Punitive Damages in Just Cause Dismissals, The Law Times (November 28, 2016, p. 7)

Punitive Damages in Just Cause Dismissals, The Law Times (November 28, 2016, p. 7)

By Nikolay Y. Chsherbinin

A dismissal for just cause is a matter of substance, not form. An unsubstantiated allegation of cause could result in punitive damages for corporate employers.
A recent employment case in point is Morison v. Ergo-Industrial Seating Systems Inc., 2016 ONSC 6725, where Justice P.E. Roger ordered the employer to pay $50,000 in punitive damages for breaching its duty of good faith by asserting just cause for tactical and financial gains.

The employer’s intentional delay in providing the employee his record of employment and paying amounts owing under the Employment Standards Act, 2000 were factors that underlay the award of punitive damages, causing the judge to send a clear message to employers that they would not be allowed to behave in such a fashion.

In Morison, 58-year-old Tom Morison was dismissed for cause after eight years of employment as Ergo-Industrial Seating Systems Inc.’s regional sales manager. On Oct. 22, 2012, Ergo’s president called Morison during which he alluded that his employment may be terminated for cause, but he offered him five months’ notice, which included one month of working notice.

Morison refused to accept Ergo’s severance package and argued that allegations of cause were made in bad faith to facilitate a more favourable settlement for Ergo.
Ergo retorted that it had a bona fide belief of cause relating to an alleged mismanaged demo chair account, failing to properly market the health-care line of products and difficulties with co-operating positively with his immediate supervisor. However, in the judge’s view, the evidence was clear that Morison was not a good fit with his new supervisor and that the dismissal date was arrived at simply in an effort to accommodate the starting date of the hired replacement.

Morison sued for wrongful dismissal. Having initially alleged cause, Ergo subsequently abandoned it. Roger awarded $98,939.32 in wages, calculated on the basis of Morison’s commissions to which he would have been entitled during the 12 months’ notice period.

Dealing with moral damages, Roger reminded that they are compensatory in nature, awarded if an employee can prove that the manner of dismissal caused mental distress and are to reflect the actual damages sustained. Morison’s evidence on this cause of action was superficial and lacked particulars.
It did not allow the judge to disassociate the evidence of mental distress caused by the bad faith manner of dismissal from the evidence of normal distress and hurt feelings resulting from losing a job. Consequently, he refused to award moral damages.

Notably, Roger was not concerned with the lack of medical evidence. His position adds to a growing trend that medical evidence is not mandatory to successfully claim moral damages. What is mandatory is the evidence of mental suffering. Relying on the Federal Court’s decision in Canada (A.G.) v. Robitaille, 2011 FC 1218, Roger observed that in the absence of medical evidence, the employee’s testimony may be sufficient to establish moral damages, as long as there is evidence of such damages and evidence of a causal connection between the moral injury and the wrongful conduct. While medical evidence is not an essential ingredient in a claim for moral damages, its availability could be particularly helpful for employees who seek to recover substantial moral damages.

In awarding Morison $50,000 in punitive damages, Roger concluded that Ergo committed an independent actionable wrong, being the breach of its duty of good faith. Not only did Ergo assert cause, when there was no reasonable basis for such an assertion, it delayed in providing Morison his record of employment and significantly delayed in paying amounts owing under the ESA.

The judge determined that Ergo knew of Morison’s precarious financial circumstances and that its conduct of delayed payment of statutory amounts was intentional and financially impacted Morison, who had to cash significant amounts of his RRSP and sell his house. Roger further found that Ergo’s allegations of cause were made for tactical and financial gain consideration and with a view to financially benefit it. He was troubled by the lack of any warning and of any investigation on Ergo’s part, prior to Morison’s summary dismissal. Ultimately, Roger found Ergo’s conduct to be reprehensible, exceeding what might be considered as ill advised and, thereby, meriting an award of punitive damages.

It might be helpful to keep in mind that the purpose of punitive damages is to punish an offending employer.
They are awarded only where compensatory damages are insufficient to accomplish the objectives of retribution, deterrence and denunciation and are given in an amount that is no greater than necessary to rationally accomplish their purpose. Arguably, the distinction between moral and punitive damages could be blurred whenever the same misconduct underlies the employee’s claims for both damages. However, in allocating the punitive damages, the focus is on an employer’s misconduct, not on an employee’s actual loss.

Morison illustrates that whenever an employer deploys an allegation of just for tactical and financial gains or with no other reason than to make the dismissed employee’s case more difficult than it should have been, the courts would not hesitate to award substantially higher punitive damages than would otherwise be the case. Abandoning an allegation of cause at any stage, in the course of the action, is grounds for augmented damages and costs.

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