In some circumstances, we hear about employees terminated without cause being entitled to either reasonable notice of termination or payment in lieu and severance. However, less well known is the requirement for employers not to engage in untruthful or misleading conduct in the manner of dismissal.
This article looks at the recent decision of the Ontario Superior Court of Justice in Gascon v Newmont Goldcorp in which an employee terminated after the sale of the business by his employer sought exemplary damages for misleading conduct.
Employers cannot engage in untruthful or misleading conduct in the manner of dismissal
The Ontario courts have confirmed 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”. Both pre-and post-termination conduct may be considered, but the conduct must be a component of the manner of dismissal.
The parties to an employment contract must not lie to or otherwise knowingly mislead each other about matters directly linked to the performance of the contract.
If the employer engages in untruthful, misleading and unduly insensitive conduct in the manner of dismissal, the employee may be entitled to an award of moral or exemplary damages.
Employer advises employee that he would “go with” the buyer after sale of business
The plaintiff was employed by Goldcorp Inc. as the general manager of its Red Lake Mine. In 2019, all shares in Goldcorp were acquired by the parent company of the defendant, Newmont Goldcorp Integrated Services Inc., which became the new owner of the mine. This company decided to retain the plaintiff as the mine’s general manager. He signed a new employment agreement, which included annual long-term incentive compensation.
Later in 2019, the defendant entered into an agreement to sell the mine to Evolution Mining Gold Operations Ltd, with an expected completion date of March 31, 2020. The vice president of the defendant told the plaintiff that he would be “going with” the mine when it was sold.
The plaintiff assisted in facilitating the sale and in November 2019, he received two emails from executives of the defendant thanking him for his service and wishing him well in the future. Following this, the plaintiff specifically enquired with the vice president if he still had a job with the defendant. According to the plaintiff, he was told that he did and was again told that he would “go with” the mine when sold.
Employer terminated employee after learning the buyer would not retain him
A week before the expected completion date, the defendant learned that the buyer would not be retaining the plaintiff as an employee after the purchase of the mine was completed. On March 30, 2020, the defendant provided the plaintiff with a notice of termination without cause, effective March 31, 2020. It did not pay him a long-term incentive compensation award in early 2020, the time that such awards were normally paid.
The plaintiff commenced proceedings against the defendant, claiming damages in lieu of the long-term incentive award and for being misled about his continued employment. He argued that the defendant knew in November 2019 that he would not have a position with the defendant after the sale and that he failed to advise him of this because his continued service to the company was essential to the completion of the sale.
Pre-termination conduct was relevant to the issue of exemplary damages
While Justice Fregeau was not prepared to decide whether the plaintiff was entitled to damages in lieu of the long-term incentive award without the matter going to trial, his Honour was prepared to deal with the claim for exemplary damages by way of summary judgment because there was no genuine issue requiring a trial.
Firstly, his Honour decided that the employer’s pre-termination conduct in the fall of 2019 was a component of the plaintiff’s dismissal and was relevant to whether the plaintiff was entitled to an award of exemplary damages.
Employer engaged in untruthful, misleading and unduly insensitive conduct
Justice Fregeau commented that after the plaintiff was again told that he would “go with” the mine:
However, for approximately four months thereafter, Mr. Gascon was left to speculate about his future employment with Newmont Goldcorp while working diligently to facilitate the sale of the Red Lake Mine to Evolution. Mr. Thornton’s repeated suggestions to Mr. Gascon that he would “go with” the mine appear to me to have been clumsy attempts to placate and/or mislead Mr. Gascon, a senior employee who was essential to the successful completion of the sale to Evolution.
His Honour explained that the employer did not make it clear to the employee what would happen if the buyer did not retain him. However, his Honour concluded that the employer took the decision to terminate him if he was not retained by the buyer “well prior to early March 2020” because he was not awarded the long-term incentive compensation at the usual time.
Justice Fregeau decided that the employer did not tell the employee the truth – it did not need to provide him with any guarantees but could not mislead him. His Honour awarded the plaintiff moral or exemplary damages in the amount of $50,000.
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 Grosman Gale Fletcher Hopkins LLP. We have helped workplace parties with their most challenging employment-related matters for more than three decades. We assist employers in managing risk when seeking to terminate employees without cause. We also help employees secure all their entitlements in the event of termination.
We are one of Canada’s most recommended labour and employment law firms. If you need guidance with a workplace-related issue, contact us online or at 416.364.9599.
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