Canada: The HR Space: Punitive Damages Awards In Wrongful Dismissals Being Aggravated?

Last Updated: April 6 2013
Article by David T. McDonald

The Supreme Court of Canada made it clear in its 2008 decision in Honda Canada v. Keays that punitive damages awards in wrongful dismissal cases are available only in exceptional circumstances. The employer's conduct in the course of termination must be proven to be harsh, vindictive, reprehensible, and malicious. Despite this high threshold, a number of recent trial decisions show how courts are becoming more open to providing plaintiff employees with awards of punitive damages. 

Higginson v. Babine Forest Products is a recent decision of the BC Supreme Court. In this case, a long service employee (34 years) was terminated for cause from his position as an electrical supervisor. He sued. With a mill closure pending, his lawyer suggested that this termination was part of a larger plan to eliminate long service employees and avoid the costs of severance.

Recognizing that the facts made his client somewhat sympathetic, plaintiff's counsel chose to elect a jury trial. Because it was a jury trial, there are no reasons for the decision. In the result, defendant's allegation of cause failed. The employee was awarded pay in lieu of notice equivalent to 24 months or about $286,000. Less $50,000 for failure to mitigate his damages by applying for alternate employment. But what is really surprising is the punitive damages awarded by the jury: $573,000 or 48 months' pay! 

The Company's appeal of the punitive damages award was ultimately settled. So we don't know the final outcome. However, this case reinforces that employers need to closely examine cause for termination allegations, particularly with long service employees. Especially when the cause allegations are related to poor, ongoing performance.

In another decision, also from the BC Supreme Court, Kelly v. Norsemont Mining Inc., the employee (who represented himself at a 33 day trial) won his case.  In addition to pay in lieu of notice, he was awarded punitive damages in the amount of $100,000. 

The reason for the punitive damages was the Court's finding that the company did not meet its implied obligation of good faith and fair dealing. First, the company had refused to pay the plaintiff his final month's salary after termination because he hadn't signed a release. Second, the company was overly aggressive in how it tried to retrieve what it felt was company property, by withholding the plaintiff's personal belongings. Third and most problematic for the company was the behaviour of one of its senior executives. He had threatened the plaintiff with expensive and time-consuming litigation (a threat which ultimately materialized). An additional factor was the defendant's unsuccessful allegation of incompetence. This made it more difficult for the terminated employee to find a job in his industry.

In Vernon v. British Columbia (Liquor Distribution Branch), the employee had worked at a liquor distribution branch for some 30 years, working up to the position of Senior Store Manager. She had never received a complaint against her. She had only received exemplary performance reviews. She had never been told that her management style was in any way unacceptable. Then, there was a complaint alleging that the employee bullied, harassed, and intimidated her subordinates. After an investigation, the employee was summarily dismissed.

The Court found that there was no just cause for dismissal. The investigation was found to be flawed. The final report contained numerous inaccuracies. The employee had not been given the opportunity to respond to the allegations. The investigators inaccurately indicated that the she had denied all allegations. The Court went on to find that while the employee's management style may have warranted some form of discipline, the employer did not have grounds to dismiss her without notice. She was awarded 18 months' salary in lieu of notice, plus $35,000 in aggravated damages. This was awarded because the employer did not act in good faith in the manner of dismissal. The Court also awarded $50,000 in punitive damages because the employer had required that the employee resign prior to providing her with a reference letter.  The Court found this conduct "reprehensible".

As we can see, while all of these cases have different facts, the common result is an employer being punished for what the court views as bad faith conduct in the course of and following termination. 

It is our view that these types of awards and decisions will continue to happen.  Employers need to factor them into account while striving for best practices in the difficult circumstances of terminating an employee.

These decisions, however, should only be applied in Québec with a measure of caution, notably due to the province's particular way of dealing with punitive damages, which can only be awarded where there is unlawful or intentional interference with any right or freedom recognized by the Charter of Human Rights and Freedoms (section 49).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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