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No evidence? No aggravated damages – Employees must prove basis for damages based on manner of dismissal

The Ontario Superior Court recently confirmed that for a court to award damages based on the manner in which an employee is dismissed, there must be sufficient evidence to that the employer’s conduct was egregious.

The Facts

Walker v Hulse, Playfair and McGarry was an appeal from a Small Claims Court judgment. The employee 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 was terminated thereafter.

The employer gave him a letter indicating that it believed it had cause to terminate his employment. Nevertheless, it 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, which offer the employee refused.

The employee claimed 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 which ousted his entitlement to common law notice, and the employer had paid him his contractual entitlements.

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

The Appeal

The 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 employee’s other claims, the deputy judge had found no evidence that the employee had been bullied or harassed or that the employee had experienced mental suffering as a result of his termination. The employee did not provide any medical evidence to establish mental distress damages. The evidence indicated that the manner of termination had been respectful, and that the employer had not opposed the employee’s unemployment insurance claim.

The Court affirmed that the employer was entitled to allege that it had cause to terminate the employee so 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 which 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”.

The Takeaway

Employers should of course avoid high-handed, harsh, and dishonest conduct when dismissing employees. However, 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 where 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 offering compensation in exchange for a release from liability, will not give rise to general damages without evidence that something about the employer’s conduct was unduly insensitive or dishonest.

At the 18th annual Ontario Employment Law Conference, on June 20, 2017, presented by Stringer LLP and First Reference Inc., lawyers from Stringer LLP will speak on the latest developments in employment and HR law. Join us!

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