Employer Ordered to Pay Punitive and Moral Damages for Trying to Intimidate Terminated Employee with Million-Dollar Counter-Suit
A recent Ontario Court of Appeal upheld a wrongful dismissal claim in which the trial judge had awarded the employee punitive and moral damages and costs after the finding that the employer had counter-claimed for $1.7 million in an attempt to intimidate the employee.
The employee had been hired as a sales representative by the employer in 2004 and had quickly moved up through the ranks. By 2011, the employee had been promoted to president.
However, in June 2015, the employee was terminated from his employment. At the time of his termination, he was told that he was being terminated for cause and that he had committed fraud, though no specifics were given. When the employee indicated that he would be hiring a lawyer, the employer warned him that if he did, it would counter-claim and that it would be very expensive.
The employee was 54 at the time of his termination. Apart from one brief period of employment, the employee, who has a grade 12 education, had been unable to find re-employment.
A month after his termination, the employee filed a statement of claim seeking damages for wrongful dismissal. The employer responded with a statement of defence and counter-claim in which it alleged cause and claimed damages of $1,700,000 for unjust enrichment, breach of fiduciary duty and fraud, as well as $50,000 in punitive damages.
Lower Court Decision
The trial judge found that the employer had failed to prove cause against the employee and had failed to prove any of its allegations against him. She also found that its counter-claim for damages in the amount of $1,700,000 had been a tactic to intimidate the employee and that it had breached its obligation of good faith and fair dealing in the manner of his dismissal.
As a result, the trial judge dismissed the employer’s counterclaim in its entirety and awarded the employee significant damages, including: damages in lieu of reasonable notice based on a 19 month notice period, including bonus and benefits; punitive damages in the amount of $100,000; and moral damages in the amount of $25,000.
The employer appealed and submitted that the trial judge made reversible errors of law in awarding:
- Damages representing a 19 month notice period, which it asserted exceeded the applicable range;
- A bonus for the 2015 year;
- Aggravated/moral damages; and
- Punitive damages.
Court of Appeal Decision
The 19 Month Notice Period
The Court of Appeal disagreed with the employer’s argument that the trial judge erred in principle by taking inappropriate factors into account and by awarding a notice period beyond the 15 to 17 month range. It found that the trial judge gave careful and cogent reasons for her decision that a 19 month period was appropriate and there is no case law supporting the employer’s argument that 17 months is an upper limit.
The 2015 Bonus
The court also disagreed with the argument that the trial judge erred in awarding a bonus for the 2015 year because her findings were amply grounded in the evidence.
The court further rejected the employer’s third argument. It found that the trial judge was correct in noting that employers have an obligation of good faith and fair dealing in the manner of dismissal and that an employer’s pre- and post-termination conduct may be relevant to the moral damage analysis if such conduct is a component of the manner of dismissal.
It found that the evidentiary record provided ample support for the trial judge’s finding that the manner of dismissal warranted an award of aggravated damages. It agreed with her finding that the employer’s conduct in threatening the employee not to make a claim and in instituting the counter-claim was calculated to, and did, cause him stress. She accepted the employee’s evidence that the manner of dismissal was devastating and had caused him stress. As a result, the court found no error of law or principle, or palpable or overriding error of fact that would justify interfering with the trial judge’s award of $25,000 for aggravated damages.
Additionally, the court disagreed with the employer’s submission that the trial judge erred in making a punitive damages award against it in the amount of $100,000.
The court found that the trial judge carefully reviewed all of the appropriate factors, stating:
“In reaching her conclusion, the trial judge referred to the threat by the [employer] during the termination meeting that if [the employee] sued, the [employer] would counter-claim – a threat which it carried out with its counter-claim alleging fraud. The trial judge also referred to the fact that the [employer] had, on the seventh day of trial, reduced its damages claim from $1,700,000 to $1. The trial judge concluded that “it did not appear as though the [employer] had any intention of proving damages but rather was using the claim of $1,700,000 strategically to intimidate [the employee].”
Appeal from the Costs Award at Trial
Finally, the court rejected the employer’s leave to appeal the costs award at trial, claiming that the award of $546,684 was unfair and unreasonable. While the court recognized that the costs award was unusually high, it found that the employer had not proven that the costs award was not fair and reasonable in the circumstances of the case.
As a result, the appeal was dismissed. Additionally, the court ordered the employer to pay costs of the appeal in the amount of $35,000 to the employee.
The Kitchener-Waterloo employment lawyers at Petker Campbell Postnikoff have many years of experience advising non-unionized employees and employers on a variety of workplace issues including termination and wrongful dismissal. Our team will walk you through the details of your dispute, advise you on your rights, responsibilities and obligations, and help you understand your options. If your dispute cannot be settled through negotiation, we can represent you through mediation and the court process.
We represent clients throughout southern Ontario, including the communities of Cambridge, Guelph, Elmira, Brantford, Fergus, Elora and the surrounding area. Call 519-886-1204 or contact us online for a consultation.