November 18, 2002by Israel Foulon LLP
During terminations there are various areas of potential employer liability, but by treating employees with dignity, fairness and respect employers can reduce exposure to lawsuits.
Insensitive and inappropriate behaviour by employers during a termination can result in increased liability in a number of different ways.
Where an employer acts with callous or insensitive disregard for the feelings and welfare of an employee in the course of the actual termination, a court may award the employee an extension to the reasonable notice period to which every employee is entitled upon termination. Employer conduct that occurs prior to the actual termination and results in mental suffering to the employee may result in damages for intentional infliction of mental suffering.
An employer that makes false allegations of illegality or fraud, or bad mouths the former employee in the marketplace after termination, may find itself subject to an addition to the notice period or an award of aggravated, punitive damages or even damages for defamation.
Prior to actual termination, an employer must be cautious in dealing with an employee it intends to dismiss.
In Prinzo v. Baycrest Centre for Geriatric Care, the employer was held liable for certain pre-termination conduct the court found amounted to intentional infliction of mental suffering. Prinzo was off from work due to an injury she sustained after falling in Baycrest’s parking lot. While she was off from work, Baycrest made a series of harassing telephone calls to Prinzo pushing her to return to work and inferring that she was malingering.
These calls were emotionally upsetting and caused her a significant amount of mental distress. Baycrest also sent a letter to Prinzo implying her doctor had agreed she could return to work, which was untrue. Despite awareness of the stress and anxiety being caused, Baycrest continued to make the harassing telephone calls to Prinzo.
The aggressive course of action pursued by Baycrest was designed to get Prinzo to return to work so Baycrest could terminate her employment. The court held the employer’s actions constituted a separate wrong which was independent from Prinzo’s claim for wrongful dismissal. The employer’s behaviour amounted to intentional infliction of mental suffering, and on this basis Prinzo was awarded aggravated damages in the amount of $15,000.
Engaging in conduct which is unfair or in bad faith in the course of dismissing an employee, including making unfounded allegations of cause, can also lead to increased damages by way of extending the period of reasonable notice.
In Wallace v. United Grain Growers Ltd., Wallace was dismissed by UGG after 14 years of service, in each of which he was the top salesperson. In 1986, Wallace was dismissed without any explanation. In response to the statement of claim issued by Wallace in his action for wrongful dismissal, UGG alleged Wallace was dismissed for cause. These allegations were maintained until the eve of trial and were only withdrawn when the trial commenced. As a result of the termination and the unfounded allegations of cause, Wallace suffered emotional difficulties and was eventually forced to seek psychiatric help.
The court found that while a terminated employee cannot make a separate claim for a “bad faith discharge,” an employer’s bad faith conduct in the manner of dismissal can result in an extension of the notice period. Employers are therefore subject to an obligation of good faith and fair dealing when providing an employee with notice of termination. Employers that breach this duty may be held liable for ensuing injuries such as humiliation, embarrassment or harm to the individual’s self-worth.
It should be noted that while employer conduct during the course of a termination can also result in aggravated damages (as opposed to an addition to the notice period), in order to do so the conduct must constitute an independently actionable wrong. The court in Wallace restored the trial judge’s award of damages in the amount of 24 months’ salary in lieu of notice.
Post-termination bad faith conduct may also result in an addition to the notice period or an award of aggravated damages or punitive damages.
In Hamer-Jackson v. McCall Pontiac Buick Ltd., the plaintiff was constructively dismissed after 13 years as a sales manager with McCall. After Hamer-Jackson left his employment, the employer circulated a letter to other GM dealers alleging Hamer-Jackson had directly violated GM policy. Further allegations of illegality and fraud were made with respect to Hamer-Jackson filing false expense vouchers and to his billing McCall for work done by his own company. These allegations, abandoned only shortly before trial, were held by the trial judge to be completely unfounded.
At trial the court found that the employer’s actions entitled Hamer-Jackson to an additional six months’ notice for Wallace-type damages, or in the alternative, an amount equal to six months’ notice for aggravated or punitive damages. On appeal, the court agreed the employer’s bad faith conduct in the manner of dismissal was another factor properly compensated for by an extension of the reasonable notice period in accordance with Wallace. On this basis, the court found it was unnecessary to determine whether the trial judge was correct in finding that the employer’s actions might also constitute a separately actionable wrong for which aggravated and/or punitive damages could be awarded. Potentially, the plaintiff in this case could also have claimed damages for defamation.
The lesson to be learned is that employers who are untruthful, misleading or unduly insensitive in the treatment of an employee before, during or after a dismissal, do so at their own peril. Courts have acknowledged that the time when an employee is most vulnerable and in need of protection is at the breakdown of the employment relationship. Thus, employer conduct which exacerbates the inherent trauma of losing one’s job will be viewed extremely harshly by the courts.
Ultimately, it takes little effort to be reasonable, honest and respectful with an employee when terminating employment, while the repercussions for failing to do so can be severe.
Protecting your firm
To meet obligations of good faith and fair dealing in the dismissal of an employee, employers should adhere to the following guidelines:
- Be honest and forthright with the employee and avoid making untruthful or misleading statements.
- Be sensitive to the feelings and personal circumstances of the employee when giving notice of termination.
- Do not make unfounded allegations of cause.
- Do not withhold letters of reference, records of employment or statutory notice payments.
- Do not make injurious statements or unsubstantiated allegations to would-be employers.
- Do not try to sabotage the employee by slurring the person’s reputation in the market, but rather make every effort, to the extent possible, to assist the employee in procuring alternate employment.
What the courts are saying…
Marshall v. Watson Wyatt & Co. was an appeal of a jury decision in which the plaintiff was originally awarded damages for wrongful dismissal equivalent to 12 months’ notice plus punitive damages in the amount of $75,000.
The award of 12 months of notice was comprised of a reasonable notice period of nine months and a Wallace bump-up of an additional three months for bad faith conduct in the manner of dismissal.
The Ontario Court of Appeal held that although the jury’s award of nine months’ notice was generous it fell within the range of reasonable notice.
The three months in Wallace-type damages was also justified as the court found ample support in the record for a finding of bad faith and unfair dealing in accordance with Wallace. In particular, the court referred to the fact that Watson Wyatt alleged just cause for dismissal even though it told its human resources department that the termination was due to corporate restructuring. It also made allegations of insubordination, wilful disobedience and failure to achieve the expected level of performance, all of which were maintained until shortly before the trial began. Watson Wyatt also refused to pay Marshall approximately $80,000 in commission revenues it acknowledged it owed, and did not provide her record of employment for several months following termination.
Describing Wallace as “a call for employers not to ‘play hard ball’ with employees when dismissing them,” the court found these acts constituted exactly the kind of behaviour the courts were trying to guard against.
Finally, the court overturned the jury’s award of $75,000 in punitive damages expressing doubt as to whether the employer’s conduct gave rise to a separate actionable wrong. Although, even if it did, the court held that punitive damages would serve no rational purpose in this case since Marshall had already received generous compensation in the total damage award of 12 months’ notice.
For reference see:
- Prinzo v. Baycrest Centre (2002), 17 C.C.E.L. (3d) 207.
- Marshall v. Watson Wyatt (2002), 209 D.L.R. (4th) 411.
- Hamer-Jackson v. McCall (2000) 77 B.C.L.R. (3d) 214.
- Wallace v. United Grain Growers,  3 S.C.R. 701.
Peter Israel and Chris Foulon are partners in the Toronto law firm of Israel Foulon LLP – Employment and Labour Lawyers. They can be reached at 416-640-1550 or firstname.lastname@example.org. or email@example.com. The authors would like to thank Carita Pereira for her assistance with this article. A version of this article originally appeared in the Carswell publication, Canadian HR Reporter.