The recent decision of the Superior Court in McGregor v. Atlantic Packaging Products Ltd. provides a number of important insights into key aspects of employment litigation.
McGregor had been employed for 25 years by GT French Paper. He held the title of Vice President of Sales when that employment ended. He had signed a restrictive covenant prohibiting him from competing in the same business for 18 months.
Just cause is difficult enough to establish in the best of circumstances.
After the end of that employment, he approached the Defendant, Atlantic Packaging, for employment. Atlantic was a competitor of GT French. He was hired as a branch manager in a new plant opened by Atlantic Packaging in April, 2005. He was terminated without any suggestion of just cause about 2 ½ years later at which time he was offered a severance package. He did not accept the severance package and started this lawsuit in February, 2008. Over two years later, in April 2010, Atlantic amended its Statement of Defence to allege just cause for the first time.
When the matter reached trial, the only defence put forward by Atlantic was that of just cause. Atlantic argued that McGregor had made fraudulent misrepresentations during the hiring process as to sales revenues that would be realized by Atlantic Packaging if he were brought on board.
The first aspect of the case that is of interest has to do with the nature of the evidence of both sides, which conflicted in a number of important respects.
Simply put, the trial judge preferred the evidence of McGregor where these conflicts arose. She found that on critical issues, his evidence was corroborated by e-mails, memos or other documents.
On the other hand, she noted that the evidence put forward by the Defendant’s witnesses were completely devoid of any written corroboration. There were no notes or e-mails to document critical evidence. For example, the Defendant’s main witness indicated that about a year and a half after the hiring, when he confronted McGregor about the lack of the promised business, McGregor said “Do you think if I had given you the real numbers you would ever hired me and opened the warehouse in St. Catherines?” While the witness indicated that he was shocked and upset by the admission, he made no notes of the alleged lie, he did not record his upset in any e-mail or letter to McGregor, he did not share the information with his immediate superior or the owner of the business, he did not inform the Human Resources department, and he made no reference to the alleged lie in any way in the process of McGregor’s dismissal.
Lesson number 1: if an employer is going to raise just cause, a failure to document the underlying facts will be extremely damaging to the credibility of its position.
Atlantic did not raise this misrepresentation at the time of the termination. It should be noted that there is plenty of case law standing for the proposition that just cause can be alleged by an employer based on facts that only come to light after the termination itself. In this case, however, the employer’s evidence was that it was aware of the alleged lie prior to termination. Nevertheless, it was not relied upon at the time of the termination and not even raised until long afterwards.
Lesson number 2: if an allegation of just cause is going to be put forward, given its seriousness, it should be raised at the time of the defence of the lawsuit if not earlier. Raising the allegation long afterwards will severely damage the credibility of that position.
At trial, Atlantic relied heavily on the alleged fraudulent misrepresentation as playing a key role not only in the decision to hire McGregor but also in its subsequent conduct. It maintained that it had opened a new warehouse facility in St. Catharines in reliance on what McGregor had said.
The trial judge found this proposition to be completely unbelievable. While McGregor had submitted a business plan, which Atlantic characterized as being full of promises and guarantees as to the number of clients, dollar amounts, and sources of revenue that might be anticipated, the judge determined that this business plan was in no way a promise or guarantee of sales but merely a forecast of what McGregor hoped to achieve over the next 5 years. He concluded that it would have been unreasonable for Atlantic to assume that one would be able to control what a former client would do particularly given the fact that McGregor had been out of the workforce for 18 months. She found that as Atlantic was a large company employing thousands of individuals, it was inconceivable it would have invested significant dollars in a new plant without any due diligence confirming or analyzing McGregor’s predictions. She also pointed out that its offer of employment to McGregor contained no provision whatsoever with respect to any of these alleged promises or guarantees. It understood that it was taking a risk and simply hoped that the numbers would materialize. As a result, she rejected the defence of just cause.
Lesson number 3: if an employer is going to allege just cause, the underlying facts have to make sense. While dishonesty before the commencement of employment can justify dismissal, statements that are more accurately regarded as innuendo, puffery, embellishment, or opinions do not amount to fraudulent or dishonest misrepresentation.
As for the fact that the alleged lie was well known to Atlantic some time before termination, the judge referred to the well-established law that if misconduct is known to an employer and the employer does not terminate the employee immediately, it may be found to have condoned the misconduct and it cannot thereafter rely on it as just cause for the dismissal. The trial judge went on to award damages equivalent to six months’ notice, even though McGregor had only been employed for 2 ½ years.
The employer strenuously argued that McGregor had failed to mitigate his damages. That argument was rejected. The trial judge pointed out that at the time of termination, McGregor was 60 years of age. He had no formal education and all of his experience was related to his job. The downturn in the economy in 2008 would have affected the market in which the company was involved.
At the time of termination, McGregor was in shock, and the judge found that it was not unreasonable that he required some time to regroup. He prepared a resume, he made contact with the people he knew in the industry, he checked daily newspaper ads, and he posted his profile on several job search websites. Atlantic, on the other hand, waited almost three months to provide McGregor with a proper letter of reference. At the time of termination, it provided no counseling or job search assistance.
The trial judge found that it was not unreasonable that his searches for a new job were within the same industry which he had worked for over 30 years, and within a reasonable commuting distance from the Niagara area in which he had lived for the previous 40 years.
Lesson number 4: terminated employees are not expected to turn the world upside down when looking for a new job if they are approaching the end of their working careers.
At McGregor’s rate of pay, which was $75,000 per annum, damages equivalent to six months’ notice was not a particularly significant sum. However, this action occupied five days of trial time so that the costs awarded against Atlantic in favour of McGregor were almost certainly well in excess of that amount. Furthermore, it appears that the entire trial was taken up dealing with the defence of just cause, which was clearly burdened with a number of significant problems.
Lesson number 5: just cause is difficult enough to establish in the best of circumstances. If what an employer has to deal with are circumstances which are less than ideal, it should give some serious thought to cutting its losses at an early stage.