Employer’s Immoral Manner of Dismissing Long Term Worker Deserving of Punishment

Written by Lewis Waring, Paralegal, LL.B., Articled Clerk, Editor, First Reference Inc.

In a recent Ontario Superior Court ruling, an employer was ordered to pay a wrongfully dismissed employee $10,000 in punitive damages and $45,000 in aggravated damages on top of 24 months of pay in lieu of notice. In total, the employee was awarded approximately $150,000 in damages. The additional damages that were awarded made up one-third of the total amount and were awarded due to the employer’s conduct that it displayed when dismissing the employee. While its wrongful dismissal of a loyal long-term employee was egregious, the way it decided to carry it out displayed a lack of morality as well as misconduct far from ordinary standards of reasonable behaviour.

Background

The employer operated a national chain of department stores. The employee had worked for the employer since 1992, devoting himself to the organization for 28 years, and working his way up to the position of Sales Manager of eight departments within the location in which he worked. The employee’s long career ended when the employer dismissed him without cause in 2020. While the employee’s dismissal was unconnected to any misconduct, the employer directed the employee’s supervisor to immediately walk the employee out the front door.

At the time of his dismissal, the employee did not have a written contract of employment. As such, the employer had left itself no ability to limit the ability of notice it was liable for and the employee was entitled to an amount in line with the decision under common law. The employer offered the employee 40 weeks of pay, which it claimed included owed amounts for severance and termination pay. However, in later court documents, the employer itself estimated the employee was owed at least 14 months of compensation. Given this wide discrepancy, the employer’s wrongful dismissal of the employee was clear.

Upon dismissing the employee, the employer offered him an alternative position, but this position involved a significant reduction in income and, furthermore, the contract did not promise that the employee would be given any certain number of hours in a week. Under this new position, the employer would have been free to schedule the employee to work 40, 28, 10 or even zero hours each week. The contract also permitted the employer to essentially make any change to the contract at any time for any reason. Finally, the employment offer required the employee to voluntarily relinquish all acquired service he had accumulated in his prior position, essentially extinguishing any claims he might have put forward in the future.

Analysis

While the employee’s award of notice was relatively straightforward, it is worth discussing the court’s additional awards of aggravated and punitive damages, which increased the employer’s liability by over $50,000. The employee was awarded aggravated damages, also called “moral damages,” because the employer breached its duty of good faith and fair dealing while terminating the employee. An employer can breach their duty of good faith and fair dealing by being untruthful, misleading or unduly insensitive. When employees are subject to such immoral conduct, aggravated damages are intended to compensate employees for their moral distress, recognized as being beyond the usual distress and hurt feelings associated with being dismissed.

The employer breached its duty of good faith and fair dealing for four reasons. First, the employer was unduly insensitive when it decided to walk the employee, a loyal 28-year worker, out the door. This manner of dismissal incorporates an element of shame and suggests that the employee engaged in some form of misconduct. The employee in this case had engaged in no such conduct and was dismissed merely due to the employer’s desire to restructure its workforce.

Second, the employer was misleading when it offered the employee a sales associate job. This offer was carefully designed not to maintain a relationship with the employee but to attempt to prevent the employee from gaining any compensation for wrongful dismissal. In fact, the offer’s absurd provisions included an ability for the employer to refuse to ever schedule the employee for a single shift. This offer thus illustrated the employer’s desire to take advantage of the employee in a time of extreme vulnerability.

Third, the employee violated the Ontario Employment Standards Act by failing to provide the employee his wages, including termination pay and severance pay, within the required period of seven days following his last day of employment. In sharp contrast, the employer had attempted to pay the employee’s owed wages out over a period of approximately six months.

Fourth, the employee violated the Ontario Employment Standards Act a second time by failing to provide the employee with a record of employment within five days after the interruption of his employment, which occurred seven days after his termination. Not only did it fail to provide this documentation in a timely fashion, the two records of employment it provided contained serious errors, failing to accurately describe the employee’s alleged date of recall or the reason for issuing the document.

The overall result of the employer’s immoral conduct was to increase the employee’s sense of exploitation, humiliation and depression. As a result, the employer’s conduct in the course of dismissing the employee was found to breach its duty of good faith and fair dealing.

The employee was also awarded punitive damages due to the employer’s failure to pay out the wages owing to the employee in accordance with the Employment Standards Act and the failure to issue a timely or correct record of employment. The employer persistently refused to provide the employee his due compensation and documents despite being repetitively requested to do so by his legal counsel.

This award of punitive damages is all the more important to note due to the fact that the employer’s failure to pay was more precisely described as a failure to pay in the right way. While the employer did not withhold the employee’s compensation full stop, it refused to pay them out in one lump sum as required by the Employment Standards Act. This ruling thus demonstrates that employers will face extremely harsh repercussions if they try to place any type of barrier between a former employee and compensation owed in lieu of notice.

The reason that these two failures were sufficient to justify an award of punitive damages was that such choices showed the employer was being malicious and oppressive. In such cases, which are admittedly rare, the Canadian legal system may grant an award for punitive damages for the sole purpose of punishing the employer for offending the court’s sense of decency.

Takeaway

A wrongful dismissal is an expensive form of liability that employers should always seek to avoid. However, this ruling demonstrates that failing to provide an employee with sufficient notice is not all that an employer can be liable for when a dismissal goes wrong. Employers can find themselves under a pile of damages if a court finds the manner in which they dismissed an employee to be immoral or deserving of punishment. While aggravated damages and punitive damages are separate forms of legal liability, this ruling shows how they can attach to the same conduct. This means that employers who dismiss an employee in a manner that is seen to be dishonest, misleading or insensitive can also be found deserving of punishment. For this reason, employers should generally keep in mind that employees, even those that they wish to part ways with, are deserving of respect and must be treated fairly. Employers that fail to learn this lesson may find themselves on the receiving end of exorbitant damages that not only compensate an employee for lost wages but also seek to compensate for egregious conduct and punish an employer seen to have engaged in offensive conduct.

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