The Ontario Court of Appeal issued an interesting decision a few weeks ago dealing with damages in wrongful dismissal cases. In McNevan v. Americredit, the employee had been fired suddenly, with no warning at all, after only 13 months of work. According to trial judge, his work had been competent if not very good. The employer refused to provide McNevan with an explanation for the dismissal and did not point to any deficiency in his work, although it told the court cryptically that it just thought McNevan lacked a skill set necessary to do the job. The employer offered 3 month’s notice, which McNevan refused. He then filed a wrongful dismissal action.
The trial judge ordered 1 year’s salary in lieu of notice, comprised of: (1) 6 months’ notice (which, oddly, included an “extended Bardol” period owing to the fact that McNevan would have expected the job to be longer term, and that the company had a culture of openness which would have caused McNevan to expect some warning of a problem); (2) 3 months ‘extended’ Wallace damages for failing to warn McNevan that there was a problem and for requiring him to sign a release as a condition of receiving his 3 months’ notice; and (3) an additional 3 months extended Wallace notice for a litany of unpleasantries occuring after the dismissal.
The Court of Appeal upheld the 6 month notice award, while noting though that the judge had erred in applying an “extended Bardal” test. I think that was the right call. The problem in the trial judge’s ruling was more one of semantics than legal substance. Courts have always considered things like, whether the hiring situation was one that would lead an employee to believe that the job was long-term. Six months notice was reasonable here given the senior position of the employee.
The Court’s treatment of the damages for bad faith in the manner of dismissal was interesting. The majority quashed the entire 6 month extension on the simple basis that the employer had not committed bad faith at all. The clear inference is that an employer is not required to provide any warning to an employee of their impending termination, at least where the employer does not intend to allege “cause”.
The Court’s decision on this point is questionable, in my opinion, at least in regards to the particular facts of this case. Here’s why. The facts indicated that this employer boasted an open culture, promoting open communication and information-sharing. We have seen this sort of corporate culture before in Ontario, at Wal-Mart. In the (infamous) Wal-Mart Canada decision of the OLRB (upheld on review), the fact that Wal-Mart promoted an open environment of information sharing was a key fact that led the OLRB to rule that a sudden case of corporate larygitis–a refusal to answer the question of whether it would close the store if the employees voted for a union–would have sent a message to these employees that the employer might fire them all if they voted for the union.
In other words, employers who develop a culture of openness and dialogue raise expectations in their employees, including the expectation that problems will be discussed openly before major decisions are made that affect them. The trial judge recognized this, and found that in the particular culture of this workplace, McNevan would have anticipated some warning that the employer perceived there to be a problem. But the Court of Appeal said that the corporate culture was irrelevant.
I disagree. I think it is relevant in two ways. Firstly, it creates a strong argument that it was an implied term of McNevan’s contract that the employer would discuss with him any serious performance problems and give him a chance to address them. The employer here would have breached that term.
Secondly, the culture is relevant to the Honda v. Keays approach to damages for bad faith in the manner of dismissal. Keays ruled that such damages are available when:
(1) the mental distress is beyond the normal level you would expect when someone is fired (the judge found this to be the case as a fact); and
(2) it was within the “reasonable contemplation of the parties when the contract was formed” that a breach of the contract in certain circumstances would cause the employee mental distress.
If an employer prides itself on a culture of open dialogue and communication, then it is reasonable to assume that new recruits would expect to be warned of performance issues before being suddenly dismissed. Indeed, these so-called “open dialogue” companies often use this culture as a recruitment tool, to attract like-minded individuals. In that environment, it is reasonable to assume that it would be in the contemplation of the parties that a sudden dismissal for performance-related issues with absolutely no warning would come as a particular shock, which could easily cause the employee “mental distress”.
From a policy perspective, we might ask too what is gained by permitting an employer to suddenly dismiss an employee for performance-related reasons without any notice whatever or any chance to address the employer’s concerns. Certainly this is not permitted in a unionized environment, so why should the law encourage this result in a non-union workplace? The Supreme Court has already noted that the law should recognize that employees are particularly vulnerable in the employment relationship and that being dismissed is a traumatic event that can damage self-esteem and self-worth. This is why the Court encouraged “progressive discipline” in McKinley (para. 52-55) in the case of discipline for cause.
But then again, that’s just me. Any thoughts on this case are, as always, welcome. See, by the way, the very thorough review of this case by Ryan Edmonds at Osgoode’s Labour & Employment Law Society Blog.