Workers alleging wrongful dismissal may subject directors to statutory claims for unpaid wages: case

Corporations should be aware that employees in wrongful dismissal cases may make successful claims against corporate directors for unpaid wages and vacation pay under the Employment Standards Act and the Business Corporations Act, a firm’s article has said.

“Employers are encouraged to consider whether they have grounds to move to strike statutory claims against directors in a wrongful dismissal action, and to do so if the grounds exist,” said the article by George Vassos, partner, and Rhonda Levy, knowledge management counsel, at Littler LLP.

In Abbasbayli v. Fiera Foods Company, 2021 ONCA 95, the appellant alleged in a statement of claim that, in 2002, he began working as a security guard for the three corporate respondents, which were manufacturers of frozen dough and bakery products and which he claimed were his common employer and that, in 2018, he was terminated for cause while in the role of boxing line operator.

The appellant alleged that the employer falsely accused him of punching a colleague’s timecard as a way to get back at him for his acts of promoting the organization of a labour union and of raising concerns about perceived manufacturing, health and safety and storage requirement violations and failed to conduct a proper investigation.

The appellant’s action sought wrongful dismissal damages, punitive damages and moral damages, as well as claims against individual respondents, two corporate directors, for unpaid vacation pay under s. 81 of the Employment Standards Act, 2000, S.O. 2000, c. 41, and s. 131 of Ontario’s Business Corporations Act, R.S.O. 1990, c. B.16, as well as relief from oppression under s. 248 of Ontario’s Business Corporations Act.

Upon the respondents’ motion to strike certain claims and paragraphs from the statement of claim, the motion judge struck some parts without leave to amend and other parts with leave to amend. The Court of Appeal for Ontario partially allowed the appeal.

With regard to the s. 81 claim, the appellate court affirmed the motion judge’s striking without leave to amend because it was plain that the claim would not succeed and because no amendment could cure the defect in the circumstances. Assuming that a s. 81 claim could be sought in a wrongful dismissal action, the appellant failed to state the material facts needed to satisfy the statutory preconditions, the court said.

As for the s. 131 claim, the appellate court ruled that the statement of claim disclosed a reasonable cause of action, but the appellant should be allowed to amend the statement to clarify that the claim would be limited to vacation pay. While the current phrasing of the claim was too broad, the appellant did plead the needed material facts to support this claim.

For the s. 248 claim, the appellate court upheld the motion judge’s striking with leave to amend because the appellant failed to plead the necessary material facts, such as the elements of an oppression claim, his reasonable expectations of the directors or the fact that oppressive corporate conduct breached those reasonable expectations. It was not enough for the appellant to plead that the individual defendants acted oppressively as directors. Wrongful dismissal on its own would not typically amount to oppression, a claim which is usually asserted by shareholder employees whose interests have been unfairly disregarded in the context of wrongful dismissal.

The appellate court set aside the order striking paragraphs 14 to 23 of the statement of claim. The court disagreed with the respondents’ assertion that these paragraphs, which alleged that ongoing production-related conflicts led to changes in the appellant’s position and the reduction of his hours, should be struck as evidence containing irrelevant facts that impugned the integrity of the corporate respondents.

The appellate court varied the order in relation to paragraph 40, striking only para. 40(iii). While paragraphs 40(i) and (ii) pertained to the appellant’s claim that his employment was terminated as a reprisal, paragraph 40(iii) listed numerous wrong practices supposedly practised by the respondents but did not allege that the appellant observed, documented and reported these practices. As such, they were irrelevant to the wrongful dismissal claim, the court said.