Otherwise known as
Michael’s soapbox

2017-11-01T16:28:20-04:00 November 2, 2017|Employment Contracts, Employment Law|

Rushing to Judgment Proves Costly in a Just Cause Termination

Another day another employment case where the Court awards exceptional damages (in this case aggravated damages). The case involved an employer who terminated an employee, ostensibly for just cause following an investigation. The employer withdrew the allegation of just cause on the opening day of trial.  The case is Lalonde v Sena Solid Waste Holdings Inc, 2017 ABQB 374 (CanLII) and provides an excellent reminder of the costly consequences associated with alleging just cause for termination when the evidence is sparse.

Alleging just cause should only occur after having carried out a timely, transparent, thorough and objectively defensible investigation. To do otherwise comes at a price.In this case the plaintiff was a 62 year old Millwright with approximately 4 years service. Of note is that shortly after his dismissal the plaintiff obtained employment earning close to the hourly wage he was earning while working for the defendant. According to the court, the overall quality of the new employment was lower and he was required to drive long distances to different job sites and perform work that was more physically challenging.

The employer abandoned its allegation of just cause at the trial and, as such, the court turned to consider the issue of reasonable notice of termination which it determined to be in the range of between 4 and 8 months. The court held that 6 months was appropriate.

The court then turned its attention to the damages principles in employment law as set out in the relatively new (and now leading) case of Paquette v TeraGo Networks Inc., 2016 ONCA 618 (CanLII) where the Court of Appeal stated:

The basic principle in awarding damages for wrongful dismissal is that the terminated employee is entitled to compensation for all losses arising from the employer’s breach of contract in failing to give proper notice. The damages award should place the employee in the same financial position he or she would have been in had such notice been given… In other words, in determining damages for wrongful dismissal, the court will typically include all of the compensation and benefits that the employee would have earned during the notice period.…

Damages for wrongful dismissal may include an amount for a bonus the employee would have received had he continued in his employment during the notice period, or damages for the lost opportunity to earn a bonus. This is generally the case where the bonus is an integral part of the employee’s compensation package… This can be the case even where a bonus is described as “discretionary”…. [References Omitted]

I set this quote out at length because it encapsulates the applicable legal principles succinctly and clarifies some misconceptions that some employers have with respect to bonus payments and the default position of courts to include them in damages. The court awarded a bonus component in Lalonde through the reasonable notice period despite the fact that the bonus program included the following:

“employees who are released without cause will be compensated on a pro-rated basis under the Short Term Initiative and under the Long Term Initiative. Any pro-rated payments will be based on the number of months worked in the calendar year with one day worked in a month being considered working in that month.”

The court then considered whether to award aggravated damages and punitive damages. The leading case on these issues comes from the Supreme Court of Canada in Keays v Honda Canada Inc, 2008 SCC 39 (CanLII).

In short, the court can award “damages resulting from the manner of dismissal …. where the employer engages in conduct during the course of dismissal that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive.” It is the manner of dismissal, rather than the mere fact of dismissal that can result in damages.

In Lalonde the court considered the fact that the employer had made up its mind to terminate the employee for just cause without consideration of his explanation or request for further information. The Court put it this way:

An internal memo from the Maintenance Manager …. to the HR Manager… ,shows a decision had been made to terminate the Plaintiff; this despite not having any response from the Plaintiff as to the alleged breaches of conduct. The Defendant ignored a letter from an employee … which supported the Plaintiff’s contention that he had done nothing wrong in relation to the alleged lack of supervision of a contract employee. The evidence supports the conclusion that the internal investigation was essentially a sham. [emphasis added]

The decision was a fait accompli and the investigation was simply window dressing. Furthermore, the employer made and maintained its allegation that Lalonde had been terminated for just cause until the first day of trial. Among other things, this resulted in a delay of Lalonde’s Employment Insurance Act benefits.

The Court concluded that:

I am satisfied that the Defendant’s conduct during the course of dismissal was unfair, breached the requirement of good faith and the expectation that both parties to the contract had that the employer would act in good faith in the manner of dismissal.

The Plaintiff has proven that the manner of dismissal caused mental distress, particularly by the Defendant’s actions in attacking the Plaintiff’s reputation at the time of dismissal and representing that there was sufficient cause for dismissal for an extended period of time.

In the circumstances, and following a review of the case law, the court awarded Lalonde $75,000 as aggravated damages. The court did so without the usual requirement of the plaintiff providing expert medical evidence supporting mental distress flowing from the proven conduct of the employer. It refused to award punitive damages because, although the employers’ “actions were clearly insensitive, inappropriate and caused mental distress for the Plaintiff” they were not malicious.

Even more recently, an Adjudicator reminds us of the dangers that flow out of an investigation that is wanting. The case is Thomas v. Shamattawa First Nation [2017] C.L.A.D. No. 203 where the employee had been employed as a Building Healthy Community Coordinator by Shamattawa First Nation. She was terminated on July 24, 2015 for just cause after 20 years of service. At the time of her termination she was 58 years of age.

The problem for the employer was that the “investigation”, such as it was, was found to be a “sham” by the Adjudicator. The Adjudicator put it this way:

…. no one in a position of authority took any steps whatever to investigate the matter further by interviewing the participants, specifically the alleged perpetrator. To the contrary, she was deliberately and systematically shunned and excluded, as was her workplace supervisor. I find that the investigation was a sham, plain and simple, so that no genuine effort was made to get to the bottom of what had actually happened, and as to how seriously it ought to be treated.

Further, in the termination letter there were “no details, no dates, and not even a whiff of a suggestion that any investigation has been conducted”. The employer was unwilling to hear what the plaintiff had to say in reply to the allegations against her, it acted precipitously and hastily. The Adjudicator awarded the employee 40 weeks pay for the unjust dismissal, $10,000 as punitive damages for the embarrassment and suffering which she sustained due to the manner of the handling of the dismissal and the high-handed behaviour of the employer and $9,000 in legal fees.

These cases provide a clear reminder that just cause for termination is tough to prove and should only be alleged in the clearest of cases (at least where there is evidence to objectively support the finding in the individual circumstances). Further, where it becomes clear that just cause for termination is unlikely to succeed, it is better to “eat crow while it is young and tender” rather than pursue the defence until the steps of the courthouse and then withdraw it.