Canada: Asserting Cause Where No Reasonable Basis Costs Employer $50,000 In Punitive Damages:

Last Updated: December 12 2016
Article by Barry Fisher

In Morison v Ergo-Industrial Seating Systems Inc. ( 2016 ONSC 6725) Justice Rogers held that reasonable notice for a 58 year old Regional Sales Manager with 8 years service making $211,000 annually was 12 months.

But the Judge did not stop there. The judge was very concerned about the defendants' conduct and considered that in analyzing both the issue of aggravated damages and punitive damages.

This is what the Court said about aggravated damages :

40. It is clear that an employer can allege just cause as a ground for dismissal and that abandoning cause at any stage, in the course of the action, does not necessarily mean that such conduct should attract aggravated damages. Provided the employer had a reasonable basis on which it believed it could dismiss an employee for cause, a finding of bad faith will not automatically follow: see Mulvihill v. Ottawa (City), 2008 ONCA 201, 90 O.R. (3d) 285, at paras. 49, 55 .

41 However, in this case, the evidence is rather clear that the plaintiff was simply not a good fit with his new immediate superior (Exhibit 1, tab 19 being a convincing example). It is equally clear that this superior knew someone she respected who expressed interest in Mr. Morison's position. The defendant was interested in trying someone new who had what the defendant perceived was a more positive disposition towards the healthcare sector. The defendant was clearly entitled to these beliefs and to hire someone else. However, none of this constituted reasonable belief in just cause.

42. Considering all the evidence on this issue, I conclude that alleging cause was an integral part of the defendant's negotiation strategy. The defendant was counselled in September 2012 that it would not be able to establish cause. The defendant alluded to a possibility of alleging cause in its dismissal letter. The defendant then alleged cause in its defence and adopted a rather aggressive position while providing no convincing evidence at trial that could support its alleged reasonable belief in cause or that it was reasonably justified in initially adopting a position of just cause.

43. This is exactly the kind of conduct mentioned in Honda v. Keays as an example of conduct in dismissal that could result in aggravated damages. I find that the defendant did not act fairly or in good faith in the manner of dismissal of Mr. Morison as the defendant was not candid, reasonably honest, nor forthright with Mr. Morison. The defendant, by its allegations made with no reasonable basis in support thereof, attacked the reputation of Mr. Morison by making misrepresentations regarding the reasons for his dismissal for financial gain (i.e. seeking a better outcome in its negotiations with Mr. Morison). This is a classic example of bad faith.

However the Judge noted that to award monetary damages there had to be evidence of actual damages sustained. The Court commented as follows:

45. On this point, the evidence in this case is quite different from that in Middleton v. Highlands East (Municipality), 2013 ONSC 763, 8 M.P.L.R. (5th) 114, where the Court found, at para. 142, sufficient evidence of mental distress. Here, the evidence of mental distress caused by the manner of dismissal cannot be dissociated from the usual anguish and stress resulting from having one's employment terminated. I point out that I am not concerned with the lack of a medical report (on which time was spent during closing arguments), but rather with the lack of convincing evidence of mental distress on which I could properly assess damages resulting from the manner of dismissal. By way of example, some of the plaintiff's evidence on this related to how he was in a fog when he found out by a friend that he would be dismissed and how this was a horrible day, with other parts of his evidence relating to his financial distress. Despite mentioning that the allegations of cause got his back up and caused him some upset, his evidence in that regard was extremely superficial and lacked particulars. The evidence is not at all convincing and is simply not sufficient to warrant any damages in this context, since normal distress and hurt feelings resulting from a dismissal areensable. For these reasons, the facts relevant to damages in this case are quite different from those in cases such as Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419, 120 O.R. (3d) 481, and Strudwick v. Applied Consumer & Clinical Evaluations Inc., 2016 ONCA 520, and do not give rise to compensable damages.

46. As indicated in Canada (A.G.) v. Robitaille, 2011 FC 1218, at para. 38, the employee's testimony may be sufficient to establish such damages and the absence of medical evidence does not deny the damages suffered by the employee as long as there is evidence of such damages and evidence of a causal connection between the moral injury and the wrongful conduct.

However, there is no need to prove actual damages in order to award punitive damages. In the following strong language the Judge awarded punitive damages in the amount of $50,000:

52. In this case, the defendant committed an actionable wrong independent of the underlying claim for damages for breach of contract: the breach of its duty of good faith, as found above.

53. I find the facts of this case particularly troubling. Not only did the defendant assert cause when there was no reasonable basis for such an assertion, the defendant delayed in providing the plaintiff his record of employment, and significantly delayed in paying amounts owing under the Employment Standards Act, 2000, until June 15, 2015. This had a significant financial impact on the plaintiff and the employer had knowledge of the plaintiff's financial circumstances. Moreover, the allegations of cause, made with no reasonable basis, were made for tactical and financial gain considerations.

54. I had the advantage of listening to the evidence and observing the witnesses and I find such conduct to be reprehensible. It exceeds what might be considered as ill-advised. The allegations of cause, made with no reasonable basis, and the significantly delayed payment of statutory amounts were intentional and financially impacted the plaintiff. These actions of the defendant were designed to financially benefit the defendant and the defendant had knowledge of the plaintiff's precarious financial position. Such a conduct is "malicious, oppressive and high-handed" and "a marked departure from ordinary standards of decent behaviour". A similar finding was made in Kelly v. Norsemont Mining Inc., 2013 BCSC 147, at para. 115.

55. Since I have awarded no amount for aggravated damages, the pitfalls of double-compensation or double-punishment mentioned in Honda v. Keays is avoided if I award punitive damages.

56 .Considering the facts of this case, I find that an award of punitive damages is rationally required to punish the defendant and to meet the objectives of retribution, deterrence, and denunciation. Employers cannot be allowed to behave in such a fashion without a clear message being sent by this Court that this is not acceptable.

The facts that justified an award of aggravated damages were virtually the same as those relied upon for punitive damages, which reinforces my belief that they are one and the same.

In order to get over the hurdle that the Plaintiff was not committed to a mental health facility as a result of the defendants' actions, the Court simply recast the defendants' behavior in the language of punitive damages and came to the same result.

To somewhat paraphrase Michelle Obama, " When the Employer goes low, the Court will go high."

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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