May 26, 2009

 

LITIGATING IN AN ECONOMIC DOWNTURN: THE "FAST-TRACK" PROCESS

Many employers will, at least once, face a wrongful dismissal complaint. The economic downturn has resulted in an increase in the number of terminations or material changes to employees' terms and conditions of employment. These have, in turn, lead to an increased risk of wrongful and constructive dismissal claims. If such claims are unresolved, they can lead to litigation. This economic downturn also means that employers need a way to handle such litigation in an economic and speedy fashion.

At a recent conference, the Honourable Chief Justice Brenner reported the results of a survey that the legal fees for an average three day trial in Supreme Court are now around $60,000. In light of these fees, which are daunting for employers and employees alike, the court and the legal profession regularly attempt to find ways to make the litigation process more economic. Many wrongful dismissal claims are resolved by way of summary trial using affidavit evidence, or by mediation. However, those processes are not always ideal, particularly if there is a credibility issue, which would make a summary trial unsuitable, or if one party will not agree to mediation, which is a voluntary procedure.

In 1998, the courts introduced a "fast-track" process, under Rule 66 of the Rules of Court. The purpose was to provide parties with cheaper and speedier access to judicial determination, where the issues to be resolved are fairly straightforward. Until now, the process has been underutilized. However, given the increased cost of standard litigation, Rule 66 may be worth a second glance, particularly for wrongful dismissal claims where the damages are limited in scope.

Rule 66 applies to actions in which a full trial is estimated to take no more than two days. There is no monetary limit on the amount of the claim, but, because of the time limit, the rule generally requires straightforward factual and legal issues. It may be ideal for wrongful dismissal cases which are relatively straightforward but are not suited for summary trial. Some examples of wrongful dismissal cases which may be useful for fast-track:

Rule 66 provides a code for the entire litigation. It is not an automatic process and must be chosen by one or more of the parties. Rule 66 does not have a provision allowing for parties to move into Rule 66 after the pleadings are filed, however, and once a party makes an election to use the process, it is very difficult to move out of the process. All of this means that the parties must decide whether to use the Rule at the outset of the litigation. This forces both lawyers and clients to think about how best to handle the claim early on.

The key benefits of using Rule 66 are:

  1. Often a trial date can be obtained within four months from the date applied for, compared to at least a year or more for regular trials.
  2. The pre-trial discovery procedures are truncated, and therefore cheaper. Lists of documents are delivered with the pleadings, and examinations for discovery are limited to two hours each.
  3. Rule 66 sets out a strict trial scheduling process, which is designed to ensure that the trial may be completed within two days, and that the parties always keep in mind the time limits.
  4. For employers, the fast-track proceeding offers the ability to cap awards of costs. If liability is not an issue, employers are generally liable for the former employee's taxable costs and disbursements. Taxable costs are capped at $5,000 for one day trial, $6,600 for two days, exclusive of disbursements. By contrast, a one day summary trial may result in taxable costs of around $8,000 to $10,000, and full trials upwards of $20,000.

There are limitations to the Rule, however:

  1. The matter must be capable of resolution in two days or less, as a full trial. If the judge does not agree, the judge may postpone the trial, which in turn leads to delays and expense.
  2. The election must be made at the outset of the litigation, perhaps before there is a full appreciation of the facts.
  3. Electing to proceed means foregoing a summary trial, which is not available under Rule 66.
  4. Opting out is difficult, even where you did not select the process. You may be forced to proceed.

Rule 66 requires clients and lawyers to engage in preparatory work at the outset of the litigation, both in terms of gathering facts and analyzing the case. Questions to ask are: Is the summary trial process (Rule 18A) appropriate? If not, can this be done in two days?

It is crucial for the client to be engaged in the process for a number of reasons. First, the client may be required to forego some claims in exchange for the time and costs savings of the process. Second, the client can carry out a significant portion of the initial document gathering and reviewing. Third, the client must be made aware that there will be sacrifices in preparation to keep costs within a framework.

Within the process, clients and lawyers must always keep an eye on the trial estimate. If it becomes apparent that two days will not be enough, both must deal with that early. The focus should be getting on with the trial as quickly as possible.

The parties must be judicious about examinations for discovery. With a maximum of two hours, counsel must be careful to deal with only the contentious issue: narrow in on finding out the other party's case and obtaining the necessary admissions.

Rule 66 may be an effective and creative way of bridging the gap between summary trial and full trials where the issues are relatively straightforward and a full trial would be uneconomic. Given the increased opportunity for wrongful dismissal claims, together with the legal cost involved in traditional litigation, we believe that our clients want us to offer creative solutions in how we manage litigation. Accordingly, we invite our clients to consider this rule and other methods of expediting the resolution of employment related disputes when speaking to us about litigation.

 

BC SUPREME COURT PUNISHES EMPLOYER FOR LYING ABOUT THE REASONS FOR DISMISSING AN EMPLOYEE

In 1997, the Supreme Court of Canada told employers they must be honest, forthright and candid with employees during the dismissal process. The law has been refined since then but the principle remains the same. The obligation also requires an employer to be honest about the reasons for dismissal with others and during any subsequent litigation.

A recent decision of the BC Supreme Court highlights the consequences of an employer not being honest about the reasons for an employee's termination. In Marchen v. Dams Ford Lincoln Sales Ltd., 2009 BCSC 400, the court awarded $100,000 in punitive damages. The court found that the employer had tried to cover up the reasons for dismissing an apprentice mechanic in order to defeat the employee's claim for damages for wrongful dismissal.

The employee was hired in November 2002 as an apprentice mechanic by Dams Ford Lincoln Sales Ltd. ("Dams"). The employer agreed to sponsor the employee's apprenticeship for the full four years subject to the right of the employer to terminate the employment without notice for a shortage of work. The employee's brother had also been employed by Dams, but had been dismissed for thefts committed to support a drug addiction. The thefts resulted in a police investigation.

In January 2005, the employee was dismissed, and given his record of employment and two weeks of salary as severance pay. The employee's manager told him the reasons were not up for discussion, and the manager had tried to stop the termination but the decision had "come right from the top". Another manager told the employee that the employee was no longer welcome on company property. A day later, Dams' owner told the employee's father that the employee had been fired because charges of theft might be laid against both the employee and his brother.

The employee's manager confirmed to an investigator from Human Resources and Skills Development Canada (in response to the reasons for termination given on the Record of Employment) that the employee was dismissed because of a suspicion that he could have been involved with the thefts committed by the brother.

The employee commenced litigation in June 2005 for damages for termination of the employment before the conclusion of the four year apprenticeship program. A week later, Dams' owner called the investigator and told the investigator that the employee was dismissed because Dams had downsized its body shop operation and there was a shortage of work for the employee.

The matter went to trial in September 2008 and in March 2009. The court's decision was issued on March 26, 2009.

The owner and the two managers testified at the trial for Dams. All acknowledged that the employee was a good employee and all denied that the employee was dismissed because of the criminal activities of his brother. Their evidence was that the employee was dismissed because Dams had decided to downsize its body shop operations.

The court rejected their evidence, even though Dams did ultimately downsize. The court found that the employee was dismissed because of unfounded suspicions that he was involved in his brother's criminal activities. The court found that there was no evidence whatsoever to support that suspicion, and that the employee at all times was a loyal and faithful employee.

The court found that the apprenticeship agreement had a four year fixed term and was terminated wrongfully. The court awarded damages of twenty-two months of wages, less what the employee had earned in mitigation. The damages award was around $18,000.

The court also found that the wrongful termination of the apprenticeship agreement had significantly set back the employee's career. He was unable to complete his apprenticeship and his wages remained well below what he would have earned as a journeyman. The court awarded additional damages of $25,000 in respect of the loss of training and loss of status which had resulted, and special damages of around $2,000.

Significantly, the court went on to award punitive damages of $100,000 against Dams. The court noted that the basis of the award was not the employee's dismissal, or even the fact that the dismissal was based on unfounded suspicions of criminal activity.

The court found that the attempt to justify the employee's dismissal on the ground of downsizing was a "planned and deliberate attempt to mislead this court as to its true motives". The court made the following comments on an employer's obligations:

I find that Dams' actions are reprehensible and a substantial departure from the conduct and practices reasonably to be expected from an employer such as the defendant. It beached its obligation to Tyler to act fairly and in good faith. It is particularly reprehensible that Dams acted in this manner in regard to a young apprentice whom it wrongfully terminated from his first full-time job because of unfounded suspicions. Tyler was a hard working, loyal employee. He deserved better. While I have found that the method of termination did not warrant moral damages, I find that Dams' attempt to cover up the true reasons for the termination merit an award of punitive damages.

Finally, the court found awarded the employee special costs of the litigation, which are fixed as a percentage of the employee's legal fees (usually between 60% and 90% of actual legal fees).

The decision represents a strong rebuke to the employer for the way it handled the litigation. In an attempt to save $18,000 in damages, Dams became liable for $145,000, its own legal fees and the "special costs" of the employee.

While the decision is likely to be appealed, it nevertheless provides a reminder to employers who are considering terminating employees, to:

 

COPING WITH SWINE FLU AND OTHER PANDEMICS

The swine flu, or H1N1, outbreak is subsiding somewhat, however, this potential pandemic created a number of challenges for employers, and raised the issue of how employers should best manage these types of events. Questions being raised include: What can employers do about employees intending to travel to or returning from trips to "hot spots"? Do employers have any say in where their employees choose to spend their vacation time? How can employers reduce the risk of absenteeism? How should employers treat sick or quarantined employees?

Employers should consider putting a plan in place to communicate prevention strategies and to cope with any potential increase in absenteeism. This plan may not only apply to swine flu but other similar situations. Depending on the nature of their business, and size of work force, absenteeism may create particular operational problems for employers.

It is important for employers to make their plan consistent with existing law and legislation. Pandemics do not give employers the right to ignore the law. Consequently, employers should consider their obligations under employment standards, human rights, occupational health and safety, workers compensation and privacy legislation. It is important to review employment policies, benefit plans, employment contracts, collective agreements and applicable legislation to ensure that the employer is aware of potential legal consequences before a pandemic strikes.

Tips for employers include the following:

Communicate Prevention Techniques:

Containment:

Further information may be obtained from www.fightflu.ca and www.vch.ca/story.

We welcome your comments and feedback. Please let us know what you think of this publication by emailing the editor, Nicole Byres at: nmb@cwilson.com