Ontario Employer’ Bad Faith Conduct Results in Aggravated/Moral Damages

Misbehaving Employers Dinged with Significant Damages Award in Wrongful Dismissal Claim

There has been a recent trend in wrongful dismissal cases that reflect a clear and resounding message to Ontario businesses: the courts will not tolerate any breach by an employer of its duty of good faith, honesty and fair dealing.

Generally, Ontario employers have a right to terminate employment for any reason or no reason at all (other for discrimination or reprisal), as long as they provide an employee with a financial severance package. However, what employers often forget is that the courts will always carefully examine how a termination takes place. In fact, the issues that get employers caught in a bind with wrongful dismissal claims are usually:

• employer falsely alleging just cause for dismissal (and not being able to prove it)
• employer not providing adequate notice of termination or a severance package
• employer acting in bad faith in the manner of dismissal

What is an Employer’s “Duty of Good Faith” Anyway?

As the Supreme Court of Canada noted in the leading case called Wallace v. United Grain Growers Ltd.:

The obligation of good faith and fair dealing is incapable of precise definition.  However, at a minimum, I believe that in the course of dismissal employers ought to be candid, reasonable, honest and forthright with their employees and should refrain from engaging in conduct that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive. 

a)      where an employer has breached its duty of good faith and fair dealing in the manner in which the employee was dismissed;

b)      conduct that could qualify as employer’s breach of good faith or the failure to deal fairly in the course of a dismissal includes employer’s conduct that is untruthful, misleading or unduly insensitive, and a failure to be candid, reasonable, honest and forthright with the employee;

c)      where it was within the reasonable contemplation of the employer that the manner of the dismissal would cause the employee mental distress;

d)      the wrongful conduct of an employer must cause the employee mental distress beyond the understandable distress and hurt feelings normally accompanying a dismissal; and

e)      the grounds for moral damages must be assessed on a case-by-case basis.

A few recent cases demonstrate that, when deciding wrongful dismissal claims, judges really focus on an employer’s conduct in how they implement a termination of employment. When courts determine that an employer has engaged in inappropriate or unfair conduct, they will not hesitate to express their disapproval by awarding an employee with aggravated or moral damages. The moral of the story: when ending an employment relationship, employers must always act in a manner convinces the court it handled the termination of employment with sensitivity, respec, honesty and forthrightness.

Humphrey v. Mene

The court awarded a wrongfully dismissed employee additional compensation of $50,000 for aggravated or moral damages based on the following:

• the employer alleged just cause for termination by raising false claims of performance issues and misconduct as a pretext terminating her employment.
• apart from the decision to terminate for cause reflecting bad faith, the court found that the employee “was set up to fail” in that she had never received a performance review, or any indication that her position was in jeopardy when she was promoted to the position of COO; that her request for a raise set the wheels in motion for her termination; that she was removed from the position of COO and “suspended” for a variety of alleged performance issues, pending an investigation that never took place; that clients and other employees were informed of her removal from the position before she was informed; that her formal dismissal relied in part on the fact that she had retained counsel; the manager engaged in unprofessional and abusive outbursts; and that an internal communication set out spurious allegations of cause for which the employer insisted it had extensive supporting documentation, which never materialized.
• the employer mangled the termination process.
• some of the employee’s co-workers had been instructed to “dig up dirt” on the terminated employee.
• the employer’s dealings with the employee were “disingenuous”.
• “letter of termination, coupled with the circumstances surrounding the termination process itself, echoed the ‘hard line’ tone taken by the employee’s manager throughout their dealings.
• the managers’ overall conduct, as reflected in the pattern of his communications with the employee, justified aggravated or moral damages
• it appropriate to consider the employer’s conduct in context and as a whole and illustrate the abuse employee suffered was ongoing throughout her employment and that it was “directly related to the manner of her dismissal”.
• while some of the employer’s conduct in relation to the dismissal viewed in isolation would not constitute bad faith, the same conduct when part of a course of conduct on the part of an employer that inflicts mental distress on an employee may legitimately inform the result.
• the time frame the courts will look at when deciding whether to award of aggravated or moral damages is not limited to the moment of dismissal. In fact, even pre- and post-termination conduct leading up to and in connection with the termination (i.e., as long as such conduct is “a component of the manner of dismissal).
• the employee suffered embarrassment and humiliation from the public nature of her wrongful dismissal.
• the employer’s conduct harmed the employee’s reputation because of the just cause allegations.
• the judge accepted that what happened was devastating to the employee’s sense of self and would be with her for a long time (this was something that her manager in particular would have been aware of).

Pohl v. Hudson’s Bay Company

The court awarded a wrongfully dismissed employee additional compensation of $45,000 for aggravated or moral damages based on the following:

1. Walking Mr. Pohl out the Door was Insensitive

• • the employer’s decision to walk the employee out the door was unduly insensitive, particularly since he was a loyal, 28-year employee and he had committed no misconduct. There was no reason to treat him so insensitively.

2. The Employer Attempted to Trick or Induce Mr. Pohl Into Waiving his Rights

• • the employer’s offer of continued employment following the wrongful termination was misleading and a breach of the duty of good faith and fair dealing. It was carefully designed and would have extinguished the employee’s severance pay rights on termination. The employee’s new employment contract purported to allow the employer to make essentially prevented him from claiming a constructive dismissal (i.e., a disguised termination) if the employer ever made changes to his new employment contract. As the court noted:

  • “HBC’s decision to include a clause that would allow it in the future to gut Mr. Pohl’s contract while purportedly not triggering a constructive dismissal says the quiet part out loud. HBC offered him nothing of substance in exchange for waiving his right to pay in lieu of notice of termination on a 28-year career, and forward-looking provisions that would have permitted HBC to never schedule him for a single shift.”

  • the employee is most vulnerable at the time of termination and that is the time when an employee is most in need of protection, and here the employer sought to take advantage of the employee at a moment of extreme vulnerability.
  • in effect, the “employer of 28 years was attempting to trick or induce [the employee] into giving up my right to such compensation without corresponding benefit,” which resulted in the employee’s feelings of humiliation, diminished self-worth and anxiety deepened and he became depressed”.

3. HBC Failed to Pay ESA Amounts Promptly

• the employer violated the Employment Standards Act by not paying out the employee’s statutory termination pay and severance pay in a lump sum within 7 days or on his next payroll day. Ontario employment provides that if an employee’s employment ends, the employer shall pay any wages to which the employee is entitled not later than the later of seven days after the employment ends and the day that would have been the employee’s next pay day. 
• an employer’s compliance with Ontario employment law is not optional. As the court noted:
  • “HBC is not at liberty to improve its cash flow by withholding money it was statutory obliged to have paid to Mr. Pohl and turning him into an unsecured creditor.”

      4.   HBC Did not Provide a Timely and Correct Record of Employment

• the employer failed to issue the employee’s record of employment within 5 days after the interruption of his employment.

Russell v. The Brick

The court awarded a wrongfully dismissed employee additional compensation of $25,000 for aggravated or moral damages based on the following:

a)      A lack of transparency and fair dealing by The Brick in the termination process by failing to advise that Russell would be provided with his full statutory (ESA) entitlements in the event he rejected the offer reflected in the termination letter;

b)      A lack of transparency and fair dealing by failing to advise Russell that his benefits would be extended consistent with his statutory notice period irrespective of whether he accepted The Brick’s offer;

c)      The failure of the offer to meet all of the statutory entitlements, including vacation pay accrued over the course of the statutory notice period; and

d)      Mental distress Russell suffered beyond the usual hurt feelings and distress of being dismissed, and which was reasonably foreseeable to The Brickarising from its lack of transparency and fair dealing in the manner of terminating his employment.

Call Employment Lawyer Now

The importance of these recent is to deter employers from making misleading and disingenuous offers of re-employment to employees as a tactic to prevent employees from obtaining a severance package following a wrongful dismissal. Just as importantly, employers who do not carefully conduct a termination of employment in a respectful, sensitive manner can find themselves being forced by a court to pay employees moral damages award, on top of paying out the employee’s severance package. Put simply, employer’s must be mindful of their duty of good faith by not being unduly insensitive or unreasonable when terminating employment, and to always be fair, candid and forthright.

It is important for an employee (or an employee) to speak with an experienced wrongful dismissal lawyer before taking any action that could affect the situation at workplace. Our Ontario employment lawyer has experience advocating for both employers and employees, which allows him to anticipate the other side’s arguments and develop an effective strategy.

What does a duty of good faith mean? Put simply, it requires employers to not be unduly insensitive or unreasonable when terminating. They must be candid and forthright. This overarching legal principle exists to protect employees from the power imbalance between themselves and their employers.

If you are looking for a wrongful dismissal lawyer in Toronto, call today at 647-822-5492 for a case evaluation with an experienced employment lawyer.

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