Pound v. iWave, 2017 PECA 17, a recent decision by the Prince Edward Island Court of Appeal, is a cautionary tale for employers about the legal issues that may arise when standard form employment policies are adopted without management fully understanding their obligations to employees in practice.read more
NL Court Finds Employee’s Resignation Was Involuntary
In Evans v Avalon Ford (1996) Limited, 2015 NLTD(G) 100, the employee, Mr. Evans, was Fleet Manager at the Avalon Ford auto dealership, the largest Ford dealership in Atlantic Canada (the “Dealership”), for more than 12 years. On the morning of Thursday, June 10, 2010, a meeting was called by Mr. Wilkins, the Dealership’s owner to discuss an error regarding the delivery of a commercial vehicle without appropriate paperwork being completed. In addition to Mr. Evans, the General Sales Manager, Mr. Lester, and the Comptroller, Mr. Drodge, were also present at the meeting. Mr. Evans acknowledged the error, taking sole responsibility for it and rectified it without delay. Mr. Evans was reprimanded by Mr. Wilkins during the meeting, who used profanity and raised his voice.
Immediately following the meeting Mr. Evans had an acute stress reaction to the reprimand. This was worrisome to him, given his history of cardiac health problems, which the Dealership had been aware and supportive of in the past. Mr. Evans decided that he wanted to discuss the reprimand with Mr. Wilkins. On the way to Mr. Wilkins’ office, he stopped by to see Mr. Drodge. Mr. Evans stated to Mr. Drodge “I’m done; I can’t deal with this anymore”. Mr. Drodge tried to get him to sit down and advised him not to “do anything stupid”. Mr. Evans then proceeded to Mr. Wilkins’ office to ask him if he wanted him to resign. Mr. Wilkins told Mr. Evans “No. If I had wanted to fire you I would have done it his morning” and continued “We are going to do fleet business with or without you. You need to walk around the building and decide what you want to do”.
Evans later headed home for his supper break and returned to the Dealership still stressed and anxious from the earlier events. A short while later, Mr. Evans placed his work cell phone and keys on Mr. Lester’s desk and stated “I’m done”.
The next morning, Friday, June 11, 2010, Mr. Evans telephoned the Dealership to speak to Mr. Wilkins. Unable to reach him, Mr. Evans asked that Mr. Wilkins be given the message to return his call. Mr. Wilkins testified only that he was told that Mr. Evans had called, not that he was to return his call. He assumed that Mr. Evans resigned and abandoned the Dealership at their busiest time of year. Mr. Wilkins also believed that Mr. Evans went to work for a competitor, which was untrue.
On Monday, June 14, 2010, Mr. Evans went to see his family physician. Dr. Hart’s assessment of Mr. Evans was that he was suffering from an acute stress reaction. He also provided Mr. Evans with a medical note supporting his inability to return “to his present employment”. Mr. Evans and Mr. Wilkins arranged to meet later that afternoon, which did not go well. At the conclusion of the meeting, Mr. Evans gave Mr. Wilkins the medical note which Mr. Wilkins angrily crumpled, tore and threw in the garbage.
On June 21, 2010, Mr. Evans went to see Dr. Rolfe who completed forms for Mr. Evans’ application for short-term disability with the Dealership’s benefits provider which were submitted on June 23, 2010. On July 2, 2010, Mr. Evans provided Mr. Wilkins with a letter explaining why he had left and that he considered that his departure was involuntary.
The Dealership subsequently received the employer’s portion of the disability claim forms, completing them on July 7, 2010. It noted on the forms that Mr. Evan’s had resigned from employment and that there was “no notice given, no prior indications or discussions of health or work issues due to stress”. As a result, Mr. Evans did not qualify for short-term disability benefits. Mr. Evans subsequently received EI disability benefits retroactive to June 10, 2010 and was cleared by Dr. Rolfe to return to “other work” on October 14, 2010.
In her analysis, Justice Butler found that the evidence in this case supported the finding that the relationship between the parties was subject to an implied term of good faith and a general duty of good faith in contractual performance. The duty was not limited to the time of dismissal.
Justice Butler held that while Mr. Evans resigned from the Dealership, his resignation was neither voluntary nor equivocal. In the circumstances of confusion and uncertainty in this case, she found that both parties had an obligation to make their intentions clear. While she found that Mr. Evans had done everything he could to clarify his situation, the Dealership failed to do so and was required to make further enquiries. Therefore, she found that even if Mr. Evans had resigned, the duty of good faith and fair dealing was breached by the Dealership in failing to provide Mr. Evans with time to cool off and reconsider. Justice Butler also found that the Dealership’s actions demonstrated careless disregard for Mr. Evans which also represented a breach of the implied fundamental term of good faith and fair dealings.
The parties agreed that if a breach of the employment contract was found, the appropriate notice period would be 12 months’ or pay in lieu thereof. Interestingly, in the calculation of damages for pay in lieu of notice, Justice Butler determined that Mr. Evans’ damages must be assessed based on the earnings that were reasonably expected on alternative employment with the Dealership during the notice period. She found that since Mr. Evans did not want to continue with the additional duties of his Fleet Manager position, due to stress, his salary must be calculated based on modified duties. According to the evidence of Mr. Wilkins, Mr. Evans would have made between $80,000 and $90,000 per year at a modified role, compared to the approximately $165,000 he earned in 2009 in the role as it existed. On this basis, Justice Butler calculated the pay in lieu of notice based on a salary of $85,000 between October 15, 2010, the date that Mr. Evans was cleared to return to work, and February 1, 2011, the date that he obtained new employment. Mr. Evans was also awarded one week pay in lieu of notice for the week immediately following his termination for which he would have spent waiting to receive disability benefits. He also received an award of $14,450 based on the short term disability benefits that he should have received up until he was cleared to return to work. In total, the damage award for pay in lieu of notice amounted to $46,201.87.
In finding that it was an implied term and condition of Mr. Evans’ employment that he would be entitled to receive one third of any incentive received from Ford Motor Company of Canada, Justice Butler concluded that whether Mr. Evans resigned or was dismissed, he was entitled to receive one third of the $81,600 received by the Dealership from Ford Motor Company of Canada for May Mania. Since Mr. Evans had already received $571.90 towards the May Mania incentive as of his termination, he was awarded $26,661.10 in special damages.
In her consideration of moral (also known as bad faith damages), Justice Butler found that the Dealership deliberately took steps to deprive Mr. Evans from obtaining his short term disability benefits. She also found that the Dealership’s action were insensitive toward Mr. Evans. However, Justice Butler declined to make an award for moral damages because Mr. Evans had experienced acute stress and anxiety related to the error he made and to the way he was treated before he was dismissed.
The error made was first discussed with Mr. Evans on the same day as his involuntary resignation; his reaction continued from the morning meeting where he was reprimanded for the error up until the point that he left the Dealership. This finding suggests that had Mr. Evans suffered a stress reaction after “resigning” on the evening on June 10, 2010, moral damages would have been awarded. It also raises concern as to whether this decision stands for the proposition that an employee predisposed to stress or similar health conditions, like Mr. Evans, could be successful in a claim for moral damages.
Lessons for Employers
This decision serves as a reminder to employers that they have the onus of proving that an employee voluntarily resigned. Where the circumstances surrounding the purported resignation are emotionally charged, especially where an employee has a history of health concerns, the employer must take steps to clarify the employee’s intention by making further enquiries. In addition, the duty of good faith and fair dealings in contractual performance, which was found on the facts of this case, requires an employer to give the employee time to cool off and reconsider or risk a finding of a breach of this duty.
Please click below for a link to full decision of the Newfoundland and Labrador Supreme Court Trial Division:
Evans v Avalon Ford Sales (1996) Limited, 2015 NLTD(G) 100.