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Damages for Manner of Termination

November 28, 2017

Many would agree that a person’s employment is an integral part of one’s identity, as recognized by Justice Dickson of the Supreme Court of Canada in Reference Re Public Service Employee Relations Act (Alta.), [1987] 1 S.C.R. 313, where he said:

 

            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. Accordingly, the conditions in which a person works are highly              significant in shaping the whole compendium of psychological, emotional, and physical                elements of a person’s dignity and self-respect.

 

The law expects employers to terminate their employees in a manner of “good faith”. Employers are required to be “candid, reasonable, honest, and forthright with their employees” when terminating them from employment (discussed in Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701 at para. 98). Failure to do so can lead to foreseeable damages known as aggravated damages, or even punitive damages.

 

Aggravated damages in the employment context are generally viewed as moral damages resulting from conduct in the manner of termination that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive” (Wallace, supra, at para. 98). The court in George v. Cowichan Tribes, 2015 BCSC 513, indicated that aggravated damages will generally be awarded where: (1) the conduct of the employer in effecting the termination is inconsistent with the employer’s duty of good faith; and (2) the employee suffers mental distress because of that conduct. The Court of Appeal in Lau v. Royal Bank of Canada, 2017 BCCA 253, however, recently clarified that mental distress is not a prerequisite for an award of aggravated damages, and that the evidentiary foundation may be testimony that demonstrates “serious and prolonged disruption that transcended ordinary emotional upset or distress”.

 

Punitive damages, on the other hand, are designed to punish the employer for conduct that is deserving of reprimand (unlike aggravated damages which are compensatory in nature). The objects of punitive damages are retribution, deterrence, and denunciation towards an employer for conduct that is so malicious and outrageous that it is deserving of punishment. In Vernon v. British Columbia (Liquor Distribution Branch), 2012 BCSC 133, for example, the court awarded $50,000 in punitive damages because the employer “offered” the plaintiff a reference letter that was conditional on her resignation. The court stated:

 

            [387]   [Offering] a reference letter as a carrot to resign is… conduct which is properly the              subject matter of retribution, deterrence and denunciation.

 

            [388]   [W]hen punitive damages are awarded, they should be assessed in an amount                      reasonably proportionate to such factors as the harm caused, the degree of the                                  misconduct, the relative vulnerability of the plaintiff and any advantage of profit gained                  by the defendant. At the time the proposal was made, [the plaintiff] could not have been                more vulnerable. She had just been told she was being terminated from her job of 30                      years. She knew that without a reference she would have little chance of finding suitable                new employment. The [employer] knew that if she voluntarily resigned, it could avoid a                possible lawsuit for wrongful termination in which it would have to justify its treatment                  of a 30-year employee. I award $50,000 in punitive damages.

 

The court in Ram v. The Michael Lacombe Group Inc., 2017 BCSC 212 reminded us that care must be taken to avoid the pitfalls of “double compensation” or “double punishment” for the same actions when considering aggravated and punitive damages. In Ram, a Burger King employee of 24 years’ service was fired for taking a medium order of fries and a drink at the end of her shift. Although she admitted that she took the food without paying, the plaintiff claimed that she asked for permission to take a fish sandwich and the general manager allowed this. The court in Ram took a common sense approach and found that the punishment (termination) did not fit the alleged “theft” of the fries and drink, and awarded the plaintiff $25,000 in aggravated damages, while noting that punitive damages were not warranted.

 

In sum, employers should be aware of their obligation of good faith and fair dealing towards employees in the manner of termination, as the failure to act reasonably and fairly in the course of termination can lead to costly awards of aggravated and/or punitive damages.

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