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Tears Are Not Enough: Court of Appeal Tosses Aggravated Damages Award

October 28 2018

A recent British Columbia Court of Appeal decision reminds us that balling your eyes out when you are fired is not “evidence” of psychological harm resulting from the manner of dismissal in Canadian employment law.  Cottrill v. Utopia Day Spas and Salons also considers some other interesting contract law issues that will be of interest to employment law students using my Law of Work text.

The trial judgment from the B.C. Supreme Court is here, and the Court of Appeal decision decided last week is here.

Overview

The employee (EE) was terminated for cause in June 2015 after 11 years’ service.   The employer (ER) alleged poor performance and a failure to improve during a contractthree month period after she had been warned.   As employment law students know well, it is very difficult for an employer to make out a case of summary dismissal without cause based on poor performance alone.  In this case, the trial judge found that the employee’s performance did improve since she’d be warned and that the employer’s vague accusations that the EE was complacent and had a poor attitude did not rise to the “serious or gross incompetence”.  There is a lengthy discussion of the test of summary dismissal for poor performance in the trial decision (paragraphs 55-97).  Therefore, there was no cause for summary dismissal and the employer committed a wrongful dismissal for not providing the EE with notice of termination.

Notice of Termination: Common Law or ESA?

The next question was how much notice was required.  There were some interesting little issues that arose on this point.

The ER made two arguments why the common law presumption of reasonable notice had been rebutted.  Firstly, it argued that it had given notice when it provided the EE with a letter telling her she had 3 months to improve or she would be fired.   The Court rejected that argument on the basis that the letter did not clearly and unequivocally state that the EE would be terminated on a specific day, but rather stated that she may be fired if she did not improve or if she had two successful months.  A notice of termination must be specific and unequivocal.

Secondly, the ER argued that one or both contracts that the employee had signed limited notice to that required in the B.C. Employment Standards Act (which was 8 weeks’ notice).  The parties had a phone conversation in which the EE was told she was “hired” and that she was to come into work for an orientation.  On the first day of work in 2004, before she performed any services for the ER, the EE was given and signed a contract in 2004.  It included the following termination clause:

8. The Employer may terminate the Employment of the Employee without cause or notice in accordance of the Employment Standards Act of British Columbia …

In 2014, the ER told the EE to sign a new contract and informed her that there was no change to the terms and conditions of employment as a result of the revision.  However the 2014 contract did alter the termination clause slightly.  The new clause read:

8.1 The Employer may terminate the Employment of the Employee without notice or pay in lieu of notice in the following manner in the following circumstances:

(a) At any time, for cause;

(b) At any time, for notice in writing or pay in lieu or notice, said notice to be in accordance with the notice requirements provided in the Act, as amended from time to time.

The parties made a number of arguments on the notice issue.  The argued that the parties had entered into an oral contract during the phone conversation before she started work that required implied “reasonable notice of termination” and therefore the 2004 written contract, which limited notice to ESA minimums, constituted an amendment to the verbal contract for which the EE did not receive any new consideration.   Readers of my Law of Work text will recognize this argument.  It was essentially the argument made successfully by the EE in Rejdak v. Fight Network, considered in Chapter 7.

However, the Court in this case ruled that no contract was made in the phone conservation because, unlike in Rejdak, there were no actual terms of employment discussed.  The EE had just been told only that she was hired and that she should report for orientation.  She signed the 2004 contract before she started work and therefore that was the contract.

The ER argued that the termination clauses in both the 2004 and 2014 contracts were binding and clearly ousted the common law implied requirement to provide “reasonable notice” of termination (which would be considerably longer than the 8 weeks’ required by the ESA).   The Court agreed that the 2004 contract term was binding.  It clearly expressed an intention to require only those amounts required by the ESA and not “common law reasonable notice”.   Therefore, the ESA amounts applied which entitled the EE to 8 weeks’ pay in lieu of notice.  The Court found that the 2014 contract was unenforceable for lack of new consideration when it was signed.

Aggravated Damages: The Court of Appeal Weighs In

The trial judge order an additional $15,000 for aggravated damages arising from the manner of dismissal (Honda Damages …   See Chapter  16 Damages in Wrongful Dismissal Lawsuits).   This finding was based on the fact that the employer had:

-  issued her with a performance warning although there were no recent incidents noted in her file about performance.

-  held the EE to new standards not before applied to her and then responded to deficiencies in a “disproportionate manner by terminating her employment”

-  told the EE if she improved she would not be fired and then when she improved they still fired her.

The judge found that this behaviour amounted to bad faith in the manner of dismissal.  She found that the “events clearly had a profound effect on the plaintiff” and caused her “emotional distress …well beyond the distress from the fact of dismissal.

The employer appealed only the order to pay aggravated damages.  The B.C. Court of Appeal overruled the trial judge on this point.  The Court emphasized “unfairness” in the manner of dismissal alone does not ground an aggravated damages award.  There must be evidence of a psychological disturbance that rises above the the normal level of upset, anxiety, agitation, and disgust of being terminated:

B.C. Court of Appeal:

In this case… there was no evidence from the plaintiff or from family members, friends or third parties concerning the impact of the termination on Ms. Cottrill and her mental state. Although not required, there was no expert evidence, medical or otherwise. The only evidence of mental distress is that Ms. Cottrill cried during the March meeting, following which she had to go home early because she was so upset, and that at the June meeting, she went numb and could not take anything in. The evidence of Ms. Cottrill’s reactions at the two meetings at its highest establishes a transient upset. It falls well short of the legal standard that requires a serious and prolonged disruption that transcends ordinary emotional upset or distress.

Questions for Discussion

1.  Why was the EE arguing that the two contracts she signed were unenforceable?

2.  Explain the EE’s argument about lack of consideration and how the court distinguished the Rejdak decision found in the Law of Work textbook.

3.  What kind of evidence would have supported the EE’s claim for aggravated damages?

4.  More advanced question for Ontario employment law nerds:  Ignoring the consideration issue, would the language in article 8.1 of the 2014 (see above) contract have been ruled enforceable if the contract were governed by Ontario law?  If not, what argument would you have made on behalf of the EE (assuming Ontario law applied)?

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