In the recent case of Scarrow v Walkey et al, 2024 ONSC 3876, the Ontario Superior Court of Justice issued a considerable award, totaling $343,980.00, to a 58-year-old farm labourer/manager who was constructively dismissed by his employers after 40 years of service.
The individual defendant in this case, John Robert Walkey, was the principal and controlling mind of the three corporate defendants, Riverglen Farms Limited (Riverglen Farms), Gary Farms Limited, and James Wilson & Sons Limited.
Importantly, the defendants failed to file Statements of Defence, despite having been given ample opportunity to do so. As a result, Justice Lemon deemed the defendants to have admitted all facts described in the Statement of Claim.
Facts
The plaintiff was originally hired part-time by the defendants in 1978, and moved to full-time work in 1979. Over the course of the next 40 years, he worked for all three of the corporate defendants. While the plaintiff largely performed general farm labour, he also served as a farm manager, overseeing four farms with four full-time, permanent employees, and three more full-time, and ten more part-time employees during the seasonal rush.
The plaintiff testified that, despite this low salary, he retained his employment with the defendants, and worked significant overtime hours, on the promise that he would be given a retirement allowance payment by the defendants. In 2006 or 2008, Mr. Walkey told the plaintiff that he would have 8-10% of the nonvoting shares in Riverglen Farms, and that “the big money is at the end”.
The plaintiff later learned that Riverglen Farms had been sold for $2,200,000, and continued work on the assumption that he would receive approximately $250,000 upon his retirement.
On or about January 22, 2019, the plaintiff was advised by Mr. Walkey that he was laid off, effective January 18, 2019 (the previous Friday), without cause, and without the provision of notice of termination or payment in lieu thereof.
The plaintiff was advised that the layoff was temporary, and work would resume around April of 2019. Despite this, the plaintiff continued to assist the defendants with various tasks around their farms until May 4, 2019. The plaintiff was not paid for this assistance, with the exception of a one-time payment of $100, representing the money Mr. Walkey had left over from his sports betting.
On May 4, 2019, the plaintiff met with Mr. Walkey, who suggested that he could come back to work and be paid in cash, while still collecting employment insurance. Mr. Walkey also informed the plaintiff that he would no longer have a helper to assist him with heavy lifting.
The plaintiff rejected this proposed arrangement on the grounds that: (i) it was illegal; and (ii) he could not do the work required of him without assistance.
Analysis / Conclusion
Constructive Dismissal
Justice Lemon concluded that the defendants had constructively dismissed the plaintiff on March 4, 2019, for three reasons:
- they had told the plaintiff, effective immediately, that there would be significant and fundamental changes to his job duties;
- they had insisted that the plaintiff accept improper and illegal payment arrangements as compensation; and
- they had failed to provide the plaintiff with any notice of termination or payment in lieu thereof.
Regarding reasonable notice, the Court noted that, given the plaintiff’s long length of service and senior role, as well as the fact that his age, physical health, and training made it unlikely that he would find reasonably comparable re-employment, a notice period at the high end of the range was warranted, and granted the plaintiff 24 months of salary in lieu of working notice, amounting to $109,980.00.
Unpaid Wages
Based on the evidence before him, the Court concluded that the plaintiff had worked approximately 177 hours from January to the end of April 2019.
Having found that he worked upon the defendants’ request but was not paid for same, the Court awarded the plaintiff $5,000.00.
Retirement Allowance
As regards the purported retirement allowance, the Court applied the test set out in Matthews v Ocean Nutrition Canada Ltd., 2020 SCC 26, which holds that courts should ask two questions when determining whether damages for breach of the implied term to provide reasonable notice should include bonuses or other incentives:
- Would the employee have been entitled to the bonus or benefit as part of their compensation during the reasonable notice period?
- If so, do the terms of the employment contract or bonus plan unambiguously take away or limit that common law right?
The Court noted that the defendants had admitted that the plaintiff was induced to continue and maintain his employment, including working significant overtime hours, on the assurances of an allowance on his retirement, and found that there was no evidence to suggest that the bonus was taken away at any time.
Accordingly, the Court held that the plaintiff was entitled to the retirement allowance. While ignoring some hearsay on the matter, the Court found that there was no evidence to suggest that the plaintiff’s valuation of his retirement allowance was incorrect, and granted him an award of $250,000.
Aggravated Damages
In considering whether an award of aggravated damages was appropriate, the Court noted, inter alia, the following:
104 The defendants have admitted that, because of their conduct, Mr. Scarrow has suffered and continues to suffer, inter alia, mental distress, frustration, aggravation, the erosion of his self-esteem and confidence. Mr. Scarrow’s normal enjoyment and the comfort of his family life and friendships have been severely impaired. His economic security and plans for future economic stability and comfort in retirement have been irreparably damaged and that is a source of great concern and emotional upset to him…
111 After all of the work that Mr. Scarrow had done for Mr. Walkey and his company, the offer of an illegal pay structure amounts to bad faith in the termination. While I cannot determine if Mr. Walkey intended to deprive Mr. Scarrow of his retirement allowance, that was the effect of the termination.
112 The manner of termination left Mr. Scarrow with the embarrassment of having been betrayed and cheated by the man he had trusted for many years. That was clearly devastating to Mr. Scarrow.
In view of the defendants’ callous conduct, and the effect this conduct had on the plaintiff’s well-being, Justice Lemon held that an aggravated damages award of $50,000 was appropriate.
Punitive Damages
The Court held that punitive damages were appropriate in this case, as the conduct of the defendants constituted an independent actionable wrong.
The Court was critical of Mr. Walkey’s actions, noting the following:
125 Mr. Walkey has failed in his duty of good faith and fair dealing and has failed to comply with the provisions of the Employment Standards Act. Those constitute independent and actionable wrongs. He has behaved in a heartless and cowardly way. He continued to ask Mr. Scarrow to work for four months but apparently had no intention of paying Mr. Scarrow even this low wage. Mr. Walkey placed his sports betting ahead of his loyal employee’s care. His conduct overall drops to the level of being so malicious and outrageous that it is deserving of punishment on its own…
Having taken into account the amounts already awarded, the Court held that an award of $20,000 was appropriate in the circumstances.
My Take
One of the more unusual aspects of this case is that the Court awarded a 24 month reasonable notice period plus the $250,000 payment (which it called a “retirement allowance”). If the employer had defended, surely they would have argued that these payments overlapped and amounted to double recovery of severance. Also, using the term “retirement allowance” is a bit confusing, because an ordinary severance payment is often called a retiring allowance.
In any event, this case is interesting, because that the court awarded a 24-month notice period to a mid-level manager. Although the plaintiff was the most senior person at the farms he managed, he oversaw a relatively small staff, with only four permanent, full-time employees, and he was described only as having “supervise[d]” these employees.
This case is also significant in that the court upheld a fairly vague oral representations by Mr. Walkey regarding the plaintiff’s retirement allowance (“the big money is at the end”).
It is important to remember, however, that the court’s decision in this regard was influenced in large part by the fact that the defendants had failed to defend the action, and thus were deemed to have admitted the truth of the plaintiff’s allegations regarding the retirement allowance. If the employer had defended, the plaintiff would have had to prove its allegations with evidence.
As such, employees should be aware that whenever their employer makes a representation regarding their employment terms, they should seek written confirmation of same. While oral contracts can be upheld by a court, they are, practically speaking, much more difficult to prove.
Finally, this case serves as an important reminder as to why it is essential to retain legal counsel to assist in litigation. As the defendants failed to defend the action, the court deemed that they had admitted all statements of fact in the Statement of Claim, several of which were highly damaging to their case.
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Bow River Law is a team of knowledgeable, skilled and experienced employment lawyers handling employment law, human rights (discrimination) and labour law matters. Bow River Law is based in Calgary but we are Alberta’s Workforce Lawyers.
