August 17, 2022


Slick Healthy

Tale shows risks of both sides ‘going for the jugular’ in

Sometimes you even lose when you win

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Sometimes you even lose when you win. Just ask Sonia Gracias.

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This is a cautionary tale about employees with cases of limited value suing in Superior Court and about the risks of making serious allegations of misconduct, only to withdraw them.

Gracias, 39, was fired from her $75,000 a year, five-and-a-half month, employment as a dental hygienist by Dr. David Walt Dentistry Professional Corp.

If she had come to my firm, I would have set her up with an articling student to take her case to Small Claims Court to limit her legal fees and maximize her net recovery. The case never should have been launched in Ontario Superior Court.

She had signed an employment contract providing for notice and severance pay pursuant to the Employment Standards Act (“ESA”) as well as continuing benefits for the period required by that Act if fired without cause.

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However, the contract also stipulated that she could be dismissed for cause with no pay at all. The problem is that the ESA requires that a dismissal without pay can only occur if there is “wilful misconduct“ — i.e. a “subjective advertent intent“ — as opposed to “just cause,” which can occur through “inadvertence, carelessness or thoughtlessness.“

This meant that the “with cause” provision was void and therefore, the without cause provision fell with it.

Initially, Gracias also alleged that she was fired for human rights reasons while Walt Dentistry responded claiming that it had cause based on her misconduct. Both parties abandoned those claims adding further unnecessary costs to a case already of minimal economic value. Ouch!

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As Justice Paul Perell of Ontario Superior Court put it, “releasing the dogs of litigation war and going for the juglar,” Walt Dentistry alleged that “Ms. Gracias falsified her evidence of mitigation with fabricated records for her Internet job applications.“

It retained a Mr. Hatch of DFI forensics, a certified digital forensic examiner, and alleged that she did not actually apply to her job search list.

As the court achingly (for Ms. Gracias) put it: “From a litigation perspective, Miss Gracias’ response to this assault was PATHETIC. She did not cross-examine Mr. Hatch. She did not retain an expert of her own. She did not swear an affidavit to contradict or explain away the discrepancies.”

Instead, she just made a technical legal argument, rejected as entirely unfounded, that the employer’s evidence was inadmissible. But, as the court found, the evidence was both admissible and relevant. Ouch again.

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Notwithstanding the ensuing hullabaloo, the court ultimately decided that there was no falsification, just a mistake or misadventure with the documents, and that Walt Dentistry‘s evidence was “too flawed” for the court to conclude that she had “attempted to defraud the court.”

Gracias attempted to increase her length of notice service by two years because she had occasionally (one or two shifts a month) worked for Walt Dentistry before she became its full-time employee. The Court rejected this argument too given the irregularity of her work.

The court commented disapprovingly on “the considerable and expensive legal resources that the parties had already invested in the litigation” even prior to the summary judgment hearing.

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The court had to deal with how many months’ severance Gracias would receive. Gracias’ counsel argued that she was dismissed at the outset of COVID so her damages should be increased. As the court noted, “The effect of COVID- 19 was very harmful for the overall economy but its affect on particular sectors was not uniform. For example, there was a high demand for health professionals.” The court also noted the number of job openings on at the time in finding that COVID-19 did not increase the notice period for Gracias.

The court also chose not to deduct the CERB payments which she received noting that Ontario decisions, unlike B.C., had not done so. In dealing with Gracias’s counsel’s argument that she should receive greater notice because the employer had not provided her a reference when the lawyer requested one, Justice Perell disagreed.

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“There is no obligation on an employer to provide assistance to a former employee…. And given the bitter and strained relationship that developed between the parties, it was a pro forma request and understandable that Dr. Walt did not provide one,” the judge wrote, adding that Gracias had already been looking for work before she was dismissed, “which says a great deal about how discontented both parties were.”

Justice Perell concluded that Gracias was “in the prime of her career with considerable work experience and her age, credentials and experience present a competitive advantage in the job market.“

Justice Perell considered that the notice period was between one and three months, coming down at three months, awarding her just over $17,000.

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Gracias had risked having her CERB receipts reduce this further, and being awarded as little as one or two months. Imagine if the court had used its discretion and awarded her only one month severance less the one week already paid — about $4,100 in total — against the massive costs of this legal proceeding. Or if the court had deducted her CERB receipts reducing her award even further.

I suspect that might have influenced Justice Perell in awarding three months, not one or two.

But even without these deductions and at three months, the amount ordered was only half of the small claims court limit.When a litigant makes the mistake of suing in Superior Court but is awarded an amount within the jurisdiction of the small claims court, they are presumptively entitled to no costs at all.

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Alive to this, the court provided a very unusual caution in asking for submissions on costs: “If the parties choose to make cost submissions, I alert them that, based on what I presently know about the prosecution of the claim and of the defense, there is some serious explaining for them to do to justify a cost award to either party and it is quite possible that there will be no order as to costs.”

Such parting words would send shudders through any lawyer, let alone litigant.

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I am presuming that the reference respecting the employer is to its having made allegations of fraud related to her job search and initially alleging cause and, on the employee side, making allegations of human rights violations which were then withdrawn, and suing in superior court for a case clearly within the small claims court limit.

Given that the Justice Perell had already commented upon the “substantial and expensive costs” even before the hearing, one would assume that the actual legal costs would be many many times what the employee was awarded, whereas, if she had sued in small claims court, the legal costs would have been dramatically less.

Lessons for employees of this multi-issue case: Get a good handle on the real value of your case, do not make exaggerated allegations such as human rights violations, only to abandon them at trial, and sue in Small Claims Court for a case of limited value rather than risk the caution that Justice Perell issued.

Got a question about employment law? Write to Howard at [email protected]

Howard Levitt is senior partner of Levitt Sheikh, employment and labour lawyers with offices in Toronto and Hamilton. He practices employment law in eight provinces. He is the author of six books including the Law of Dismissal in Canada.



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