Ms. Fedorowicz was a bookkeeper for Pace Marathon Motor Alliance Inc. (“Pace”), and a friend of the Principal of Pace, George Mallouk. Ms. Fedorowicz knew Mr. Mallouk from a previous employer where she worked in an administrative capacity and Mr. Mallouk was the general manager. Mr. Mallouk left this company to start Pace and Ms. Fedorowicz was invited by Mr. Mallouk to join him in May 1992 as its bookkeeper. There is no dispute that Ms. Fedorowicz’ played a significant role at Pace, which company grew over the years. There is further no dispute that both Mr. Mallouk and Fedorowicz liberally interpreted tax rules such that Ms. Fedorowicz received part of her remuneration on a non-taxable basis. Furthermore, during the course of Ms. Fedorowicz maternity leave, Ms. Fedorowicz continued to receive payments from Pace, which conduct may have breached Employment Insurance rules. Presumably, Mallouk and Fedorowicz thought that their employment relationship and/or friendship would not end and that their remuneration agreement would never cause either any harm.

However, in March, 2000, Ms. Fedorowicz was diagnosed with cancer. In May, 2000, Mr. Mallouk imposed certain conditions that Ms. Fedorowicz had to comply with in order to return to work, one of which was that Fedorowicz would only be compensated as reflected in the payroll records and would not receive the extra funds (non-taxable). Ms. Fedorowicz ultimately took the position that the reduction in salary constituted a constructive dismissal. Ms. Fedorowicz brought a claim for constructive dismissal and a claim for malicious persecution stemming from criminal charges laid by Pace against Ms. Fedorowicz, alleging that she conducted a fraud against Pace.

The Court held that Ms. Fedorowicz was constructively dismissed given that her remuneration was significantly diminished. The Court awarded her eight (8) months notice. Ms. Fedorowicz was also awarded an additional two months because the Defendants did not act in good faith when they did not respond to her letter seeking clarification of the terms of her return to work. The Court also awarded Ms. Fedorowicz $44,500.00 as damages for malicious prosecution. The Court found, in part, that the criminal charges were pursed by Pace as a result of malice and for the improper purpose of pressuring Ms. Fedorowicz to drop and/or settle the civil claim.

Ms. Fedorowicz was victorious on all accounts. She was awarded damages for wrongful dismissal, malicious prosecution and bad faith. However, the ultimate irony in this case was that the Court held that since it heard evidence of admissions of tax improprieties by both the Plaintiff and Defendant, that it was appropriate in the circumstances to provide a copy of the Court decision to the tax authorities. Whether the tax authorities acted upon receiving a copy of the decision and whether Ms. Fedorowicz was ultimately better off pursing the claims in such circumstances is unknown.

Having a dispute heard in Court is a public process leaving the decision a matter of public record. Whether such a forum is appropriate in all cases is a factor that parties should discuss with counsel prior to commencing litigation.

This article is provided for information purposes only and does not constitute legal advice. Any individual questions or legal issues should be discussed with independent counsel.