In recent years, we have seen numerous court decisions awarding significant damages to terminated employees on account of the employer’s misconduct throughout the termination process. These cases may suggest that the threshold for additional damages is lowering in wrongful dismissal actions. Below are some best practices that employers should follow when terminating employees to avoid the risk of additional damages:
- Do not suggest that an employee should voluntarily resign to avoid termination obligations – Judges are highly critical of attempts by the employer to pressure an employee into voluntarily resigning. In Pasap v Saskatchewan Indian Gaming Authority and Bear Claw Casino, 2022 SKQB 200, the employee was awarded $25,000 in punitive damages because the employer gave the employee an ultimatum of being terminated or resigning. When the employee said that he was not resigning, the employer asked him to leave his keys, leave, and then maintained that the employee had resigned.
- Conduct a procedurally fair investigation into alleged misconduct if intending to terminate an employee for cause – In Rutledge v Markhaven, 2022 ONSC 3183*, the employee who was terminated for cause was awarded $50,000 in bad faith damages because 1) the investigator was not truly independent, 2) the defendant obtained information from the Plaintiff without her prior knowledge of the investigation; 3) the investigation was not fully confidential; and 4) the investigation’s scope expanded throughout the process. As cause is referred to as the “capital punishment” of employment law, it is critical that employers take careful steps to investigate concerns before alleging cause.
- Pay out the Employment Standards Act, 2000 (“ESA”) minimum entitlements on time – In Pohl v Hudson’s Bay Company, 2022 ONSC 5230 (“Pohl”), written about in our October newsletter, the employee was awarded $45,000 in moral damages and $10,000 in punitive damages on account of the Defendants’ termination conduct, which included the failure to pay the employee’s ESA entitlements on time. Similarly, in Halupa v. Sagemedica Inc., 2019 ONSC 7411 (“Halupa”), the employee was awarded $25,000 in punitive damages in part because of the employer’s failure to pay out the ESA minimums on time, with the Court stating that the failure was a “flagrant breach of the minimum statutory employment standards in this province”.
- Properly fill out the employee’s Record of Employment (“ROE”) and issue it on time – In both Pohl and Halupa, the damage awards were also based on the employers’ failure to complete and deliver the ROE within five (5) days of termination, and for making mistakes in the ROE. A faulty or delayed ROE can impact an employee’s ability to collect employment insurance benefits, which courts are being critical of.
Courts in Canada have long recognized the power imbalance between employers and employees, as well as the vulnerability of employees who are being terminated. Against this backdrop, we are seeing more and more damage awards against employers who exacerbate the vulnerability of employees in the termination process by engaging in bad faith, insensitive or careless conduct. Employers who plan on terminating employees should follow the above tips and consult with legal counsel. The lawyers at Heeney Vokey LLP would be more than happy to assist employers with navigating this legal minefield.
*This decision is not publicly available at this time.