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“Unfair and Cruel” Dismissal of Employee Still Not “Bad Faith Discharge”

In the era of Wallace v. UGG, so-called “Wallace Damages” for bad faith in the manner of dismissal were very common.  If the employer was a prick in the manner in which it dismissed an employee, the period of reasonable notice would be extended by a month or more to compensate the employee for ‘bad faith discharge’.

When the Supreme Court of Canada revisited the Wallace rule in Honda v. Keays (2008), it decided that things had gone too far.  Almost every wrongful dismissal lawsuit was throwing in a claim for Wallace damages.  In Honda, the SCC put an end to the Wallace approach of extending the notice period to punish employers who fail to dismiss workers in a respectful manner.  It said that from now on, damages could still be awarded for bad faith in the manner of dismissal if the employer engages in conduct that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive”.  However, the conduct must be ‘egregious’, and must cause actual physical damage, such as mental distress, that could have been contemplated by the parties.  When such damage occurs, the damages should reflect the actual damage suffered, and not be assessed by simply bumping up the notice period.

Many cases that would have resulted in bad faith damages under Wallace are no longer successful under the Honda approach.  Consider a recent case called Evans v. Complex out of Ontario.

Facts – Evans v. Complex (2012, Ont. SCJ)

Evans was 52 years old, with 8.5 years service when she was dismissed without cause.  It appears from the ruling that the employer gave her the statutory minimum of 8 week’s notice.  The judge explained the circumstances of her termination as follows:

On May 5, 2005, the day before Wendy’s termination, a very unfortunate incident took place. Wendy required authorization for over-time work and further authorization to have a vendor access one of her systems. She needed that authorization from Tom MacKenzie, the defendant’s manager of operations and, from Larry Fretz whose position was at a similar level to that of MacKenzie. When she telephoned MacKenzie he advised her that Fretz was present in his office. Wendy then heard Tom MacKenzie advise Larry Fretz that the plaintiff was on the phone requesting authorization but “don’t spend too much time on this, Wendy’s getting canned tomorrow anyway.”

The comment of MacKenize was unprofessional, callous and careless. It was compounded by management when they did not deal with Wendy immediately and appropriately. When she confronted her superiors regarding the comment, she was not told the truth by either Tom MacKenzie or Tim Rodd, MacKenzie’s superior. She was allowed to continue working a further 9 hours overtime under the impression that she was not to be terminated the following day.

So, to summarize, Evans learned of her imminent dismissal by overhearing a comment that she was to be ‘canned tomorrow’, and then was lied to about whether that was in fact true.  The judge characterized the employer’s treatment as “at a minimum unfair and cruel’.   Evans presented evidence that she required medication for depression afterwards, though the judge noted that the cause of the depression was not made clear in evidence.

Decision

The court ruled that the conduct, while unprofessional, dishonest, callous, careless, unfair, and cruel, nevertheless fell below the threshold required for bad faith damages in Honda.  The judge wrote:

… while Wendy’s employers are certainly not to be commended for their conduct, their conduct does not appear to reach the level of misconduct contemplated in Gismondi or Pate. On the evidence presented, it is not open to this court to find that the misconduct of Complex through Tom MacKenzie and Tim Rodd caused or contributed to any depression on Wendy’s part. It is perfectly understandable that the fact of her termination caused Wendy to suffer considerable pain and distress over the actual loss of her job, but the Honda decision makes it clear that damages are not available for that kind of pain and distress.

The judge’s decision appears to be based on two findings:  (1) the conduct falls short of the Honda standard for bad faith conduct in the manner of dismissal; and (2) the medical evidence did not prove that the depression was a result of the cruel manner in which she was dismissed, as opposed to the fact of dismissal itself.  I noted when Honda came out that it would be very difficult for employees to prove that distinction, since the ‘manner of dismissal’ and the dismissal itself will almost always occur simultaneously.  Assigning harm to one event and not the other seems like an artificial exercise.

Questions for Consideration

1.    I think this is another case that would have resulted in Wallace damages, but does not result in Honda damages.  Whether you think that is a good thing or not for employment law is a matter of opinion and perspective.  Do you think an employer who acts with dishonesty and cruelty (to use the judges words) deserved to be punished in some way for that conduct?

2.    Remember that there is an implied term in every employment contract, including Evans’ contract, that the employer will treat the employee with respect, dignity, and decency.  Do you think that the employer violated that term in its behaviour the day before Evans was fired?  If it was a violation of that contract term, then should Evans be able to recover damages for that breach, separate from the damages for breach of the separate contract term requiring ‘reasonable notice’ of termination?  Why or why not?

3.   Once again, we seem to have an employer who gave the employee the ESA ‘minimum notice’ amount of 8 weeks until it is sued, at which point it comes to court and says, ok, ok, we admit we should have given the employee at least “6-8 month’s notice”.   The judge ordered 9 month’s notice, out of which the employee must now pay her legal fees, which will bring her take home from the wrongful dismissal win well below the 6-8 months’ pay the employer admits it should have given from the outset.  What do you think of employers who give employees the minimum ESA notice period when the contractual notice term required considerably more than that?  Should courts punish those employers, or is this just smart tactics by the employers, who know that most employees won’t ever sue to recover the contractual notice period?

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3 Responses to “Unfair and Cruel” Dismissal of Employee Still Not “Bad Faith Discharge”

  1. Dennis Buchanan Reply

    November 27, 2012 at 11:34 pm

    I blogged about this case last week, and I share your concerns: I agree that ultimately this decision is well in line with the bulk of the jurisprudence following Honda v. Keays, but I do find it deeply concerning that conduct a judge feels is appropriately called “cruel”, given the inherent power dynamics of the employment relationship, is not in any way worthy of sanction.

    Regarding the Brito v. Canac Kitchens analysis (i.e. that it is wrong to pay only the statutory minimums), though, I should note that it is *relatively* unusual to see an employer offering nothing in excess of the statutory minimums. (I have seen it, including by very large and well-known employers, but it’s the exception, not the rule.) Most employers want a Release, and I’ve very seldom seen employers asking for a Release without offering more than the stat minimums. (Again, I’ve seen it, but rarely.)

    So it isn’t usually about banking on employees not being willing to pursue their rights beyond the statutory minimums. (What is *far* more frequent is that the employer will make a low-ball offer, wisely suggesting that the employee should obtain appropriate professional advice, yet banking on the fact that the employee will think the offer is generous and just sign off on it.)

    In some cases, the employer is hoping that the employee will mitigate, but in most cases an employer just wants a full and final release in exchange for the payment in respect of common law damages.

    • Doorey Reply

      November 28, 2012 at 10:57 am

      Thanks Dennis. Here’s what I see a lot of: the employer acknowledges that common law ‘reasonable notice’ (i.e. the amount of notice required by the contract) would be in the range of 8-12 months, but rather than offer 8 months notice, the employer offers the employee 12 weeks notice (4 weeks above the statutory minimum) in exchange for a release. In that case, is the release enforceable? What new valuable consideration is given to the employee in that scenario? This a good question for getting employment law students to think about how the system works.

  2. Dennis Buchanan Reply

    November 28, 2012 at 12:42 pm

    True. I’d even say it’s the minority case where the initial offer is *that* far down the scale, but it’s not different in principle from the general practice. The extent to which its a matter of trying to pull a fast one versus just trying to leave extra bargaining room…varies from situation to situation.

    But – outside of extreme examples like Rubin v. Home Depot – setting aside releases is not an easy thing to do. Consideration won’t usually be the problem; particularly at the point of termination, there’s no vested entitlement to pay in lieu of common law notice. They’re common law damages, subject to the duty to mitigate. Take an employee in your scenario, who signs the Release for 12 weeks’ pay, then obtains a new job with equivalent remuneration the next day. The extra 4 weeks is a pure windfall, in that case, which never would have been obtained in Court.

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