A recent judgement highlights the importance of the duty of good faith throughout the termination process. In Pohl v Hudson’s Bay Company, 2022 ONSC 5230, the employer was ordered to pay $45,000 for moral damages and $10,000 for punitive damages to a former employee on account of their conduct in the manner of termination.
Mr. Pohl had been employed by the Company for 28-years and held the full-time role of Sales Manager. In this role, he earned a salary of $61,254 plus pension contributions and other benefits. His entitlement to common law notice was not limited by any contractual provisions. Prior to his termination, Hudson’s Bay Company (“HBC”) approached Mr. Pohl and offered him an Associate Lead position, which would require him to “voluntarily relinquish” his current position and transition to the new position. In the new role, he would be paid $18.00 per hour and he would not have a guaranteed minimum number of hours in any week. The company provided him with a contract to sign which would enable them to terminate his employment at any time without cause by paying him only his minimum entitlements under the Employment Standards Act, 2000 (“ESA“).
Mr. Pohl did not accept the new role and was terminated without cause. When he sued for wrongful dismissal, HBC took the position that he failed to mitigate his losses by refusing the offer of “continued employment.”
Mr. Pohl was awarded 24-months of reasonable notice at common law. The Court rejected the company’s position that he failed to mitigate by turning down the Associate Lead role, stating that the offer was “unreasonable.”
The Court concluded that the company breached the duty of good faith and fair dealing at the time of termination by:
1. walking Mr. Pohl out the door upon his termination, despite that he had committed no misconduct;
2. providing an offer of “continued employment” without adequate consideration that was misleading and purposely designed to extinguish Mr. Pohl’s rights on termination;
3. violating the ESA by paying out Mr. Pohl’s termination pay and statutory severance pay by way of salary continuance instead of in lump sum within seven (7) days of termination, as required by section 11(5) of the ESA; and
4. failing to issue Mr. Pohl’s Record of Employment (“ROE”) within seven (7) days of his termination and making mistakes on the ROE.
Mr. Pohl was awarded $45,000 in moral damages on account on this conduct. The Court noted that it was “within the reasonable contemplation of HBC that its conduct would cause Mr. Pohl mental distress.” Mr. Pohl further supplied evidence that he experienced mental distress beyond the understandable distress and hurt feelings normally accompanying a dismissal. Notably though, Mr. Pohl did not seek damages for the intentional infliction of mental distress.
The Court did not stop there. While noting that punitive damages are “only awarded in exceptional cases for malicious, oppressive, and high-handed conduct that offends the court’s sense of decency and is deserving of punishment,” the Court found that the failure to pay out Mr. Pohl’s ESA minimums in accordance with the ESA and the failure to issue a timely and correct ESA justified an award of punitive damages.
There appears to be a growing trend in the courts of awarding high moral and/or punitive damages for the employer’s termination conduct. It is a relatively common for employers to pay out an employee’s ESA termination pay and severance entitlement by way of salary continuance, but this judgement suggests that a strict reading of the ESA requires both termination pay and severance to be paid out in lump sum. The ESA states that severance pay can be paid in installments if the employee agrees, meaning that employers must ensure they obtain consent to do so. Further, it is not uncommon for employers to issue ROE’s late and/or with errors that require them to be re-issued. This case serves as an important reminder of the potential consequences of such conduct, and to be particularly mindful of conduct surrounding an employee’s termination. Employers are encouraged to consult legal counsel when terminating employees to ensure that they act in accordance with their duty of good faith, which is a growing area for damages in the court system. The lawyers at Heeney Vokey LLP would be happy to assist with this.