There have been several cases this year in which employers have been hit with damages awards after engaging in bad faith conduct during the termination of employees. These significant costs to the employer mean that it is crucial to follow proper processes when terminating employees and also to understand the types of acts that draw the ire of courts.
We have reported on some of these decisions that have ordered aggravated/moral and/or punitive damages against employers. For example, an employee was awarded $75,000 in aggravated and punitive damages after the employer did not act with good faith in claiming it had just cause to terminate the employee and subjected her to a toxic work environment.
This article looks at the latest in the line of these decisions out of the Ontario Superior Court of Justice. In Pohl v Hudson’s Bay Company, an employee was awarded $55,000 in moral and punitive damages after being marched out the door and for the employer’s failure to comply with the Employment Standards Act (ESA).
Plaintiff sales manager was terminated without cause
The plaintiff employee started working for the defendant in 1992. By the time he was terminated without cause, he was the sales manager of eight departments in a Hudson’s Bay Company (HBC) store. 30 sales associates reported to him. He was employed full-time and received over $60,000 per year.
At the time of his termination in September 2020, his supervisor was directed to walk the plaintiff out the front door immediately. He later brought a claim for wrongful dismissal.
HBC eventually paid plaintiff his ESA entitlements
The employer argued that it did not wrongfully terminate the plaintiff because it offered him a separation package of 40 weeks’ pay in lieu of notice. When the employee declined this, the employer provided him with his ESA entitlements. They were initially paid bi-weekly until the plaintiff’s lawyer requested in November 2020 that the termination and severance be paid as a lump sum. The employer did so in December.
HBC offered plaintiff continued employment as an associate lead
The employer also offered the plaintiff continued employment as an associate lead. The relevant terms of this offer were:
- the employee would “voluntarily relinquish” his sales manager job;
- the employee would be paid hourly, based on 28 to 40 hours per week (but there was no minimum number of hours), and
- the employer could terminate him without cause by paying him the ESA minimum notice period.
Sensibly, the employee did not accept this offer. It would have involved resigning from his full-time employment, eliminating his entitlement to a common law notice period based on his 28 years of service.
Court decided that plaintiff was wrongfully dismissed
Justice Centa noted that the plaintiff did not have a written employment contract and was entitled to reasonable notice under the common law. His Honour decided that the employer’s severance package of 40 weeks was less than his common law entitlement and settled on a reasonable notice period of 24 months.
Plaintiff awarded $55,000 in moral and punitive damages
In addition, Justice Centa decided that the employer’s conduct warranted an award of both moral and punitive damages.
Moral damages are available for untruthful, misleading or unduly insensitive conduct
His Honour explained that moral or aggravated damages are available:
“where the employer engages in a breach of the duty of good faith and fair dealing at the time of termination. An employer can breach this duty, for example, by being untruthful, misleading, or unduly insensitive.”
These damages are designed to compensate employees for distress beyond a dismissal’s normal suffering. Medical evidence showing mental distress is not required.
HBC made several errors warranting an award of moral damages
Justice Centa awarded the plaintiff $45,000 in moral damages.
Firstly, his Honour considered that marching the plaintiff out the door was unduly insensitive, given that he had committed no misconduct. Secondly, offering the sales associate job was misleading and designed to extinguish the plaintiff’s rights. He was offered “nothing of substance” in exchange for losing his right to a lengthy period of common law notice. The court criticized the employer for trying to take advantage of the plaintiff while he was at his most vulnerable.
Moral damages were also warranted because the employer did not initially pay the ESA entitlements as a lump sum. Under section 11(5) of the ESA, the employer must pay wages, termination and severance pay required under the ESA no later than seven days after the employment ends and the day that would have been the employee’s next payday. The court criticized the employer for failing to comply with the ESA and waiting until the plaintiff’s lawyer demanded payment.
Punitive damages awarded for failure to comply with the ESA
In addition, Justice Centa awarded the plaintiff $10,000 in punitive damages. These are awarded in exceptional cases to “punish misconduct that represents a marked departure from ordinary standards of reasonable behaviour.” The defendant’s failure to pay the plaintiff his ESA entitlements on time and failure to issue an accurate record of employment in the timeframe required by the Employment Insurance Regulations justified this award.
Contact Haynes Law Firm in Toronto for Guidance on Employee Termination
This case shows how important it is for employers to manage the termination process to avoid insensitive conduct. It is also crucial to avoid being untruthful or misleading and to strictly comply with all requirements under the ESA. For advice on how to undertake this process, or respond to a claim brought by an employee for wrongful termination, contact the Haynes Law Firm. We will work with you to manage the risk and reduce your liability.Alternatively, Paulette Haynes will preserve your legal rights if you are an employee who has not been given your ESA pay or received an offer designed to strip you of your entitlements. Please contact the Haynes Law Firmonline or call us at 416.593.2731.
