A recent decision of the Ontario Court of Appeal is of more than passing interest to employers who provide assurances of job security to employees promoted out of the bargaining unit to supervisory positions. The message to such employers from this decision is: don’t make promises you can’t keep. (See also “Terminating employees: a tough job, but someone’s got to do it” on our Publications page.)
In Leonetti and Halsey v. Hussmann Canada Inc. (May 8, 1998), the two plaintiff employees had been working on the shop floor for 20 years when, in 1986, the company offered to promote them to supervisory positions. The promotion would have little impact on their job duties and salary level, but would require them to leave the bargaining unit.
Leonetti and Halsey had accumulated substantial seniority, and were concerned about the implications for their job security should they accept the promotions. When they eventually agreed to the promotions, they did so in return for a promise that they would be returned to the bargaining unit in the event their new positions did not “work out”.
As the economic climate soured in the early 90’s, the company downsized. Leonetti and Halsey, who at the time had accumulated 26 and 27 years of service, were terminated with some nine months’ severance. They sued Hussmann, claiming that the company’s promise at the time of their promotion entitled them to employment for as long as the company and the bargaining unit existed.
TRIAL JUDGE: A LIMITED COMMITMENT, A SIGNIFICANT NOTICE
The trial judge accepted that the employees had been promised that they would be returned to the bargaining unit should it be necessary. He rejected the company’s argument that the collective agreement made it impossible to return them to the unit if any member of the unit was on layoff, holding that this in no way excused the company from honouring its commitment.
However, the judge held that it was reasonable to impose a ten-year limitation on the commitment. In rejecting the plaintiffs’ argument that the promise was unlimited in duration, he stated that “no job can be guaranteed permanently”.
The judge concluded that the commitment allowed for termination upon reasonable notice and that the employees’ ages, limited education, lower level management positions and long service with only one employer put them in a vulnerable position and entitled them to significant notice. He therefore awarded 22 months’ notice to each. Both parties appealed the ruling.
COURT OF APPEAL: DAMAGES EQUAL TO THE REMAINDER OF EMPLOYEES’ WORKING LIVES
The Court of Appeal upheld the trial judge’s finding that the company had breached an “unqualified promise” to return the employees to the bargaining unit if their new positions did not work out and rejected the company’s argument that it was barred by the collective agreement from doing so. Further, the Court expressed agreement with the trial judge that, if returning the employees to the unit raised other problems for the company, this did not excuse it from honouring its commitment.
However, the Court held that the trial judge had erred in imposing a time limit on the company’s promise, due to his view that the promise was a permanent job guarantee rather than a commitment to treat the employees as if they had never left the bargaining unit:
“The promise … was not a guarantee of a permanent job. It gave Leonetti and Halsey the same security they would have had if they had remained in the union throughout their employment. [They] would have been subject to dismissal or layoff under the terms and conditions provided for in the collective bargaining agreement.”
The Court also disagreed with the trial judge that the company had the right, once it had made the promise, to dismiss the employees with reasonable notice, holding that such a right was inconsistent with the fundamental promise made to them:
“The commitment to return [the employees] to the bargaining unit if the supervisor’s jobs did not work out could not live along with a right of Hussmann to terminate on reasonable notice. Certainly, [the employees] would never have agreed to such a term as it would have given them significantly less job security than they would have had had they remained in the bargaining unit.”
When the company decided to terminate the two employees, it was obliged to return them to the unit. If it could not do so, it had to compensate them in a manner consistent with that obligation. Based on this interpretation of the agreement between the two employees and the company, the Court held that the employees were entitled to damages calculated on the basis that they would have worked in the unit until retirement age, discounted for contingencies such as layoff, illness, voluntary early retirement, accident and plant closing.
IN OUR VIEW
The substantial damages awarded by the Court in this case emphasize the importance of avoiding commitments to employees relating to rights governed by a collective agreement. It is clear that a court will not allow employers to renege on such commitments on the basis that they violate provisions of the collective agreement.
For more information on this subject, please contact Steven Williams at (613) 563-7660, Extension 242.