In a recent decision, the Ontario Superior Court of Justice harshly rejected an employer’s allegation that it had just cause to dismiss an employee. In allowing the employee’s claim for damages for wrongful dismissal, the Court awarded the employee $100,000 in punitive damages in response to the employer’s “terrible conduct.”
The Court found that the employer’s true basis for terminating the individual’s employment was to avoid financial obligations arising out of a share purchase agreement between the employee’s and the employer’s companies. As such, the Court’s view was that the employer had “conjured up a cause” to terminate the employment agreement. The Court was forthright in expressing its discontent for the employer’s behaviour:
The conduct of [the employer] is outrageous because [the employer] got mean and cheap in trying to get rid of an employee as they approached arbitration for the determination of any adjustment in the asset purchase agreement price. They had a contracted process in place and chose to park it with an unfounded allegation to fire [the employee] (paragraph 39).
Accordingly, the Court held that the employer’s conduct amounted to a failure to honestly perform the employment contract, which justified an award of punitive damages. While punitive damages of this magnitude are not commonly awarded in wrongful dismissal litigation, this case illustrates the risk that can arise when an employee is dismissed without sufficient cause. If you’re going to dismiss an employee for cause, make sure you have sufficient grounds!