HARD LABOUR – BY WARDSPC LAWYERS
EMPLOYERS TERMINATING IN GOOD FAITH? PUNITIVE OR AGGRAVATED DAMAGES MAY NOT BE ORDERED EVEN THOUGH THE EMPLOYER MAINTAINS “CAUSE” FOR TERMINATION UNTIL THE VERY END, BUT FAILS TO PROVE IT
Employees who sue for wrongful termination often claim additional punitive or aggravated damages based on, for example, the employer’s alleged bad faith manner of termination, breach of its duty to perform the contract honestly or tactically alleging cause to gain an advantage, when it did not truly hold the belief that cause existed.
In Ontario, the Courts are increasingly awarding punitive or aggravated damages when it would be appropriate to do so in the specific case, which usually involves bad faith, poor conduct or strategic, one-sided plays by the employer, like asserting cause to gain a tactical advantage in an early settlement with the terminated employee.
Cause for termination is a very high threshold for employers to prove in Ontario. If they terminate for cause, are sued and fail to prove cause at trial, it is more likely they are exposed to paying additional punitive or aggravated damages, in addition to the damages for the pay in lieu of notice arising from the actual dismissal.
However, if an employer can establish that it alleged cause, which it subsequently failed to prove at trial, without bad faith, but rather in good faith, a new British Columbia case establishes that punitive or aggravated damages would not be awarded.
The key issue, then, is the conduct of the employer. If bad faith, poor conduct or tactical plays were not engaged in, this new case suggests the employer should not pay these special, additional damages, even though it improperly alleged cause at the time of termination, which it continued to assert during the lawsuit, but ultimately failed to prove in Court at the trial, the end of the lawsuit process.
In this case, the manager employee hired a third party to do work for the employer, but before he arranged the appropriate permits. He was terminated. After his termination, the employer discovered other errors by the employee and, therefore, asserted these as cause for the initial termination, too.
The Court held the employee had made a serious error in judgment and engaged in unacceptable conduct, but did not intend to deceive or mislead the employer. Therefore, cause for his termination did not exist. Rather, progressive discipline and a punishment less than abrupt termination for cause would have been appropriate. The employer, as a result, alleged cause, asserted that throughout the lengthy case and ultimately failed to prove it. The employee was awarded damages at common law for pay in lieu of notice.
The Court refused to order punitive or aggravated damages, though, because: (a) the termination was conducted in a respectful manner; (b) the issue of cause effectively arose after termination; and (c) the employer had conducted a fair and reasonable investigation to support its allegation of cause.
In other words, punitive or aggravated damages will not automatically be awarded against an employer that maintains a cause position until the very end, but fails to prove it. Rather, this case establishes that those damages may not be given when there is fair dealing with the employee in the manner of termination and the employer behaves in a fair, reasonable way when investigating employee misconduct and in the manner of termination.
Case Reference: Smith v. Pacific Coast Terminals Co. Ltd., 2016 BCSC 1876
Thank you for reading this - Jason Ward of WARDS PC LAWYERS.
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