ONTARIO SUPERIOR COURT OF JUSTICE. Plaintiff ) Defendant )

Transcription

1 COURT FILE NO.: 03-BN-6687 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: DAWN MARIE BENNETT William R. Gale, for the Plaintiff Plaintiff - and - KAREN ROSALEE CUNNINGHAM Kenneth Alexander, for the Defendant Defendant HEARD: October 18, 19, 20, 23, 24 and 25, CanLII (ON SC Valin J.: [1] Karen Cunningham operates a law firm in Mississauga. In the summer of 2002, she was looking for an associate lawyer to work in her office. She hired Dawn Bennett to fill that position in July Ms. Cunningham terminated Ms. Bennett s employment on January 8, [2] Ms. Bennett sued Ms. Cunningham for damages for breach of contract and for payment of money owed to her. The trial of this action raised the following issues: (a (b (c What was the nature of the contract between Ms. Bennett and Ms. Cunningham? Was it an implied term of the contract that Ms. Bennett was entitled to reasonable notice on termination? Did Ms. Cunningham have just cause to terminate Ms. Bennett?

2 (d If Ms. Bennett was entitled to reasonable notice on termination, and Ms. Cunningham did not have just cause to terminate her, what is a reasonable period of notice in this case and what amount of damages flows from it? [3] Ms. Bennett was called to the Ontario bar in She applied to Ms. Cunningham for the position of junior associate lawyer to practice in civil litigation. Ms. Cunningham interviewed her on July 4, 2002 and offered her the position. [4] They discussed two schemes of remuneration. On July 8, 2002, Ms. Bennett accepted the offer to work and elected to be remunerated under the first scheme. Ms. Bennett was to be paid 50% of all fees billed and collected. She would receive advances on commission at the rate of $38,000 per year. Ms. Bennett would be responsible for the payment of standard employee deductions, her Law Society fees and liability insurance premiums CanLII (ON SC [5] Ms. Bennett began work on July 15, During her first morning of work, Ms. Cunningham presented her with a written agreement specifying the terms of the position. The written agreement contained a number of provisions that had not been discussed during either the interview or the subsequent telephone conversation when Ms. Bennett accepted the position. Ms. Bennett signed the agreement. [6] Ms. Bennett immediately assumed responsibility for a number of files, the majority of which were family law cases, an area in which she had little experience. The office was busy. Ms. Bennett worked long hours from Monday to Friday, and often on weekends. She became concerned that Ms. Cunningham was not providing her with the tools she required to do her work. Her concerns focused on the paucity of office resources available to her and the inadequacy of the technology in place. [7] Ms. Bennett prepared a proposed business plan to address those concerns. She met with Ms. Cunningham in mid-august 2002 to discuss them. In addition to office resource and technology issues, Ms. Bennett expressed concern that she had been asked to sign a written agreement relating to her position on such short notice, particularly when there had been no mention of a written agreement during the interview or at the time of the job offer. [8] In response Ms. Bennett s concerns, Ms. Cunningham had the staff attend at the office on a Saturday after her meeting with Ms. Bennett. They identified and listed the files assigned to Ms. Bennett. Ms. Cunningham invested in voice mail and software known as Amicus Attorney. She also adopted Ms. Bennett s suggestion that each file contain a sub-folder for lawyer s notes. [9] Prior to the introduction of the Amicus Attorney software, Ms. Bennett had submitted handwritten dockets for the time spent on all files she worked on. The receptionist was responsible for entering the dockets into the office computer for file and billing purposes. The receptionist retired suddenly about August 22, 2002, and was not replaced until September 1, 2002.

3 [10] Ms. Cunningham met with Ms. Bennett on the evening of November 5, Ms. Bennett expressed concern that, while her share of fees billed was about $26,500, only $2,650 had been collected. She was also concerned about whether all her time dockets had been entered. A subsequent comparison of the handwritten documents with the computer records for her files confirmed that 42.8 hours of her docketed time had not been entered in the computer. [11] The two lawyers met again on December 16, Ms. Bennett remained concerned. The gap between fees billed and collected had increased; after five months, the advances paid to Ms. Bennett exceeded her share of fees collected by about $10,000. She asked Ms. Cunningham for a legal assistant. Ms. Cunningham told her that if she wanted one, she would have to bear the cost from her commission income. [12] Prior to this meeting, Ms. Bennett had pulled some accounts rendered and discovered a number of instances where time she had docketed had been credited to Ms. Cunningham. When she learned of this, Ms. Cunningham told Ms. Bennett that these errors would be corrected upon receipt of copies of the accounts where such errors had occurred CanLII (ON SC [13] Ms. Bennett met with Ms. Cunningham on Saturday morning, December 21, 2002, just prior to Ms. Cunningham leaving on a Christmas vacation. She handed Ms. Cunningham a four-page letter dated December 21, 2002, which documented nine areas of concern. She also sent her a copy by registered mail. In the letter, Ms. Bennett made a number of statements that Ms. Cunningham claimed were untrue. Under the heading Docketing System, Ms. Bennett accused Ms. Cunningham of being dishonest and negligent. The letter contained other comments suggesting that Ms. Cunningham was disorganized and incompetent. [14] Ms. Cunningham left on vacation and returned to the office on January 6, On that date, she invited Ms. Bennett to her office and informed her that she was terminated. On January 8, 2003, Ms. Cunningham handed a termination letter dated January 7, 2003 to Ms. Bennett, advising that her last day of work was to be January 10, [15] Ms. Bennett subsequently secured a similar position on similar terms with another lawyer. She began working for him on March 25, 2003, although he had invited her to commence work as of March 1, [16] Prior to the commencement of this action, Ms. Cunningham never asked Ms. Bennett to re-pay her any money by way of excess advances paid over Ms. Bennett s share of fees collected, although the agreement dated July 15, 2002 entitled her to do so. While Ms. Bennett may have been concerned about her ability to pay Law Society fees and liability insurance premiums due at the end of December, she never expressed that concern to Ms. Cunningham. [17] During the trial, Ms. Cunningham admitted through her counsel that Ms. Bennett s share of fees billed and collected to date, and remaining unpaid net of

4 advances, is $18, Ms. Cunningham admitted that she owed that amount to Ms. Bennett. (a What was the nature of the contract between Ms. Bennett and Ms. Cunningham? [18] The traditional approach to an action for wrongful dismissal required the plaintiff to establish that s/he was an employee working under a contract of service as opposed to an independent contractor working under a contract for service. The distinction was important because, in the case of an employee, the courts were prepared to find that the employment contract contained an implied term that required the employer to give reasonable notice of an intention to terminate the contract. On the other hand, a person working as an independent contractor did not enjoy the protection of such an implied provision CanLII (ON SC [19] Counsel for Ms. Cunningham argued that Ms. Bennett was an independent contractor. In support of that position, he stressed the following features of the evidence: Ms. Bennett was paid on a commission basis 50% of fees billed and collected. Ms. Bennett submitted an invoice to Ms. Cunningham every two weeks for professional services rendered. The invoices were paid by way of advance on Ms. Bennett's commission income. Ms. Bennett was responsible for the payment of her own taxes/payroll deductions. Ms. Bennett was responsible for her own expenses associated with the practice of law such as the payment of Law Society fees, liability insurance premiums, and the wages of a secretary or law clerk in the event she hired one to assist her. Ms. Cunningham testified that it was her intention that Ms. Bennett work for her as an associate lawyer as an independent contractor. During crossexamination, Ms. Bennett did not deny that she was an independent contractor. [20] I do not agree with that submission. Whether a person is an employee or an independent contractor is an issue that the court must determine based on the facts of each case. The fact that parties have agreed in writing that an individual is to be designated as an independent contractor, rather than an employee, is not determinative of the issue. [21] There is no universal test to determine whether a person is an employee or an independent contractor. The central question is whether the person who has been

5 engaged to perform services performs them as a person in business on his/her own account. When determining that question, the court should consider such additional factors as the level of control the employer has over the worker s activities, whether the worker provides his/her own equipment, whether the worker hires his/her own helpers, the degree of financial risk taken by the worker, and the worker s opportunity for profit in the performance of his/her work. [22] Having regard to those factors, the evidence disclosed that: Ms. Cunningham required Ms. Bennett to maintain hours of work between 9 a.m. and 6 p.m. from Monday to Friday. Except when she was in court, Ms. Bennett was expected to be in the office maintained by Ms. Cunningham. All clients and their files belonged to Ms. Cunningham, as did their private retainers and Legal Aid certificates CanLII (ON SC Ms. Bennett did not provide any equipment. Ms. Cunningham provided a computer, dictaphone, telephone and office furniture. Ms. Bennett did not hire any employees at her expense. She did not pay rent for her office. Ms. Bennett did take some financial risk in that she worked on a commission basis restricted by the proviso that the commission would only be paid on fees billed and collected. Ms. Bennett did not have any opportunity for profit in the performance of her work beyond the commissions she earned on fees billed and collected. [23] From this evidence, I conclude that Ms. Bennett was not in business on her own account. Her work effort was devoted exclusively to clients in Ms. Cunningham's office. She was under the control of Ms. Cunningham and had no opportunity or ability to pursue other revenue streams as a lawyer while engaged in the service of Ms. Cunningham. I find that Ms. Bennett was not an independent contractor. [24] On balance, the evidence suggests that Ms. Bennett was an employee. If my conclusion in that regard is incorrect, the courts have recognized that a continuum of working relationships has developed between those of employer/employee and principal/independent contractor. Relationships that are more akin to employer/employee than to independent contractor are now described as the intermediate category. [25] In circumstances where a worker is not carrying on business for himself/herself, and some degree of control has been established in the relationship, the court may find that the relationship falls within the intermediate category. [26] Having regard to the relationship between Ms. Bennett and Ms. Cunningham, the following facts are worthy of note. Ms. Bennett was engaged to work as an associate

6 lawyer for an indefinite period of time. She devoted her work effort exclusively to the clients of Ms. Cunningham. She was not entitled to any vacation until after she had worked in the office for one year. She was subject to the daily control of Ms. Cunningham. Notwithstanding she was paid on a commission basis with no employee deductions or benefits, I find that Ms. Bennett was either an employee or, at the very least, a member of the intermediate category. (b Was it an implied term of the contract that Ms. Bennett was entitled to reasonable notice on termination? [27] In the traditional employer/employee relationship, there is an implied obligation that, absent just cause, the employer can only terminate the relationship upon reasonable notice. A relationship that falls within the intermediate category may also be terminated only with reasonable notice CanLII (ON SC [28] Having concluded that Ms. Bennett was either an employee or a member of the intermediate category, I find that it was an implied term of her contract that, absent just cause, she was entitled to reasonable notice on termination. (c Did Ms. Cunningham have just cause to terminate Ms. Bennett? [29] If an employee has been guilty of serious misconduct, the law recognizes the employer's right summarily to dismiss the delinquent employee. The onus is on the employer to justify the summary dismissal of an employee. [30] In this case, the incident that gave rise to the summary dismissal was Ms. Bennett's four-page letter to Ms. Cunningham dated December 21, Ms. Bennett hand-delivered the letter to Ms. Cunningham on Saturday morning, December 21, 2002, as Ms. Cunningham was about to leave the country for a family vacation. She also mailed the letter to Ms. Cunningham by registered mail. [31] Ms. Cunningham had attended her office that morning to clean up some last minute matters before leaving on her vacation. She was not expecting to meet with Ms. Bennett. She opened the letter, read the first page and then put the letter in her purse. She did not read the letter in full until she was sitting in the airport. [32] Ms. Cunningham s office was equipped with PC Law, a computer software program for accounting and practice management recommended by the Law Society of Upper Canada for use in small law offices. As a result of the meetings she had with Ms. Bennett in August and November, Ms. Cunningham: had her entire staff attend at the office on a Saturday in August to help Ms. Bennett organize and list the files assigned to her; advised Ms. Bennett that she could have the process server obtain copies of any missing pleadings from the court office at the expense of her office;

7 installed Amicus Attorney computer software designed to improve efficiency in managing client appointments and the direct inputting of lawyer time dockets, at a cost in excess of $6,600; installed voice mail at a cost in excess of $4,800; revised the office filing system to include a sub-folder in each file for lawyer s notes; and told Ms. Bennett to provide her with records verifying errors in docketing and that she would have them corrected. [33] Ms. Bennett s letter, dated December 21, 2002, purported to address nine areas of concern that she claimed to have previously expressed to Ms. Cunningham without results. Ms. Cunningham testified that she was shocked and angered by numerous false and insulting comments in the letter. For example: 2006 CanLII (ON SC It suggested that Ms. Bennett signed the written agreement under duress on July 15, During cross-examination, Ms. Bennett admitted Ms. Cunningham did not force her to sign it. It suggested that that there was no list of the files for which Ms. Bennett was responsible. Shortly after their first meeting in mid August, Ms. Cunningham s staff attended at the office on a Saturday to help Ms. Bennett organize her files. They prepared a list at that time. Ms. Cunningham testified that there was no reason why Ms. Bennett could not have maintained an accurate current list of files from that point forward. It alleged that many dockets entered by hand were credited to Ms. Cunningham when they should have been credited to Ms. Bennett. Ms. Bennett states the monetary gain to you is both dishonest and negligent. The dockets to which Ms. Bennett referred were entered by the receptionist or the billing clerk, not by Ms. Cunningham. Notwithstanding the fact that Ms. Cunningham had told Ms. Bennett to bring the information to her and she would have the errors corrected, Ms. Bennett did not respond to that invitation. It complained about Ms. Bennett repeatedly requesting Ms. Cunningham to provide her with a legal assistant. Ms. Cunningham never promised Ms. Bennett a legal assistant. Her position from day one had been that Ms. Bennett was at liberty to hire a legal assistant, but it would be at her cost. After five months of work, the advances on commission paid to Ms. Bennett exceeded fees billed and collected by about $10,000. In the letter, Ms. Bennett stated you claim that I owe you approximately $10,000 to pay for your advances to me. Ms. Cunningham testified that, as of the date of the letter, she had never asked Ms. Bennett for repayment of any

8 money advanced to her in excess of fees billed and collected. Her testimony to that effect was not challenged in cross-examination. [34] In an employment relationship context, insolence has been described as derisive, contemptuous or abusive language or conduct directed by an employee at his/her employer. Generally, two or more instances of insolence are required to justify summary dismissal. However, a single incident of insolence will justify summary dismissal if the employer and employee are no longer capable of maintaining a working relationship. [35] Ms. Bennett testified that she wrote the letter because she had become frustrated at what she felt was a lack of response by Ms. Cunningham to the matters to which she referred, and because of the anxiety that had overcome her about the payment of fees to the Law Society and liability insurance premiums due at the end of the month. She admitted she had not discussed her anxiety with Ms. Cunningham. She also admitted that the language of the letter was harsh CanLII (ON SC [36] Notwithstanding Ms. Bennett's professed frustration and worry about her ability to pay pending bills, it cannot fairly be said that Ms. Cunningham provoked her into writing the letter. Ms. Bennett s actions in writing the letter were unreasonable. They cannot be characterized or excused as an error in judgment. [37] I find that Ms. Bennett did not offer any reasonable explanation for writing the letter, nor did she seek to apologize. Ms. Cunningham did not return from her vacation until January 6, The intervening period afforded Ms. Bennett ample opportunity to cool off and to offer an apology. Although that would have been difficult, if not impossible, to do in person, Ms. Bennett could have prepared and placed a written apology on Ms. Cunningham s desk for her attention when she returned from vacation. [38] Counsel for Ms. Bennett argued that the letter, dated December 21, 2002, was a private communication between two lawyers. The closing words in the letter read: "I would like to work together with you to resolve these issues. Kindly contact me so that we may work together to make this arrangement a successful one for both of us". Counsel for Ms. Bennett submitted those words constituted an invitation to Ms. Cunningham to address problems noted, and that the letter was courteous rather then insolent. [39] I disagree. The overall tone of the letter was anything but courteous. It was critical. It was accusatory. It was disrespectful. The letter suggested that Ms. Cunningham was disorganized, incompetent, dishonest and negligent. [40] In addition to delivering the letter by hand, Ms. Bennett also mailed it to Ms. Cunningham by registered mail. This fact casts a dark cloud over the sincerity of the closing words of the letter that, in the submission of Ms. Bennett s counsel, operated to soften the overall tone of the letter. [41] The relationship between lawyers practicing in the same law office is fundamentally based on confidence, respect and trust. After she had an opportunity to read the letter in its entirety and to consider its implications, Ms. Cunningham concluded that she could no longer have a working relationship with Ms. Bennett.

9 [42] Her conclusion in that regard was justified. The letter was highly critical of the operations in the law office and of Ms. Cunningham's integrity. The comments and accusations in the letter undermined the confidence she had in Ms. Bennett and destroyed the employment relationship. [43] I find that the contents and tone of the letter constituted serious misconduct on the part of Ms. Bennett. The insolence was not reconcilable with maintaining the employment relationship. In the circumstances, Ms. Cunningham had just cause for terminating the services of Ms. Bennett without notice. (d If Ms. Bennett was entitled to reasonable notice on termination and Ms. Cunningham did not have just cause to terminate her, what is a reasonable period of notice in this case and what damages flow from it? [44] In the event my finding that Ms. Cunningham had just cause to terminate Ms. Bennett without notice is incorrect, I should assess Ms. Bennett s damages arising from the failure by Ms. Cunningham to give reasonable notice CanLII (ON SC [45] Reasonable notice must be decided with reference to each particular case, having regard to the character of the employment, length of service, the age of the employee and the availability of similar employment, having regard to the experience, training and qualifications of the employee. [46] Ms. Cunningham hired Ms. Bennett as an associate lawyer to do work in civil litigation, primarily in family law. The majority of clients were funded by Legal Aid certificates. Most of the court work was in the Ontario Court of Justice. She did not have any management or supervisory responsibilities. [47] Ms. Bennett received her call to the bar in 2001, and was 31 years old at the time of termination. She worked for Ms. Cunningham for six months. Prior to working for Ms. Cunningham, her entire working experience as a lawyer consisted of a nine-month contract to work in a law office to replace a lawyer on maternity leave. She had been out of work for five months before she secured the position in Ms. Cunningham's office. [48] Following her termination, Ms. Bennett secured employment as an associate lawyer in the office of a sole practitioner. The position and terms of remuneration were similar to those she enjoyed while working for Ms. Cunningham. She began working at her new job on March 25, There was no evidence of depressed economic conditions affecting job availability. [49] Having considered these facts in concert with the factors set out in Bardal v. Globe and Mail Ltd., I find that a reasonable notice of termination would have been four months. [50] Counsel agreed that, for the purpose of calculating notice damages, Ms. Bennett earned $6,000 per month when working for Ms. Cunningham and $4,623 per month in the position she obtained following termination.

10 [51] Ms. Bennett s new employer offered her the position with a start date of March 1, However, he was going to be away from the office on vacation for the month of March. Ms. Bennett did not feel comfortable starting a new job when her employer was not going to be in the office. She eventually agreed to a compromise and began work on March 25, Counsel for the defendants argued that Ms. Bennett failed to mitigate her damages fully by delaying her start date. I do not agree. I find that her decision to start work on the date she selected was reasonable. [52] The damages flowing to Ms. Bennett from the failure to give reasonable notice of termination amount to $17,065, calculated as follows: January 8, 2003 to May 8, months at $6,000 per month $24,000 Less mitigation earnings March 25, 2005 to May 8, months at $4,623 per month $ 6, CanLII (ON SC Total $17,065 Result [53] Ms. Bennett s claim for damages for breach of contract arising from Ms. Cunningham s failure to give reasonable notice is dismissed. [54] Ms. Bennett shall have judgment against Ms. Cunningham in the amount of $18, for her share of fees billed and collected. [55] In the event they are unable to agree on costs, counsel may contact the trial coordinator in North Bay to arrange a telephone conference to address that issue. Mr. Justice G. Valin Released: November 7, 2006COURT FILE NO.: 03-BN-6687 ONTARIO SUPERIOR COURT OF JUSTICE

11 B E T W E E N: DAWN MARIE BENNETT and KAREN ROSALEE CUNNINGHAM Plaintiff Defendant 2006 CanLII (ON SC REASONS FOR JUDGMENT Valin J. Released: November 7, 2006