Employment Insurance: Should The Employer Participate Or Not?

January 27, 2006

In a recent judgement, the Ontario Superior Court of Justice has applied the doctrine of issue estoppel to preclude an employer from defending a wrongful dismissal claim on the basis of just cause, where the employer raised the same defence in an Employment Insurance appeal, and lost. As a result of Korenberg v. Global Wood Concepts Ltd. , employers should think twice before participating in the employee’s Employment Insurance proceedings.

Mr. Korenberg was terminated on December 11, 2001 based on the employer’s allegations that he permitted employees to steal employer property during the nightshift and to leave their shifts early. Mr. Korenberg was initially denied Employment Insurance benefits on the basis that his loss of employment was due to his own misconduct. He appealed to the Board of Referees and was successful. The employer further appealed to the Umpire claiming the employee was dismissed for cause. The Umpire upheld the Board decision, and Mr. Korenberg was granted benefits.

However, Mr. Korenberg had also filed an action for wrongful dismissal, which the employer defended, asserting in its Statement of Defence as it had before the Umpire, that it had just cause to terminate the employee. After receiving the Umpire’s decision, Mr. Korenberg moved for summary judgement on his wrongful dismissal claim, stating that as a result of his success on the Employment Insurance Appeal, the employer’s defence (that he had been dismissed for cause) could no longer stand in the face of the Umpire’s decision.

If issue estoppel is to apply to bar the employer’s defence of just cause, the following 3 questions must be affirmatively answered:

  1. Were the issues the same?
  2. Were the parties the same? and
  3. Was the decision a final judicial decision?

If all of these questions are affirmatively answered, the Court asks a further question, whether there is something in the circumstances of this case such that the usual operation of the doctrine of issue estoppel would work an injustice.

A previous Ontario Court of Appeal decision, Minott v. O’Shanter Development Company Ltd. , held that just cause is distinguishable from misconduct, the latter being enabling exemption under the Employment Insurance scheme. This distinction had the effect of not allowing the principle of issue estoppel or res judicata to have an effect on a wrongful dismissal claim following an adverse finding at the Employment Insurance level.

However, an exception was later carved out by the Court of Appeal in 2000 in Schwenke v. Ontario , wherein the Court concluded that where the Umpire on an appeal of a Board of Referees decision made findings of a fact which formed the basis of both allegations of misconduct under the Employment Insurance scheme and just cause under the wrongful dismissal scheme, the doctrine of issue estoppel would apply. This was the same principle that the Ontario Superior Court of Justice applied in Korenberg.

Taking note of the employer’s position in the Employment Insurance appeal, and the defence pled in the wrongful dismissal claim, the Court in Korenberg held that the issues and underlining facts in dispute were the same, and the Umpire’s decision was final. Furthermore, because the employer appealed and attended the Employment Insurance proceedings the employer became a party to that appeal. Had the employer not participated, it would not have been bound by the Employment Insurance process at all, and would be able to continue its defence of just cause to the employee’s wrongful dismissal claim.

When considering whether this was, then, an appropriate case for the Court to decline to apply the doctrine of issue estoppel, the Court noted that the Employment Insurance regime was not identical to that of a civil action, but the similarity of the legal and factual issues was a factor favouring the application of issue estoppel. The proceedings before the Umpire were part of an appeal, there were no shortcomings in the Board’s findings, and despite the employer’s submissions that it did not know that by attending the Board hearing it would be prejudicing the rights of the Company in a future legal proceeding, the employer had the resources and access to legal counsel. In the Courts words, it would not serve the interests of justice to allow it to re-litigate the facts determined at the hearing and confirmed by the appeal.

Lastly, given the fact that the employer had both received notice of the Employment Insurance Appeal, and took the opportunity to respond, it could not now rely on the fact that it may have made some poor tactical decisions. To allow it to re-litigate a matter that it had participated in and lost would be unjust to the plaintiff.

Accordingly, the Court declined to exercise its discretion, and applied the doctrine of issue estoppel to grant the plaintiff’s motion to bar the employer from pleading cause as a defence. The lesson learned for employers is to consider fully the risks of participating in Employment Insurance proceedings where there exists a concurrent claim, or the potential for a concurrent claim by an employee for wrongful or constructive dismissal, where the legal and factual issues in each are the same.