Canadian Law of Work Forum (CLWF)
  • Home
  • About
    • Professor David Doorey
  • Guest Contributors
  • Useful Links
    • Archive
  • Submissions
  • Student Blog Initiative
  • Home
  • About
    • Professor David Doorey
  • Guest Contributors
  • Useful Links
    • Archive
  • Submissions
  • Student Blog Initiative
Canadian Law of Work Forum (CLWF)
Law of Work Archive

Employee Receives $1.6 Million in "Keays Damages"!

by David Doorey December 7, 2009
written by David Doorey December 7, 2009

Here’s a question for the employment law community:

Is it now bad faith in the manner of dismissal for an employer to make an honest, but ultimately incorrect conclusion that there is cause for dismissal?

I have been left wondering that question after my quick read of a recent case from Alberta called Soost v. Merrill Lynch.
Background:  From Wallace Damages to Keays Damages
Honda v. Keays was generally received favorably by employers because the Supreme Court put an end to “Wallace Damages”: the practice wherein courts would extend the notice period to account for bad faith by an employer in the manner of dismissal.  Courts had been going nuts with that new power, ordering Wallace damages in case after case. In Honda, the Court ruled that bad faith damages ’will be awarded not through an arbitrary extension of the notice period, but through an award that reflects the actual damages‘.  The Court ruled that ‘there is no reason to retain the distinction between ‘true aggravated damages’ resulting from a separate cause of action and moral damages resulting from conduct in the manner of termination’. (para. 59) That is because, now, damages are available whenever an employer engages in bad faith conduct in the manner of dismissal that causes ‘foreseeable damage’ to the employee.
I argued back in 2005 in a paper in the Queens Law Journal (available here) that one problem with the Wallace extended notice damages approach was that, although it was pretty easy for employees to recover, it also will often significantly undervalue the true loss to the employee flowing from the bad faith.  That is because the notice period–even including the extended notice permitted by Wallace–is arbitrarily capped by the courts at about 12 months for non-managerial and 24 months of senior management types (See Cronk v. Canadian General Insurance)   Wallace damages were not intended to, and did not, compensate the employee for the actual loss suffered.
The Honda case corrected that problem by requiring employees to prove damages flowing from bad faith in the manner of dismissal.  I noted at the time that this is a double-edged sword for both parties:  it will make it harder for employees to recover damages for bad faith dismissal, but could also allow for much larger damage awards in those cases where employees can prove actual harm.
Soost v. Merrill Lynch
Now comes Soost v. Merrill Lynch. Soost was a highly paid financial advisor who was dismissed for cause by Merrill Lynch, which alleged a variety of grounds, but mostly asserted Soost engaged in practices that violated the company’s policies.  The Court ruled that there was not sufficient grounds to dismiss Soost for cause.  Therefore, the Court turned to the question of damages.  It ruled that 12 months notice was appropriate, based on the fact that Soost had been recruited from a competitor and had been employed ‘in the industry’ for 7 years, even though he had only worked for Merrill for 3 years.
The court then ruled that Merrill had engaged in bad faith in the manner of dismissal by acting ‘unfairly’ and ‘insensitively’.    It awarded Soost $1.6 million dollars for bad faith dismissal!!   The damages were recoverable because it was foreseeable that dismissing Soost for cause would  have a “significant detrimental affect on his reputation in the industry”.

To terminate for cause someone in Soost’s position in the financial industry would foreseeably have the effect of mortally wounding that person’s ability to successfully carry on as an investment advisor.  Merrill Lynch knew or ought to have known that.  There was no good reason why, once Merrill Lynch had decided to let Soost go, it could not have done so with some minimal notice or allowed Soost to resign of his own accord.

I think the judge is correct about that foreseeability of the damages that flow from dismissing an employee in this sort of position for cause–it will no doubt cast a shadow over the person’s ability to work in the industry in the future.
However, you don’t get to the question of damages for bad faith  dismissal until you have first found bad faith.  Here, I must confess to having some confusion about what the employer did that constituted bad faith in the manner of dismissal.  What was the bad faith?
Well,  the court notes that the employer should have given Soost some notice of the problem and a date by which he was to to fix the problem (para 116).   Does that mean that it is bad faith in the manner of dismissal to fail to give an employee a warning of performance problems and chance to fix them before dismissing the employee and alleging cause? Do you think a duty to warn an employee before firing them for cause should be implied through the mechanism of bad faith dismissal damages?
Was the bad faith not giving Soost notice, or a right to resign?  That would be interesting.   The reason the employer didn’t give Soost notice or a ‘right to resign’ is because it believed Soost had committed a significant breach of the contract and destroyed the necessary trust.  It turns out that the employer was wrong about that and therefore committed a wrongful dismissal.   But this wasn’t like Wallace, where the employer asserted cause when it knew there wasn’t any. Here the court accepts that Merrill Lynch actually believed it had cause to summarily dismiss Soost (see para. 204), and the judge confesses to having some difficulty deciding whether or not there was cause.
Which brings me back to my original question:

Is it now bad faith in the manner of dismissal for an employer to make an honest, but ultimately incorrect conclusion that there is cause for dismissal?

Wouldn’t surprise me if we have not heard the last of this case.  Anyone know whether an appeal is being filed?

3 comments
0
FacebookTwitterLinkedinEmail
David Doorey

Professor Doorey is an Associate Professor of Work Law and Industrial Relations at York University. He is the Director of the School of HRM at York and Director of Osgoode Hall Law School’s executive LLM Program in Labour and Employment Law and on the Advisory Board of the Osgoode Certificate program in Labour Law. He is a Senior Research Associate at Harvard Law School’s Labor and Worklife Program and a member of the International Advisory Committee on Harvard University’s Clean Slate Project, which is re-imaging labor law for the 21st century

Leave a Comment Cancel Reply

Save my name, email, and website in this browser for the next time I comment.

previous post
U of T Conference on Right to Strike
next post
Taller, Skinnier Women Earn More…Is that wrong?

You may also like

A Cross Country Update on the Card-Check versus...

October 3, 2018

A Successful Strike Vote is All That Stands...

September 16, 2018

Unifor Posts Photos of Replacement Workers as Gander...

September 10, 2018

A Wrongful Dismissal Case and the Absence of...

August 29, 2018

China Said to Quickly Withdraw Approval for New...

August 27, 2018

The Latest Hot E-Commerce Idea in China: The...

August 27, 2018

The Trump Administration Just Did Something Unambiguously Good...

August 27, 2018

Unstable Situations Require Police In Riot Gear Face...

August 27, 2018

Trump’s War on the Justice System Threatens to...

August 27, 2018

Putin Invites Trump to Moscow for Second Meeting...

August 27, 2018

Subscribe via Email

Enter your email address to subscribe and receive notifications of new posts by email.

Join 219 other subscribers

Follow Us On Social Media

Twitter

Latest Tweets

CLWFFollow

CLWF
Retweet on TwitterCLWF Retweeted
RSandillRicha Sandill@RSandill·
24 Feb

@SCLSclinic and I were so fortunate to represent this client last year. I am thrilled that this decision brings more clarity for family status accommodations rights amidst a pandemic that has tested parents, caregivers, and families like never before. https://twitter.com/CanLawWorkForum/status/1364605259071561730

CLWF@CanLawWorkForum

New from @RSandill (counsel for applicant), discussing important new "family status" discrimination decision from OHRT:

"Kovintharajah v. Paragon Linen & Laundry: When Failure to Accommodate Child Care Needs is “Family Status” Discrimination"

https://lawofwork.ca/13360-2/

Reply on Twitter 1364627677785821185Retweet on Twitter 13646276777858211851Like on Twitter 13646276777858211853Twitter 1364627677785821185
Retweet on TwitterCLWF Retweeted
TheLawofWorkDavid J. Doorey@TheLawofWork·
24 Feb

Here's my latest in @jacobinmag.

If Ontario's labor laws applied in Alabama, the Amazon vote would have been held months ago so workers could get back to their jobs. Instead, the NLRA permits Amazon to conduct a months' long onslaught of anti-union propaganda. https://twitter.com/jacobinmag/status/1364613560425275392

Jacobin@jacobinmag

Amazon workers in Alabama are voting on whether to unionize, but the company is bombarding them with anti-union propaganda. In Canada, by contrast, votes are held quickly, making it harder for companies to stack the deck — a model that can work in the US. http://jacobinmag.com/2021/02/amazon-alabama-canada-labor-law-union-vote

Reply on Twitter 1364623976174092316Retweet on Twitter 13646239761740923168Like on Twitter 136462397617409231613Twitter 1364623976174092316
CanLawWorkForumCLWF@CanLawWorkForum·
24 Feb

New from @RSandill (counsel for applicant), discussing important new "family status" discrimination decision from OHRT:

"Kovintharajah v. Paragon Linen & Laundry: When Failure to Accommodate Child Care Needs is “Family Status” Discrimination"

https://lawofwork.ca/13360-2/

Reply on Twitter 1364605259071561730Retweet on Twitter 13646052590715617304Like on Twitter 13646052590715617304Twitter 1364605259071561730
Load More...

Categories

  • Alberta
  • Artificial Intelligence
  • Australia
  • British Columbia
  • Charter of Rights and Freedoms
  • Childcare
  • Class Action
  • Collective Bargaining
  • Common Law of Employment
  • Comparative Work Law
  • competition law
  • construction
  • COVID-19
  • Diversity
  • Employee Classification
  • Employment Insurance
  • Employment Regulation
  • Europe
  • Financial Industry
  • Fissured Work
  • Freedom of Association
  • frustration of contract
  • Gig Work
  • Health and Safety
  • Health Care
  • Human Rights
  • Immigration
  • Interest Arbitration
  • International Law
  • Labour Arbitration
  • Labour Economics
  • Law of Work Archive
  • Legal Profession
  • Manitoba
  • Migrant Workers
  • Minimum Wage
  • Nova Scotia
  • OLRB
  • Ontario
  • Pension Bankruptcy
  • Privacy
  • Public Sector
  • Quebec
  • Real Life Pleadings
  • Saskatchewan
  • Scholarship
  • Strikes and Lockouts
  • Student Post
  • Supreme Court of Canada
  • technology
  • Transnational Law
  • Uncategorized
  • Unions and Collective Bargaining
  • United States
  • Videos
  • Women and Work
  • Wrongful Dismissal
  • Home
  • About
  • Guest Contributors
Menu
  • Home
  • About
  • Guest Contributors
  • Legal Scholarship
  • Useful Links
  • Archive
Menu
  • Legal Scholarship
  • Useful Links
  • Archive

2020. Canadian Law of Work Forum. All Rights Reserved.