Wednesday, 23 November 2016

Ottawa Judge Awards $50,000 in Punitive Damages after Employer Fails to Provide Statutory Minimums and ROE

(c) istock/Jrcasas

Is asserting just cause for termination where it is not warranted, failing to provide an employee with his Record of Employment (ROE), and/or his statutory minimums, all in an attempt to negotiate a lower severance amount, “reprehensible” conduct warranting the imposition of punitive damages? It is according to a decision of the Honourable Justice Pierre Roger of the Ontario Superior Court of Justice sitting at Ottawa: Morison v Ergo-Industrial Seating Systems Inc., 2016 ONSC 6725 (CanLII).

In a wrongful dismissal case in which the court was unable to award aggravated damages for bad faith on account of a dearth of medical evidence, Justice Roger nonetheless awarded $50,000 in punitive damages for “bad faith.”

Things may have just gotten easier for plaintiffs.

Facts

The plaintiff was 58 years old at the time of his dismissal. He worked in furniture sales since 1978 for a number of companies. His relationship with the defendant began on August 9, 2004. The nature of their relationship between August 9, 2004 and January 1, 2006, was in issue (namely, whether the plaintiff was then an employee or an independent contractor – Justice Roger found that he was an employee). It was not disputed that the plaintiff was an employee by January 1, 2006, until his dismissal on October 22, 2012.

The plaintiff was the defendant’s regional manager, responsible for Eastern Ontario and Western Quebec, as well as manager for federal government sales. He claims to be a top salesperson, unaware of any issue relating to his employment until October 22, 2012, when the defendant’s owner and president called him to inform him that his employment was terminated. Five months’ notice was offered, including one month of working notice. The plaintiff alleged that the defendant did not act fairly and that there was no basis to allege just cause. He claimed that allegations of cause were made in bad faith to facilitate a more favourable settlement.

At issue were: the amount of reasonable notice to which the dismissed employee was entitled (the finding was 12 months), whether the plaintiff was entitled to aggravated damages for bad faith; and whether the plaintiff was entitled to punitive damages.

Decision

On the issue of aggravated damages, Justice Roger reasoned as follows:

[30] In an action for wrongful dismissal, the general rule is that damages are limited to those resulting from the employer’s failure to give proper notice (in breach of the implied obligation in the employment contract to give reasonable notice in the absence of just cause), and that no damages are available to the employee for the actual loss of his or her employment or for the pain and distress that may have been suffered as a result of being terminated. That is because, at the time the contract of employment was formed, psychological damages would not have been in the contemplation of both parties as a result of the dismissal, as the dismissal was always a clear legal possibility. Damages resulting from the manner of dismissal must then be available only if they result from conduct during dismissal that is unfair or in bad faith: see Honda v. Keays, at paras. 50, 56–57)…

[31] What is fatal to the plaintiff’s claim for aggravated damages is the insufficient evidence of actual damages resulting from the manner of dismissal. The plaintiff’s evidence on this point was extremely limited and really had more to do with the ordinary pain, distress, and financial stress associated with losing a job, rather than that which might result from the manner of dismissal. Otherwise, the claim was made out. [On this point see my post Moral Damages for Manner of Dismissal - Meeting the Evidentiary Burden. SPB]

[32] Although the defendant initially alleged cause (until June 2015), its conduct was completely inconsistent with allegations of just cause. Just cause generally involves conduct so serious that there is a complete breakdown in the relationship. Here, the defendant made a decision to terminate the plaintiff’s employment around mid-September 2012. This is evidenced by the offer of employment to his replacement, dated September 27, 2012, and from the earlier meetings with this candidate. Nonetheless, the defendant first provided notice to the plaintiff of his dismissal on October 22, 2012, with one month working notice. This conduct is inconsistent with the allegations of cause alluded to in the dismissal letter and wholly inconsistent with the pleadings of cause contained in the defendant’s statement of defence.

[33] This inconsistency is more apparent when one considers the defendant’s Employee Handbook. As indicated by the defendant’s handbook, dismissal for cause involves a situation where continuing the relationship is untenable such as following a serious violation, act of dishonesty or conduct that is materially detrimental to the business, or the financial position of the company. This is simply not the case, and the conduct of the defendant was completely at odds with any such factual concept of cause.

[34] In its statement of defence, the defendant alleges cause essentially on three bases: poor performance and failing to market the healthcare and private sector; failing to meet sales targets; and abuse of the demo account “or worse”.

[35] The evidence was clear that the plaintiff generally met and exceeded his sales target. He was not challenged on this point, and the defendant did not produce evidence that could in any way support its position that this belief was reasonably held. On the contrary, it was essentially admitted that Mr. Morison was one of the defendant’s top performers.

[36] The plaintiff provided a significant amount of evidence that he diligently marketed to the private sector, and particularly to the healthcare sector. The defendant’s evidence on this point was quite general and inconsistent and did not challenge the evidence of the plaintiff relating to his efforts. The fact that the plaintiff did not include this experience in his curriculum vitae does not support this allegation or the reasonableness of the belief. Similarly, the fact that the plaintiff’s immediate superior felt he lacked energy on this issue and that someone else might be more driven does not at all convince me that the defendant had reasonable beliefs to allege cause on this basis.

[37] Similarly, on the demo account, it was clear that the plaintiff was doing his best to address the concerns raised by the defendant and that this was, at worst, a management problem/issue for the plaintiff, shared with the defendant and amongst a number of other representatives of the defendant. It was admitted by a former manager of the defendant that Mr. Morison’s concerns over this issue were valid and well taken, and not reflective of sloppy handling. What is particularly troubling is that, despite Mr. Cassaday stating that he did not share this opinion, the defendant did not investigate this issue prior to early 2014. One would have thought that the duty to investigate such a serious allegation as “abusing the Demo Account, or worse” would have required the defendant to investigate this issue beforehand. In any event, all of this clearly contradicts the defendant’s alleged bona fide belief in having a reasonable basis for making such an allegation.

[38] Another convincing inconsistency is the clear evidence that the actual dismissal date of October 22, 2012 was not at all established or arrived at as the result of some investigation or finding related to the allegations of cause. It is clear that the dismissal date was arrived at simply in an effort to accommodate the starting date of the hired replacement. Another inconsistency with the allegations that these beliefs were reasonably held is the complete lack of any warning.

[39] Mr. Cassaday, for the defendant, tried to blame the reasonableness of the defendant’s belief at the time on his previous counsel, which I found totally unconvincing. Mr. Cassaday admitted that he was advised as early as September 24, 2012 that he would not be able to establish cause. The defendant's failure to bring evidence in support of the reasonableness of such beliefs completely contradicts this allegation and I do not accept Mr. Cassaday’s evidence that he reasonably believed that the defendant had cause. This is amplified when one factors into the analysis the defendant’s Employee Handbook and how the defendant defines dismissal with cause therein.

[40] It is clear that an employer can allege just cause as a ground for dismissal and that abandoning cause at any stage, in the course of the action, does not necessarily mean that such conduct should attract aggravated damages. Provided the employer had a reasonable basis on which it believed it could dismiss an employee for cause, a finding of bad faith will not automatically follow: see Mulvihill v. Ottawa (City), 2008 ONCA 201 (CanLII), 90 O.R. (3d) 285, at paras. 49, 55 .

[41] However, in this case, the evidence is rather clear that the plaintiff was simply not a good fit with his new immediate superior. It is equally clear that this superior knew someone she respected who expressed interest in Mr. Morison’s position. The defendant was interested in trying someone new who had what the defendant perceived was a more positive disposition towards the healthcare sector. The defendant was clearly entitled to these beliefs and to hire someone else. However, none of this constituted reasonable belief in just cause.

[42] Considering all the evidence on this issue, I conclude that alleging cause was an integral part of the defendant’s negotiation strategy. The defendant was counselled in September 2012 that it would not be able to establish cause. The defendant alluded to a possibility of alleging cause in its dismissal letter. The defendant then alleged cause in its defence and adopted a rather aggressive position while providing no convincing evidence at trial that could support its alleged reasonable belief in cause or that it was reasonably justified in initially adopting a position of just cause.

[43] This is exactly the kind of conduct mentioned in Honda v. Keays as an example of conduct in dismissal that could result in aggravated damages. I find that the defendant did not act fairly or in good faith in the manner of dismissal of Mr. Morison as the defendant was not candid, reasonably honest, nor forthright with Mr. Morison. The defendant, by its allegations made with no reasonable basis in support thereof, attacked the reputation of Mr. Morison by making misrepresentations regarding the reasons for his dismissal for financial gain (i.e. seeking a better outcome in its negotiations with Mr. Morison). This is a classic example of bad faith.

[44] However, the law is clear that any damages resulting from such a conduct are to be compensatory and are to reflect the actual damages sustained.

[45] On this point, the evidence in this case is quite different from that in Middleton v. Highlands East (Municipality), 2013 ONSC 763, 8 M.P.L.R. (5th) 114, where the Court found, at para. 142, sufficient evidence of mental distress. Here, the evidence of mental distress caused by the manner of dismissal cannot be dissociated from the usual anguish and stress resulting from having one’s employment terminated. I point out that I am not concerned with the lack of a medical report (on which time was spent during closing arguments), but rather with the lack of convincing evidence of mental distress on which I could properly assess damages resulting from the manner of dismissal. By way of example, some of the plaintiff’s evidence on this related to how he was in a fog when he found out by a friend that he would be dismissed and how this was a horrible day, with other parts of his evidence relating to his financial distress. Despite mentioning that the allegations of cause got his back up and caused him some upset, his evidence in that regard was extremely superficial and lacked particulars. The evidence is not at all convincing and is simply not sufficient to warrant any damages in this context, since normal distress and hurt feelings resulting from a dismissal are not compensable. For these reasons, the facts relevant to damages in this case are quite different from those in cases such as Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419 (CanLII), 120 O.R. (3d) 481, and Strudwick v. Applied Consumer & Clinical Evaluations Inc., 2016 ONCA 520 (CanLII), and do not give rise to compensable damages.

[46] As indicated in Canada (A.G.) v. Robitaille, 2011 FC 1218 (CanLII), at para. 38, the employee’s testimony may be sufficient to establish such damages and the absence of medical evidence does not deny the damages suffered by the employee as long as there is evidence of such damages and evidence of a causal connection between the moral injury and the wrongful conduct.

However, the lack of medical evidence to establish aggravated damages was not a complete barrier to the imposition of any damages, on the issue of punitive damages, Justice Roger wrote the following:

[47] The plaintiff’s allegations in this regard include the following facts: the manner of dismissal (a quick telephone call followed by a letter that alluded to the possibility of cause); the allegations of cause initially pleaded and the lack of a reasonable belief on the part of the defendant to support the allegations of cause; the lack of any warning and of any investigation; the lack of reasons provided by the employer at the time of dismissal; the two months’ delay by the defendant in providing the plaintiff with his record of employment; the failing of the defendant to pay any amount owing under the Employment Standards Act, 2000, S.O. 2000, c. 41, until June 15, 2015 ($42,144 was paid on that date); the financial impact these delays had on the plaintiff (he had to cash significant amounts of his RRSPs and had to sell his house); the employer’s knowledge of the plaintiff’s financial circumstances (Mr. Cassaday admitted to such knowledge); that the allegations of cause were made for tactical reasons with no reasonable basis supporting such a belief (I made this finding above); and that the dismissal letter did not comply with the Employment Standards Act, 2000. The plaintiff also directed my attention to a number of cases on this issue.

[48] The defendant argued that punitive damages are not warranted. It pointed to factual differences in the cases relied upon by the plaintiff and argued that the facts in this case are not exceptional, with no intentional or harsh treatment over a period of time.

[49] An excellent summary of the law applicable to punitive damages is provided by our Court of Appeal in Boucher v. Wal-Mart Canada Corp., at paras. 78–92. [For a summary of that case on this point see my post Wal-Mart Rolls Back Award of Punitive Damages. SPB] Basically, in an employment or breach of contract setting, three basic requirements need to be established by the plaintiff:

  1. That the defendant’s conduct is reprehensible, “malicious, oppressive and high-handed”, and “a marked departure from ordinary standards of decent behaviour”.
  2. That a punitive damages award, when added to any compensatory award, is rationally required to punish the defendant and to meet the objectives of retribution, deterrence, and denunciation.
  3. That the defendant committed an actionable wrong independent of the underlying claim for damages for breach of contract (in this case, something other than breach of the implied notice provision). A breach of the defendant’s duty of good faith and fair dealings would constitute an independent actionable wrong.

[52] In this case, the defendant committed an actionable wrong independent of the underlying claim for damages for breach of contract: the breach of its duty of good faith, as found above.

[53] I find the facts of this case particularly troubling. Not only did the defendant assert cause when there was no reasonable basis for such an assertion, the defendant delayed in providing the plaintiff his record of employment, and significantly delayed in paying amounts owing under the Employment Standards Act, 2000, until June 15, 2015. This had a significant financial impact on the plaintiff and the employer had knowledge of the plaintiff’s financial circumstances. Moreover, the allegations of cause, made with no reasonable basis, were made for tactical and financial gain considerations.

[54] I had the advantage of listening to the evidence and observing the witnesses and I find such conduct to be reprehensible. It exceeds what might be considered as ill-advised. The allegations of cause, made with no reasonable basis, and the significantly delayed payment of statutory amounts were intentional and financially impacted the plaintiff. These actions of the defendant were designed to financially benefit the defendant and the defendant had knowledge of the plaintiff’s precarious financial position. Such a conduct is “malicious, oppressive and high-handed” and “a marked departure from ordinary standards of decent behaviour”. A similar finding was made in Kelly v. Norsemont Mining Inc., 2013 BCSC 147 (CanLII), at para. 115.

[55] Since I have awarded no amount for aggravated damages, the pitfalls of double-compensation or double-punishment mentioned in Honda v. Keays is avoided if I award punitive damages.

[56] Considering the facts of this case, I find that an award of punitive damages is rationally required to punish the defendant and to meet the objectives of retribution, deterrence, and denunciation. Employers cannot be allowed to behave in such a fashion without a clear message being sent by this Court that this is not acceptable.

[57] As indicated in Whiten, the amount awarded must be proportionate to such factors as the harm caused, the degree of the misconduct, the relative vulnerability of the plaintiff, and any advantage or profit gained by the defendant. On the issue of harm caused, I did not find that the plaintiff provided sufficient evidence to warrant compensable damages. However, the plaintiff did provide some evidence of financial stress and of vulnerability. The degree of misconduct was moderately serious and the conduct was driven, to a certain extent, by the defendant’s expectation of financial gain. A proportionate amount, as indicated in Whiten, should give the defendant its just desert, should deter the defendant and others from similar misconduct in the future, and should mark the community’s collective condemnation of what has happened, thereby achieving retribution, deterrence, and denunciation.

[58] I have carefully reviewed the evidence and the cases mentioned by both parties and, although the circumstances of this case are serious and clearly warrant punitive damages, I agree with the defendant that they are not, on a spectrum of seriousness, quite as serious as the facts contained in the many cases referred to be the plaintiff. Consequently, I find the amount sought by the plaintiff of $250,000 to be excessive. In fact, this case is a somewhat less serious version than the situation found in Kelly v. Norsemont Mining Inc., where the Court awarded $100,000 in punitive damages.

It is interesting to note that the wrongful dismissal award came to $98,939.32, plus pre-judgment interest; the award of punitive damages moved the plaintiff outside of Simplified Rules territory.

Commentary

What does this case stand for? Well, first, it shows the court’s continued disapproval of hardball tactics by employers when it comes to negotiation. Withholding an employee’s statutory termination pay and/or ROE will not be well received by the court. On this point see also my post on the case of Gordon v Altus, 2015 ONSC 5663 (CanLII), where Justice Bruce A. Glass awarded $100,000 in punitive damages after an employer got “mean and cheap”: Court Awards $100,000 in Punitive Damages after Employer gets "Mean and Cheap" on Dismissal .

What I find interesting, and perhaps a little troubling, about this decision is that Justice Roger essentially makes a finding for aggravated damages and then, because he rightly observes that there is a lack of necessary medical evidence, uses that finding to award punitive damages. His Honour then goes on to say that because he did not award aggravated damages (because they were not appropriate) there is no risk of double recovery and therefore punitives may be even more appropriate. I am not sure that this is what the Supreme Court had in mind when it wrote its decision in Keays.

In my opinion what this shows is a desire by the court to show its clear disapproval at the employer’s actions, which disapproval may well be warranted in this case, and the fact that the plaintiff had failed to satisfy the lower test for aggravated damages was not going to be a barrier to any such award. As I said at the outset, things may have just gotten easier for plaintiffs.

Takeaways for Employees with Labour Pains

The takeaway for employees with labour pains is ‘hang in there.’ If your employer is playing hardball in its negotiations know that the court may have your back. The current sentiment among Ontario judges appears to be that such an approach will not be approved.

If you are an individual looking for assistance with respect to the termination of your employment, contact the professional, experienced and cost-effective employment lawyers for employees at Ottawa's Kelly Santini LLP; we would be happy to be of service to you.

Takeaways for Employers with Labour Pains

Lesson for employers: do not allege just cause unless you believe you have it. If you believe you have just cause, act like it and do not attempt to provide working notice. Also, if you know you do not have just cause for termination, provide the employee with at least his minimum statutory entitlements. A failure to do any of those things can, and likely will, be punished by the court.

If you are an employer and you need to terminate the employment of one of your employees either with cause or without, contact the professional, experienced and cost-effective employment lawyers for employers at Ottawa's Kelly Santini LLP first; we would be happy to be of service to your business or organization.

Contact Me

To reach the author of this blog, Sean Bawden, email sbawden@kellysantini.com or call 613.238.6321 x260.

Sean P. Bawden is a partner with Kelly Santini LLP, located in Ottawa, Ontario, Canada. He practices in the areas of employment law and civil litigation. He has also taught Trial Advocacy for Paralegals and Small Claims Court Practice at Algonquin College in Ottawa.

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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.

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