As an employment lawyer, I have helped both employers and employees with a wide range of workplace disputes and bad faith conduct, including termination of employment resulting from a business acquisition.
In one recent instance, I assisted a 65-year old employee who had worked as a supervisor with the same company for nearly 28 years. Her circumstances were unique, in that she was stranded overseas as the COVID-19 pandemic struck. As a result, she was unable to return to Canada for over a year. During that time, her employer was regularly updated on her situation and appeared supportive. However, what the employer was not sharing with her was that it was selling its business to another company. And when he arrived back in Canada eager to return to work, he was advised the company was terminating his employment following a “restructuring,” and that somehow he was not entitled to severance pay. Obviously, this was a false, dishonest and misleading statement, as my client was, indeed, entitled to financial compensation in the form of a severance package as a result of the wrongful termination.
Unfortunately, this situation is far too common, with some employers going to extreme lengths in an unfair attempt to avoid their legal requirements to provide employees with severance package compensation. In fact, in a recent case called Gascon v. Newmont Goldcorp., 2022 ONSC 2511, the court dealt with a similar situation, where it ultimately punished the employer for dishonest and unfair conduct. In doing so, the court’s decision represents a warning to employers of the consequences of misleading employees in circumstances surrounding the end of their employment.
What Happened in this Case – Employer’s Bad Faith Conduct
In November 2019, the employer (Newmont) entered into an agreement to sell its business to another corporation (successor). The anticipated completion date of the transaction was March 31, 2020. As Newmont’s General Manager and most senior employee on site, the employee played a major role in facilitating the sale.
Before entering into the purchase agreement, one of Newmont’s Vice Presidents assured the employee he would be “going with” the successor company after the sale was completed. Naturally, the employee understood this to mean that his employment would continue with the successor company.
Later on, in mid-March 2020, the employee asked the Vice President about his long-term incentive grants and a merit increase, which he usually received from Newmont in late-February or early-March. He was assured that Newmont was working with the successor company to replace these entitlements after the closing of the transaction. The Vice President also asked the employee for his cooperation to continue performing his duties prior to the closing.
Around the same time, Newmont learned that the successor company would not be retaining the employee after the closing of the transaction. Less than one week later, Newmont terminated his employment with Newmont on a without cause basis.
As a result, the employee brought a wrongful dismissal action against Newmont alleging, in part, that Newmont misled him, acted dishonestly, and breached its duty of good faith when he repeatedly inquired about the status of his employment following the sale to the successor company.
The Court’s Decision
In dealing with the wrongful dismissal claim, the court agreed with the employee and found that Newmont’s Vice President’s conduct in the months leading up to the closing of the transaction was untruthful, misleading, and unduly insensitive. In the judge’s view, the Vice President “must have known well prior to early March 2020 that they would be terminating Mr. Gascon if Evolution did not hire him.” Moreover, the employee sought numerous opportunities to have a “frank discussion” with Newmont about the future of his employment, and was denied repeatedly. As the court noted:
[3] Mr. Thornton never advised Mr. Gascon of this fact. In his March 16, 2020 email to Mr. Gascon, Mr. Thornton again misled Mr. Gascon. He implied that Evolution would be hiring him and asked for Mr. Gascon’s “cooperation in continuing to perform [his] job duties on a business as usual basis until Closing”. Surely the contractual duty of honesty and good faith in the employment context demands more of an employer in these circumstances.
As a result of Newmont’s failure to fulfill its common law duty of good faith and honest performance, the judge ordered Newmont to pay the employee $50,000 in moral or exemplary damages.
It is important to note the court’s comment affirming an employer’s obligation toward an employee:
1. The duty of honest performance – meaning simply that the parties must not lie to or otherwise knowingly mislead their counterpart about matters directly linked to the performance of the contract – is applicable to employment contracts; and
2. When an employee alleges a breach of the duty to exercise good faith in the manner of dismissal, courts may examine a period of conduct that is not confined to the exact moment of termination itself.
Lastly, the court referred to a previous case called Doyle v. Zochem Inc., 2017 ONCA 130 (CanLII), where the Ontario Court of Appeal reiterated that there is an obligation of good faith in the manner of dismissal of an employee and that damages are available where an employer engages in conduct that is “unfair or is in bad faith by being…untruthful, misleading or unduly insensitive”. Most importantly, the court in Doyle confirmed that the time frame to be considered is not “limited to the moment of dismissal. Pre and post termination conduct may be considered in an award for moral damages, so long as it is a ‘component of the manner of dismissal.”
Therefore, in Doyle, the Court emphasized that the question of moral damages is a fact-specific exercise, and in doing so, upheld the lower court’s finding that the employer’s decision to hold out to the employee a promise that she would be given a chance to improve her job performance and told her that her job was not in jeopardy even though the decision to terminate her had already been made, was “evidence of untruthful, misleading or unduly insensitive conduct” justifying the trial judge’s award of moral damages.
Lessons Learned
Employers must always be mindful of (and according to) their duty of good faith, honesty and fair dealing toward an employee, especially when it comes to the termination process. This includes, among other things, the reasons for termination, decision-making process and how the dismissal itself is communicated and carried out. Most importantly, in the context of a sale of a business, the Gascon decision reminds employers cannot knowingly mislead their employees, including as to whether they will continue to be employed by the successor company.
Contact Employment Lawyer Today
If you are an employer who would like to know your options before terminating one of your employees in the context of a sale of your business, or an employee who has recently lost your job and would like to know if you have the right to sue your employer for wrongful dismissal or negotiate your severance package, our experienced employment lawyer at Bune Law can help. Contact us by phone 647-822-5492 or fill out the contact form to the side. We would be happy to assist in your employment law matter as quickly as possible.
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