Low Ball Settlement Offer Costs Employer

Written by Daniel Standing LL.B., Editor, First Reference Inc.

In his brief reasons for the decision on a motion concerning costs, Justice Frederick Myers of the Ontario Superior Court of Justice didn’t mince words. Focused squarely on issues of fairness and access to justice, the judge awarded significant costs to the plaintiff in a wrongful dismissal matter while providing clear guidance to employers about how to handle such situations.

The decision in Court File Number CV-20-00646993 followed a written hearing at the end of October 2022. The judge noted that the litigation was all about money, and it wasn’t the time or place to assess the claim on the merits, but rather to fix costs. He described the case as a very modest one where the only real issue was that of mitigation. Eventually, the parties settled the matter for $15,000.

The court said that fixing costs is something that is left to the judge to decide based on various principles and factors like the complexity of the issues, the expectations of the unsuccessful party, and the general rule that costs go to the winner. That said, costs have to be reasonable, such that access to justice is fostered.

In this matter, both sides sought costs. The defendant said it was entitled to costs, having made several offers to settle of progressively diminishing value, with the plaintiff accepting the final, lowest one. The court saw it differently, however, calling the defendant’s characterization of value disingenuous because only its last offer was made exclusive of costs. The previous ones were all inclusive of costs, which can be substantial when assessed separately.

The court rejected the defendant’s allegation that the plaintiff wasn’t forthright concerning mitigation by misrepresenting the existence of her second job that she held while working for the defendant. The judge dismissed this argument as petty ‘mudslinging’ and focusing too narrowly on a single issue.

Employers can take a nugget of wisdom from the court’s remarks about bullying a plaintiff into accepting an improvident settlement. The court said that employers shouldn’t be incentivised to low-ball offers and force a plaintiff to accept an unfair settlement simply to avoid the risks associated with costs and delay.

The judge took the view that in a wrongful dismissal action, a plaintiff should expect to be paid costs on a partial indemnity basis to remedy the unfairness that would result from a situation where the employer should have taken its final position much earlier at the time of termination. More criticism was heaped on the defendant for its conduct during the litigation, namely its strategy of employing a “document dump” to inundate the plaintiff with paper to cause costs. Noting that “it takes two to tango”, the judge assessed a 20 percent deduction for the plaintiff’s role in the excessive communication at every step of the litigation, which continued after the assessment. The matter culminated in an all-inclusive award of costs of $30,000.

Key takeaways

To the extent that Justice Myers’s reasoning is accepted and applied in other jurisdictions, employers should anticipate paying some degree of partial indemnity costs – that is, something less than half of the other side’s lawyer’s fees – in a wrongful dismissal action.

Applying this case, it would be preferable for employers to fairly compensate employees at the time of dismissal rather than force them to sue for wrongful dismissal damages. Even if a termination results, the costs ramifications could present a means for the court to level the playing field.

Source: Janmohamed v Dr . Zia Medicine PC ( Ct file # CV-20-00646993)