A recent decision of the Ontario Superior Court[1] provides a vivid example of how an employer should not conduct a termination case.

The employee had been employed for 11 years, held the position of President and was earning roughly $300,000 annually at the time of termination. The trial judge awarded 19 months compensation.

The Award

The more significant part of the award was that the judge also ordered $25,000 for moral or aggravated damages for unfair conduct at the time of termination and the manner in which the lawsuit was defended, plus a further $100,000 for punitive damages. The latter award is particularly unusual as such damages are intended to punish the company for deliberate, malicious or reckless behaviour.

The Offensive Conduct

The case is factually grounded. Here are the facts which led to this award:

1. At the time of termination, the company advised the employee that should he sue, it would counterclaim for $1.7 million on the basis of fraud;
2. The company had testified at trial that in the past it had done the same to another employee;
3. The company stated at the time of termination that the employee should be aware of the significant cost of lawyers;
4. The defendant advised the opposing counsel and the court that it would call 25 witnesses, a number reduced to 5 just prior to trial. It called 3.
5. Although the company did not allege just cause at the time of termination, it did do so when it defended the case;
6. Even though it did counterclaim for $1.7 million, it offered no evidence on the issue of the counterclaim; and
7. After its own expert testified, it dropped its counterclaim from $1.7 million to $1. (one dollar)

The court rightly concluded that the company had no intent of proving the alleged counterclaim and did so to intimidate the plaintiff. To date, the costs award has not been set. Given the above findings, it will likely follow that substantial indemnity costs will be awarded, even if no offer was made. The trial took 11 days. The costs award will be very significant.

Hard to Imagine

One would expect that in this day and age, such tactics would never be considered. A reasonable and fair employer could have easily settled this case at the time of termination and avoided such incremental damage awards, trial costs for both sides and public embarrassment. The judge’s notice award of 19 months was also likely influenced by this unsavoury conduct of the employer.

Need for Advice or Ignoring It?

There may well be limits as to what impact legal advice may have upon an employer in this context. It is difficult to believe that the company took no advice prior to termination. It certainly had advice when it completed the defence and counterclaim.

Conduct of this nature puts the legal counsel in an awkward position. The law firm can either resign from the case or at the very least, ensure that it is recorded that such actions are taken against its advice.

It will be reassuring to the employee to see that he or she can be vindicated, but at what cost? These cases take a tremendous toll on the employee’s personal life. Perhaps the incremental damage award does not provide sufficient compensation?

Whether you are an employer or employee, get advice when facing a termination.

Employees should be aware of the potential power available through class action claims.

If you have questions about such issues, be you employer or employee, contact the offices of Toronto employment lawyers Grosman Gale Fletcher Hopkins. We regularly advise workplace parties on a wide range of legal workplace issues. Contact us online or by phone at 416 364 9599 to schedule a consultation.

[1] Ruston v Keddco