When it comes to terminating an employment relationship, employers don’t generally have an obligation to keep someone in their employ. We have covered topics such as payment in lieu of notice in other blogs, but it’s also worth discussing other factors which may impact someone’s compensation upon being terminated. One factor is the way an employer treats an employee during the termination process. As we saw in a recent decision from the Ontario Court of Appeal, misconduct on the employer’s behalf can have expensive consequences.
The employee started working for the employer in 2004. They were acquired by another company in 2011, and the employee, who had been rising through the ranks, became president of the new owners of the employer, despite only having a grade-12 education.
The employee’s job was terminated in June 2015. At the time, he was told he was being terminated for cause, having committed fraud, however no details of the accusation were provided to him. When the employee told the employer he planned to hire a lawyer, he was advices that if he did, a counter-claim would be filed. The employee responded a month later with a claim seeking damages for wrongful dismissal. The employer kept their promise and filed a counter-claim alleging cause, claiming damages of $1,700,000 for unjust enrichment, breach of fiduciary duty, and fraud. They also sought $50,000 in punitive damages.
The original trial
The first trial lasted for 11 days, after which the trial judge ruled that the employer had failed to prove cause against the employee. The trial judge also determined the employer’s counter claim for $1,700,000 was a tactic used to intimidate him, breaching the employee’s obligation of good faith and fair dealing with his dismissal. The trial judge awarded the employee payment equal to 19 months’ notice, as well as punitive damages of $100,000 and moral damages of $25,000.
One grounds of appeal put forward by the employer was that the judge erred in arriving at a 19-month notice period, and that she did not provide enough reasons as to why such a lengthy notice period was established. However, the court found that the judge took many factors into account and even listed them in the decision, including the employees age, the availability for similar work where he lived, and the serious allegations made against him.
The employer also challenge the $100,000 in punitive damages awarded to the employee, arguing the trial judge awarded “an amount that exceeds what is rationally required to punish the misconduct and achieve the accepted purposes of a punitive damages award.”
The court dismissed this argument as well, stating,
“In reaching her conclusion, the trial judge referred to the threat by the appellant during the termination meeting that if (the employee) sued, the appellant would counter-claim – a threat which it carried out with its counter-claim alleging fraud. The trial judge also referred to the fact that the appellant had, on the seventh day of trial, reduced its damages claim from $1,700,000 to $1. The trial judge concluded that ‘it did not appear as though the [appellant] had any intention of proving damages but rather was using the claim of $1,700,000 strategically to intimidate (the employee)’… These facts supported her finding of misconduct justifying a punitive damages award.”
The appeal was dismissed, and the employee walked away with what amounted to $546,684.73 in damages.
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