Be careful what you wish for: litigation lessons for employers
Hirings and firings are common to workplaces across Ontario. For various reasons, people come and go. Employment dismissals, however, when mishandled, can bring with them significant risk and result in unintended liability.
It is important for employers to be strategic in structuring employment relationships, and to be live to their legal obligations. That said, regardless of how careful an employer is, litigation can sometimes still result.
In the event your business (or organization) faces a claim for dismissal damages, the matter should be assessed dispassionately and with a focus on your overarching business goals. For example, it may make sense to reach an early resolution, or in the right circumstances, it may be important to take a hardline against a perceived exaggerated claim for damages.
A recent costs decision from the Ontario Superior Court of Justice, Chin v. Beauty Express Canada Inc. 2023 ONSC 56 (“Chin”), offers some useful guidance to employers in the way they approach wrongful dismissal litigation and the risks that can be reduced with a careful strategy.
The plaintiff in Chin worked part-time for a beauty shop in Toronto. She was terminated on a without cause basis after 6 years’ employment and provided with just over 11 weeks’ working notice.
The plaintiff brought a court claim, seeking damages for wrongful dismissal, aggravated and punitive damages, and damages for age discrimination contrary to the Human Rights Code.
Following a two-day trial, the court awarded 7.25 months’ pay in lieu of notice and dismissed the balance of her claims. In so doing, the court noted that there was a lack of objective evidence to support the claims for extraordinary damages. Ultimately, having sought almost $200,000, the plaintiff received damages of $15,701.71 (plus interest).
As the parties were unable to agree on costs, they made submissions to the court. The plaintiff sought substantial indemnity costs of $54,777.36 on the basis that the claim was important to her, the defendant’s actions unduly lengthened the proceeding, and the court award exceeded the defendant’s Rule 49 settlement offer of $10,000.
In response, the defendant argued that the court award was:
well below the $200,000 sought in damages (and as such was unsuccessful); and
well within Small Claims Court jurisdiction (being below $35,000).
In light of this latter point, the defendant employer asserted that the court should exercise its discretion under Rule 57.01 of the Rules of Civil Procedure and refuse to award any costs to the plaintiff.
The court accepted the defendant’s submissions and refused to award costs. As a result, after presumably incurring time and costs in excess of $50,0000, the plaintiff employee was left with a substantial net loss.
In reaching this determination, the court made the following important observations:
“the trial can be objectively characterized as an unfortunate waste of the parties’ resources.”
“the quantity of damages is far outweighed by the legal fees.”
“this size case is precisely what Small Claims Court is for. Pursing a claim in that court does not diminish its importance, but it does provide a more streamlined procedure appropriate to the monetary value of the case to the parties. Importantly, it also frees up Superior Court of Justice resources for claims that other courts cannot handle, making for a more efficient administration of justice.”
The plaintiff’s “pursuit of the extensive claim, on the other hand, appears to have been more a product of emotion than reason.”
While this decision was an unwanted outcome for the plaintiff employee, it offers helpful guidance to employers when considering how to approach wrongful dismissal litigation:
make reasonable settlement offers to either resolve the matter or to be able to rely on the same in the event the matter goes to trial and costs becomes an issue;
consider the costs involved in litigating a claim of this nature. While not having to pay costs to the plaintiff may be viewed as a “win”, the employer would have still spent considerable time, money and resources in going to trial (which were not recovered);
if commencing an action, ensure you are in the appropriate forum or be prepared to pay the consequences;
treat employees with respect and consideration. Train your management to lead from the front and set a positive tone. While unfounded in Chin, where an employee can prove their dismissal was due to age discrimination, or they were treated in bad faith, it can result in additional damages;
do not let emotion guide your litigation strategy. To the extent possible, remove sentiment from the equation. Look at the matter objectively and consider your strategy in light of the surrounding legal framework and the strength of your case. Focus on matters you can control – like assisting the dismissed employee in finding new work; and
ensure that if you are advancing a legal argument or factual narrative, that you have marshalled the evidence to back it up.
Employment terminations continue to be a flash point for workplace disputes. Employers should be proactive to minimize risk in this regard, but where court claims nonetheless result, adopt a thoughtful and strategic approach.
This article was originally published on March 10, 2023 at First Reference Talks.
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.
