If an employer terminates an employee without cause in the wrong way, they could end up on the hook for aggravated and/or punitive damages. This not only harms the employer’s financial position but also damages its reputation, potentially making it more difficult to attract top talent.
Courts in Ontario have not been shy in recent times in punishing employers that engage in wrongful conduct. This article looks at the recent decision of the Ontario Superior Court of Justice in Pohl v Hudson’s Bay Company, in which an employee was awarded both moral and punitive damages.
This decision serves as a reminder to employers of the need to take care when dismissing an employee. It is crucial for employers to comply with the requirements of the Employment Standards Act (“ESA”) and not attempt to have the employee waive rights by accepting another job offer.
Employee marched out the door after being terminated without cause
In the case at hand, the plaintiff employee started working for the defendant employer, the Hudson’s Bay Company, in 1992. The plaintiff worked his way up through the company over a 28-year career with the defendant and, by 2012, he was the sales manager of eight departments in the Eglinton Square store and was responsible for 30 staff.
In September 2020, the defendant terminated his employment without cause. Despite no assertion of misconduct, the plaintiff’s supervisor was directed to “immediately walk him out the front door”.
The plaintiff sued for wrongful dismissal.
Employee wrongfully dismissed and entitled to 24 months notice period
When the matter was presented to the Court, the defendant argued that it did not wrongfully terminate the plaintiff’s unwritten employment contract because it offered him a voluntary severance package of 40 weeks’ pay in lieu of notice. However, the defendant argued that a reasonable notice period, in this case, would be 14 to 18 months, which is much longer than 40 weeks.
Justice Centa found that the severance package did not fall within the range of reasonable notice and that the plaintiff had been wrongfully dismissed.
His Honour applied the Bardal factors and concluded that a notice period of 24 months was reasonable in these circumstances, noting that there were no exceptional circumstances presented to justify a notice period longer than 24 months.
Employer did not prove that employee failed to mitigate damages
Most of the argument focused on whether the plaintiff had taken reasonable steps to mitigate his damages.
In particular, the defendant noted that it offered the plaintiff continued employment as an associate lead. In contrast to his previous full-time position in which he earned over $60,000 plus benefits, the new position required the plaintiff to resign (thereby relinquishing his entitlement to a reasonable notice period based on his 28 years of service) and accept a wage of $18 per hour for work that could vary between 28 to 40 hours per week, however there were no guaranteed minimum hours. The offer also contained a ”breathtaking” provision, which purported to allow the employer to terminate his employment and pay him nothing or cut his hours to one per week without constituting constructive dismissal.
Justice Centa disagreed with the employer that this was a comparable position. As a result, failure to accept this “unreasonable” offer was not required in order to mitigate the plaintiff’s damages.
Employee awarded $45,000 moral or aggravated damages
There is an obligation of good faith on employers in the manner of dismissal of an employee. Employers might be found in breach of this obligation if they are untruthful, misleading or unduly insensitive. Moral damages are awarded to compensate employees for distress beyond the normal distress associated with being terminated.
Justice Centa decided to award the plaintiff $45,000 in moral damages, due to the presence of four factors:
- The decision to walk the employee out the door was unduly insensitive. He had committed no misconduct.
- Offering the associate lead position was designed to extinguish the employee’s rights on termination. His Honour explained:
“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. … HBC sought to take advantage of [the employee] at a moment of extreme vulnerability.”
- The employer violated the ESA by failing to pay him the termination and severance pay that was required by the ESA not later than the later of seven days after the employment ended and the day that would have been the employee’s next payday. The defendant paid out the termination pay by way of installment instead of a lump sum. His Honour criticized this “entirely unacceptable” conduct, saying:
“HBC is not at liberty to improve its cash flow by withholding money it was statutorily obliged to have paid to [the employee] and turning him into an unsecured creditor.”
- Finally, the employer failed to issue a record of employment to the employee within five days after the interruption of his employment. It issued two such records after the deadline, both of which were incorrect.
Punitive damages warranted for failure to comply with ESA or issue record of employment
Additionally, Justice Centa awarded the plaintiff $10,000 in punitive damages. This type of damage award is intended to punish misconduct in exceptional cases of malicious or oppressive behaviour. His Honour awarded punitive damages because of the defendant’s failure to make payment in accordance with the ESA and to issue a timely or correct record of employment.
Contact Grosman Gale Fletcher Hopkins LLP in Toronto for Guidance on Employee Termination
If you are an employer or an employee going through the termination process, contact the employment lawyers at Grosman Gale Fletcher Hopkins LLP. Our team assists employers to manage risk when seeking to terminate employees to help ensure that they do not end up liable for aggravated or punitive damages due to a careless termination. We also help employees secure all their entitlements in the event of termination and make sure they avoid severance packages or job offers that waive their rights. To speak with one of our lawyers for guidance with a workplace-related issue, contact us online or at 416.364.9599.
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