Canada: BC Court Of Appeal Overturns Trial Judge's Aggravating Aggravated Damages Award

Last Updated: August 2 2017
Article by Michael MacLellan

We can virtually guarantee you that a plaintiff's wrongful dismissal claim WILL allege that the employee is entitled to aggravated damages.  That is not surprising.  What is surprising is when a Court actually awards aggravated damages, as was initially the case in Lau v. Royal Bank of Canada, 2017 BCCA 253.  Fortunately, in a recent decision issued by British Columbia's Court of Appeal, the trial judge's decision was overturned, and the state of the world once again resembled normal.

Marco Lau was employed by RBC as a customer service representative starting in 2007.  He became an account manager in 2010, and in 2011 became sponsored by RBC to sell mutual funds, making him subject to certain compliance rules.  In early 2012 a client complained to RBC about Mr. Lau, and it was determined by the bank's investigation services that he was tracking sales incorrectly.  Further steps were taken by the employer, who ultimately decided to terminate Mr. Lau for just cause, at least in part due to "falsification of bank records and failing to tell the truth when questioned".  Upon termination the employer offered Mr. Lau the services of an employee assistance program, including career counselling, which he declined.

The trial judge decided on the basis of the evidence before her that the bank did not have just cause to terminate Mr. Lau's employment, and awarded him wrongful dismissal damages equal to nine months' pay, or $31,125.00.  The trial judge then additionally awarded Mr. Lau $30,000.00 in aggravated damages based on her findings of the manner of dismissal.

In cases such as the Supreme Court of Canada's decision in Wallace v. United Grain Growers Limited, [1997] 3 S.C.R. 701, courts have said that:

... in the course of dismissal employers ought to be candid, reasonable, honest and forthright with their employees and should refrain from engaging in conduct that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly sensitive.

The Court of Appeal in the instant case gave examples of cases where aggravated damages would be appropriate, including attaching the employee's reputation by declarations made at the time of dismissal, misrepresenting the reasons for dismissal, or dismissal that is intended to deprive the employee of a pension benefit of other right.

Further, the Court of Appeal reviewed the principle that an employee is not entitled to be compensated for the regular hurt feelings that accompany a termination of their employment.  To get these exceptional damages, an employee would have to show that they suffered some additional injury beyond the normal distress associated with dismissal, and that the injury was caused by the employer's manner of dismissal of associated acts.

In this case, the trial judge determined that RBC's investigation into Mr. Lau was flawed, and then went on to make some disconcerting rulings, including: "I could not help put gain the impression from the slow, quiet, and almost monotone manner in which he testified, that he is depressed", and "I do not need medical evidence to prove that a false accusation of failing to tell the truth which is published can lead to mental distress".  It is worth noting that Mr. Lau did not testify that he suffered from depression or mental distress, he did not present any medical evidence, and the trial judge was not a clinical psychologist.

Mercifully, if not obviously, the Court of Appeal overturned the trial judge's decision on the basis of aggravated damages.  It held that Mr. Lau failed to establish that he had suffered any injuries beyond those to be expected in the course of termination, and failed to establish that he suffered any injuries because of the manner of his dismissal.  In overturning the lower court's decision, the Court of Appeal re-stated a number of helpful legal principles:

  • It is not open to the court to award damages for the normal distress and bad feelings resulting from the loss of employment;
  • Aggravated damages for wrongful dismissal must reflect "actual damages", as they are intended to be compensatory; and,
  • To receive aggravated damages based on mental distress, the employee is required to show that the manner of dismissal caused injury rising beyond the normal distress and hurt feelings that arise from the fact of dismissal.

The Court of Appeal held that Mr. Lau failed to make out a case for aggravated damages, and that the trial court's decision to the contrary was unreasonable.

This is the kind of common sense decision that employers should embrace.  However, don't think that your company is necessarily immune from aggravated damages awards in the appropriate case.  Employers must conduct their terminations in good faith, and be sure not to cause any additional hardship or injury to their dismissed employees by, for example, being untruthful or unduly insensitive in the manner of dismissal.

It is always a good idea to make offers to the employee that will ease their transition out of employment with your company if you can.  Things like providing positive reference letters or letters confirming employment, offering outplacement counselling, reminding employees that they can access an employee assistance program, and of course providing adequate notice of termination in cases where you are not alleging just cause, are all factors that will help demonstrate good faith, and make it less likely to expose your company to aggravated damages awards.

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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Michael MacLellan
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