July 27, 2022
by Michael Carabash, BA, LLB, JD, MBA, CDPM
Lawyers excepted, everyone lost. That’s my conclusion after reading two recent Ontario employment cases involving hygienists and dentists.
A dental hygienist (“Nicholas”) was employed part-time until she resigned in 2018. She had been employed from 1991 to 2011 with Dr. Michael Veer without a contract. In 2011, Dr. Edyta Witulska Dentistry Professional Corporation (“Witulska”) bought the practice, but did not make any material changes to Nicholas’ employment.
Witulska presented Nicholas with a new contract in July 2016; Nicholas was informed that she had until August 10, 2018, to consider and return the signed agreement, failing which her employment would end on September 10, 2018.
The employment agreement included clauses such as a work schedule, termination provisions (to reduce an employer’s liability to minimum standards under the Employment Standards Act, 2000 or “ESA”), restrictive covenants (i.e. for the employee not to compete or solicit patients) and a severability clause (i.e. if a clause is found to be invalid by a court, that clause will be severed but the rest of the agreement would remain in full force and effect).
At a performance review on July 17, 2018, Nicholas signed the employment agreement as-is. Thereafter, Witulska showed Nicholas a sheet listing 25 days Nicholas had been absent over the previous fiscal year. She was told that she needed to work on her “attendance” and “dependability” as her absenteeism had in part cost the practice $400k in lost revenue; as a result, no employee would be receiving a bonus or raise that year.
Nicholas responded that her absences had resulted from a communicable infection (MSRA) that she experienced and from the need to recover from foot surgery. Witulska then presented Nicholas with a new work schedule that reverted Nicholas back to her previous two days a week, down from three days.
Nicholas went home upset and on July 23, 2018, submitted a letter of resignation.
Nicholas subsequently sued for constructive dismissal and sought 24 months’ worth of pay (on the basis that the termination provisions in the employment agreement didn’t apply, so it would have been as if she was employed with Witulska since 1991 without a contract).
Nicholas also claimed $30k in damages for breach of her human rights: she argued that her absences, caused by her disability, were a factor in Witulska’s decision to reduce her hours and earnings.
Nicholas brought a motion for summary judgment (a process whereby the court is asked to decide the case without a full trial on the basis of the evidence presented thus far) before Justice D.A. Broad of the Ontario Superior Court of Justice.
Citing the Ontario Court of Appeal’s tectonic decision in Waksdale v. Swegon North America Inc., 2020 ONCA 391 (which I wrote about in “Are Employment Law Cases Ruining Practice Sales?”, Oral Health, May 2021, pp. 64-67), Justice Broad found that the termination provisions in the employment agreement that Nicholas signed were invalid. So IF Nicholas were found to be constructively dismissed (i.e. the employer terminated the employee by making a unilateral change to a fundamental term to the employment relationship), then the limited notice entitlements in her employment contract (i.e. the ESA entitlements, up to 8 weeks max) would NOT apply. Instead, Nicholas would get the more generous common law damages (i.e. judge-made law), which is typically 1 MONTH per year of service, up to 24-30 months max.
But none of that mattered because the Court found that Nicholas was NOT constructively dismissed: the employment contract Nicholas signed stated that the number of days/hours worked per week were in Witulska’s sole discretion and subject to variation, based upon the dentist’s schedule. In eliminating a temporary third shift and reverting to Nicholas’ previous two (2) shifts, Witulska did not breach an essential term of the employment agreement.
But even if it did, this single act did not amount to constructive dismissal. Why? Because constructive dismissal is only made out “where there has been a series of acts that, taken together, show that the employer no longer intended to be bound by the contract.” So even the single act of allegedly punishing Nicholas for unavoidable absences was, per the Court, “not sufficient” to satisfy this constructive dismissal test.
Since Nicholas lost on her constructive dismissal claim, her human rights claim was also dismissed (it could not be maintained as a stand-alone remedy by operation of the Human Rights Code).
Worth mentioning is that Witulska countersued for $200k against Nicholas, arguing that Nicholas had breached her employment agreement by competing less than half a km away from their practice after leaving and had attempted to solicit patients to go over to the other practice; Witulska also sought to enforce the non-compete and non-solicit clauses.
Here, Justice Broad reviewed the jurisprudence about the enforceability of non-compete clauses (which I’ve written about, for example in my article, “Are Non-Complete Clauses Legal?”, Oral Health, July 2021, pp. 46-49) and concluded that there were no “exceptional circumstances warranting a non-competition covenant to protect the defendant’s proprietary interest and that a non-solicitation clause would not be sufficient to afford that protection.” So the Court refused to enforce the non-compete clause.
With respect to the non-solicit clause, Justice Broad found that it was not reasonable based on the way it was drafted: it did not properly define what a “patient” was (because a “patient” could have been a person at either one of the 2 practices owned/operated by Witulska, regardless of whether Nicholas had treated the patient or had any contact with them and regardless of whether they were a patient during the time that Nicholas was employed by Witulska). Per the Court: “I find that the broad restriction on solicitation to include patients of the defendant with whom the plaintiff had no contact is unreasonable as between the parties.”
So Witulska’s counterclaims were all dismissed too. And all of the parties were ordered to cover their own costs.
A dental hygienist (“Gracias”) was employed by Dr. David Walt DPC (“Walt”) as a full time hygienist for five months and 21 days before she was terminated without cause (i.e. based on notice entitlements under her contract, not based on her having done anything wrong). In line with the ESA and her contract, she was given 1 week of pay and benefits ($1,507.74). She was even offered another one week of pay if she signed a release and indemnity (so $3,015.47 in total).
Gracias ended up suing Walt for $50k for common law damages for wrongful dismissal, $50k in punitive damages, and $50k in damages for discriminating against her contrary to the Ontario Human Rights Code.
Her discrimination claim was based on her alleged unavailability for work because of chemotherapy and childcare responsibilities BUT she ended up abandoning those human rights claim, as well as claims for punitive damages, employee benefits and a bonus.
So when the matter got to summary judgment, Gracias claimed $43,750 based on compensation for wrongful dismissal based on a notice period of seven (7) months.
Gracias alleged that the termination provisions in her employment contract (which limited her to ESA) were unenforceable because of Waksdale; as such, she claimed she was entitled to common law damages for reasonable notice.
Justice Perell of the Ontario Superior Court of Justice agreed. Since the Termination With Cause section conflicted with the ESA, it rendered both termination clauses invalid and NEITHER could be saved with the severability clause (i.e. a clause which directs a court to strike down part or all of an invalid clause but save the rest of the clause/agreement). Per the Court: “The unlawful termination provision cannot be severed, and it taints the entirety of the termination provisions…In my opinion, the termination for cause provisions in Ms. Gracias’ employment contract are not compliant with the Employment Standards Act, 2000, and she is entitled to her common law entitlements for a dismissal without cause.”
So how much was Gracias entitled to at common law? The unwritten rule of thumb is around one (1) month of pay per year of service but courts don’t like to admit that because each case needs to be based on all the relevant Bardal factors (derived from a Supreme Court of Canada case). Those factors include: the character of employment, length of service, age of the employee, availability of similar employment having regard to the experience, training and qualification of the employee, etc.
Somewhat surprisingly, Perell J. wrote that the “appropriate reasonable notice period in the immediate case ranges between one month to three months” and then proceeded to award a whopping three months’ notice based on the Bardal factors: “[Gracias] was not a valued employee, and she did not have any management responsibilities. The duration of her employment was less than six months. She is in the prime of her career with considerable work experience and her age [note: she was 39 at the time], credentials, and experience presented competitive advantages in the job market. Her evidence and Dr. Walt’s evidence reveals that the COVID-19 pandemic was not a major impediment to her finding a new position. Her efforts at mitigation were reasonable. Balancing the various factors in play in the immediate case, three months is a reasonable notice period.”
The three months’ damages award amounted to ~$19k (including pre-judgment interest).
Terminated employees have a legal duty to mitigate their damages by seeking out employment elsewhere.
Here, Walt challenged Gracias’ mitigation efforts (i.e. applying for jobs at another dental office) by getting a digital forensic specialist involved to show how records could be fabricated. The specialist reviewed Gracias’ Indeed e-mails and found “significant reason… to seriously question the authenticity of… 86 Indeed Emails” and then requested electronic versions of the e-mail files in their native format to verify.
But Gracias never provided the e-mail files, claiming she was the victim of a computer hack. The court noted that this was a suspicious coincidence, but concluded that Internet hacks of e-mail accounts are not uncommon and it was “more plausible that the impugned emails are the product of mistake or misadventure than of a grand and continuing mitigation fraud.”
Walt also obtained affidavits (documents sworn under oath) from three other dental offices saying that they had never heard of Gracias and had no applications to their jobs from her (despite her claiming otherwise). But the Court did not find this evidence to be enough and instead concluded that the more plausible explanation was that her emails were misdirected by mistake and not fabricated.
Thus, Gracias had not failed to mitigate her damages.
Looking at these two court cases objectively, I think it’s clear that nobody really won here.
In the Nicholas v. Witulska case, all claims were dismissed and the parties had to cover their own costs. In the Gracias v. Walt case, the employee won just a tiny fraction of what she originally claimed (and her lawyers would presumably get a big chunk of this tiny amount) and the Court suggested that the parties cover their own costs. And let’s not forget the public court systems funded by taxpayer dollars that had to process these lawsuits over many years. Significant time, money and effort invested for what?
Meanwhile, the Gracias v. Walt case sets a very bad precedent for dentist employers who rely on deficient employment contracts; there, a young, experienced, and capable employee who worked only 5 months and 21 days was entitled to a whopping 3 full months of pay. Plus, the employer’s extensive efforts to disprove the employee’s mitigation efforts were fruitless because the judge was more convinced that bad luck and misadventure occurred than anything dubious.
Dentists should proceed with caution and seek advice before trying to rely on clauses in their employment contracts – like termination, non-compete and non-solicitation clauses – which haven’t been updated to reflect the latest Ontario court decisions and legislative changes. In these two cases, clauses were found to be invalid and unenforceable because of court cases that came out after the lawsuits started. Worth mentioning is that recent amendments to the ESA make non-compete clauses entered into after October 25, 2021, unenforceable against employees (in a non-sale context).
About the Author
Michael Carabash, BA, LLB, JD, MBA, CDPM is a founding partner of DMC LLP, Canada’s largest dental-only law firm that helps dentists sell and buy practices in Ontario. Michael leads DMC’s annual Caribbean dental mission trips (Grenada, Jamaica, and Turks) Michael is now organizing Sint Maarten and Philippines dental outreach trips for 2023. Michael can be reached at firstname.lastname@example.org or 647.680.9530.