A recent case from the Ontario Superior Court of Justice highlights that terminating employees requires careful planning, particularly where just cause is alleged. The case is Morison v Ergo-Industrial Seating Systems Inc., 2016 ONSC 6725 (CanLII).
The plaintiff was the company's regional manager, responsible for Eastern Ontario and Western Quebec, as well as manager for federal government sales. He was 58 years of age and had worked for the employer from 2004 until his termination in 2014 (about 10 years).
The “nature of the relationship” was in dispute from 2004 to 2006 as he was classified as an independent contractor not an employee. Ultimately, the judge found him to be an employee during this time despite the classification of the parties. In reaching this conclusion, the court considered the leading cases of McKee v. Reid’s Heritage Homes Ltd., 2009 ONCA 916 (CanLII), Belton v. Liberty Insurance Co. of Canada (2004), 2004 CanLII 6668 (ON CA) and Sagaz 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59 (CanLII).
The employee was terminated over the phone. He was offered 5 months of severance (including 1 month of working notice). It would seem that the employer alleged “just cause”. The employee argued that there was no basis for any allegation of just cause, that the employer acted in bad faith and that the employer took this position in order to “facilitate a more favourable settlement”. The employer paid the amounts owing under the Employment Standards Act, 2000 but, it seems, in June 2015.
The employer disputed this arguing that it genuinely believed that it had just cause to terminate Mr. Morrison based on certain performance concerns and that it did not act in bad faith.
The court awarded reasonable notice of 12 months, less statutory amounts paid and mitigation income earned.
Mr. Morrison also claimed aggravated and punitive damages.
The Court considered these claims and denied the claim for aggravated damages as the plaintiff failed to prove any actual damages. Aggravated damages are compensatory and the plaintiff was not able to prove any actual loss. The Court stated:
Here, the evidence of mental distress caused by the manner of dismissal cannot be dissociated from the usual anguish and stress resulting from having one’s employment terminated. I point out that I am not concerned with the lack of a medical report (on which time was spent during closing arguments), but rather with the lack of convincing evidence of mental distress on which I could properly assess damages resulting from the manner of dismissal. By way of example, some of the plaintiff’s evidence on this related to how he was in a fog when he found out by a friend that he would be dismissed and how this was a horrible day, with other parts of his evidence relating to his financial distress. Despite mentioning that the allegations of cause got his back up and caused him some upset, his evidence in that regard was extremely superficial and lacked particulars. The evidence is not at all convincing and is simply not sufficient to warrant any damages in this context, since normal distress and hurt feelings resulting from a dismissal are not compensable.
In terms of punitive damages, these are, unlike aggravated damages, which are compensatory, designed to punish. The Court relied on the Court of Appeal decision in Boucher v. Wal-Mart Canada Corp. 2014 ONCA 419 (CanLII) which set out three (3) requirements to be established by the plaintiff:
- That the defendant’s conduct is reprehensible, “malicious, oppressive and high-handed”, and “a marked departure from ordinary standards of decent behaviour”.
- That a punitive damages award, when added to any compensatory award, is rationally required to punish the defendant and to meet the objectives of retribution, deterrence, and denunciation.
- That the defendant committed an actionable wrong independent of the underlying claim for damages for breach of contract (in this case, something other than breach of the implied notice provision). A breach of the defendant’s duty of good faith and fair dealings would constitute an independent actionable wrong.
The court stated as follows:
I find the facts of this case particularly troubling. Not only did the defendant assert cause when there was no reasonable basis for such an assertion, the defendant delayed in providing the plaintiff his record of employment, and significantly delayed in paying amounts owing under the Employment Standards Act, 2000, until June 15, 2015. This had a significant financial impact on the plaintiff and the employer had knowledge of the plaintiff’s financial circumstances. Moreover, the allegations of cause, made with no reasonable basis, were made for tactical and financial gain considerations.
The court concluded that “an award of punitive damages is rationally required to punish the defendant and to meet the objectives of retribution, deterrence, and denunciation.”
In the circumstances, the court awarded the plaintiff $50,000 in punitive damages which it viewed as “proportionate and reasonable”.