the Bank’s employ. She began her employment at the Bank in southern Ontario in 1989, becoming a “Mortgage Specialist” in 1999, a position she held until September 2014, when she transferred to a job as Senior Account Manager, Personal and Business, on the Sunshine Coast in British Columbia, where her brother resides. The circumstances leading to the alleged overpayment arose from her position as a Mortgage Specialist, and before she left Ontario.

 

According to the evidence before me, Mortgage Specialists work under an employment contract titled “Mortgage Specialist Compensation Plan” (hereafter the Compensation Plan), the terms of which are set and articulated by the Bank. The Bank provides a new contract each year, which is discussed with employees in the second half of the previous year, who then sign a Statement of Acceptance, which for 2014 commenced with the sentence, “I acknowledge receipt of and accept the revised Terms of Employment as outlined in the 2014 Mortgage Specialist Compensation Plan document…” (emphasis in original). In 2013, the 2014 Compensation Plan was sent to Mortgage Specialists in an electronic communication package titled “Mortgage Specialist Compensation Kit – 2014”, with an invitation to join an on-line meeting. The Complainant testified that at some point she contacted the Bank’s Human Resources department to inquire what what would happen if she did not sign the Acceptance, and was told that failure to accept the Compensation Plan would mean that the employee would cease to function as a Mortgage Specialist.

 

The Mortgage Specialist’s job is to sell mortgages, either through a particular bank branch, or by going into the community to find clients. As I understand the evidence, individual mortgages are usually sold, if that is the right word, through a branch, but what are termed “Builder’s mortgages” are sold in the field, by Mortgage Specialists going in search of developers and builders in the course of planning and/or building subdivisions and other multiple dwelling projects. The builder/developer would then put the Specialist and individual buyers in contact.  As described by the Complainant, “builders means developers and builders at subdivisions. We would go out and search for builders’ sites and approach the builders, sell the Royal Bank, quote rates, and meet with their clients. The minimum amount for a project was 3 1/2 million dollars to hold the [preferred] rate. I would have to contact the client [buyer], introduce myself as the person from the bank and the builder…I worked from home with no particular hours, seven days a week.” Rex Thomson, the Southern Ontario Regional Sales Manager and the Complainant’s supervisor from 2010 to 2014, described Mortgage Specialists’ mandate as acquiring new clients and servicing existing ones. He described the subsequent steps as meeting with the client, putting their application in the system, and collecting the required documents. Both Thomson and the Bank’s second witness, Sue McLaughlin, Manager, Mortgage Specialist and IRP Payroll, testified that it is also the role of the Mortgage Specialist to keep the Bank, and in particular the payroll department, apprised of the status of mortgage deals, which I take to mean the status of particular projects with updates as to when individual mortgages are expected to be funded. If a deal does not close by the expected date, the Mortgage Specialist would provide a new date. Similarly, if a deal cancelled, that information was communicated to the Bank by the Mortgage Specialist.

 

The Complainant testified that a typical mortgage would close within ninety days, from application by the mortgagor to the advancement of the monies. But the potential pending period for a builder’s mortgage is much longer, and there are often delays usually related to delays in construction. The Complainant said that on condominium deals, it is common for a delay to last two to three years beyond an initially anticipated date. In her estimate, the number of mortgages that do not eventually close is approximately 5%, a figure she said she based on her own experience with builders’ mortgages she dealt with in 2009, 2010 and 2011. The Employer’s witnesses confirmed that builders’ mortgages can be pending for up to five years, but McLaughlin disagreed with the Complainant’s percentage of failed deals, testifying that their figures show a 45% eventual rate of cancellation.

 

The root of the current dispute stems from the mechanism for determining and paying wages. Compensation for Mortgage Specialists is made up almost entirely of commissions. (I say almost entirely because the Compensation Plan refers to bonuses and “credit insurance compensation”, which are not of concern in the current matter.) According to the Compensation Plan, Mortgage Specialists are not entitled to a commission until a given mortgage closes and the money is advanced, but they have the option of taking a percentage as an advance which was referred to as an “approval commission”. The remainder of the total commission is not paid until the mortgage is eventually funded. The percentage allowed as an approval commission has changed over the years, from 50%, to 65% and the current rate of 35%. When a mortgage deal fails to close and is cancelled, the approval commission must be returned to the bank.

 

The Compensation Plan for 2014, contains the following provisions directed at commission advances, which do not differ substantively from previous years:

 

COMPENSATION ELIGIBILITY

In any case where the mortgage does not close, any commissions or bonuses advanced to the mortgage specialist at approval are deemed to be “unearned” and must be repaid to RBC.

 

“Unearned commissions or bonuses” refer to (a) commissions or bonuses paid in respect of mortgages for which funds are not dispersed by the Royal Bank of Canada;…

 

1. C) HOME BUILDERS RESIDENTIAL MORTGAGE PACKAGES

The mortgage specialist will be eligible for commission for the funded mortgage, whereupon 35% of the commission will be paid at approval 65% of the commission will be paid at funding. Should the mortgage not close, the 35% commission advanced must be repaid to RBC (refer to page 12 for details regarding the reconciliation and repayment process).

 

At page 5:

 

…In the event that RBC, for any reason, does not advance funds to a

Mortgagor with respect to an approved Mortgage for which commission has been paid, the Mortgage Specialist must reimburse to the Bank any commission paid with respect to that Mortgage within 10 days of receiving notice to that effect from RBC (refer to page 12 for details regarding the reconciliation and repayment process).

 

At page 12, in regard to details regarding the reconciliation and repayment process:

 

Reconciliation and Repayment Process

 

The Royal Bank of Canada will recover any unearned commission, fee or sales bonus that has been paid to the Mortgage Specialist in the following manner:

 

The unearned commission/sales bonus will be immediately repaid from earnings (the next pay period(s) after an audit determination is made). If earnings during two pay periods following the loss of mortgage sales or discovery of a breach of compliance policies or procedures are insufficient to reimburse the unearned commission or sales bonus in question, the Bank will discuss with the Mortgage Specialist other arrangements to affect the amount of unearned commissions, fees or sales bonus to be repaid will be calculated based on the compensation plan in effect at the time of payment…

 

Employment Status Changes

 

… If you transfer out of the Mortgage Specialist role, but stay within

RBC, you will be paid as follows:

 

Commissionsfor any mortgages which are funded within 120 days of the transfer date.

 

Sales Bonus for any mortgage sales which fund within 120 days of the transfer date.

 

Creditor insurance compensation for creditor insurance product sales, which close within 120 days of the transfer date, provided eligibility requirements are met.

 

The Statement of Acceptance also refers to repayment and reconciliation:

 

Repayment and Reconciliation: in the event that RBC, for any reason, does not advance funds to a mortgage or with respect to an approved mortgage for which commission has been paid or in the event of errors and/or omissions during the operational process resulting in an overpayment of compensation, the Mortgage Specialist agrees to repay RBC the overpayment amount immediately.

 

In 2013, the Bank drafted a “Mortgage Payroll Administration Guide” (the Guide), which is made available to Mortgage Specialists on-line. The wording in the Guide is markedly different with respect to what will happen when a Mortgage Specialist changes roles in the Bank, and states explicitly, that beyond the 120 day post transfer period, a “Mortgage Specialist is not eligible for any compensation. Builder deals – approval portion will be recovered.” But the Guide was not part of the “Mortgage Specialist Compensation Kit – 2014” sent to Mortgage Specialists for the on-line meeting in the fall of 2013. The evidence is that it is available but not required reading.

 

The Complainant testified that she had signed a succession of Compensation Plans over her years in the role, and was aware that approval commissions on mortgage deals which did not fund, would have to be returned to the Bank. But she said that she thought that as long as a deal was pending, and not cancelled, there would be no recovery. She said that she had never looked at the Guide and was unaware, as per the Guide, that the Bank would recover approval commissions on all mortgage deals that had not closed within 120 days of changing jobs at the Bank. She had been of the view that she would be entitled to keep her approval commission on any builder’s mortgages she sold and which eventually funded, no matter how far in the future.

 

With respect to her own circumstances, the Complainant said she had suffered a number of losses and difficulties in her personal life beginning in 2009, and that her work performance and her income had suffered. As a result, in 2014 she decided to seek another role, eventually successfully applying for the job of Senior Account Manager, Personal and Business, on the Sunshine Coast in British Columbia. Correspondence dated August 20, 2014 confirming the move lists the start date as September 15, 2014, and a salary of $64,000. A later document, from 2015, indicates both “high performance” in the new role, and a salary increase to $65,000 plus a “high performance bonus” of $5,825.

 

The sequence of events identifying the Bank’s claim began with a conversation between the Complainant and Mr. Thomson in September 2014. The Complainant testified that shortly before she left for her new position, Thomson met with her and gave her a folder which she recalled listed some $18,229.69 in approval commissions. At the same time he told her that the Bank would conduct an audit of all of her files. She said that repayment of commissions was not discussed at the time and that she had “never thought I would have to pay back commissions on non cancelled mortgages.” But, she said she was startled by the amount. Thomson recalled that she was upset.

 

In fact, according to the Bank’s documents, the value of the Complainant’s approval mortgage deals still outstanding at the time was $44,579.14, some going back to 2010. That figure is listed in an internal email to Thomson dated June 6, 2014 which included a listing of the total amount broken down into ICM, the post-2013 payroll tracking system, and Mrpay, the pre-2013 payroll tracking system. In any case, I accept the evidence that the meeting took place, that Thomson was concerned about the number of pending mortgage deals on her file, and that he gave her a folder listing the files, which for unexplained reasons, contained only the Mrpay listings totalling $18,229.69; but that the actual figure at the time was in fact $44,579.14.

 

There were apparently no further communications on the subject until February 2015, by which time the Bank had completed an audit of how many of the Complainant’s mortgage deals for which she had received approval commissions, remained unfunded 120 days after she left the position, and arrived at a figure of $54,332.01 which represented the amount of unfunded mortgage deals ($56,313.01) minus the closing commissions on deals that had closed in the 120 days ($1981). That information was communicated to the Complainant by Thomson via email on February 4, 2015, with the proposal that it could be repaid over a period of up to 24 months.

 

It is apparent that the Bank later considered a recovery schedule of three years rather than two, and a letter was drafted addressed to the Complainant, dated March 9, 2015. But the copy put into evidence by the Bank is not on Bank letterhead nor signed. Thomson felt that he would have emailed the letter to the Complainant, but the latter testified that she did not receive such a letter and was never presented with a revised schedule. On balance, given the absence of documentation in the form of an email with attachment or signed letter on letterhead, I accept the Complainant’s evidence that she did not see the letter nor was she informed of a three year option.

 

The Complainant replied to Thomson’s February 4, 2015 email, in letter form on March 13, 2015, indicating that she had sought legal counsel, and setting out several objections to the Bank’s claim to recover the amount they claimed was owed. In particular, she objected to the repayment of any monies related to commissions provided in 2012 and earlier, and to the notion that she had to repay commission advances related to mortgages which remained pending. In the latter regard, she asked that the Bank confirm what “deals did not close”, which in context appears to mean deals that were cancelled as opposed to had not closed but remained pending.  Consistent with that position, she wrote that the Bank had failed to pay her the remaining commission percentage on the mortgages which had been funded in the 120 days since she left the role, the $1981; and stated that she had left the Bank with “over $21 million of firm deals on the table”. In cross examination she reiterated her understanding that the 120 day rule meant

that she would receive the remainder of a commission if a deal closed in that time frame, but it did not apply to approval commissions on deals still pending.

 

The next communication with the Complainant did not occur until March 3, 2016, a year later, at which time Thomson sent the Complainant a letter via electronic mail, which states in part:

 

Since your transfer from the mortgage specialist role in 2014, we have made several attempts to arrange for a mutually acceptable plan for you to repay unearned commissions in the amount of $54,332 owed by you to Royal Bank of Canada (“RBC”).

 

… Considering your 15 years experience as a mortgage specialist, you are familiar with the Mortgage Specialist compensation plan. The reconciliation and repayment process outlined in the plan speaks to the recovery of any unearned a commission, fee or sales bonus paid to a mortgage specialist. Moreover, as a mortgage specialist you signed a statement of it acceptance annually, acknowledging receipt of and accepting the terms of employment as outlined in the plan. This document specifically explains that, as it relates to repayment and reconciliation,

 

“In the event that RBC, for any reason, does not advance funds to a mortgage or with respect to an approved mortgage for which commission has been paid or in the event of errors and/or omissions during the operational process resulting in an overpayment of compensation, the mortgage specialist agrees to repay RBC the overpayment amount immediately.”

 

Upon your transfer from the mortgage specialist role, an audit was conducted to review any commissions paid on builder deals which had not funded within 120 days of your transfer date. The audit revealed that the unearned commission/sales bonus you are required to repay was $56,313. The commissions you earn as a result of deals funded within 120 days of your transfer date amounted to $1981 this amount was set off against the amount of unearned commissions you owe to RBC, bringing the total amount of unearned commissions owed two $54,332.

 

RBCs request for repayment was and continues to be within the contractual recovery. As set out in the plan as well as within the statutory limitation period.

 

In keeping with RBC values and the code of conduct as it relates to Integrity and Doing What’s Right, we expect that you will accept responsibility for these unearned commissions and make immediate arrangements for repayment without further delay. In the event we do not enter into an acceptable repayment agreement by March 11, 2016, RBC will begin making regular deductions all these overpayments from biweekly pay in the amount of $1000 starting March 17, 2016

 

As such, please contact me…no later than March 11, 2016 finalize arrangements for your repayment of unearned commissions.

 

The Complainant responded on March 10, noting that questions raised in her letter of March 13, 2015 had not been answered, and stating her view that the Canada Labour Code prohibited the deduction of monies from her account without written authorization. The Bank replied by letter of March 23, 2016 from Thomson, stating the Bank’s view that they were indeed entitled to recover overpayments of wages without authorization and that “commissions paid on Builder deals which had not funded within 120 days of your transfer date constituted an overpayment that you agreed to repay to RBC according to the Mortgage Specialist Compensation Plan.” The final paragraph of the letter reads:

 

Please be advised that RBC will begin making regular deductions of $1000 from your biweekly pay starting April 14, 2016 as you have not made any efforts to enter into a mutually acceptable alternate repayment plan. However, if you would like to propose an alternate repayment plan, please contact me immediately.”

 

Ms. McLaughlin testified that in choosing this recovery schedule, the Bank had considered that they were not taking the Complainant below minimum wage.

 

The Complainant did not contact Thomson or McLaughlin with an alternate repayment plan, although she testified that at some point she spoke to her manager in B.C., Adrian Sherriff, about “working something out over four years”, but she did not hear anything back other than “four years was not going to work.”

 

She testified that the Bank’s letter caused her to go on short term sick leave citing stress and anxiety. She said that she went to her doctor, telling her that “I was not thinking straight, vomiting…not sleeping”. The deductions began in April, 2016, reducing her biweekly pay from $1641.90 net on her March 31 pay cheque, to $666.51 on her April 14 cheque.

 

She returned to work from sick leave in April, and continued to work for May and June, during which she concluded that she could not live on the reduced income, and that her only option was to access her pension through early retirement and in the interim to borrow money from her brother and cash in a $10,000 RRSP. Access to the pension required retirement, which she took, effective June 30, 2016.

 

The Bank’s perspective on the sequence of events is somewhat different in focus, but not substantively different on most pertinent facts. Both Ms. McLaughlan and Mr. Thomson testified as to their view that the contract of employment obligated a departing Mortgage Specialist to repay all approval commissions on deals which do not fund within 120 days of transfer, and their practice of doing so in the past. Ms. McLaughlan went into considerable detail with respect to the systems the Bank has had in place to administer builder’s mortgages and the responsibility of Mortgage Specialists to track the status of pending deals, including advising as to deals which would not fund, or providing new anticipated closing dates. She also spoke to the Bank’s attempts in recent years to clean up aged builder’s mortgage files, and a new 90 day system, implemented in 2014, with built in time frames and steps to be taken by Mortgage Specialists to avoid mortgage deals which have passed anticipated funding dates, from being cancelled.

 

At one point in the hearing Complainant’s counsel began to go through every listed mortgage in the Complainant’s name, to verify that each commission had been paid and not already recovered. I made a ruling at the time that I accepted that the listed amounts had been paid and not recovered.

 

Submissions on the merits:

 

The Complainant’s argument is six fold, which I have outlined below in order of convenience rather than importance. At a basic level, counsel argues that the Bank’s claim of overpayment has not been proven, to the extent that they have failed to provide item by item proof that the bonuses were paid, and if paid, were not recovered. On a legal plane, based on the contract of employment accepted by the Complainant, counsel maintains that there has been no “overpayment” where mortgages have been approved, but remain pending. In that respect he argues that there is no express language in the employment contract requiring repayment of approval commissions 120 days after a transfer, and the language which does exist with respect to recovery of approval commissions is ambiguous. Third, and connected to their position on what is recoverable after 120 days, the Complainant argues that the Bank has not proved that any of the mortgage deals associated with the alleged overpayment are no longer pending and have been cancelled. Fourth, they urge a narrow interpretation of sec. 254(1) of theCanada Labour Code, such that there must be either acknowledgment or authorization to deduct monies from a paycheque, including with respect to overpayments. Fifth, the Complainant counsel maintains that notwithstanding its other arguments, the amount unilaterally deducted by the Bank was sufficiently large as to render future employment untenable. Sixth, he argues that the length of retroactivity sought by the Bank should exclude commissions from 2012 backwards as being beyond the period intended by the Canada Labour Code as implied by limits put on an employee’s right to claim retroactive wages. Mr. Petersen also made reference to the Ontario Limitation Act, and the 2013  Statement of Acceptance form signed by the Complainant, which limited retroactivily of a Bank review arising from a compensation dispute, to 36 months, all of which I take as a reflection of what counsel says I should consider fair and reasonable applied in the other direction.

 

The Bank’s argument also has several parts. Primarily, they maintain that the contract of employment in place explicitly and in unambiguous language, gives them the right to recover approval commissions “immediately” when a mortgage deal does not fund, and all approval commissions 120 days after an employee transfers to a role other than Mortgage Specialist. Hence, it is argued, a recovery of approval commissions when a mortgage does not fund within 120 days after the employee transfers out of the Mortgage Specialist role, cannot represent a reduction of wages or constructive dismissal. It is instead an accepted and agreed facet of the employment contract. BMO Nesbitt Burns Inc. v. Bond (2002), O.J. No. 4093 is cited as support for the proposition that if “an employee knows that an adjustment could be made at any point during employment, change in remuneration does not constitute constructive dismissal.” At

para 18:

 

Employers have some latitude in making changes in the disposition of their forces as their business conditions change. Not every change in an employee’s remuneration constitutes a constructive dismissal. Where terms of employment do not entitle an employee to a particular income or commission level, and an employee knows that an adjustment could be made at any point during employment, a change in remuneration does not constitute constructive dismissal.

 

Similarly, Faragher v. Jim Pattison Industries Ltd. (2005), BCPC 92 is cited as support for the proposition that if an employment contract provides that an employer can alter the terms of a compensation plan, such a change cannot represent constructive dismissal.

The Bank points to the explicit wording in the Mortgage Payroll Administration Guide as setting out the right to recover approval commissions after 120 days. They maintain that while the Guide provides “details with respect to process”, it is no different from the Compensation Plan.

 

With respect to the Bank’s ability to act unilaterally to recover the monies as it sees fit, counsel points to sec. 254.1(2)(d) of the Canada Labour Code as permitting deductions from an employee’s pay which represent “overpayments of wages by the employer”. Zia v. Telus CommunicationsLtd., 2007 BCSC 1426 is referenced as representative of a fact pattern involving unilateral recovery of an overpayment at a rate of $1,125 per pay period, and in the face of disagreement that there had been any overpayment. The Court in Zia rejected the argument that the affected employee’s permission was required.

 

With respect to the Complainant’s argument that it is too late to claim recovery related to any deals from 2012 backwards, the Bank maintains that it was unaware of deals which had not funded until the audit was done subsequent to her move to the new job and out of the Mortgage Specialist role. Therefore the extent of the overpayment did not crystallize until early2015. See Bentall v. Goulart, (2017) BCSC 599 as articulating the requirement that knowledge of actual injury, loss or damage has to be present as opposed to knowledge of potential injury, loss or damage.

 

With respect to the Complainant’s argument that the speed of the recovery, at $1000 per paycheque, was excessive, the Bank argues that the Complainant was given several opportunities to negotiate an alternate repayment schedule, but she refused to pay anything. Counsel points out that the Plaintiff in Telus, supra similarly disputed that there had been an overpayment and failed to present an alternate repayment schedule.

 

Analysis and Decision

 

It is worthwhile, I think, to confirm that my jurisdiction is to decide whether or not the

Complainant was dismissed without cause based on the claim of constructive dismissal; and to make findings of fact related to that question. Several issues were argued in the course of the hearing, including questioning of the fact of an overpayment, contractually and in fact, the amount if the alleged overpayment, and the legality of unilateral recovery of monies from the Complainant’s paycheques without her authorization. There was also a great deal of evidence about how the Bank has tracked the status of pending mortgages currently and in the past, and the Complainant’s responsibilities in that regard although there was no explicit evidence or argument of malfeasance in that respect. To the extent necessary I will address those issues further below. But in my view, they are peripheral to the fundamental question which arises in any issue of constructive dismissal, which is whether or not the employment contract has been frustrated. In the current matter, that fundamental issue relates directly to the Bank’s actions in

removing $1000 per paycheque from the Complainant’s remuneration projected to continue for a two year period, at all, and as opposed to a much smaller amount extended over a longer period of time.

 

A working definition of constructive dismissal is set out in Pavlis v. HSBC Bank Canada, [2009] B.C.J. No. 740:

 

49 For a fundamental breach to exist, substantial alteration to essential contractual terms must occur: Farber v. Royal Trust Co., [1997] 1 S.C.R. 846, at paragraph 26. The failure of one party to properly adhere to each element of the contract does not suffice. In Jedfro Investments (U.S.A.) Ltd. v. Jacyk, [2007] 3

S.C.R. 679, at paragraph 21, the Supreme Court of Canada highlights the distinction between fundamental, or repudiatory, breaches and other breaches, stating, “[o]rdinary, non-repudiatory breach is consistent with ignoring the terms of an agreement. More is required to establish repudiation”.

 

50 For a breach to qualify as fundamental, it must be tantamount to the frustration of the contract either as a result of the unequivocal refusal of one party to perform his or her contractual obligation or as a result of conduct which has destroyed the commercial purpose of the contract, therebyentitling the innocent party to be relieved from future performance: Poole v.Tomenson Saunders Whitehead Ltd., [1987] 6 W.W.R. 273 (B.C.C.A.), at 282. Thebasic question is whether the breach strikes at the heart of the agreement in amanner that evinces an intention not to be bound by the contract any longer.(emphasis added)

 

The Court goes on in Pavlis, to address the relevance of failure to pay a portion of an employee’s salary:

 

52 The authorities on point suggest that an employer’s failure to pay a portion of an employee’s salary may amount to a fundamental breach where the unpaid amount makes up a significant or substantial part of the employee’s total remuneration. Relative dollar amounts matter.

 

53 Comparing the case law establishes that the failure to pay an employee up to approximately 9-10% of his or her average salary without more does not amount to a fundamental breach:Poole, supra, and McSeveney v. PhoneDirectories Company, Inc., 2005 BCSC 1510. A failure to pay between 14-17% can amount to a fundamental breach, but only in conjunction with some other significant unilateral change to the employment contract: Doran v. OntarioPower Generation Inc. (2007), 61 C.C.E.L. (3d) 232 (Ont. S.C.). A reduction in remuneration amounting to anywhere between 20-46% (and presumably anything greater) by itself has been held to amount to a fundamental breach: Boyd v. Whistler Mountain Ski Corp., [1990] B.C.J. No. 821; Streight v.Dean, 2002 BCSC 399; Wood v. Owen De Bathe Ltd. (c.o.b. Canadian Tire), [1998]

B.C.J. No. 288 (S.C.), aff’d 1999 BCCA 29; Farquhar v. Butler Brothers Supplies

Ltd.(1988), 23 B.C.L.R. (2d) 89 (C.A.); and Ilkay v. Acadia Motors Ltd., 2006

NBCA 103. (emphasis added)

 

In Boyd v. Whistler Mountain Ski Corp., the employer reorganized, in the course of which it significantly altered Mr. Boyd’s duties and reduced his salary by 20%. In Wood v. Owen De BatheLtd. the employer unilaterally cancelled what had previously been a regular “bottom line” bonus representing 25% of the employee’s income. In Ilkay v. Acadia Motors Ltd., (at para. 9) the employer’s “failure to pay a monthly bonus of $2,000 represent[ed] nearly one half of the employee’s monthly remuneration and, therefore qualifie[d] as “substantial” modification or deviation from the terms of the employment contract.” In Farquhar v. Butler Brothers SuppliesLtd., the employer reduced salaries across the board by 30%. From Farquhar(page 92):

 

◦A constructive dismissal occurs when the employer commits either a present breach or an anticipatory breach of a fundamental term of a contract or employment, thereby giving the employee a right, but not an obligation, to treat the employment contract as being at an end. See Reber v. Lloyds Bank Int.Can. (1985), 61 B.C.L.R. 361, 7 C.c.E.L. 98, 18 D.L.R. (4th) 122 (C.A.). The employee’s decision must be made within a reasonable time. But he is entitled to a few days, or even a couple of weeks, to think it over.

 

◦The notice to Mr. Farquhar of a 30 per cent reduction in his salary, given on 27th December 1984, with effect from 1st January 1985, constituted an anticipatory breach of a fundamental term of his contract of employment and, as such, a repudiation of the entire contract. The repudiation was accepted by

Mr. Farquhar, within a reasonable time, by his act of leaving his place of employment on 16th January 1985. That sequence of events constituted a “constructive dismissal”.

 

◦Counsel for Butler Bros. did not seek to argue that the contract of employment permitted the salary reduction. He argued instead that, assumingthe reduction was  a breach, it was not a fundamental breach and so did not terminate the contract. But, in my opinion, the question of salary goes to thevery root of the contract. So the 30 per cent reduction was an anticipatorybreach of a fundamental term and, thus, a repudiation of the whole contract.(emphasis added)

 

None of those cases represented an employer’s attempt to recover what it considered to be overpayments. And there is an undeniable conceptual difference between the removal of funds to which an employee is found to be entitled under their contract of employment, and recovery of monies an employer believes constitute an overpayment to which the employee is not entitled. But in my view that difference does not alter the significance of the amount of the pay reduction in determining frustration of contract, even in the case where recovery of approval commissions is anticipated as is the case here. I have reached that conclusion for the following reasons.

 

First, I respectfully disagree with the Bank’s submission that the fact that the Compensation Plan contains language permitting recovery of “unearned” commissions, necessarily means that recovery can never represent constructive dismissal. The portion of the Compensation Plan setting out the recovery process reads:

 

The unearned commission/sales bonus will be immediately repaid from earnings (the next pay period(s) after an audit determination is made). If earnings during the two pay periods following the loss of mortgage sales or discovery of a breach of compliance policies or procedures are insufficient to reimburse the unearned commission or sales bonus in question, bank will discuss with the mortgage specialist other arrangements to affect such reimbursement.

 

Clearly, $54,332 calls for “other arrangements”. The issue becomes whether this language permits to Bank to set whatever repayment schedule it chooses to recover that sum, regardless of the effect on the employee’s income and regardless of the above wording, and the contract of employment. I find that proposition to be at odds with the Bank’s commitment as above, to discuss alternate arrangements with the employee, but also with the whole scheme of employment law in Canada, relative to the significance of pay.

 

I find that the schedule of the recovery applied by the Bank in this case to be grossly excessive and unreasonable. Ms. McLaughlin testified that the criteria applied by the Bank in determining the recovery schedule was that they were not going below the minimum wage, and on that basis proceeded to reduce the Complainant’s pay in her new, non commission based job, by what amounts to 40% of her gross income, and 60% of her take home pay, for a projected period of two years. The size of the reduction in pay is not speculative as it was in Faragher v.Jim Pattison, supra. Nor does it represent a change in the compensation plan, as per Faragher and BMO Nesbitt Burns Inc., supra.

 

When the Bank began to remove the monies from the Complainant’s paycheques, she was well established in her new job with a set salary, the only variation being a yearly bonus. Reducing her pay by that large amount was the Bank’s decision, in effect salary far in excess of the 30% limit currently applied by the courts in British Columbia.

Preserving a minimum wage is not the test. I can see no reason, contractual or otherwise, that the simple fact that the Complainant remained a Bank employee should allow the Bank to unilaterally exceed what the courts have accepted as the normal limit. In effect, the Bank reduced the salary established for her new position by 60% based on alleged overpayments from a previous job.

 

The decision to reduce the Complainant’s pay by $1000 per pay cheque appears to have been made with little or no regard to the significant financial consequences for the Complainant; and with no apparent consideration of reasonably available less severe alternatives. She remained a Bank employee, with a sizeable salary and almost seven years remaining before retirement. The decision to recover the total amount over 24 months ignored even the Bank’s own draft March 9, 2015 proposal of 36 months, albeit undelivered. A more attentive and less oblivious recovery schedule stretched over a longer portion of the Complainant’s reasonably anticipated remaining working years would have significantly reduced the hardship on the Complainant, and more important in terms of the employment contract, would have allowed her to remain at a living wage in her Senior Account Manager position. As it was, I find that the $1000 per cheque reduction in her bi-weekly take home pay was neither reasonable nor fair, and obviated the fundamental purpose of the employment contract, denying suitable income to the employee and thereby, in the circumstances, amounts to constructive dismissal. I agree with the Court in Farquhar, supra, that “the question of salary goes to the very root of the contract. So the 30 per cent reduction was an anticipatory breach of a fundamental term and, thus, a repudiation of the whole contract.”

 

In the normal course of events, constructive dismissal via reduction in salary of a sufficient amount, is related to the terms of the contract, and not to the affect on the employee’s well being, per se. For example, the plaintiff in Boyd, supra, was not made destitute by the reduction in pay of 20%. Nor is it apparent on the face of the decision that Farquhar was put in dire financial straights with the 30% reduction in pay. The question in both of those cases was determining what constituted a fundamental term of the contract with respect to income for service. The current matter is different and somewhat more complicated, but the breach of a fundamental term related to pay was nonetheless achieved. In my view, the mere fact of an ability to recover approval mortgages is not unfettered, just as a certain amount of restructuring of pay will not produce a fundamental breach. Changes can be made, but within limits. I respectfully disagree with the Bank that the fact that recovery of approval commissions on deals which have cancelled is contemplated and even expected under the Compensation Plan, means that no recovery amount and schedule will amount to constructive dismissal. It is relevant in this regard, that the Bank acted unilaterally, and unnecessarily chose to reduce, by 60%, the remuneration it was committed to provide the Complainant in her new job. It is also relevant that the financial effect on the Complainant meant she found herself working in a relatively senior position, with otherwise expected commensurate compensation reduced to near minimum wage.

 

I do not find this conclusion to be at odds with Telus, supra, the main issue in which, was whether the plaintiff had been dismissed with cause, although the latter made a counter claim that he had been constructively dismissed because of the recovery of an overpayment including the quantum of the per pay cheque recovery. The recovery of overpayment is addressed only briefly at the end of the judgement with no analysis. By that stage, the Court had decided to uphold the discharge with cause, finding that the plaintiff had repudiated the contract in his dealings with his employer, including through the nature and tone of his communications with management, his suit against Telus, and that he had not come to the process with clean hands having been “knowingly unjustly enriched” for several years. All of which was decided before the Court briefly dealt with the counter argument of constructive dismissal, with the cursory sentence, “in view of my findings and conclusions above, this argument cannot succeed”, followed by reiterating that the plaintiff was “knowingly unjustly enriched”. There is no analysis of the relevance of the per pay cheque recovery amount which in any case, was considerably less in percentage terms than what the Complainant in the current matter faced.

The Complainant’s failure to propose a different alternative does not affect the above conclusion. The statement contained in Thomson’s March 2, 2016 letter that the Bank had “made several attempts to arrange for a mutually acceptable plan for you to repay” is not consistent with the evidence. The evidence before me is that the Bank’s initial proposal was twenty-four months, at which time the Complainant asked for more information about deals which had not funded. The Payroll Department’s draft proposal to extend the period to 36 months if the Complainant agreed to the liability, was never put to the Complainant, who testified that she had not seen the letter before the hearing. The “several attempts”, therefore, amounted to no more than the initial February 4, 2015 claim. More importantly, she did in fact propose a four year alternative to her B.C.  manager, but it was rejected. Similar to the circumstances in Boyd, supra, given the rejection of the four year proposal, there was little likelihood of the Bank changing its mind to any significant extent.

 

In any case, the Complainant’s failure to provide Thomson with an alternate plan did no relieve the Bank from its responsibilities and open the door to any recovery schedule it wished. There is no evidence that they gave any consideration to the Complainant’s circumstances, and the effect that a reduction in net biweekly pay, roughly from $1600 to $600, extended over a two year period would have. There is insufficient evidence to conclude that the Bank acted with malice in choosing a two year schedule. The unfairness of the schedule appears to have been the result of careless disregard and high handed insensitivity rather than bad faith. But they ought to have realized the significant effect a 60% reduction in her salary would have on her ability to continue to work for the Bank.

 

The second and independent reason I view the Bank’s actions in this case to amount to constructive dismissal, is that I am not persuaded of the extent of the claimed overpayment in that I find that the Bank had no right to recover approval commissions on mortgage deals which remained pending. The Bank has argued that recovery of an “overpayment” given a contractual and legislative right to recovery, cannot constitute constructive dismissal. I have already addressed that contention with respect to the quantum and schedule of recovery, even if the total amount was accurate. I find that it is not accurate because it includes approval commissions on pending mortgage deals, which I find do not become overpayments until the particular mortgage deal is cancelled.

 

The Bank relies on the Mortgage Payroll Administration Guide for their interpretation and application of the actual contract of employment. But the Guide is not the contract accepted and signed by the Complainant. I disagree with the Bank that the two documents are “the same”, as was argued. The Guide contains clear language on page 9, stating that a Mortgage Specialist who retires or moves to another role will not receive “any” compensation if the mortgage does not close in 120 days; and even clearer: “Builder deals – approval portions will be recovered”. The signed off Compensation Plan contains no such language, nor anything similar.

 

The Complainant testified that she understood that if a mortgage failed to close, meaning it was no longer pending—effectively cancelled—that she would have to repay the approval commission. But nowhere does her contract of employment—the Compensation Plan, not the Guide—state in clear and unambiguous terms that if the mortgage does not close within 120 days the advance will be recovered even if the mortgage remains pending. The Compensation Plan she formally accepted, states simply that if a Mortgage Specialist transfers out of the role, “commissions for any mortgages funded within 120 days of the transfer date” “will be paid”. In context and on its face, the sentence is ambiguous.

 

Standing alone and taken broadly, the sentence, and in particular the word “commission”, is capable of carrying the meaning urged by the Bank, that no commission whatsoever would be due, including the advanced, “approval” portion. But it could also be read, refer to the portion of the total commission which comes due after funding such that the portion of the total commission payable on closing will only “be paid” to the transferred Mortgage Specialist if the mortgage closes in 120 days, which is what the Complainant thought would take place. The wording is directed at what will be paid, not what will not be paid. There is no mention of recovery of approval commissions already paid on mortgage deals which remain pending after 120 days. For a transferred employee, retaining the advanced commission would not represent taking part in two compensation programs at the same time, which is forbidden in the Plan, since the approval commission compensates work done in the past and in another job.

 

I find the second meaning makes more sense because it would protect the Mortgage Specialist’s right to compensation for work that they did in the past which eventually leads to a successful deal and to the Bank’s financial benefit. It cannot, therefore, be categorized as an overpayment. Otherwise, and by contrast, if the mortgage is eventually funded, they would not be paid anything whatsoever for their work in securing and stick handling the deal in the first place—nor would anyone else—and the Bank would have  effectively gained the Mortgage Specialist’s services for free yet still benefit from the completion of the sale of the product. They would be getting the benefit of the employment bargain, without any cost. According to the Guide, the Mortgage Specialist who eventually closes the deal after 120 days will be paid 35% to 50% of the total commission on a deal, which would mean that no one will be paid for the work of finding, securing and tracking the deal even when it is completed and funded. Given the evidence that builders’ mortgages often do not fund for up to five years, the interpretation urged by the Bank would mean that work done by Mortgage Specialists in securing builders mortgages, even several years before retirement, would likely go unpaid, since ultimate closings would occur more than 120 days after their departure. Viewed from that perspective, the Bank’s interpretation would lead to what borders on an exploitive and absurd result. It is irrelevant that they may have been able to recover sums on that basis in the past, from other employees.

 

Notwithstanding the finding that the Complainant’s interpretation of the Compensation Plan is a more reasonable and feasible interpretation, the doctrine of contra proferentem provides that ambiguities in contract wording should be resolved against the party that drafted the contract. That is particularly the case with contracts of adhesion, where the contract and all of its terms are drafted by one party and amount to a “take it or leave it” proposition as is the case with the Mortgage Specialist Compensation Plan. The Bank chose the contract language presented to Mortgage Specialists for their individual acceptance, including the Complainant, and made it clear to the Complainant, when she asked, that failure to accept the Compensation Plan would mean that an employee would cease to function as a Mortgage Specialist.

 

The affect of the above findings on the Bank’s claim that the Complainant owed some $54,332.01 as of February 2015, is significant, in that it was conceded by Mr. Thomson that many of the assumed “overpayments” related to mortgages which remained, and may still remain, pending. He testified that builders’ mortgages can remain pending for up to five years, which in the Complainant’s case, would take her to 2019 on some deals. In an email dated April 08, 2015, after the above figure was arrived at, Mr. Thomson wrote “…no doubt, numerous files she put together will ultimately close.”

 

It was suggested in argument that accepting the Complainant’s position would effectively leave a mortgage deal pending indefinitely. I respectfully disagree. How long an unfunded mortgage remains pending and not cancelled, is up to the Bank, which can cancel a mortgage deal at its own discretion.

 

Based on the above evidence and analysis, I find that the figure the Bank presumed in February 2015, was an overpayment, is too high, likely by a significant amount, in that it included mortgages deals which were, and perhaps still are, pending, given Thomson’s evidence that “numerous files she put together will ultimately close.” The Bank had no right to recover approval commissions associated with those deals, which do not become overpayments until the deals are cancelled.

 

As already noted, considerable evidence was provided as to a Mortgage Specialist’s responsibility to keep up to date with clients, track unfunded mortgages and to inform the Bank of cancellations; and a new 90 day review system established in 2014. There was also evidence in the form of spreadsheets explained by Ms. McLaughlin, to the effect that at least the Payroll department of the Bank relies on Mortgage Specialists to determine the ongoing status of particular mortgages in their systems. She referred to a multi page spreadsheet listing all of the Complainant’s mortgage deals including funding date, approval commission, and a comments section, which in many cases states “invalid Casper number”. I find that that evidence is not helpful in determining which mortgages were eventually funded after the 120 day mark, or remain “pending” to this day, and those which were cancelled. As above, the employment contract allows recovery when a mortgage is cancelled, not when it is pending.

 

The Complainant has conceded that she is contractually obligated to repay approval commissions for mortgages which are cancelled. The onus is on the Bank to show that mortgages have been cancelled. Once the Bank identifies those mortgages and those amounts, she will be obligated to repay what she was advanced. But they did not do so in these proceedings, and do not appear to have done so at the time that the recovery of the claimed overpayments commenced.

 

In the result and by way of summarizing, I find that the Complainant was constructively dismissed, and therefore, without cause. The Bank had no right under the contract of employment accepted and signed by the Complainant, to recover approval commissions for mortgage deals which remained pending. A significant portion of the amount the Bank sought to recover was comprised of approval commissions which remained pending in June 2016. These commissions will not become overpayments unless the deals are cancelled, which will in turn require proof that they have been cancelled.

 

In my view, the recovery schedule was sufficiently large and long lasting as to, by itself, amount to constructive dismissal. It was also a violation of the terms of the Compensation Plan, which when combined with the schedule of deductions from the Complainant’s pay cheques, brings the circumstances in this case on par with Boyd v. Whistler Mountain Ski Corp. supra, and Farquhar,supra.

 

Given my decisions on those points, it is unnecessary to address the issue of recovery of overpayments pursuant to sec. 254(1)(d) of the Canada Code, or whether amounts which may otherwise be due for mortgage deals made in 2012 and earlier cannot be recovered.

 

Remedy:

 

The Complainant has asked for damages for loss of wages with interest, loss of secure employment, loss of pension, aggravated damages for mental distress, and legal costs.

 

Loss of wages, loss of secure employment:

 

In June 2016, the Complainant was 58 years of age and had worked for the Bank for 27 years. As a Bank employee she took part in the RBC Defined Benefit pension plan. She occupied a relatively senior role as Senior Account Manager, Personal and Business, in a relatively small community on the Sunshine Coast in British Columbia, isolated from the Vancouver area Lower Mainland by water, but connected by 45 minute ferry ride. She testified that she intended to continue in that job until November 2022 and age 65. She lives with her bother. According to both her testimony and a supporting letter from her family physician, she has health problems, and suffers from Type II diabetes, which in June 2016 was exacerbated by stress and attendant anxiety. To mitigate the loss of income from the Bank, she cashed in a $10,000 RRSP and applied for her pension, the latter being reduced from what she would have received had she continued to work and contribute to the pension plan until retirement at age 65. She then began to look for work on the Sunshine coast, but not further afield.

 

There is no dispute between the parties that return to work for the Bank is untenable. The calculation in that circumstance becomes constructing a remedy that will adequately make the Complainant whole for the loss of her job.

 

Complainant counsel maintains that the amount of damages ought to equal her lost Bank salary over seven years minus wages earned in subsequent employment. Counsel relies on the Supreme Court of Canada’s recent decision in Wilson v. Atomic Energy of CanadaLtd., 2006 SCC 29 as establishing the right to compensation beyond reasonable notice.  They further maintain that her efforts to find alternate employment were reasonable.

 

The Bank argues that damages should be restricted to the loss of earnings from the date of her resignation to the date of this award. They further maintain that the weight of jurisprudence represents an approach which limits damages for the loss of a job, to concepts such as seniority and security of employment. B.C. Ferries Services Inc. v. B.C. Ferry and Marine Workers’ Union [2005] BCCAAA #68, British Columbia (Ministry of Public Safety) v. Government and Service Employees’ Union [2009] BCCAAA #92; Catalyst Paper Corp. (Croften Division) v. Pulp, Paper and Woodworkers of Canada Local No. 1 [2006]BCCAAA #212, are cited as decisions which concluded that severance pay provisionsagreed to by the parties themselves in their respective collective agreements, representedthe appropriate level of compensation for loss of a job without just cause.

 

With respect to the Complainant’s job search, they argue that the Complainant’s efforts do not meet a standard of reasonableness, in that she did not look beyond the Sunshine Coast in her efforts to maintain income and professional status. Michaels et al v. Red DeerCollege (1975), 57 D.L.R. (3d) 386 (S.C.C.) is cited as the seminal case articulating an ex employee’s obligation to take reasonable steps to mitigate their loss of income. Larocquev. Louise Bull Tribe [2006] C.L.A.D. No. 111 and Anderson v. Nekeneet First Nation [2016] C.L.A.D. No. 76 are proffered as examples of the steps complainants must take to maintain a “reasonable” search, which should increase over time and expand to areas away from the ex-employee’s home area.

 

My understanding of the law regarding making an employee “whole” from the loss of secure employment, is contained in Harbour Air Ltd. v. Maloney, [2012] C.L.A.D. No. 105, the fundamentals of which were confirmed in general, in Wilson v. Atomic Energy, supra.

From Harbour Air:

 

165. The jurisprudence includes various explanations as to what should and in some cases, should not, go into the calculation to “make whole”. The fundamental tenet is described in Larocque v. Louis Bull Tribe, [2006] C.L.A.D. No. 111 (Dunlop):

 

242(4) has been the subject of substantial and not altogether consistent interpretation. The majority view of the courts and the adjudicators is that the section is intended “to [greater than]make whole” the claimant”s real-world losses caused by the dismissal.” See [Geoffrey England and Roderick Wood, Employment Law in Canada, 4th ed. looseleaf (Markham, Ontario: LexisNexis, 2005), vol. 2] at paragraph 17.148. In the same paragraph, Professor England quotes MacKay J. of the Federal Trial Court:

 

The intent of …[s. 242(4) of the Canada Labour Code]…is to empower the adjudicator as near as may be to put the wronged employee in the position of not suffering as a result of his unjustified dismissal.

 

The result is that the approach of the common law courts in setting damages according to a reasonable notice period has been replaced with the goal of compensating the claimant’s losses caused by the dismissal. Adjudication decisions which seek to limit the scope and purpose of s. 242(4) by the superadded test of pay in lieu of reasonable notice should not be followed.

 

…While adjudicators have largely avoided a reasonable notice period approach, they have limited damages in two ways. First, they have, in the words of adjudicator Hepburn quoted in the England book at paragraph 17.165, required that “there must be some reasonable connection between the harm sought to be remedied and the dismissal.” Secondly, they have looked for evidence that the employee made reasonable efforts to mitigate his or her loss, and they have taken into account money actually earned or received since the unjust dismissal.

Both limits find their authority in s. 242(4) which says that damages must have resulted from the dismissal. Mitigation, which can be seen as an extension of the causation rule, is a central issue in this case.

 

166. In fashioning a make whole remedy based on “a reasonable connection between the harm sought to be remedied and the dismissal”, Employment Law in Canada, supra, suggests that,

 

…the adjudicator must ascertain the the probability of the employee finding another job in the future, having regard to the current and projected state of the labour market in the employee’s occupation and the personal marketability of the employee, for example, his or her age, education and qualifications, experience and prior performance record.

 

167. Arbitrator Joan Gordon inMcCluskie v. Cascade Aerospace Inc. [2005] C.L.A.D. No. 67 defines the exercise as, (at para. 50):

 

In my view, Section 242(4)(a) expresses a “make whole” approach to remedial relief for proven unjust dismissal. That provision authorizes an adjudicator to remedy an unjust dismissal with an order for monetary compensation in an amount “equivalent to the remuneration that would, but forthe dismissal, have been paid by” Cascade to Mr. McCluskie. In fashioning a remedy, I am not limited to what would be ordered by a court in a common law wrongful dismissal action. In exercising the remedial jurisdiction under theCode,adjudicators take a variety of factors into account including: age; experience; seniority; transferability of job skills; the job market; and,other circumstances of the case. See Casey and Akgungor, Remedies in Labour,Employment and Human Rights Law, at pages 5-16 to 5-20. (emphasis added)

 

170…the difference between what is meant to be achieved with reasonable notice and making a person whole when reinstatement is found to be untenable. The factors may seem similar, but the concepts and goals are quite different. The “make whole” goal is defined inEmployment Law in Canada as “requir[ing] that the employee must be compensated for the difference between the financial position the employee would have occupied had he or she not been unlawfully dismissed; and (2) the financial position the employee occupies as a result of having been unlawfully dismissed”. Damages are paid for the loss of the job. By contrast, reasonable notice flows from a contractual obligation to cushion the blow of job loss by providing a reasonable period to look for other work where an employer’s obligation increases with the person’s length of service. Where there is a finding of unjust dismissal and failure to provide reasonable notice, damages are paid to put the person in the same position they would have been had reasonable notice been given–for the loss of reasonable notice. This payment would be expected to make the employee whole during the reasonable notice period that she was not given the opportunity to work. Under sec. 242 of the Canada Code, where reinstatement is not just a possibility, but the preferred option, damages are awarded to put the person in the same position they would have been had they not lost the job at all not simply been denied reasonable notice of that loss.

 

The key concepts here, are that “making whole” and “reasonable notice” are similar but different concepts, and that making a person whole from the unjust loss of a secure job means to put the person in the same financial position they would have been in had they not lost the job at all, and subject to an obligation to mitigate, taking into consideration “age; experience;seniority; transferability of job skills; the job market; and, other circumstances of the case.”

 

The awards taken from the collective bargaining regime where damages are awarded to replace a failure to reinstate are, in my view, inconsistent with this legal framework. Arbitrator McPhillips in B.C. Ferries, supra, concluded that damages where reinstatement is possible but not appropriate, should include loss of what amounts to “collective agreement” rights associated with seniority and job security. He cites Metropolitan Toronto (Municipality) and CUPELocal 79 (2001) 99 L.A.C. (4th) 1, as authority for the proposition that, as such, damages should consist of “a fixed sum without regard to what may happen following the breach”; and that “mitigation ought not to play any role in the final outcome”. Arbitrator McPhillips nonethelesslimited damages equal to severance pay at “one half month’s basic pay for each year of service”as per the collective agreement, on the basis that the grievor in that case was largely responsiblefor reinstatement being inappropriate despite a lack of just cause in the discharge. The award inMetropolitan Toronto, supra, awarded the “retirement allowance” of one and a quarter monthsper year of service referenced in the collective agreement. The awards in Catalyst Paper, supra,and British Columbia (Ministry of Public Safety), supra, also awarded damages equivalent toseverance allowances set in relevant collective agreement provisions and without regard tomitigation. The formula in British Columbia (Ministry of Public Safety)was three weeks per yearof service to a maximum of 12 months. In all of these cases, the “value” of the lost job wasbased what the parties’ negotiated collective agreement contained, in the form of severance orretirement allowance.

 

Unlike any of these cases, in the current matter there are no negotiated severance pay provisions reflecting the parties’ agreement on the value of a job. More importantly, what I will term for convenience the “severance approach”, fails to consider all of the circumstances of the case, including “age; experience;… transferability of job skills; the job market; and, other circumstances of the case.”

 

The better approach, particularly on the facts in this case, in my view, is to apply the tests followed in Childrens’ Hospital of Eastern Ontario v. OPSEU, 2015 CanLII 57922, articulated in George Brown College v. OPESU (2011), 214 L.A.C. (4th) 368, which I think effectively and fairly “compensate[s] for the difference between the financial  position the employee would have occupied had he or she not been unlawfully dismissed; and (2) the financial position the employee occupies as a result of having been unlawfully dismissed”:

 

24 Arbitrator Sims stated his conclusion on the preferable approach in these terms (at pages 389-90):

 

My conclusion is that the loss of fixed term employment framework is more appropriate and adaptable to situations at hand than the common law damage approach. A position covered by a collective agreement is not a fixed term or lifetime position, but is subject to many of the same contingencies.

 

Applying the loss of a fixed term job approach to damages does not imply they are unlimited. The Court decisions quoted above suggest the types of contingency that need to be assessed. These include such matters as plant closings, bankruptcy, technological change, chance of layoff, chance of illness, quitting for other work and so on. A unionized job is not a guaranteed job, even with seniority and just cause protections. These factors in many cases will reduce considerably the horizon of damages down from any notion of a life time job. However, the appropriate discount depends on the individual circumstances. Similarly, the likelihood of future employment elsewhere needs to be factored in, and if the individual is skilled and employable this too will significantly reduce the level of damage. That too however is dependent on the overall circumstances. Applying this approach allows the flexibility to tailor the estimate of damage to the reasons for the refusal or inability to reinstate; the particular nature of the exceptional circumstances that allow that step despite the lack of just cause.

 

25 We respectfully endorse arbitrator Sims’ approach. In our view, it describes more accurately the loss suffered by a grievor, and it allows for appropriate elements to be factored in for a particular grievor so as to result in a more focused assessment of the loss. This does not mean that the compensation due to a grievor can be calculated with precision since there are so many incalculable. As arbitrator Sims stated in his award, quoting from common law decisions: “One must try to assess. One cannot calculate.”

 

26 Based on arbitrator Sims’ award, we intend to proceed as follows:

 

Step 1: calculate the maximum income the grievor could have received if she had not been wrongly discharged;

Step 2: add to that amount the value of benefits attached to her position;

Step 3: reduce that sum to reflect the various contingencies that might have prevented her from continuing in employment; and

Step 4: further reduce that sum to reflect her obligation to mitigate her loss.

 

At the point of resignation, the Complainant was six years and five months short of retirement (July 1, 2016, to November 30, 2022). Her Bank salary for 2015 amounted to $70,825, comprised of base salary of $65,000 and a $5825 “high performance” bonus. Therefore, her gross loss is approximately $454,460. I accept that figure as representing total lost wages. It may have gone up or down to some extent over the remaining years before age 65, but I find that it is nonetheless a reasonable assessment in the circumstances.

 

My understanding is that the Complainant’s pension plan provides similar health/welfare benefits to her old position, therefore there has been no loss of benefits to be evaluated.

With respect to Step 3, the clear contingency is the Complainant’s early retirement. The relevance of early retirement income as a mitigating factor is explicitly noted and applied in George Brown College, supra. Statements from RBC Investor & Treasury Services for July 2016 and January 2017, indicate that the Complainants monthly income from her Bank pension is $2649.32 which translates as a yearly penion income of $31,791.84. Presuming that payments began on July 1, 2016, the gross figure from Step 1 must be reduced by $203,997.64.

 

Which takes me to Step 4 and mitigation. The Complainant said that she applied for jobs for which she thought she was qualified, which included applications for underwriter at Scotia Bank and a similar job at Dominion Lending, neither of which yielded interviews. She also applied at what appear to be jobs less similar to her banking experience, including Accounts Receivable Specialist at an insurance firm, Level 1 Broker at Sechelt Insurance, Agent Support Coordinator at Royal LePage, coordinator at the Sunshine Coast Community Foundation, another coordinator position at the Sunshine Coast Community Centre, and clerk positions at Cooperators Insurance and Kerns Furniture. None of those applications were successful, but she eventually secured employment in April 2017, as a front desk person at the Driftwood Inn, making $15 per hour. Red Deer College, supra, confirmed that the burden of proving a failure to mitigate rests on the employer, and includes both an onus to prove a failure to make a reasonable search, and that the dismissed employee would likely have found suitable employment if reasonable efforts had been made. The Bank did not proffer any evidence of the likely availability of suitable work even had the Complainant expanded her search. In some circumstances, a determination that a search has been unreasonably narrow can lead to a conclusion that there has been a failure to mitigate, even without evidence of what suitable alternate work was available, because that likelihood is implicit in the type of work required. Such appears to have been the case in Larocque and Anderson. But I think that the situation changes where the work concerned is skilled and the number of available jobs are likely to be limited. I find that is the case in the current matter, and that the Bank has failed to establish that an expanded search would likely have led to alternate work of a suitable nature.

 

In any case, in my view, the Complainant’s job search was reasonable in all the circumstances, particularly considering her age, her personal circumstances including health, and the nature of her lost job. I agree with the adjudicators in Laraoque and Anderson, that the obligation to expand a search for alternate employment increases over time, but the circumstances in the current matter are quite different, on two points.

First, the Complainant in the current matter put considerably more effort into finding alternate employment than what either of the Complainants in Larocqueand Anderson appear to have done, based on the face of both awards. Second, the kind of employment is different. Both Larocque and Anderson were relatively unskilled workers. The Complainant in the current matter, by contrast, was in a skilled job where openings will be more limited in a general sense, and even more so for an older worker with limited employment years remaining. The lack of evidence that employment opportunities closer to her Bank job, were likely available, becomes more determinant in that circumstance.

The Employer estimates that the Complainant’s yearly income from the Driftwood Inn amounts to approximately $26,920, commencing at the end of April 2017. Projected to November 30, 2022, that would amount to a total of $150,303.33. I accept that figure as an accurate assessment of mitigation arising from replacement wages.

 

Applying the two mitigating factors to the gross figure, yields a loss of $100,159.03 in income over the period.

 

In the result, I find that the Complainant is entitled to damages representing her lost income at the Bank, including her basic salary plus high performance bonus—a total I assess at $70,825per year—for the period commencing her last day or work, June 30, 2016, and ending on the date her full post-age 65 pension will commence, December 1, 2022; minus her income from the Driftwood Inn and her pre-age 65 pension income. All of which yields a total of $100,159.03.

 

Lost Pension Benefit:

The Complainant testified that when she secured the job in B.C., she intended to keep working for the Bank until age 65. The Bank challenged that evidence as not credible based on a comment contained in an October 5, 2011 “Incident Report” completed by her manager, otherwise dealing with performance issues, that “she has talked all year about retiring in 2012”; and an internal note that she contacted the Bank’s Human Resource Service Advisory Group in November 2013 for advice on retirement options.

Retirement from employment is akin to resigning, and requires both an objective action and evidence of continuing intent to severe the employment relationship. Neither heresay reporting of informal expressions of thoughts of retiring, nor seeking advice about retirement options fulfill either requirement. At the time—2012 and 2013—the Complainant had suffered a number of personal losses, and she was under review for poor work performance in her position as a Mortgage Specialist. She clearly did not retire in 2012, and there is no evidence that she followed up her 2013 inquiry. In 2014 she secured a different job in a different part of the country, and there was no evidence that early retirement was again considered.

 

In the result, I accept the Complainant’s testimony, that had the Bank not constructively dismissed her in June 2016, she intended to continue working and contributing to her pension plan, until age 65. The loss of the value of those contributions and the penalty applied because of early retirement are therefore losses directly connected to the constructive dismissal. The appropriate approach to the calculation of damages in this regard is set out in Bardal v. Globe and Mail Ltd., (1960), 24 D.L.R. (2d) 140 (Ont.H.C.), cited in Ansari v. British Columbia Hydro and Power Authority, 1986 CANLII 175 (BCSC) QL. From Ansari, QL:

 

The question of benefits is a difficult one because Mr. Ansari’s pension vested after 10 years’ service and he became entitled to a pension upon termination. The increased value of this asset, as it would have accrued to Mr. Ansari if 21 months’ notice had been given, is properly included in an award for damages. McRuer, C.J.H.C. in Bardal said at p. 146:

 

◦”If he had continued in the service for another year, pursuant to proper noticed the defendant’s contribution would have been on a higher basis. The matter of what the dollar value of the plaintiff’s pension would have been had he been employed for another year is a matter for actuarial computation. This aspect of the case was not developed in argument. It is, however, quite clear that had the plaintiff been given proper notice according to the implied term of the contract he would have had another year’s service with the defendant which would have increased his pension allowance.”

 

As addressed above, in the somewhat unique circumstances of this case, the Complainant’s decision to apply for an early pension was directly related to her attempts to mitigate the loss of her Bank income. Given my conclusions in that regard, and the reduction of lost income damages by an amount representing pension benefits from dismissal to normal retirement at age 65, I find that the Complainant is entitled to an amount determined through an actuarial computation, of the present value of her pension had she continued to work until age 65, less what she will receive at age 65, having taken early retirement. That is to say, the present value of her full pension at age 65, including contributions which would have been made if she continued to work until that time, and without the early retirement penalty.

 

Aggravated Damages

The Complainant requests an award for mental distress damages due to the manner of the dismissal, citing the ratio from Honda Canada Inc. v. Keays, [2008] S.C.J No. 40, (at para 55) that “in cases where parties have contemplated at the time of the contract that a breach in certain circumstances would cause the plaintiff mental distress, the plaintiff is entitled to recover.” Citing Saadati v. Moorhead, 217 SCC 28, counsel further argues that evidence on this point from the Complainant herself, supported by a letter from her family doctor, is sufficient to ground the claim.

 

For its part, the Bank also relies on the framework established in Honda Canada Inc. v. Keays, supra, but emphasize a different part (at para 57: “Damages resulting from the manner of dismissal must then be available only if they result from the circumstances described in Wallace, namely where the employer engages in conduct during the   course of dismissal that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive”. The Bank denies that it has acted in a manner which was egregious, in bad faith or unfair, untruthful, misleading, or unduly insensitive. They do not dispute that the Complainant became upset, but maintain that the cause of that mental distress was the result of having to pay back advanced commissions, and the financial predicament that that placed her in, all of which began before she decided to resign and retire.

 

Honda Canada Inc. v. Keays, supra, provides the following direction:

 

55 Thus, in cases where parties have contemplated at the time of the contract that a breach in certain circumstances would cause the plaintiff mental distress, the plaintiff is entitled to recover (para. 42 of Fidler; p. 1102 of Vorvis). This principle was reaffirmed in para. 54 of Fidler, where the Court recognized that the Hadley rule explains the extended notice period in Wallace.

 

It follows that there is only one rule by which compensatory damages for breach of contract should be assessed: the rule in Hadley v. Baxendale. The Hadley test unites all forms of contractual damages under a single principle. It explains why damages may be awarded where an object of the contract is to secure a psychological benefit, just as they may be awarded where an object of the contract is to secure a material one. It also explains why an extended period of notice may have been awarded upon wrongful dismissal in employment law: see Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701. In all cases, these results are based on what was in the reasonable contemplation of the parties at the time of contract formation. [Emphasis deleted.]

 

56 We must therefore begin by asking what was contemplated by the parties at the time of the formation of the contract, or, as stated in para. 44 of Fidler: “[W]hat did the contract promise?” The contract of employment is, by its very terms, subject to cancellation on notice or subject to payment of damages in lieu of notice without regard to the ordinary psychological impact of that decision. At the time the contract was formed, there would not ordinarily be contemplation of psychological damage resulting from the dismissal since the dismissal is a clear legal possibility. The normal distress and hurt feelings resulting from dismissal are not compensable.

 

57 Damages resulting from the manner of dismissal must then be available only if they result from the circumstances described in Wallace, namely where the employer engages in conduct during the course of dismissal that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive” (para. 98).

 

The evidence related to the Complainant’s mental distress in June 2016, came from the Complainant herself corroborated in some sense, by Dr. Hourihan’s letter dated June 7, 2017 which addresses the Complainant’s mental state beginning in March 2016. The Complainant testified that the Bank’s letter of March 23, 2016, stating their intent to begin deductions of $1000 per pay cheque, caused her to go on short term sick  leaveciting stress and anxiety. She said that she told her doctor that “I was not thinking straight, vomiting…not sleeping”. The physician’s letter is dated June 7, 2017 but refers to his knowledge and experiences related go his patient’s condition in 2016, reporting what was presumably the patient’s own reporting at the time, that she was “experiencing poor sleep, poor eating habits, low energy, palpitations, low mood, anxiety, social withdrawal, poor memory and poor concentration.” The letter further notes elevated blood sugars, and a need at the time for medications for anxiety and sleep.

 

It is clear that the cause of the Complainant’s mental distress was the Bank’s decision to remove $1000 from each of the Complainant’s pay cheques, and the result that that drop in income had on her affairs and her life. The fundamental question, in my view, is whether this circumstance represents distress with loss of income which would be expected with the loss of a job as per para. 56 of Honda Canada, and, therefore, exempt from aggravated damages; or unfair and insensitive treatment in the manner of the dismissal as per para. 57. After considerable deliberation I find that the former is more in line with the Court’s direction.

 

In that light, I find that there is no evidence of bad faith or maliciousness in the Bank’s decision. They were not untruthful or misleading, and I accept that there was a sincere belief, not only that they were entitled to recover the sum demanded, but also the schedule for repayment. And there was no lack of civility. That they were, at the same time, insensitive and oblivious to the financial predicament they were imposing on the Complainant, does not qualify as misbehaviour in the manner of the dismissal. It would be the same financial predicament and resulting distress she would have been in and suffered, had she been dismissed outright.

 

In the result, I decline to award aggravated damages for mental distress.

 

Legal Costs:

The Complainant asks for full legal costs, arguing full solicitor/client costs are warranted in the circumstances. Harbour Air, supra is referenced as authority that solicitor/client costs are appropriate in circumstances of bad behaviour by a respondent. The Bank argues that costs of any kind are only appropriate where the circumstances are egregious.

 

An award of legal costs in a case of unjust dismissal under sec. 242 of the Code, is not automatic, but the jurisprudence indicates that such awards have become fairly normal. See Thornton v. Toronto Dominion Bank, 2008 CanLII 49578 (CA LA) [2008] C.L.A.D. No. 216, paras. 166 to 168), and Larocque v. Louis Bull Tribe[2006] C.L.A.D. No. 111, paras. 62 to 64. The authority and logic are set out in Banca Nazionale del Lavoro of Canada Ltd. v. Lee-Shanok, [1988] F.C.J. no. 594; 22 C.C.E.L. 59 (F.C.A.) (QL):

 

…Legal costs incurred would effectively reduce compensation for lost remuneration, while their allowance would appear to remedy or, at least, to counteract a consequence of the dismissal. I am not persuaded by theApplicant’s contention that paragraph (c) does not permit an award of costs because the only pecuniary award contemplated by Parliament is compensation as provided for in paragraph (a). I understand paragraph (c) as extending the range of possible remedies somewhat beyond those already  specified in paragraphs (a) and (b). While we are not called upon here to define its true breadth, I am satisfied that it does surely embrace the awarding of costs to a successful complainant in appropriate circumstances.

 

The regularity of legal costs following Banca Nazionale del Lavoro of Canada Ltd., supra, is noted in Larocque, supra:

62 The authority of an adjudicator to grant costs is s. 242(4)(c) of the Canada Labour Code as interpreted by the Federal Court of Appeal in Banca Nazionale Page  34 of 3 7 del Lavoro of Canada Ltd. v. Lee-Shanok, [1988] F.C.J. no. 594; 22 C.C.E.L. 59 (F.C.A.). Adjudicators regularly grant party and party costs and occasionally solicitor-client costs.  The board in Larocque awarded costs despite a finding that the Complainant was “not without fault”.

 

In Thornton v. Toronto Dominion Bank, supra, the Board appears to go so far as to suggest that an award of costs should be the default unless there are reasons otherwise:

 

166 …There was also no reason advanced to deny the Complainant his reasonable legal costs in the event of his success in this matter. In Misty Press v. 942260 Ontario Ltd. (c.o.b. Allanport Truck Lines), [2003] C.L.A.D. No. 491 (Luborsky), I examined the governing principles on the question of the appropriate scale of legal costs at paras. 8 — 10, that apply in the present circumstances:

 

◦para. 8 Allanport did not dispute my authority to award costs under the Canada Labour Code, R.S.C. 1985, c. L-2, as amended. I accept as a correct statement of the law on the quantum of costs to be awarded to a successful party in cases of this nature, the following by Adjudicator Kuttner in Polchies v. Woodstock First Nation, [2002] C.L.A.D. No. 441, at paragraph 21:

 

▪para. 21 Counsel has requested the awarding of costs to the complainant on a solicitor-client basis. Since the decision of the Federal Court of Appeal in Banca Nazionale del Lavoro of Canada Ltd.,supra, the jurisdiction of an adjudicator to award costs is beyond question. There, Justice Stone found that jurisdiction to be grounded in section 242(4)(c) inasmuch as “legal costs incurred would effectively reduce compensation for lost remuneration, while their allowance would appear to remedy or, at least, to counteract a consequence of the dismissal” (at p. 12,182). As Adjudicator Bruce noted in Re. Tina Paul, supra, that legal costs in cases such as this have been incurred over a lengthy period of time is self-evident. Here, as there, the complainant has incurred the legal costs associated with the pursuit of this complaint over a significant period of time and it would be unfair to place the burden of those costs on him. However, ordinarily costs are not awarded on a solicitor-and-client basis but at a lower tariff whether party-and-party or otherwise. Nevertheless, in the appropriate case solicitor-and-client costs may be awarded. In the Banca Nazionale case Justice Stone addressed the matter as follows:

 

▪”Even in the courts, that sort of award is ordered “only in rare and exceptional circumstances to mark the court’s disapproval of the parties’ conduct in this litigation” (Isaacs v. MHG International Ltd.(1984), 45 O.R. (2d) 693 (Ont. C.A.) at page 695), and a judge must be “extremely cautious in departing from the general rule” that only part-and-party costs should be allowed a successful litigant (Vanderclay Development Co. v. Inducon Engineering Ltd. et al., [1969] 1 O.R. 41 (Ont. H. C.), at page 48). An extraordinary award of this kind ought only to be made in circumstances that are clearly exceptional, as would be the case where an adjudicator wishes thereby to mark his disapproval of a party’s conduct in a proceeding.” (p. 12,183).

 

I take this jurisprudence to establish that party and party costs are appropriate in most cases, but that solicitor/client costs are only to be awarded “in rare and exceptional circumstances” to mark “disapproval of the parties’ conduct.”

 

As with the arbitrator in Thornton, I can see no reason to deny the Complainant her reasonable legal costs. But I also see no reason to increase those costs from the normal calculation of party-and-party costs, to solicitor client costs. Although guilty of insensitivity in the action which led to the constructive dismissal, the Bank’s prosecution of this case has not been improper. The circumstances in no way approach the facts in Harbour Air, supra.

 

In the result, I find that DD is entitled to party-and-party legal costs.

 

Interest:

The Court in Banca Nazionale del Lavoro of Canada Ltd., supra, is also the authority for the awarding of interest under sec. 242(4)(c) of the Code (QL):

 

The intent of Parliament, according to the language used, was that anything permitted to be done pursuant to paragraph (c) should be something “like” that provided for in paragraphs (a) or (b). I take this to mean that it should have as its objective making a victim of unjust dismissal whole again in the way that an award of compensation or reinstatement, or both, would make him whole again in some circumstances. The adjudicator would seem entitled to resort to paragraph (c) to find something that, if ordered, would of itself, or in combination with either or both compensation and reinstatement, bring about that result. As I see it, compensation without interest thereon would fall short of that objective in the sense that the dismissal deprived the complainant of the use of the money withheld in consequence thereof. An award of interest would surely serve to remedy or, at very least, to counteract a consequence of the dismissal. I see no overriding reason for construing paragraph (c) so as to deny an adjudicator power to award interest in appropriate circumstances when its language does not require any such limitation.

 

This reasoning applies in the current matter. DD is entitled to interest on her

damages award.

 

With respect to the calculation of interest, the arbitrator in Thornton, supra, ordered interest pursuant to the Federal Courts Act, R.S.C. 1985, c. F-7. Similarly, in Harbour Air,supra, the award was for court interest. The board in Larocque, supra, took a  differentapproach and ordered interest at a rate of 50% of “the prevailing prime rate”, which I take to mean 50% of the prime rate on the date of the award. The award reasons that “because the money would have been received at various points during the four years, it would be excessive to give Mr. Larocque the prime rate on the lump sum award for the whole period.” Larocque notes, at para 61, that this approach has gained endorsement by the Ontario Labour Relations Board and the England and Wood text Employment Law in Canada, 4th ed. looseleaf (Markham, Ontario: LexisNexis, 2005).

 

I adopt the Larocque approach as the simpler and more understandable, but still fair, formula. The Complainant is awarded interest on the award of damages, at a rate of 50% of prime on the date of this award.

 

Summary:

1. I find that the Complainant was constructively dismissed, which necessarily equates to a wrongful dismissal.
2. Reinstatement is untenable.
3. Damages are awarded for lost income in the amount of $100,159.03, which represents gross lost income of $454,460, minus projected income from the Driftwood Inn of

$150,303.33, minus $203,997.64 the Complainant will receive in pension benefits from July 1, 2016 to November 30, 2022. Interest on the damages amount, is to be paid at a rate of 50% of the prime rate at the date of this award.

5. The Complainant is entitled to an amount determined through an actuarial computation, of the present value of her pension had she continued to work until age 65, less what she will receive having retired early and without the benefit of contributions in the intervening years. That is to say, the present value of her full pension at age 65, including contributions which would have been made if she continued to work until that time, and without the early retirement penalty.
6. I retain jurisdiction with respect to the application and interpretation of this award, including those areas already identified.

 

It is so awarded.

Dated in Vancouver, B.C., this 17 day of November, 2017.

Richard Coleman, Arbitrator