Ontario: Dismissed Employees Must Prove Basis for Damages

By Amanda Boyce Mar 2, 2017

Canadian courts have the power to award former employees damages based on the manner in which they were terminated. Damages for the manner of dismissal may be available where employers engage in serious instances of conduct that is in bad faith, untruthful, misleading or unduly insensitive. For example, lying about the reasons for firing an employee or attacking his or her reputation at the time of dismissal could attract damages even if the termination was not otherwise "wrongful."

The Ontario Superior Court confirmed that for a court to award such damages, there must be sufficient evidence that the employer's conduct was egregious.

In the case at issue, the plaintiff had been employed for a few months when it came to the employer's attention that he had made inappropriate comments about a co-worker and had failed to complete his job duties. The employee was suspended with pay pending the results of an investigation and then was terminated.

The employer gave the employee a letter indicating that it believed it had cause to terminate his employment. Nevertheless, the employer indicated that it would terminate him without cause and pay him termination pay in accordance with his employment contract. The employer also offered to pay him two weeks of additional notice payments and forgive a small loan in exchange for a release from liability—an offer that the discharged employee refused.

He sued, claiming damages for wrongful dismissal, mental distress, punitive damages, intentional infliction of mental suffering and aggravated damages. The deputy judge at Small Claims Court rejected the wrongful dismissal claim. The employment contract had a clause that prevented his entitlement to common law notice, and the employer had paid him his contractual entitlements.

The deputy judge also rejected most of the plaintiff's other claims but awarded the former employee $5,000 as general damages for the manner in which he had been terminated.

The Ontario Superior Court reviewed the deputy judge's findings and found that there were no findings of fact that could support the award of general damages.

In rejecting all of the plaintiff's other claims, the deputy judge had found no evidence that the former employee had been bullied or harassed or that he had experienced mental suffering as a result of his termination. The plaintiff did not provide any medical evidence to show justification for mental distress damages. The evidence indicated that the manner of termination had been respectful and that the employer had not opposed the former employee's unemployment insurance claim.

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The court affirmed that the employer was entitled to allege that it had cause to terminate the employee as long as it had a reasonable basis for having that belief. The fact that it did not ultimately fire the employee for cause was not a basis to award damages for the manner of dismissal. Further, the court noted that the deputy judge had not found that the employer's offer to provide the employee with two additional weeks of notice in exchange for a release was untruthful, misleading or unduly insensitive.

Parenthetically, it is unclear from the decision how something that was clearly an offer to settle became the subject of litigation. Employers that elect to make a severance offer in the body of the termination letter should take care to expressly state that the offer is "without prejudice."

Walker v. Hulse, Playfair and McGarry, Ont. Super. Ct., 2017 ONSC 358 (CAN LII, Jan. 17, 2017).

Professional Pointer: This case illustrates that employers will not be deemed to have acted in bad faith solely by virtue of taking prudent steps to avoid unnecessary litigation. Employers are entitled to allege just cause for termination if they have a reasonable basis to do so, even if they do not ultimately pursue the allegation. Litigation is time-consuming and costly and taking steps to avoid it, such as by offering compensation in exchange for a release from liability, will not give rise to general damages being awarded without evidence that something about the employer's conduct was unduly insensitive or dishonest.

Amanda Boyce is an attorney with Stringer LLP, the Worklaw® Network member firm in Toronto.

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