Canada: Terminated Employee Awarded Aggravated Damages for Employer's Conduct

Last Updated: August 21 2017
Article by Kelly Nicholson and Kendra Heinz

Termination of employment can cause an employee a great deal of hardship. This is especially true when allegations of misconduct and insubordination are at play. The case of Lalonde v. Sena Solid Waste Holdings Inc, 2017 ABQB 374 cautions employers to exercise good faith when dismissing an employee.
 
At the time of his termination, Mr. Lalonde (the "Plaintiff") was a 56-year-old millwright who had worked at the Swan Hills Waste Treatment Plant (the "Facility") from April 15, 2008 until his dismissal on July 24, 2012. Prior to his dismissal, he had not received any verbal or written warnings from his employer, nor had he been subject to any suspensions.
 
On June 13, 2012, the Plaintiff was called to the office of his manager and was accused of a number of workplace infractions, including putting a life in danger, lying to his supervisor-, and insubordination. The Plaintiff was surprised by the allegations, but was not given an opportunity to respond. He was told he was suspended, and was escorted off the Facility by two other employees.

Subsequently, the Plaintiff made efforts to communicate his side of the story. For several weeks he did not hear anything from his employer, and became so upset while waiting for a response that he went on stress leave. Then, on July 24, 2012, the Plaintiff received a letter advising him that his employment had been terminated for just cause "due to [his] failure to follow safety procedures and [his] failure to follow [his] supervisor's instructions."
 
As a last resort, the Plaintiff wrote a letter to a Division Manager providing a detailed response to the allegations and asked a number of questions. The employer responded with a list of safety infractions it investigated in the course of making its decision to terminate him. The Plaintiff subsequently filed a claim against the employer seeking compensation for wrongful dismissal.

The Notice Period and Letters of Employment
 
The Court found that the Plaintiff had been wrongfully dismissed without just cause. As a result, the Court turned its mind to the question of an appropriate notice period. The Plaintiff had signed two employment letters in 2008 (the "April 2008 employment letter") and again in 2011 (the "February 2011 employment letter") when ownership of the Facility changed. The employer argued the April 2008 employment letter applied, as this limited reasonable notice to the amounts prescribed by provincial legislation. For his part, the Plaintiff argued the February 2011 employment letter should apply since it did not restrict the notice period to amounts set out in ss. 56 and 57 of the Employment Standards Code.
 
The Court found that the April 2008 letter applied, because the Plaintiff had been employed since April 20, 2008 and the February 2011 employment letter did not effectively restart his employment. The Court then assessed the limiting clause in in the April 2008 employment letter, which provided  

Should your employment with [the employer] be terminated for any reason, other than willful or professional misconduct, conflict of interest, disobedience or willful neglect of duty, that has not been condoned by [the employer], your sole legal entitlement will be notice of termination (or termination pay) and/or severance pay equivalent to the legal requirements, as prescribed by provincial legislation, and you will not be entitled to any payment in excess thereof.

The Court found that termination for any reason "other than willful or professional misconduct, conflict of interest, disobedience or willful neglect of duty that has not been condoned by [the employer]" would have limited the Plaintiff's entitlement to the amounts prescribed by provincial legislation. However, the Court went on to find that if the reason for termination is "willful or professional misconduct, conflict of interest, disobedience or willful neglect of duty that has not been condoned by [the employer]" then by implication the employee's entitlement is not limited to the amounts prescribed by provincial legislation. Since the Plaintiff was terminated for alleged disobedience and professional misconduct, the April 2008 employment letter did not have the effect of limiting the amount of notice he was entitled to be paid. The Court ultimately decided upon a notice period of six months.

Aggravated Damages

The next issue concerned whether the Plaintiff was entitled to aggravated damages for how he was treated by his employer before and after the termination: he was accused of theft, humiliated, and escorted off company property in full view of his co-workers. It was also significant that throughout the entire litigation, the employer maintained its grounds for just cause, until the first day of trial in May 2017 when it withdrew its allegations. The Plaintiff argued his reputation in the small town he resided in was harmed by the employer's bad faith conduct.
 
The Court characterized what had happened as a case where the employer decided to "shoot first and ask questions later." Mr. Justice Gill held the actions of the employer amounted to a breach of the obligation of good faith and fair dealing as considered by the court in Wallace v. United Grain Growers Ltd, [1997] 3 SCR 701. The employer maintained the wrongful allegations as "serious safety violations and insubordination" from the date of the Plaintiff's suspension for a period of nearly five years, up until shortly before trial. It also terminated his employment without regard for his explanation and without giving him a full opportunity to explain the alleged misconduct. This conduct breached the requirement of good faith and the expectation of both parties to the contract that the employer would act in good faith in the manner of dismissal. An award of $75,000 was granted to compensate the Plaintiff for the employer's conduct.

Takeaway

Employers are urged to review termination clauses in letters and contracts of employment to ensure they clearly limit notice amounts if – and in the manner – intended to do so. In this case, the Court found the reasons for dismissal relied upon by the employer did not limit the Plaintiff's entitlement to the amounts prescribed by provincial legislation, based on the wording of the clause and what it implied. The Court's finding underscores once again the crucial importance of clarity and precision in drafting termination clauses.
 
In addition, the Lalonde decision suggests that, in cases of wrongful dismissal, the Court will consider the employer's conduct in carrying out the termination. If there is any indication the employer has acted in bad faith, in particular by humiliating the employee in some fashion, or denying an opportunity to make full answer to allegations of wrongdoing, the Court may award aggravated damages.

The lawyers in the Field Law Labour and Employment Group can assist you and your organization in reviewing termination clauses in letters and contracts of employment in order to safeguard your interests.

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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