Munoz v. Sierra Systems Group Inc., 2016 BCCA 140 (CanLII)
In Munoz, the BC Court of Appeal overturned the trial judge’s assessment of damages in a wrongful dismissal case. The notice period was reduced from 10 to 8 eight months.
In January 2011, Munoz was recruited by Sierra and, after an extensive interview process, began working for Sierra on March 21, 2011 at an annual base salary of $82,500. He had been raised and educated in Mexico. He spoke Spanish and was familiar with Latin American business practices. Sierra hired Munoz primarily to provide IT infrastructure and network support to Sierra’s client, Goldcorp Inc. In fact, it was the only client he serviced.
The compensation provisions of the employment contract in that case were somewhat unusual. The Employee could opt between salary, a somewhat lower salary plus billable hours, or simply billable hours. If there were no billable hours, the employee would be paid nothing (but would receive benefits) – and was “benched” for the time. Employees had the option to switch between these options with certain conditions. Munoz chose to be paid by billable hours only.
Munoz worked extremely hard and did well. However, in June 2013, Goldcorp stopped working with Munoz. After he was “benched,” Munoz initially decided to switch to a “salary plus” option but changed his mind. In the result, he was not paid a salary. In October Sierra gave “working” notice to Munoz (he was required to be at work), effective 5 December 2013. He was 43 years old then.
Munoz sued for wrongful dismissal, seeking damages on the basis of 12 months’ notice. The trial judge awarded 10 months, recognizing that “…. Shorter-term employees are generally awarded a disproportionately longer notice.” She found that there was “some inducement” to leave his former employer, that his position required “very special skills,” and that employment opportunities for him were scarce at the time. The employer appealed.
The Court of Appeal found that the trial judge erred in her consideration of the scarce job opportunities. In terms of justifying a longer notice period, the Court said: “The employee bears the burden of proving that the notice period should be longer because of the lack of availability of suitable work.” Noting the trial judge’s finding that “neither party produced cogent evidence of similar employment at the time of termination,” the Court of Appeal concluded that the notice period should be reduced – by 2 months.
After his termination, Nunoz worked on his own business and did not seek alternate employment. The Court of Appeal deferred to the trial judge’s finding that Nunoz did not act unreasonably in working on his own business.
The Court then turned to quantification of damages. The interesting fact in this case is that the employee did not in fact have any earnings in the last almost 6 months of his employment. The Court found that she erred because she failed to consider the terms of the particular employment contract before her.
The Court of Appeal noted:
“[69] The assessment of Mr. Cuesta’s loss must, however, take into account the term of his contract pursuant to which he would receive no wages while benched. I agree with the trial judge that the absence of work for an hourly employee which eventually leads to his dismissal cannot sensibly result in a notice period entirely without pay; that would equate to no notice period at all. A notice period is intended to give an employee time to find work while he is still employed and receiving wages. The object of notice is to assist in an orderly transition from one job to the other without a precipitous drop in income (see Rizzo & Rizzo Shoes Ltd. (Re), 1998 CanLII 837 (SCC), [1998] 1 S.C.R. 27 at para. 25, citing Innis Christie, Geoffrey England & Brent Cotter, Employment Law in Canada, 2d ed. (Toronto: Butterworths, 1993) at 572-81; Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (SCC), [1997] 3 S.C.R. 701 at para. 69).
[70] That said, an employee who has agreed to benefit from periods of increased income and to accept periods of reduced income cannot expect to avoid his part of the bargain and have his employer pay him only the higher income during the notice period.”
During his employment, Nunoz had not been “benched.” The contract did not expressly address the question of the length of a bench period. The contract did, however, provide for an “80% utilization rate” before an employee could move up to the “billable hours” option. In the Court’s view this suggested that 20% of an employee’s work might reasonably be “bench” time. The Court considered that a 3-4 months “benching” would not be unreasonable where the employee, as Nunoz, had been working “flat out” and billing almost double the base salary. Based on that:
“[75] Based on the conduct of the parties and the risks apparent in the various compensation options, in my view it would be reasonable to use as an estimate of loss Mr. Cuesta’s average earnings per month based on the 12 months immediately before his notice of termination on October 24, 2013. That period incorporates eight months of bountiful work and four months on the bench. Wages during that 12 month period come to approximately $115,000 or $9,583 per month. Mr. Cuesta is entitled to eight months at that salary or about $76,000 plus benefits for six and one-half months (eight months less benefits for one and one-half months already paid by the employer).”