September 18, 2002by Israel Foulon LLP
Damages for mental suffering back on the table
The landmark Wallace decision in 1997 seemed to spell the end of claims for mental distress related to termination, setting the precedent that employees were not entitled to damages for any mental anguish that losing a job may bring.
The recent Prinzo decision puts damages for mental suffering related to termination back on the table. Employers will want to take note, because damages for the intentional infliction of mental suffering will probably be upheld if the employer’s actions are flagrant, calculated to produce harm or are necessarily certain to produce harm and result in a visible and provable illness to the employee.
The case: Prinzo v. Baycrest Centre for Geriatric Care
In one of the most important employment law decisions of the year, the Ontario Court of Appeal has upheld an award of damages for intentional infliction of mental suffering by an employer in the weeks leading up to termination.
In Prinzo v. Baycrest Centre for Geriatric Care,  O.J. No. 2712 (Ont. C.A.), Iole Prinzo, 49, had been employed by Baycrest for more than 17 years as the manager of the beauty shop, earning $30,000 per year when she was terminated. She was considered a model employee until 1996, when Mr. Gates became her new supervisor. Gates was unhappy with Prinzo’s performance. In January 1997 Gates recommended the elimination of Prinzo’s position as part of a series of cost-cutting measures and in October 1997 the board of directors accepted this recommendation.
On Nov. 20, 1997, prior to being notified, Prinzo fell and injured her arm in Baycrest’s parking lot. At first, she was able to continue to work with light duties and physiotherapy treatments but her pain was increasing. On Nov. 27, 1997, she received a letter indicating her position was being eliminated and the effective date of termination would be determined over the following weeks. On Nov. 28, 1997, she went off work due to her previous injury, and, according to her doctor, was medically unfit for any form of work until her return on Feb. 9, 1998.
In early December Baycrest started calling Prinzo, inquiring about her ability to return. The trial judge found the phone calls were extremely upsetting to Prinzo and caused emotional distress as the calls were harassing and implied she was malingering (faking injury). Baycrest said it was obligated to contact her pursuant to its return-to-work and accommodation obligations under the Workplace Safety and Insurance Act.
However, the evidence at trial suggested Baycrest was aggressively attempting to have Prinzo return in order to let her go. In addition, on Dec. 23, 1997, Gates sent Prinzo a letter implying that her doctor had agreed she was ready to return when this was not the case. Finally, when Prinzo told Gates she would not return until her doctor gave her the green light, Gates said this would be considered a work refusal. Prinzo’s lawyer advised Baycrest that these calls were causing stress and anxiety and requested all further communication to run through his office. Nevertheless, the calls continued.
Prinzo returned to work on Feb. 6, 1998. Baycrest immediately arranged a lengthy meeting with her to discuss her termination. Prinzo only wanted to discuss modified work duties. During the meeting, a statement was allegedly made that Baycrest was concerned that Prinzo’s conduct may cause harm to the residents, something she found very hurtful. On March 11, 1998, Prinzo was given a letter indicating her last day of employment would be March 31, 1998.
At the trial Prinzo’s doctor testified the manner in which she was treated caused her emotional distress, increased blood pressure, weight gain and a worsening of her diabetes symptoms. Prinzo found another job, which paid somewhat less, in October 1998. Baycrest paid Prinzo until November 1998.
The trial judge held that Prinzo was given notice of termination when she received the letter on Nov. 27, 1997 and that she was entitled to 18 months’ reasonable notice of her dismissal (less the amounts earned in mitigation of her damages). The trial judge also awarded her $15,000 for aggravated damages for mental distress on account of the conduct of Baycrest and the resulting effect on Prinzo’s health. Finally, the trial judge awarded Prinzo a payout for banked lieu time, punitive damages in the amount of $5,000, as well as reimbursement of legal costs on a substantial indemnity basis.
On appeal Baycrest argued the trial judge erred in awarding damages for mental distress, because the conduct of Baycrest did not amount to a separate actionable wrong. In Wallace v. United Grain Growers Ltd.,  3 S.C.R. 701, the Supreme Court of Canada confirmed that any award of damages beyond compensation for breach of contract for failure to give reasonable notice had to be founded on separate actionable conduct.
In Wallace, the court held that if an employer failed to comply with its duty of good faith and fair dealing at the time of dismissal, this did not constitute a separate actionable wrong for which an employee could be compensated, but it did provide a basis for the court to extend the period of reasonable notice.
The appeal court upheld the award of damages for infliction of mental suffering. It noted that damages for intentional infliction of mental suffering could be awarded if it: (1) is flagrant or outrageous conduct; (2) is calculated to produce harm; and (3) results in a visible and provable illness. The appeal court held these elements had been met in this case in that the manner of dismissal humiliated Prinzo, was damaging to her self-esteem and adversely effected her health. The trial judge had characterized the employer’s behavior as harassing and reckless, certain to result in harm to Prinzo, and her doctor confirmed the adverse effect on her health.
The appeal court reduced the length of notice from 18 months to 12 months because, although the November notice letter was not certain enough to constitute proper notice of termination, it still indicated that Prinzo knew her employment would soon be coming to an end.
Finally, the appeal court set aside the award of punitive damages as serving no rational purpose as Baycrest had already been adequately punished by the award of damages for mental suffering and a lengthy period of reasonable notice. Similarly, the award of legal costs on a substantial indemnity basis was set aside and replaced with an award on the usual partial indemnity basis.
Plenty of ammunition in Prinzo
The decision in Prinzo is significant for a variety of reasons. After the Wallace decision, claims for mental distress went out of vogue. Wallace required that damages for mental distress be based on a separate actionable wrong. A terminated employee was not entitled to damages for hurt feelings and general emotional upset. The employer was required to have committed some separate tortuous act, such as making a defamatory statement, in order for the employee to be entitled to damages in addition to pay in lieu of reasonable notice.
Wallace established that, where an employer failed to act in good faith in carrying out the termination, the employee could be compensated by a lengthening of the reasonable-notice period. This created a problem, from an employee’s perspective, where the employee partially or fully mitigated her damages. Arguably, an employee would lose the benefit of the extension of the reasonable-notice period if she mitigated during that period. Therefore, the award by the court of a Wallace extension would not serve the intended purpose of compensating an employee for damages to self-esteem and embarrassment.
The upholding of mental suffering damages in Prinzo will encourage plaintiffs to seek such damages because these damages are not subject to mitigation. A dismissed employee is entitled to these damages even if another job is found immediately after termination. In light of the finding in Prinzo, employers ought to be particularly sensitive in regard to actions and behaviour leading up to a termination so that claims based on mental suffering cannot be substantiated.
The Ontario Court of Appeal’s conclusion in respect of the effective date of dismissal is also significant. The appeal court confirmed the principle that notice of termination, to be effective, needs to be clear and unambiguous. The employee must know her employment will end as of some certain future date. Therefore, in Prinzo, the appeal court concluded the employee was not provided with proper notice until she received the letter advising her of a March 31, 1998, termination date. The original Nov. 27, 1997, letter was too uncertain to constitute proper notice.
Nevertheless, the appeal court went on to find that “the fact that Prinzo knew well before March 11 that her employment would soon end is a consideration affecting the length of notice.” Based on this finding, the appeal court reduced the length of reasonable notice.
The provision of reasonable notice is provided in order to allow an employee time to find other employment. The appeal court appears to be suggesting that where an employee knows her employment will soon be ending (even where she does not know the exact date), that employee should be looking for other work or at least preparing to do so.
This reasoning may prove helpful for employers in unintended ways. Where an employee has been repeatedly disciplined and received notice that she will be terminated if performance doesn’t improve, employers may try to argue that she was well aware her employment would soon be ending. Therefore, the employee should have been looking for other work, or preparing to do so, well before being formally notified and accordingly would be entitled to a briefer period of reasonable notice.
Chris Foulon is a partner in the Toronto law firm of Israel Foulon LLP – Employment and Labour Lawyers. He can be reached at 416-640-1550 or email@example.com. A version of this article originally appeared in the Carswell publication, Canadian Employment Law Today.