The Law At Work

September, 2019 (Published in the Hamilton Law Association Journal)

With the recent Ontario Court of Appeal decision in Colistro v. Tbaytel 2019 ONCA 197, it is becoming increasingly apparent that damages for bad faith dismissals may be on an upward trajectory. This important doctrine continues to evolve and is a powerful and uniquely flexible tool to use when advocating on behalf of employees.

With these damages on the rise, it is becoming all the more important for employers to treat their employees with careful sensitivity in all facets of the termination process. Notably, post-dismissal conduct on the part of the employer (and even employer counsel) can be caught within the ambit of “dismissal” for the purposes of  bad faith damages. As such, employers and their counsel ought to avoid unreasonably zealous litigation tactics and treatment of a dismissed employee Plaintiff which could be considered disdainful, or as the Court of Appeal has called it “playing hard ball.”

Damages for bad faith dismissal have been around for a long time as a result of the longstanding recognition by Canadian courts of the unequal bargaining power between workers and employers. In the absence of a labour union, the average employee lacks the ability to negotiate favourable contractual terms and is vulnerable to life-altering dismissal essentially at the employer’s whim.

The Supreme Court noted in Slaight Communications Inc. v. Davidson, [1989] 1 SCR 1038 that “the relation between an employer and an isolated employee or worker is typically a relation between a bearer of power and one who is not a bearer of power. In its inception it is an act of submission, in its operation it is a condition of subordination.”

This kind of contractual inequality is all the more concerning given the importance of work in a person’s personal and financial life. In Reference Re Public Service Employee Relations Act (Alta.), [1987] 1 SCR 31, the court noted that “work is one of the most fundamental aspects in a person’s life, providing the individual with a means of financial support and, as importantly, a contributory role in society. A person’s employment is an essential component of his or her sense of identity, self-worth and emotional well-being.”

It was the unique combination of inequality in bargaining power coupled with the importance of work in a worker’s life, that caused the Supreme Court to first recognize a duty on the part of employers to treat employees with good faith at the time of dismissal. The seminal case in this regard was Wallace v. United Grain Growers Ltd., [1997] 3 SCR 701 where the court recognized that the point at which the employment relationship ruptures leaves the employee so vulnerable, that “employers ought to be held to an obligation of good faith and fair dealing in the manner of dismissal.”

In the Wallace era, the method for compensating an employee dismissed in bad faith was to simply lengthen the applicable notice period. But since Honda Canada Inc. v. Keays, 2008 SCC 39, there has been an acknowledgement that all contracts are presumed to be entered into with the expectation that the employee will be treated in good faith upon dismissal and therefore, bad faith damages are really just like any other breach of contract damages (i.e. damages that may fairly be considered either arising naturally from the breach or those that were within the reasonable contemplation of the parties).

The court in Honda called these damages moral damages. They are not true “aggravated damages” in the sense that no independent actionable wrong is required. The requirement is merely that the employee show that the manner of dismissal caused mental distress.

Obviously the bad faith analysis is fact-driven and very case-specific. However, the higher courts have repeatedly used overlapping terminology in attempting to describe the sort of employer conduct that would be considered bad faith referring to conduct that could be considered: untruthful, misleading, insensitive, demeaning, humiliating.

Some common and reoccurring themes where employer conduct has attracted bad faith damages include: false allegations of cause or incompetence, harming the employee’s reputation, causing embarrassment at the time of dismissal, harassment or sexual harassment prior to dismissal, dismissal connected to disability, reprisals, and heavy-handed pre and post dismissal conduct.

Of all of these, probably the most common are dismissals followed by untruthful allegations against the employee meant to “justify” the dismissal and cases where an employee was harassed during or leading up to dismissal.

One interesting aspect of the evolution of the doctrine has been the clear inclusion of post-dismissal conduct. The flexibility and potential impact of this inclusion is profound.

The Court of Appeal clarified in Doyle v. Zochem Inc.  2017 ONCA 130 that “Pre and post termination conduct may be considered in an award for moral damages, so long as it is a component of the manner of dismissal.” How courts define “a component of the manner of dismissal” when dealing with conduct that occurred after dismissal, has been very broad. The following employer conduct after dismissal has been found to constitute or contribute to a finding of bad faith in the manner of dismissal:

  • Pressuring an employee to accept an inadequate severance package by using false cause allegations as a negotiation tactic or otherwise advancing a baseless allegation of cause leading up to trial;
  • Refusing, during the course of negotiations, to pay already-earned commissions which were acknowledged to be owing;
  • Delaying in sending the employee her Record of Employment and frustrating an application for Employment Insurance;
  • Failing to send a corporate representative to a mediation;
  • Failing to produce obviously relevant documents;
  • Failing to communicate with Plaintiff’s counsel, to answer questions, or professionally respond to the Plaintiff’s position or concerns;
  • Refusing to provide a letter of reference in the absence of real performance concerns;
  • Failing to pay statutory minimums upon termination;
  • Refusing to answer undertakings;
  • Cutting off salary continuance and benefit continuation without notice;
  • Acting indifferent toward the Plaintiff “to the point of disdain”
  • Adopting a tactic of “attrition” in hopes that the employee will eventually give up and go away.

Perhaps the foregoing can be simply summarized as the Court of Appeal stated in Marshall v. Watson Wyatt & Co. [2002] O.J. No. 84: “Wallace is a call for employers not to ‘play hard ball’ with employees when dismissing them.”

Of course, that does not mean that a respectful, vigorous defence will be considered bad faith, but where an employer attempts to use its inherent power over an employee in a heavy handed and insensitive manner – even during the litigation process – such conduct may attract a hefty bad faith award where the employee suffers mental distress as a result.

Most recently, in Colistro, the Court of Appeal was asked to review the question as to just how much bad faith dismissal is worth. The court was asked to review a $100,000 moral damages award on the basis that no breakdown or explanation of the dollar amount was provided by the trial judge. The Court of Appeal easily concluded that $100,000 was well within the established amounts and, unsurprisingly, referred to the two Wal-Mart decisions: Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419 and Galea v. Wal-Mart Canada Corp., 2017 ONSC 245.

Galea represents the high-water mark of bad faith damages. In that case, the employer was not forthright with the employee in the drawn-out, 10 month process leading up to her dismissal. Thereafter, the employer ‘played hard ball’ with the employee over the course of litigation. She was awarded $250,000 – in part as a result of the employer’s post dismissal conduct.

In Boucher, the Court of Appeal upheld a $200,000 bad faith damages award where the employee had been harassed, reprised against, and where the employer failed to take her harassment complaint seriously eventually triggering her constructive dismissal.

Unfortunately, bad faith conduct on the part of employers is common. As such, it is a welcome development that employees can be compensated with significant damages where serious injuries have stemmed from unfair employer conduct – including conduct which takes place after the lawyers are in the picture.

Counsel on both sides ought to be on the lookout for bad faith conduct which might work its way into the  negotiation and litigation process and should not shy away from calling out such conduct for what it is. After all, employment law is not a game of hard ball. Real life is soft and delicate and the bearers of power must treat it that way – or pay the cost.

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