Court Awards Punitive Damages for Employer Conduct in Terminating Employment

In a recent decision, Wilds v. 1959612 Ontario Inc., the Ontario Superior Court of Justice awarded punitive damages against an employer for its conduct at, and following, the time of termination. In so doing, the court provided a helpful reminder for employers to meet their lawful obligations when ending the employment relationship or risk exposure to additional liability.

In Wilds, the plaintiff worked for the employer as an executive assistant from June to October 2020. On October 29, 2020, the defendant terminated the plaintiff’s employment on a without cause basis. It issued a termination letter which informed the plaintiff that, upon its receipt of a release of claims, the defendant would provide: 2 weeks’ pay: the plaintiff’s minimum statutory entitlements under the Employment Standards Act, 2000 (“ESA”): accrued but unpaid vacation; and a bonus payment.

The plaintiff declined this offer and did not return a signed release of claims. The defendant consequently withheld all proposed payments set out in the termination letter. It also delayed issuing a Record of Employment, eventually doing so on December 1, 2020. The plaintiff argued that this delayed her ability to receive EI benefits – exacerbating an already precarious financial situation.

During the termination meeting, the plaintiff had informed the defendant that she had several unpaid work-related expenses for using the 407 ETR highway. The defendant failed to repay these expenses once provided with necessary receipts to support the same.

The plaintiff thus retained legal counsel who notified the defendant on numerous occasions that it had failed to issue:

1. mandatory termination entitlements under the ESA (which could not be traded for a release of claims);

2. a contractual entitlement to a bonus payment; and

3. repayment for legitimate work-related expenses.

The plaintiff’s legal counsel also asked that the defendant provide the plaintiff with a reference letter to help in her search for new employment. The defendant failed to do so.

The Court’s Decision

The dispute was ultimately decided at a summary judgment motion. The court ruled in the plaintiff’s favour, finding she was entitled 2 months’ pay in lieu of notice at common law plus an additional $10,000 in punitive damages.

In awarding punitive damages, the court noted that the defendant “failed to pay Ms. Wilds her minimum entitlements under the ESA, it issued Ms. Wilds’ Record of Employment very late, and it failed to reimburse Ms. Wilds for the legitimate business expenses properly incurred during her employment.” The court found this conduct was made worse by the defendant’s ongoing failure to correct these deficiencies despite them being repeatedly brought to its attention both before and during litigation.

The court was particularly unimpressed by the defendant’s assertion during examinations for discovery that the payments had not been made as a result of a “clerical error”. Notwithstanding this assertion, the “clerical error” was never corrected (remaining unpaid at the time of the hearing) and the court observed that “such an error – if in fact it was an error – should have been discovered months earlier given that it was brought to Gibson’s attention numerous times that Ms. Wilds had not been paid anything.”

The court concluded that it viewed an award of punitive damages as necessary to punish the defendant and to deter it and others from engaging in similar misconduct in future.

Takeaway for Employers

This decision is a reminder for employers to promptly issue all due and owing statutory and contractual entitlements, along with any unpaid expenses and an RoE. These steps are simple and may avoid unnecessary headaches down the road (such as additional liability and an unflattering public decision).

Employers should work with their legal counsel at the time of termination to ensure all required payments have been made. It is also a good idea to provide departing employees with a reference letter (or confirmation of employment letter) and, if feasible, to consider offering career transition services. These steps will help to demonstrate a commitment to treating departing employees with dignity and respect.

Finally, this case is a reminder that:

1. an employer cannot withhold statutory payments in exchange for a release of claims. ESA entitlements are mandatory and cannot be traded.

2. sometimes, clerical errors will happen. This may be the non-payment (or incorrect payment) of a statutory or contractual amount. Should such a situation be raised, verify whether the payment calculations are accurate and, if not, make prompt payment to correct the error – noting in writing that this is what is being done. Such action will show that any failure to pay was inadvertent and not the type of conduct to warrant punishment by the courts.

If you are an employer navigating a termination of employment, and require assistance, please contact one of our employment lawyers to discuss further. 

Vey Willetts LLP is an Ottawa-based employment and labour law firm that provides timely and cost-effective legal advice to help employees and employers resolve workplace issues in Ottawa and across Ontario. To speak with an employment lawyer, contact us at: 613-238-4430 or info@vwlawyers.ca.