Employer Who Acted in Fair Manner Dodges Employee’s Award of Damages

A recent Supreme Court of British Columbia decision reveals that an award for aggravated and/or punitive damages is not automatic where termination for cause is not justified and upheld by the court.

Background

Until the employee’s employment was terminated, purportedly without cause, he was employed by Pacific Coast Terminals as manager of maintenance and engineering for just over 16.5 years. The employee was offered a severance package.

However, prior to the offer of severance being accepted, the employer, based on information that it subsequently obtained about the employee’s conduct during his employment, withdrew its offer of severance. Allegations of Pacific Coast Terminals included dishonesty, cavalier behaviour, and failure to follow rules. Moreover, while assigning a new employee to the terminated employee’s work, the employer discovered additional misconduct on the employee’s work computer relating to conflicts of interest as well as a breach of the company’s pornography policy. Therefore, the employer revoked the severance offer it had made pending what it described as a further investigation. After meeting with the employee in question about what they found, the employer terminated the employee’s employment for cause.

Pacific Coast Terminals claimed after-acquired cause for termination.

The employee sued for wrongful dismissal.

The Court’s decision

The Court had to answer the following questions: Did the proven misconduct of the employee, even if acquired after the fact, justify the immediate termination of his employment without notice? Was the impact on the employment relationship irreparable?

In addressing the employee’s dishonesty, the Court noted that “there is a significant difference, particularly when considering cause for termination, between an employee being dishonest with an employer and an employee giving an opinion, even an overly optimistic opinion, that turns out to be wrong.” In application to this case, the Court had the following to say:

[246] Clearly, Mr. Smith was responsible for the project work and ensuring that permission was granted by the regulatory authority. However, Mr. Smith did not lie or misrepresent to his employer whether there was permission from the Port for the work undertaken. He did not say to his superior that the Port had permitted the work. What I find he indicated to Mr. Catton when they started the work before the permit was issued was that he thought it was fine or that doing the work was fine, words to that effect. He made a judgment based on the circumstances and his experience. As it turned out his judgment was wrong. But it was a judgment and I find Mr. Catton, who was aware that there was no permit in place at the time, took it to be his judgment, not a factual misrepresentation.

…

[248] The conduct of Mr. Smith involved taking a risk for the company based on what I find was an error in judgment. I find he did not lie to or mislead his employer as is alleged. While the context was of a potentially costly decision on his part to proceed without a permit being in place, it was a judgment made by an employee with his superior knowing it was a judgment. It was an error in judgment committed by an employee with a stellar employment record. Mr. Smith was a dedicated and effective employee who enjoyed his job and worked hard for his employer for many years. The error in judgment was made in trying to complete the project promptly and while his motivation might also have been to look good in his employer’s eyes it was certainly not done for an ulterior or improper purpose or for a dishonest purpose. I would not characterize his conduct as dishonest but rather as an error in judgment fueled by an aggressively optimistic view that had significant financial consequences, or at least could have.

In addressing whether the employment relationship was irreparable, the Court had the following to say:

[260] …had the plaintiff misled his employer, then, together with the additional evidence, the defendant would have established a character flaw or misconduct that would constitute a repudiation of the employment contract justifying summary termination. In those circumstances there would be an irreparable impact on the employment relationship.

Resultant of its findings, the Court did not uphold the termination for cause and awarded reasonable notice damages.

The employee had also claimed additional amounts for aggravated and punitive damages, as Pacific Coast Terminals breached its duty of good faith and fair dealing in the manner of dismissal.

However, the Court did not agree that such damages should be awarded. The Court found that the termination was done “in a respectful and not in an unduly insensitive manner”, and that the issue of cause for termination only arose from a search of the work computer and emails of the employee. These inquiries were reasonably carried out for another employee to take over the employee’s projects. Further, the Court found that the company did not intentionally inflict mental harm when it came to the manner of the employee’s dismissal, the searching of his work computer and emails, or the investigation.

The investigation conducted by the company was fair and reasonable.

Lesson learned

As seen in this case, steep awards of aggravated and/or punitive damages can possibly be avoided where an employer conducts itself in a fair manner when it comes to employee investigations and terminations.

These types of damages (aggravated and punitive damages) will not be awarded simply because an employer asserts or continues to assert at trial, that it has cause for termination.