I observed on November 30, 2017 the argument and decision in an appeal (Nofrio v Allstate Insurance
) launched by an employee against the Trial Decision denying him any recovery for termination by Allstate Insurance in 2008. It became apparent in the course of the arguments that this was not a constructive dismissal issue, as many commentators had alluded to, but that the circumstances all turned on and had to do with justification for cause for dismissal.
Nofrio v. Allstate Case
Allstate had given the employee, in July 2007, 2 years and 2 months formal written notice of a future significant change to his employment terms and had advised that during that transition period things would remain status quo and, as consideration for the changes, the agent was guaranteed $20,000 income each month as a base, no matter what his sales commissions actually entitled him to in any month.
At the end of that notice period, the employee had to accept the changed terms of employment or be terminated. What then happened was that Allstate, after about 15 months, decided that it was going to change the location of the employee’s employment and the method in which he carried on his insurance agent sales operations, which had been in place for 4-5 years beforehand.
Allstate relied on an earlier contract that gave it the right to change locations and operational methods for its agents. When Nofrio said he could not and would not go along with those changes, as they would in effect significantly affect his income and business, Allstate said you must, by contract, do so and if you refuse (which he did) then we are terminating your employment for cause for breach of your existing employment contract at 17 months into the notice period. Allstate fired Nofrio with no further payments (that happened in Nov 2008).
Apparently, the trial judge did not dig deep enough into the history of contractual relations between these parties, as the appellant argued that factually a new deal had been struck a few years earlier, for various business reasons that Allstate wanted to set up, setting out new parameters of this and other agents' business operations. As was clearly established by the ONCA, and eventually reluctantly agreed to by Allstate’s lawyer, there was nothing in this “new agreement” similar to the terms in the older employment agreement that allowed Allstate to change locations and business methods and so the new agreement that was in effect immediately before and, in 2007, was the status quo when the notice of a change was given in July 2007.
The ONCA in oral reasons determined that Allstate had given proper notice with consideration that would have sufficed to end the employment relationship at the end of the notice period and that clearly on the evidence at trial, the employee was not going to accept the new regime so he would have been “out the door” at the end of the 26 months notice period. But Allstate then attempted part-way through the notice period to make changes to location and business operations that were not apparently available to them to do under the existing "new arrangement”. It appears Allstate did not review its historical employment arrangements with this agent carefully enough.
Therefore Allstate had no cause in Nov 2008 to terminate the employee based on his then-existing employment contract and he had 9 months and 26 days to go on his notice period, so the court found he was wrongfully dismissed and set the damages at 9 months and 26 days @ $20,000 a month (the appellant had that as their fallback position, but their first position was the employee should have received 24 months damages from his termination date), plus the costs of the trial were reversed in the employee’s favour ($60,000) and the employee got his costs of the appeal in the amount of $7,500 (an amount agreed on by both counsel before the ONCA bench adjourned to deliberate).
The takeaway is that if you, as the employer, go to the trouble of setting up a notice period with consideration for a change in employment terms, don’t do anything during that notice period to disturb the status quo you have put in place, unless you are absolutely sure that you can clearly and legally do so under the existing employment contract and accepted employment practices, in place prior to the notice and allegedly being maintained for and during the notice of change period.
The content of this article is intended to provide a general guide to the subject matter and is not legal advice. Specialist advice should be sought regarding your specific circumstance.