Ignorance of the Law Suspends Limitation Clock, The Lawyer’s Daily (March 15, 2022)

(this article originally appeared in the Lawyer’s Daily on March 15, 2022)

By Nikolay Y. Chsherbinin

For wrongful dismissal actions the limitation clock begins to tick when notice of dismissal is communicated to an employee. This is so, even if the actual termination date is in the future, as in a working notice scenario. In contrast, in cases of constructive dismissal, the limitation clock is not activated until the employee accepts the employer’s deemed repudiation of the employment contract by means of his or her involuntary resignation. Error or ignorance of the law,or uncertainty of the law, does not postpone the running of the limitation period. Right? Wrong. In Fresco v. Canadian Imperial Bank of Commerce, 2022 ONCA 115, the Court of Appeal for Ontario has effectively recognized that an employee’s ignorance of legal consequences of the facts is a valid basis on which the limitation period can be suspended.

Fresco is an overtime pay class action, with a 16-year class period and about 31,000 class members. It concerns the application of the Canada Labour Code (Code) to CIBC’s overtime policies. It started in 2007 and is national in scope. There, Dara Fresco claimed that two of CIBC’s policies enabled it to permit its employees to work overtime hours without appropriate compensation, contrary to the Code. As a result, two competing narratives emerged: CIBC argued that its policies aim to stop unnecessary overtime in order to control costs and prevent overwork; while Fresco argued that these policies resulted in CIBC getting the economic value of overtime work without compensating employees, as required by the Code.

A slew of legal proceedings ensued, one of which involved a summary judgment motion where CIBC moved for a classwide limitation period order, which would have greatly assisted it, because it is faced with a class period that begins on Feb. 1, 1993, and ends on June 18, 2009, being the certification date approved by the court. The motion judge dismissed CIBC’s limitation period related arguments on the basis that the statutory “appropriate means” branch of the discoverability test was not met.

In Ontario, s. 5 of the Limitations Act sets out a statutory discoverability test. It provides that the basic limitation period of two years begins to run, as soon as a person reasonably discovers that: (1) he or she has sustained a loss (s. 5(1)(a)(i)); (2) the loss was caused by the defendant (s. 5(1)(a)(iii)); and (3) that taking legal action was an “appropriate means” to seek to remedy the loss (s. 5(1)(a)(iv)).

This three-part test is insidious. Having interpreted it, the motion judge found that the first two branches of the test were met. He explained that every time CIBC’s employees received their biweekly pay, they would have known if they had been paid for overtime, and if not, that this loss was caused by CIBC. However, the motion judge found that the third branch of the test, which is whether CIBC’s employees knew that taking legal action was appropriate means to remedy their loss was appropriate, was not met. In support of his conclusion, he gave two main reasons. First, some of CIBC’s employees feared reprisal and were afraid that they might lose their job if they sued the bank for unpaid overtime. Second, some of CIBC’s employees reasonably relied on the bank’s repeated misrepresentations through the 16-year class period that its overtime policies complied with the Code.

CIBC appealed.

On appeal, the Ontario Court of Appeal was not persuaded by the motion judge’s first reason, but found that there was merit in his second reason of reasonable reliance on misrepresentation. Having cited its earlier jurisprudence, the Appeal Court reaffirmed that “resort to legal action may be ‘inappropriate’ in cases where the plaintiff is relying on the superior knowledge and expertise of the defendant.”

The appellate court acknowledged that while reliance on the “superior knowledge and expertise” criterion often, although not exclusively, occurs in a professional relationship, the categories are not closed. Therefore, it can be invoked by persons who are members of non-traditional professions or who are not professionals at all.

On the facts of this case, the Court of Appeal found that “it is quite plausible” that some CIBC’s employees reasonably relied on its misrepresentation that its overtime policies complied with the Code. Consequently, by defeating CIBC’s quest for the limitation order, its employees have established a sufficient basis to require the application of the limitations defence to be worked out on an individual basis.

In dealing with CIBC’s argument that the “appropriate means” criterion in section 5(1)(a)(iv) of the Limitations Act is not an element of the common law discoverability rules, the Court of Appeal disagreed that common law discoverability rules could not be found to function in an equivalent manner, since the ordinary development of the common law means that the categories are not closed.

The limitation period aspect of the Fresco decision is of significance because it clarified and extended the law of limitation periods in Ontario. It is also a welcome development for both federally and provincially regulated employees, because their uncertainty of the law or legal consequences of the facts can suspend the running of the limitation period.

With a presumed imbalance of power in an employer-employee relationship, Fresco entitles employees to blindly rely on their employers’ assurances of their compliance with the law or on their interpretation of the law, until the employees are advised otherwise, being the event that will activate the limitation clock, which may occur outside the basic two-year limitation period. The effect of the employee’s reliance on the employer’s “superior knowledge and expertise” of the law for the purposes of the limitations defence is a matter that will be assessed on the individual basis.

Ultimately, Fresco reaffirms that the maxim “ignorance of the law is no excuse” is a debatable formulation.