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Review Court Bars Wrongful Dismissal Claim Post-ESA Claim

Ontario’s Divisional Court has overturned a lower court decision, finding instead that an employee could not pursue a wrongful dismissal action after prosecuting an employment standards complaint.

The Ontario Employment Standards Act, 2000 (the “ESA”), provides that employees cannot file a wrongful dismissal lawsuit relating to the same termination in respect of which they filed an ESA complaint for termination and/or severance pay, unless the ESA complaint is withdrawn within two weeks of filing.  The ESA expressly says the rule applies even if the statutory limitations on recovery ($10,000) would leave the employee out significantly from what a court could have awarded.  The difference, especially for long-service employees, can often be significant.

Recognizing that this all sounds very harsh to employees who may not have the same resources and access to legal advice, the courts have taken the view that they have an inherent jurisdiction to decide whether or not to extend the two week deadline.

In Frith v. Cable Bridge Enterprises Limited, Cable Bridge terminated Ms. Frith’s employment and paid her ESA termination and severance pay.  She disputed the amounts paid and so commenced an ESA complaint by completing the online form several months later.  The Ministry of Labour commenced an investigation.  The Ministry then scheduled a fact-finding meeting at its offices.  Just before the meeting occurred, Ms. Frith withdrew her ESA complaint.  She commenced a wrongful dismissal action.

The Trial Court concluded that it was appropriate to exercise its inherent discretion to allow the action to proceed.  In particular, the Trial Court found that Ms. Frith did not know she had filed an ESA complaint at all, so she could not reasonably have known that a claim was active that had to be withdrawn.  Cable Bridge applied to the Divisional Court for judicial review of that ruling.

The Divisional Court emphasized that the authorities are clear the discretion should only be exercised in special circumstances, including:

  • the absence of access to legal representation;
  • the absence of the Ministry of Labour being engaged in any fact finding investigation or adjudication of the plaintiff’s claim;
  • the absence of prejudice to the defendant;
  • the absence of bad faith on the part of the plaintiff.

The Divisional Court found that a court should only rarely exercise its inherent discretion, and that this was not a case in which that was appropriate.  The Divisional Court found that the Trial Court had made a palpable and overriding error when it concluded, despite the clear evidence available on the record, that Ms. Frith was unaware that she had filed an ESA complaint.  Moreover, Ms. Frith had waited at least seven months after filing her application before withdrawing the ESA complaint (just how long she waited is not clear from the decision because of inconsistencies between the dates provided; it could have been as many as 19 months despite the court noting it was seven).

There are many reasons why an employee may file an ESA complaint instead of a civil action.  In our experience, this is commonly either because the process is free and without risk of costs, or because employees believe they can obtain an ESA order to pay sooner than a judgement from a court.  Of course, many employees may simply file ESA complaints without the benefit of legal advice or knowledge of what they are foregoing.

Employers who receive an ESA complaint seeking termination and/or severance pay (especially from a long-service employee) should quickly and actively engage in the process: to ensure a just and accurate result and because compliance with Ministry directions is generally a good idea, but also to establish a record of participation and fact-finding upon which a court may conclude it would be inappropriate to exercise its inherent discretion to permit a more costly civil claim to proceed.

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