The unanimous Alberta Court of Appeal recently overturned a trial judgment that awarded a terminated employee an additional $1.6 million in damages, beyond the 1 year reasonable notice awarded. The Court put the issue succinctly:
In addition to damages for one year’s notice period, can a trial judge award significant damages for the mere fact of an employee’s dismissal, or for the stigma that that dismissal brings? Or for the employer thereafter competing with the ex-employee for the clients, before the ex-employee has got a new job?
The $1.6 million in damages, according to the Court of Appeal was for "his reputation and book of business or goodwill, which would not be compensated for by an award of damages in lieu of notice".
If you're an employment lawyer or HR practitioner, this is a must read case as it provides some of the most clear and direct judicial commentary on non-unionized employee dismissals and damages that I've seen in a long time. I will set out some of the quotes that I found interesting/helpful, but read the case in its entirety.
As examples of some of the comments from the Court are:
- In employment law, "the common terminology is sloppy, even misleading. We speak of “wrongful dismissal”, or damages for that. But there is no such thing there as wrongful dismissal (apart from federal legislation). Under such a contract, either side may validly end the contract at any time. The employee neither has tenure, nor is indentured. The employee and the employer both have the right to end the contract, and ending it is not a breach of contract, nor a tort"
- "And we speak of “reasonable notice”. But all that need be reasonable is the length of the notice. The dismissal (or resignation) need not be reasonable; it may be whimsical, or inexplicable"
- "...it is implied in the contract that the party terminating the contract without cause will give notice of reasonable length. All that need be reasonable is the amount of time which it affords. So an employer wishing to dismiss an employee without cause must either give long enough advance notice, or pay salary corresponding to that period of time"
- "No employee has a right to work after dismissal. Every employee can be dismissed at once with no notice and without any grounds. That will not be a breach of the employment contract, provided that the employer gives pay in lieu of notice."
- "... in ordinary circumstances, damages because of dismissal with neither reasonable notice nor pay in lieu cannot exceed what pay in lieu would have been."
- "Indeed the damages will be less, if the dismissed ex-employee mitigated his or her loss (or should have) by getting a new job. There is but one exception to that rule, which the Supreme Court of Canada has now clarified in Keays v. Honda Can."
The Court then went on to discuss Keays:
- "The Honda case says that when dismissing an employee, an employer has a duty not to use methods which are unduly unfair or insensitive (paras. 57-60). I stress that the unfairness or insensitivity must be in the methods used, not in the mere fact of dismissal." [Emphasis added]
- "Mere sloppy conduct by the employer does not suffice for such extra damages; it takes something akin to intent, malice, or blatant disregard for the employee"
- "If Honda damages were triggered by the mere fact of dismissal, or it were very difficult to dismiss anyone without triggering them, then they would be an automatic surcharge. The Supreme Court of Canada shows in Honda that that is not the law."
- "Honda damages are limited to compensating loss, and are not punitive"
- "It is notorious that what is just cause to dismiss in a given case is often very difficult to say. It is hard to predict trial results. .... In few cases can any solicitor advise an employer that it has ironclad grounds for dismissing a certain employee without notice."
- "What if courts imposed heavy and almost automatic penalties on any defendant who alleged cause in good faith, but then failed to convince a judge or jury that it was bad enough? That would be most unfair to employers. It would deter alleging cause, so that employers with cause would instead have to give pay in lieu of notice (to avoid a second set of damages). This would be the slacker’s charter."
- "Economic loss from being dismissed does not fall within Honda damages"
- ".... when such an employee is dismissed, it is probable that some of the employee’s future earning potential will disappear. That disappearance may be temporary, or permanent. Either way, for quite some time after the notice period, the salary from the new employer is likely to be smaller. If that continues beyond the notice period, that discrepancy is not compensated."
The Court then went on to consider the arguments, conducted further analysis, and allowed the appeal as, in the Court's view, the $1.6 million award had no foundation in law, lacked a factual basis, and appeared "to contain an element of double counting for the lack of reasonable notice".
While a few of the Court's comments are generalized and sweeping in scope, they do advance the dialogue of damages in employment law and are, as I said, a must read.
