PLEADING DEFENCE TERMINATION OFFERS TO SETTLE
INTRODUCTION
As everyone who has finished law school knows, normally one cannot plead in a Statement of Claim, the offer to settle that the defendant employer made upon terminating the plaintiff employee.
The question is whether there are exceptions to this rule.
There are, and I would like to concentrate on one exception to the rule.
That is the bully offer exception set out in the classic employer two letter, or one letter with two parts, that goes like this:
(a) Employee, we are letting you go for just cause for the following reason(s) and thus you will not receive any monies, including any E.S.A. termination pay or severance pay, but check out our companion without prejudice letter…
(b) Companion without prejudice letter, that says, we the employer will give you E.S.A. monies only, if you sign the enclosed release…
THE EARLY CASE LAW ON THIS EXCEPTION TO THE PLEADING RULE
The British Columbia Superior Court heard an appeal from a Masters level decision regarding this type of fact situation in the case of Pyke v Price Waterhouse 1995 CanLii3317.
In the Pyke case, the employer’s just- cause letter stated a concern about Ms. Pyke accessing confidential emails. The second, without prejudice letter, offered her $14,000.00 in exchange for signing a release.
The Statement of Claim had paragraphs complaining about humiliation, loss of reputation and depression and loss of self- worth and punitive damages were sought.
The defendant employer sought to have the paragraph of the claim that referred to its $14,000 offer struck.
Many of the same procedural rules as those in Ontario were considered, like the issue of whether the subject claim paragraph was “embarrassing’ and the court found that it was not embarrassing. Then the court got to the nub of the issue, i.e. whether the fact that the offer was “without prejudice” should prevent the plaintiff from being able to refer to it in a Statement of Claim.
The court in the Pyke case specifically refused to follow some earlier Ontario motions court decision and held that the offer could be referred to in the Statement of Claim. The court made the point that the trial judge, per evidence law, would have the final say on whether the offer could be received into evidence but at the pleadings stage, it should stay in the claim.
Then, at the start of this century the issue came up in the BC courts again, in the case of Franklin v British Columbia Buildings Corp [2000] B.C.J. No 447.
In this case the employer did not allege just cause in its termination letter and gave a second letter that contained an offer. The employee did not accept the offer and retained counsel.
Counsel for the parties exchanged letters.
Defence counsel then in one of their letters said “ if you litigate, we will allege just cause.” Also, the defendant employer stopped paying the E.S.A. amounts.
The plaintiff referred to these matters in the Statement of Claim and the defendant employer moved to strike the relevant paragraph.
The court in the Franklin case mentioned the Pyke decision and also referred to the famous Wallace v United Grain Growers decision to say that a threat to allege just cause could equate to bad faith.
At the end of the Franklin case the Master summed things up by saying “the threat to allege just cause where none exists is highly improper and is something that should be before the court when damages are assessed.” The pleading was allowed to stand.
In 2006 a Master in Ontario had occasion to consider something similar in the case of Prior v Sunnybrook Hospital 2006 CanLii 17329.
In this case the plaintiff was an orthotist licensed by a professional body. The employer dismissed her for just cause and sent a letter to her professional governing body re that alleged bad behavior.
The defendant employer than sent her an offer to rescind its letter to the professional regulator if she would sign a release wherein the employer paid nothing.
The court was not happy. In its view the employer either had just cause or it did not have just cause, and it allowed the impugned part of the Statement of Claim to stand. The “bubble of privilege” should not extend to cover an improper threat.
Now we move back to British Columbia for the next stage of case law development.
In 2015 Master Muir of the British Columbia Supreme Court decided a pleadings motion in Brandt v Tinkerine 3D Print Systems 2015 BCSC 682.
In the Brandt case, the employer had given the employee working notice. During the working notice, the employer hit the employee with a “sign a release or you cannot complete the working notice” situation. The plaintiff refused to sign and left and sued and of course mentioned this court of events in the Statement of Claim.
The defendant moved to strike the relevant Statement of Claim paragraphs.
The court relied on the Pyke and the Franklin precedents and let the subject part of the Statement of Claim stand.
THE IRWIN CASE GLOSS
In 2019 a Master in Toronto decided the Irwin v Canadian Professional Sales Association pleadings case, being 2019 ONSC 7332.
In this case there were some oral offers and some written offers and the plaintiff referred to them in the Statement of Claim.
The same issue presented as in the earlier cases noted above, i.e. whether the settlement cloak should extend to what could be called “threats.”
The learned Master referred to the Pyke and Franklin and Brandt cases mentioned above.
The court put forward an “air of reality” test for the consideration of whether the pleading should stand. In other words, was the offer a “threat” and if there is an “air of reality to concluding it is a threat, it should stand and then it is up to the trial judge as to whether the offer can be referred to, given evidence law precepts.
It would appear this test was put forward so a motions court judge could excise such Statement of Claim paragraphs if there was no real hint in the Statement of Claim that the offer was a threat and that punitive damages could apply. In other words, the court was concerned about the insertion of punitive damages into Statements of Claim as a matter of routine.
Then the court added “the gloss.” The “gloss” refers, inter alia to the onus of leading evidence and or the onus of proof on this subject.
The court held that if the offer is only being referenced to show that the defendant does not believe in its case, then the Statement of Claim should not be able to reference the offer.
Once the plaintiff gets by that low hurdle the court will look at to whether the impugned Statement of Claim paragraph relates to a punitive damage claim or something similar. The court will use the “air of reality” test mentioned above.
This is where the court states that the onus will be on the plaintiff to show the air of reality and that normally “evidence by affidavit from both parties should be provided.”
That last provision was recently considered by Superior Court Justice Desotti in Clendenning v Jacobs Engineering Group 2022 ONSC 6559.
In Clendenning the employer gave Mr. Clendenning a letter at termination alleging just cause that actually partially mirrored the wording for refusing to pay E.S.A. monies under the E.S.A. It then gave him a without prejudice letter at the same time that referenced his long career with the company and indicated it would pay him E.S.A termination pay and E.S.A. severance pay (no common law monies) if he signed a release.
Mr. Clendenning referred to that in his Statement of Claim and claimed punitive damages.
Justice Desotti relied on the Masters level decision in Peter Irwin and allowed the subject paragraph to stand.
Further he dealt with the onus issue referred to in the Peter Irwin case, by noting that the employer had used an affidavit from someone who was not the writer of the dismissal letter or the offer letter and noted that since the matter was in the Simplified Rules stream, there could be no cross examinations on affidavits.
Thus, Justice Desotti found that the failure of the plaintiff to furnish an affidavit at the motion, had no bearing on the “air of reality” test.
CONCLUSION
Since most employment cases are under the Simplified Rules these days and most cases involve written offers only (as compared to the Peter Irwin case where at least one offer was verbal) it may be rare for a plaintiff to have to furnish an affidavit in response to a defence motion to oust an offer citing Statement of Claim paragraph.
Jonathan Pitblado
Johnathan Pitblado Law Office
London Ontario