When are employers at risk of aggravated damages awards?
Losing a job can be an upsetting experience. This may be especially so where the individual in question had been employed for a long time, was part of a small tight-knit team, or the decision came seemingly out of the blue.
Following a dismissal there is often a grieving period – people feel worried, embarrassed, hurt, angry and/or discarded. The Ontario courts generally recognize this reality. There are, however, only limited circumstances where the courts will compensate a person for the manner in which their employment ended, and the impact it had upon them.
In circumstances where an employer’s behaviour at, and following, the time of termination is particularly poor, it may result in an award of aggravated (or moral) damages. This form of damages is distinct from the wrongful dismissal damages employees may seek when they believe their employer failed to provide reasonable notice of termination (or payments in lieu thereof).
Aggravated damages are awarded relatively infrequently but may be available where the employer is found to have engaged in a breach of its duty of good faith and fair dealing. An employer may be found to have breached this implied duty by, for example, being untruthful, misleading, or unduly insensitive in handling the termination of employment. The departed employee, however, as a precondition to receipt of these damages, is required to prove that the employer’s bad actions resulted in mental distress.
A recent decision from the Ontario Superior Court of Justice resulted in a $45,000.00 aggravated damages award. It thus offers guidance for employers as to the types of behaviour that may result in an award of this type.
Pohl v. Hudson’s Bay Company, 2022 ONSC 5230
The Bay terminated the plaintiff’s employment for economic reasons in September 2020 – following 28 years of employment. The court found that the plaintiff had been wrongfully dismissed and awarded 24 months’ of pay in lieu of reasonable notice.
Beyond that, the court awarded $45,000.00 in aggravated damages, relying on four factors to support this decision:
The defendant decided to walk the plaintiff out of the building following the termination meeting. The court found this act to be unduly insensitive, given that the plaintiff was a loyal, long-serving employee who had not committed any misconduct. His termination was instead part of a nation-wide restructuring driven by economic considerations.
The defendant offered to re-employ the plaintiff in a reduced role, with a lower rate of pay, no guarantee of hours, and a loss of common law rights. The court found this to be “misleading and a breach of the duty of good faith and fair dealing.” The court also accepted the plaintiff’s evidence on this point that “[I] concluded that my employer of 28 years was attempting to trick or induce me into giving up my right to such compensation without corresponding benefit. My feelings of humiliation, diminished self-worth and anxiety deepened and I became depressed.”
The defendant violated the Employment Standards Act, 2000 (“ESA”) by failing to pay amounts owing to the plaintiff with the required period of time under the statute – and despite requests that it do so. The court noted, on this point, that the defendant was a large, sophisticated employer and that compliance with the ESA is mandatory.
The defendant failed to issue a Record of Employment within the period prescribed by the Employment Insurance Regulations. The court also commented that the defendant ultimately issued two Records of Employment, both of which incorrectly described the reason for their issuance.
The Pohl decision offers four examples of the types of conduct that may result in an award of aggravated damages. With respect to Pohl, it remains to be seen whether this award was a result of the collective impact of the four perceived acts of wrongdoing. It does, however, serve as a useful reminder to be mindful of, and to meet, minimum statutory obligations.
That being said, to play devil’s advocate, there may be situations in which the employer, despite its best efforts, cannot avoid delay in issuing a Record of Employment (perhaps the payroll provider is remiss) or a statutory termination payment. Based on the court’s remarks in Pohl that statutory compliance is not optional (which is true), such circumstances could conceivably create a risk of an aggravated damages award.
To limit this risk, and to demonstrate to a court that the employer is making best efforts and treating the former employee with respect (even where a statutory obligation may be delayed), communication is key. Even if litigation has been threatened, or commenced, it is worthwhile for an employer to explain any deficiencies in an honest and forthright manner and keep lines of communication open while taking prompt steps to fix the situation. These types of actions will help shape the context within which the court ultimately reviews the propriety of the parties’ actions.
This article was originally published on May 12, 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.
