Limitation Period for Wrongful Dismissal Starts When Employee is Dismissed

In White v Al-Man Trucking Inc., 2026 ABCJ 94, the Alberta Court of Justice ordered an employer to pay a former employee $44,603.93 (plus interest) in damages for wrongful dismissal and earned but unpaid vacation pay accrued during the employee’s eight years of employment. The judgment also included set-off for advances made to the worker which had never been repaid.

The Court concluded that the worker was an employee and not an independent contractor, even though: 1) the worker and employer had signed a contract labelling the worker as a contractor, and 2) the employer had treated the worker as a contractor for tax and payroll deduction purposes.  The Court based its decision on the fact that the employer had exercised control over the worker’s activities and provided him with the truck needed to perform the work.

The parties disagreed as to when the worker knew, or ought to have known, that the employer had misclassified him as a contractor. The Court concluded that when the worker had discovered that the employer had misclassified him as a contractor was irrelevant to the limitation period issue. Instead, the Court focused on the actual cause of action alleged: wrongful dismissal. Because the limitation period for wrongful dismissal starts when the employee is dismissed, the employee had filed his claim within the appropriate amount of time.

The Court also considered a number of other issues which commonly emerge in legal disputes between employees and their employers, including whether the worker resigned, what reasonable notice the worker’s was entitled to, whether vacation pay should be included in the notice period, and the worker’s entitlement to historic vacation pay.

Facts

The key facts are as follows:

• White had worked as a truck driver for Al-Man Trucking Inc (“Al-Man”) for approximately eight years.
• White and Al-Man had signed an “Al-Man Trucking Rental Agreement” in November 2014. There was no other written employment or contractor agreement.
• White delivered bread to Al-Man’s main customer: Weston’s Bakery. He initially did the Lethbridge run and worked three days a week.
• White subsequently started working Friday and Saturday nights in Al-Man’s yard. He moved and parked trailers and took them to the distribution centre.
• White switched to the Edmonton run in 2016. He was now working five days a week.
• White became sick in December 2022 and took two weeks off work. He returned to work around Boxing Day and asked to work three days a week until he felt better. Al-Man agreed.
• White phoned Al-Man on January 25^th, 2023. The parties disagreed regarding what happened during the call. Mr. White testified that he had been fired. Al-Man testified that Mr. White had quit. Either way, Mr. White never worked for Al-Man again after the call.
• White applied for Employment Insurance (“EI”) benefits in February 2023. Mr. White asked Al-Man for a document to support the EI application. Al-Man provided a letter stating that Mr. White had been a self-employed independent contractor performing contract services for Al-Man.
• The CRA investigated the situation and ruled that Mr. White had been an employee for the period of January 2022 – January 2023. The CRA ordered Al-Man to pay overdue EI/CPP, a failure to remit penalty, and interest.
• White subsequently sued Al-Man for wrongful dismissal and earned but unpaid vacation pay.
• Al-Man brought a counterclaim for advances paid to Mr. White which had not been repaid, and for the amounts Al-Man had paid to the CRA as a result of its investigation and ruling.

 

Analysis / Conclusion

Was the Worker an Employee or a Contractor?

The Court applied the factors described in 671122 Ontario Ltd v Sagaz Industries Canada Inc, 2001 SCC 59, to find that Mr. White had worked as an employee for Al-Man and not as an independent contractor.

While the written contract labelled Mr. White as a contractor, how the parties label the relationship is not conclusive or binding.  Neither is the employer’s payment (or non-payment) of benefits and statutory deductions. The Court examined the evidence to determine the actual nature of the relationship. The employer’s level of control over the worker’s activities will always be a factor in addressing the question. Other factors include supply of equipment, hiring of helpers, financial risk, and opportunity for profit.

Mr. White had worked exclusively for Al-Man and did not contract his services to anyone else over the eight-year period. Al-Man set Mr. White’s schedule, rates, and the routes he drove. Al-Man supplied the truck needed for Mr. White to carry out his deliveries and paid all insurance, registration, fuel, and maintenance costs. Mr. White never hired helpers. The totality of the evidence demonstrated the existence of an employment relationship.

The Court also acknowledged a third type of classification: the dependent contractor. A dependent contractor relationship will typically involve a long-standing relationship, reliance by the contractor, and a degree of exclusivity. Even if Mr. White was not an employee, the exclusive and long-term relationship and his high level of reliance on Al-Man supported the alternative finding of a dependent contractor. As a dependent contractor, Mr. White would have been entitled to reasonable notice of termination.

Also worth mentioning is that this is not the first time Al-Man has found itself on the wrong side of the employee / independent contractor debate. In Al-Man Trucking Inc v Tesfay, 2019 CanLII 111440 (AB ESAB), Alberta Employment Standards Appeals similarly found a worker to be an employee of Al-Man in circumstances much alike to those present here.

 

Did Al-Man Trucking Wrongfully Dismiss Mr. White?

The Court followed the applicable law established in Stonham v Recycling Worx Inc, 2023 ABKB 629, to determine that Mr. White had not resigned from his employment. Instead, Al-Man had terminated his employment without just cause or reasonable notice.

An effective resignation must be “clear and unequivocal” and voluntary. Alberta courts have recently started applying a two-part test:

1. Did the employee actually intend to resign?
2. Would a reasonable employer have understood that the employee had resigned?

Here, the issue was not one of legal interpretation, but rather of which version of events the Court believed.

1. White testified that he had initially intended to go to work on January 25 but nearly passed out when he went into the bathroom. He called Al-Man and advised them something was wrong. He asked for two days off to go see a doctor. Al-Man became upset and said: “No, no, you’re done. You’re done”.
2. Al-Man testified that Mr. White had called advising “I’m tired. I can’t do it – anything. I’m not going to do more work”. Mr. White advised that if he was required to work he would drive the truck into a ditch. Al-Man responded stating: “If you tired, tired is done”.

The Court concluded that Mr. White’s version of events was more credible and that Al-Man had unilaterally terminated his employment. Mr. White never intended to resign and did not objectively communicate an intention to resign. The Court’s reasoning was as follows:

1. White’s evidence was consistent with the events leading up to and after the January call.
2. There was no reason for Mr. White to abruptly resign after eight years of loyal service.
3. Al-Man failed to identify any specific example to support its “sweeping and unsubstantial allegations” that Mr. White was not credible or reliable and was demonstrably wrong.
4. Al-Man’s own evidence was not credible. Al-Man’s testimony evolved during the trial when it mentioned for the first time in cross-examination that Mr. White had been shouting and swearing during the call. Such a fact should have been noted in direct examination.
5. Al-Man claimed that he had no knowledge of Mr. White’s health condition during the call; however, it defied credibility to believe that Mr. White had not mentioned that he was sick on the call when said sickness was the reason he could not work that day.
6. Al-Man referred to Mr. White’s declining health in its February letter, which was inconsistent with its claim that it lacked knowledge about Mr. White’s health concerns.

The Court accepted Mr. White’s version of events and concluded that Al-Man had been the one to say that Mr. White was done.

 

Is the Wrongful Dismissal Claim Barred by the Limitations Act?

The Limitations Act, RSA 2000, c L-12, may sometimes act as a defense to claims brought more than two years after the date on which the plaintiff first knew, or ought to have known, that their injury had occurred. The limitation period starts when the plaintiff knows or ought to have know:

1. An injury had occurred to them;
2. The injury was attributable to the defendant’s conduct; and
3. The injury warranted bringing a proceeding.

Al-Man argued that Mr. White’s wrongful dismissal claim was barred by the Limitations Act because he would have known that Al-Man had classified him as an independent contractor in November 2014 – well over two years before Mr. White had filed his claim for wrongful dismissal.

If accepted, Al-Man’s argument would have barred Mr. White’s claim for wrongful dismissal before he was even dismissed from his employment. The Court did not accept Al-Man’s argument.

The Court reasoned that no injury had occurred to Mr. White before the dismissal, and therefore there was no reason to bring a proceeding until he was dismissed. Al-Man had failed to establish the first and third parts of the Limitations Act test.

 

Damages for Failure to Provide Reasonable Notice

The Court assessed Mr. White’s damages for wrongful dismissal by first determining the length of reasonable notice he was entitled to using the relevant factors set out in Bardal v Globe & Mail Ltd (1960), 24 DLR (2d) 140. Those factors include the nature of the employment, length of service, age, and availability of similar employment.

Mr. White had been 48 years old at the time of termination and had worked for Al-Man for eight years and two months. He did not have any supervisory responsibilities. There was no evidence of what comparable jobs were available as Mr. White had been unable to return to work.

Mr. White argued for a reasonable notice period of 12 months. Al-Man did not cite any authorities and simply argued that he was not entitled to any notice. The Court assessed a reasonable notice period of seven months and awarded Mr. White damages based on his salary for the seven-month notice period.

Mr. White also sought damages for his entitlement to vacation pay during the reasonable notice period. In Alberta, vacation pay is not always included in the award of damages for wrongful dismissal. The courts will examine the evidence to assess what the parties had done in the past respecting vacation pay and what might have happened during the notice period but for the dismissal. Vacation pay during the notice period will not be awarded when it would amount to double recovery.

In this case, the parties had never turned their minds to vacation pay at any time prior to the dismissal. Events after the termination also muddied the issue. Mr. White’s illness and subsequent disability during the notice period complicated any reasonable prediction of how vacation pay would have been addressed during the notice period. The Court concluded that Mr. White was not entitled to vacation pay during the notice period.

Mr. White’s severance damages for wrongful dismissal over a reasonable notice period of 7 months was $44,461.06.

 

Claim for Historical Vacation Pay

Having misclassified Mr. White as an independent contractor, Al-Man Trucking had not paid Mr. White any vacation pay during his employment. Mr. White sought damages equivalent to the vacation pay he should have received from 2018-2022.

As discussed above, the Limitations Act bars plaintiffs from advancing claims more than two years after they discovery the injury leading to the claim. The failure to provide vacation pay was an injury independent from and which predated Mr. White’s dismissal in January 2023, requiring further analysis from the Court.

Al-Man argued that Mr. White’s claim for historical vacation pay was statute-barred because it arose from the misclassification of his employment as a contractor in November 2014. Mr. White argued that he only discovered the misclassification when he applied for EI in February 2023.

The Court concluded that regardless of how Mr. White was classified, he knew, or ought to have known, that he was not receiving vacation pay. The fact that Mr. White did not know that he was entitled to vacation pay did not prevent the limitation period from running. The limitation period started to run when Mr. White discovered the injury, not when he learned about his legal entitlements. He was only entitled to that vacation pay which should have been paid within the two years prior to his filing his claim. Mr. White’s damages for earned but unpaid vacation pay was assessed at $2,242.87.

 

Punitive and Aggravated Damages

Mr. White sought $25,000.00 in punitive damages based on Al-Man’s conduct, which included terminating him when he was experiencing a severe medical condition and attempting to mislead the CRA regarding his EI application by stating that he had resigned.

The Court noted that punitive damages are only awarded in rare and exceptional circumstances involving reprehensible and egregious conduct. While Al-Man had terminated Mr. White without notice, it had mistakenly believed he was a contractor. Considering the history of the relationship and Mr. White’s own inattention to how Al-Man characterized his income, the Court concluded that Al-Man’s conduct was based on a mistaken and uninformed understanding of its legal obligations and was therefore not malicious enough to justify an award of punitive damages.

Mr. White had also sought aggravated damages for Al-Man intentionally misclassifying him as an independent contractor.  However, he failed to adduce any supporting evidence in support of the intentional misclassification allegations, and no aggravated damages were awarded.

 

Defendant’s Counterclaim

Al-Man’s filed a counterclaim alleging that it had made three advances to Mr. White totaling $3,600.00 which he had never repaid. Al-Man did not produce any documents confirming the advance amounts. Mr. White acknowledged requesting the three advances but disputed the amounts. He agreed that he had not repaid the advances. After reviewing text messages between the parties, the Court concluded that Al-Man had proven its counterclaim in the amount of $2,100.00.  The $2,100.00 was set off against Mr. White’s other damages, reducing his overall judgment.

Al-Man also counterclaimed for the $10,882.83 it had paid to the CRA representing overdue EI/CPP, premiums, the failure to remit penalty, and interest. The Court found that Al-Man was solely responsible for its failure to pay its portion of EI/CPP premiums, late remitting penalty, and interest. Al-Man had failed to plead or prove any cause of action against Mr. White in relation to the CRA payment.

My Take

White v Al-Man Trucking Inc succinctly considers and applies several legal principles which commonly emerge as issues in wrongful dismissal claims in Alberta and serves as a useful summary of the same. That said, this was very clearly a fact-driven legal dispute, with the credibility of the parties and totality of the evidence before the Court being most determinative of its conclusions.

The finding that Al-Man had terminated Mr. White’s employment (as opposed to him resigning) was the one which was most dependent on the parties’ testimony and credibility. Mr. White was simply the better witness and the Court preferred his version of events, having noted several inconsistencies with Al-Man’s testimony which undermined the credibility and reliability of its evidence.

The finding that Mr. White was an employee is not surprising considering the state of the law in Alberta and especially considering that Alberta Employment Standards Appeals had previously made a similar finding in relation to the same employer and nearly identical circumstances occurring several years ago.

The Court’s application of limitation periods was also consistent with existing law. Al-Man’s argument that the limitation period for a wrongful dismissal claim could start running before the dismissal itself was imaginative, and it is no surprise that the Court dismissed the same.

The parties’ arguments regarding the application of limitation periods to historic vacation pay both missed the mark regarding discoverability.  The Court focused on the actual injury suffered. Employees, especially those employed for a long period of time, should be mindful of limitation periods when seeking to enforce payment of their earnings earned prior to the dismissal.

While ostensibly a success for Mr. White, this case represents a few small victories for employers. The first was the Court’s refusal to award vacation pay during the notice period, which was perhaps no surprising considering the lack of attention the parties had paid to the issue prior to the dismissal.

One would have thought that Al-Man’s conduct – which included terminating Mr. White for calling in sick, framing the termination as a resignation, and providing not credible testimony regarding the telephone call – would have supported at least a modest award of aggravated and/or punitive damages. While the Court concluded that Al-Man had reasonably believed Mr. White to be a contractor, the Court did not comment either way as to whether Al-Man’s assertion that Mr. White had resigned had been made in good faith.

The Court’s findings suggest that it could have concluded that Al-Man’s insistence that Mr. White had resigned was done in bad faith, which could have supported an award of aggravated damages. That said, awards of aggravated and/or punitive damages are rare in the employment context – a reality only confirmed by the Court’s reasoning here.

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