Navigating aggravated damages for mental distress in terminations

In the ever-evolving landscape of employment law, employers must tread carefully when it comes to terminating employees. A recent decision by the Ontario Court of Appeal has confirmed the lowered threshold for awarding aggravated damages for mental distress and serves as a stark reminder that employers could be on the hook for substantial damages, even if employees do not have documented medical or psychological proof of the mental distress they suffered.

In Krmpotic v. Thunder Bay Electronics Limited, 2024 ONCA 332, the Ontario Court of Appeal upheld a $50,000 aggravated damages award for mental distress without requiring any expert medical or psychological evidence from the employee. This decision confirms the principle in Ontario case law that an employee need not produce medical or expert evidence to support a finding of mental distress damages.

This ruling has several significant implications for employers:

• Employer conduct scrutinized: The Court of Appeal's decision emphasizes the importance of the manner in which an employer conducts a termination. In the case of Thunder Bay Electronics, the employer's decision to fire the employee shortly after his return from disability leave, combined with dishonesty and insensitivity during the termination process, was deemed sufficient to warrant aggravated damages.
• Risk of increased liability: Employers face risk of liability for aggravated damages if they act unreasonably or in bad faith during terminations, regardless of whether the employee can provide evidence of mental distress.
• Confirmed evidence requirements: Employees need not provide medical or expert evidence of mental distress to be awarded aggravated damages. Rather, employees need only produce oral or documentary evidence of their mental distress.

Practical steps to avoid aggravated damages

Employers must adopt proactive measures to mitigate the risk of aggravated damages:

• Consult legal counsel: Before proceeding with any termination, consult with an employment lawyer to ensure compliance with legal standards and to avoid potential pitfalls.
• Document fair practices: Maintain detailed records of the termination process, demonstrating fairness and sensitivity. This includes documenting reasons for termination and steps taken to support the employee.
• Training for management: Provide management with training on how to conduct terminations respectfully and legally. This includes understanding the legal ramifications of their actions and ensuring consistent application of policies.
• Post-termination support: Consider offering support services, such as outplacement services or counselling, to assist employees during the transition.

The recent ruling in Krmpotic underscores the importance of careful and considerate termination practices. Employers must be more vigilant than ever in their approach to terminating employees to avoid substantial liability for aggravated damages.

Ronald S. Minken is a senior lawyer and mediator at Minken Employment Lawyers, an employment law boutique in the Greater Toronto Area. Tejpreet (Tanya) Sambi is a lawyer at Minken Employment Lawyers.