The Ontario Superior Court recently released a decision sending a clear message of disapproval to employers alleging just cause without any reasonable basis to do so. In Morrison v. Ergo-Industrial Seating Systems Inc., 2016 ONSC 6725, an employer was ordered to pay $50,000 in punitive damages for advancing a groundless allegation of cause, withholding payment of the employee’s entitlements under the Employment Standards Act, 2000, and delaying the release of their Record of Employment. The decision serves as a stark reminder to employers and employees that the manner and characterization of one’s dismissal could carry significant cost consequences.
Facts
The plaintiff employee worked for the defendant employer in furniture sales for over 8 years. He claims he was unaware of any issues with his performance, until his employment was terminated. The plaintiff was 58 years old at the time of termination.
Upon termination, the defendant offered the plaintiff five months’ notice, including one month of working notice. When the plaintiff rejected the offer and sued for wrongful dismissal, the defendant alleged it had just cause for the termination.
The plaintiff argued the defendant was alleging cause in bad faith, to facilitate a more favourable settlement. He claimed aggravated and punitive damages for the defendant’s bad faith conduct as well as damages for the defendant’s failure to provide him with reasonable notice of his termination (which the plaintiff claimed was between 10 to 14 months).
The defendant disputed the allegation that it engaged in bad faith conduct. It argued it had a bona fide belief that it had just cause to terminate the plaintiff because he had mismanaged the demo chair account, failed to properly market products to the health care sector, and failed to cooperate with his immediate superior. Accordingly, the plaintiff’s claims for aggravated and punitive damages were unwarranted and no notice of termination was required. In the alternative, the appropriate period of notice was 6-8 months.
Decision
The court held that the plaintiff’s termination was without cause. It awarded the plaintiff pay in lieu of 12 months’ reasonable notice.
With respect to the bad faith allegation, the court accepted the plaintiff’s position that the defendant had terminated his employment in bad faith. It based its finding on several inconsistencies in the defendant’s position surrounding cause.
The first inconsistency was the fact that the defendant offered the plaintiff a severance package, which conflicted with its position that there was just cause.
Second, the three alleged grounds for termination did not meet the definition of cause in the company’s Employee Handbook. The Handbook defined cause as “involving a situation where the employment relationship becomes untenable such as following a serious violation, act of dishonesty or conduct that is materially detrimental to the business or the financial position of the company”.
Third, the evidence did not substantiate the alleged grounds for termination. The plaintiff was shown to have met his sales targets. The plaintiff also produced a significant amount of evidence that he marketed to the healthcare sector. Finally, the evidence also established that the plaintiff was doing his best to address issues with the demo chair account.
The fourth inconsistency in the defendant’s position surrounding cause was the fact that it did not investigate its alleged grounds for termination until after it dismissed the plaintiff. This undermined the defendant’s allegation that they had a bona fide belief that there was cause for his termination. Rather, it appeared that the date of the plaintiff’s termination merely coincided with the start date of his replacement.
A final inconsistency in the defendant’s position was the fact that it did warn the plaintiff about his impending termination.
In light of the foregoing, the court found that not only was cause not established, but the defendant’s failure to provide any convincing evidence to support its allegation made it clear that it was merely adopting the position to negotiate a more favourable settlement. In doing so, the defendant was not acting fairly, honestly or in good faith, towards the plaintiff. The court noted that this was a “classic” example of bad faith conduct on the part of an employer.
Nonetheless, the court refused to award aggravated damages for the defendant’s bad faith conduct. The plaintiff failed to provide sufficient evidence of the damages he suffered as a result of the manner he was dismissed. The plaintiff’s evidence was limited to merely the ordinary pain, distress and financial stress associated with losing a job, rather than that that may result from the manner of dismissal.
Since no aggravated damages were awarded, the court’s view was that an award of punitive damages was required to punish the defendant for its bad faith conduct. It was particularly troubling to the court that the defendant asserted cause without a reasonable basis for doing so, delayed paying him his entitlements under the Employment Standards Act, 2000 (until 8 months after his termination), and withheld his Record of Employment. The defendant knew that its conduct would financially impact the plaintiff and was designed to financial benefit the defendant. In the court’s view, engaging in such conduct was “reprehensible”, “malicious, oppressive and high-handed”, and “a marked departure from ordinary standards of decent behaviour” (at paragraph 54).
With respect to the quantum of the punitive damage award, the court found that $50,000 was an appropriate amount, considering the harm caused, the seriousness of the misconduct, and the advantage gained by the defendant.
What this means for Employers
This case stands as a stark reminder for employers that they should not allege cause for termination, unless there is a reasonable basis to do so. Even if cause is alleged, employers are encouraged to consider whether the employee’s misconduct would amount to cause under the Employment Standards Act, 2000. If not, then the employee should be provided their statutory minimums, along with their Record of Employment, without delay.
If you are an employer looking for legal advice on your employee’s termination, contact one of our expert lawyers today. As this case demonstrates, mischaracterizing an employee’s termination could result in a significant award against your business.
What this means for Employees
Employees who are being faced with allegations of cause should find comfort in this case. This is another example of a court awarding an employee with a significant award to punish an employer for their hardball negotiation tactics.
If you are an employee seeking legal advice with respect to your termination, reach out to one of our lawyers today. You could be entitled to a significant amount of compensation for not only severance, but also the manner of your dismissal.
By Ozlem Yucel
