The Ontario Court of Appeal finds that rolling limitation periods do not apply for periodic payments when an employee is aware of a potential breach from the beginning. The recent decision of the Ontario Court of Appeal for Karkhanechi v. Connor, Clark & Lunn Financial Group Ltd., confirms this principle. Here, the employee’s case was dismissed because it was brought too late.
Most employment disputes in Ontario are subject to the basic limitation period of two years set out in the Limitations Act, 2002. For example, if your employment is terminated in Ontario, you usually only have two years to pursue a claim against your former employer. The two-year clock starts counting down after your claim is “discovered”. Your claim is discovered when you know:
a) That the injury or loss had occurred,
b) That the injury or loss was caused by an act or omission,
c) That the act or omission was that of the person against whom the claim is made (i.e.,
your employer), and
d) That a legal proceeding would be an appropriate means to remedy the injury or loss.
If you wait more than two years before suing your former employer, your claim will likely be dismissed, and you will get nothing. It is crucial that you move quickly in having your employment matter resolved.
What did the Ontario Court of Appeal have to say about the employee’s arguments and about limitation periods generally?
In Karkhanechi v. Connor, Clark & Lunn Financial Group Ltd., 2022 ONCA 518, the employee began working for the employer in 2014. The two entered into a Partnership Agreement that entitled the employee to receive post-retirement payments. The employee, at all times, knew and understood how much in post-retirement payments he was entitled to under the Partnership Agreement. When the employee was terminated in 2016, the post-retirement payments were triggered. The employee quickly realized the payments he was receiving were less than he believed he was entitled to. The employee sued. The problem was, however, that the employee waited three years to sue.
According to the Ontario Limitations Act, 2002, the employee was too late. He was an entire year outside the two-year limitation period. The motion judge dismissed his action.
The employee appealed this decision on the basis that the motion judge erred by failing to apply a rolling limitation period.
What is a Rolling Limitation Period?
A rolling limitation period allows for the setting of a new limitation period each time the ongoing contractual obligation is breached.
The Ontario Court of Appeal identified three different categories of contractual breaches:
1. A single “once-and-for-all”; breach of contract with continuing consequences;
2. A failure to perform an obligation scheduled to be performed periodically; and,
3. A breach of a continuing obligation under a contract.
A rolling limitation period will not apply to the first category but could apply to the second and third. See, for example, the rolling limitation period applied in Pickering Square Inc. v Trillium College Inc., a 2016 decision of the Ontario Court of Appeal. This was a category 3 case. In that case, Trillium College entered into an agreement with Pickering Square to lease
commercial space at a shopping centre for a five-year term from 2006 to 2011. Trillium was required to pay monthly rent, maintain the premises, and operate its business continuously throughout those five years. However, Trillium vacated the premises in 2007. Pickering sued Trillium in 2012 for, among other things, failing to conduct its business continuously from 2008 to 2011. The lawsuit was brought four years after Trillium first breached the contract. The limitation period first began to run in 2008, when Pickering discovered its claim.
A rolling limitation period applied in this case. Trillium’s failure to resume occupation of the premises gave rise not to a single breach, but a series of breaches, such that Pickering acquired a new cause of action each day Trillium failed to operate its business in accordance with the lease agreement. Pickering brought its action on February 16, 2012. As each new day brought a fresh cause of action and a fresh limitation period, Pickering could only go as far back as February 16, 2010. Everything before that date was statute barred. If there had been no rolling limitation period, then the only limitation period would have been back in 2008 and Pickering’s entire claim against Trillium would be statute barred. Thanks to the rolling limitation period, Pickering was entitled to claim damages for the breach of the lease agreement going back two years from the date it commenced its action.
However, it is very important to know that the breach of a recurring contractual obligation does not always mean a rolling limitation period will apply. Entitlement to rolling limitation periods is based on the idea that a “fresh cause of action” arises for each new breach. If there is no “new breach”, there is no reason to apply a rolling limitation period.
In Lunn Financial, the employee believed there should be a new limitation period each time his post-retirement payment fell below the amount he expected to receive. In his view, each insufficient payment was itself a fresh cause of action. Therefore, a new limitation period should apply with each insufficient post-retirement payment. The Court of Appeal rejected this
argument.
No Rolling Limitation Period Here
There could be no rolling limitation period in this case. The Court of Appeal agreed with the motion judge that this case fell into the first category, as a single “once-and-for-all” breach of the contract. Consequently, a rolling limitation period would be inappropriate.
The contract was breached when the employer determined the amount of post-retirement payments owed to the employee was less than what the employee believed he was entitled to. This was discovered by the employee as soon as he received the first insufficient payment. It did not matter that the employee had not yet received every insufficient payment. A limitation
period will begin to run when a cause of action arises (here, when the first insufficient payment was received) even if all the damages arising from that cause of action have not yet materialized. The cause of action here was not each individual insufficient payment but was rather the employer’s determination of how much to pay the employee. This was a single
breach of contract with continuing consequences, and thus there was consequently no basis for applying a rolling limitation period.
In determining whether a rolling limitation period applies, one should always look at the nature of the breach. In cases where there is a breach that gives rise to continuing loss or damages, a rolling limitation period typically will not apply. On the other hand, where there is more than one breach leading to separate damages claims, a rolling limitation period may apply.
Limitation Periods and Requests for Declaration
The employee had a backup plan. He relied on s. 16(1) of the Limitations Act, 2002, which says no limitation period applies in proceedings requesting a declaration if no consequential relief is sought. In his statement of claim, the employee requested a declaration that the employer had repudiated his rights. The motion judge found that this, too, was statute barred. On appeal, the employee argued this ruling was contrary to s. 16(1). The Court of Appeal quickly did away with
this argument.
According to s. 16(1), no limitation period applies to proceedings requesting a declaration if no consequential relief is sought. While the employee had requested a declaration, it was clear that he was actually requesting a remedy. According to the Ontario Court of Appeal:
“… if a pleaded claim for a declaration is, in substance, a request for a remedy against the other party and not really a request for declaratory relief, s. 16(1)(a) will not operate and a limitation period will apply.”
The idea here is to prevent plaintiffs from avoiding limitation periods by joining a remedial claim with a request for a declaration. As the employee here was, in substance, requesting a remedy, his declaration argument was also dismissed.
Extended Limitation Periods: Delayed Discoverability
As explained above, a claim is “discovered” when you know:
a) That the injury or loss had occurred,
b) That the injury or loss was caused by an act or omission,
c) That the act or omission was that of the person against whom the claim is made (i.e.,
your employer), and
d) That a legal proceeding would be an appropriate means to remedy the injury or loss.
If the worker relies in good faith on the misrepresentations of the employer, that may be sufficient to delay discoverability until the worker can reasonably know that he or she has wronged. This was the situation in a misclassification class action, in the case of Brown v. Procom Consultants Group Ltd., 2021 ONSC 4185, which was argued by the employment lawyers at Monkhouse Law.
In Brown, the claim for employee misclassification was not discovered when the loss materialized, but when the proposed representative learned of her entitlement.
This principle did not apply in Lunn Financial. Here, the employee never had any doubt as to his entitlement to the benefit. When the loss was first realized, he immediately knew his entitlements were being denied. His claim was therefore immediately discoverable, and the limitation period began to run. If, for example, the employee believed the post-retirement
payments being made were accurate because the employer assured him that they were, his claim may not have been discovered until he realized he was entitled to much more. That simply was not the case here.
Important Takeaway for Employees
This case serves as a warning to employees not to delay in bringing actions against their former employers. You will typically only have two years to act before your case disappears. If you have been wrongfully terminated, you should speak to the employment lawyers at Monkhouse Law without delay. If your employer has breached your employment contract, you should speak to the employment lawyers at Monkhouse Law without delay.
If you wait too long, you may have no case at all.
This article was written by Shane Burton-Stoner, employment associate at Monkhouse Law Employment Lawyers. Shane received his J.D. from Osgoode Hall Law School and is a barrister and solicitor licensed by the Law Society of Ontario. If you require the help of an employment lawyer, contact Monkhouse Law for a free consultation.