As a sole practitioner who often represents terminated employees, or small owner operated companies facing wrongful dismissal claims, I find myself in Small Claims Court from time to time.
Indeed, years ago, I used to sit as a Small Claims court judge several times a month for a three year term. Thus, I like to watch reported case law coming out of that court.
I am pleased to report a positive development for plaintiffs (claimants).
Further, I would like to add a cautionary note for plaintiffs and their advisors based on a recent case that, on its face was a great success for the plaintiff, but could lead to some frustrating dealing with the EI overpayment office and possibly CRA.
The good news is that a reported 2011 case precedent from this court held that the limit of $25,000 is net of deductions, or by logical extension, mitigation income. That is consistent with jurisprudence coming out of the Superior Court about its Simplified Procedure $100,000 limit.
Thus, if a court awards an ex employee, who was earning $72,000 per year, six months of notice, the award would be $36,000. That would be above the $25,000 limit. However, let us assume a usual fact pattern where the ex employee finds a job making $24,000 per year immediately after termination. The employee used to make $6,000 per month. The employee now earns $2,000 per month. The difference is $4,000 per month. Therefore, using the new case law, this case fits into Small Claims Court because the net damages on a six month reasonable notice award is $4,000 times six months, i.e. $24,000.
Now let us turn to the cautionary tale. The Small Claims court is picking up on the Wilson v Soliss Mexican Foods Superior Court precedent and has on a number of occasions in the last year or so, awarded non pecuniary general damages (fancy way of saying damages that are not taxable and do not attract E.I. repayment). However at least one of the cases listed the total damages, including the usual damages for breach of the reasonable notice period $18,000 in that case) and the human rights damages ($28,000) into a total of $45,000, i.e. a sum well above the $25,000 limit. Since the Human Rights Code breach damages can only be made as an “add on claim” in a wrongful dismissal case, and since the court can only award $25,000, how will EI and CRA treat the matter? Will they maintain they are entitled to their usual taxation on the $18,000 and their usual EI repayment from that figure? Or, will the plaintiff and her legal advisor be able to convince those authorities to prorate all the damages down into the $25,000 figure- i.e make most of the $$25,000 figure be comprised of the non taxable, non EI repaying, Human Rights Code breach damages? We will have to wait and see for some accounting firm in their newsletter to comment on that.