Going from bad to worse

It’s never a good experience for an employee to be terminated. But it is possible to make things worse than it needs to be, and if an employer’s actions make that happen, it might be a more complicated and expensive experience.

A recent story that has been making the rounds is that of Better.com’s dismissal of about 900 employees just before Christmas. While the timing itself may have seemed cold, what has also raised a lot of criticism is the way it was done — all the employees were dismissed on a three-minute Zoom call with the CEO and were given three months’ severance pay, regardless of their service.

While this happened in the U.S., it raises issues that Canadian employers should keep in mind when they’re thinking about terminating employees, whether a single worker or many. First off, the severance may not pass muster in Canada for some of the employees, if any of them had a lengthy service time or were in key roles with the company. Employees are entitled to reasonable notice of termination based on those and other factors.

But another thing that could problematic was how the dismissal was handled.

While employees are entitled to a certain amount of reasonable notice for without-cause dismissal, a successful wrongful dismissal claim could involve more damages than just for notice if the employer handled the dismissal poorly.

It’s a principle of employment law that employers have a duty to act in good faith. If they don’t, there could be punitive damages for bad-faith conduct in the course of dismissal if the fired employee can prove harm beyond the normal damages that stem from termination of employment.

Examples of bad faith

Last year, the Ontario Superior Court of Justice voided a restrictive termination clause and awarded more than $80,000 for pay in lieu of notice and $75,000 in aggravated and punitive damages after an employer terminated an executive when her lawyer wrote to the employer in response to several unilateral acts by the company — including questioning her dedication after a raise request, removing her from her position, suspending her for two weeks, and threatening to demote her to a non-executive-level role. The executive had never had any formal performance management and after she sued for wrongful dismissal, the employer scrapped its allegations of just cause.

Back in 2016, the same court awarded $85,000 in moral and human rights damages after an Ontario company failed to act on sexual harassment complaints and the fired the complainant. The complainant was a female employee in a male-dominated workplace and a third-party investigator found a “culture of intimidation, bullying and verbal abuse. However, the company didn’t follow the investigator’s recommendation and fired the worker five days after her complaint.

Walmart Canada was hit with a huge penalty for bad-faith conduct against a dismissed employee in 2017. An executive was removed from the senior executive team and reassigned at a big meeting in front of hundreds of employees and was left in limbo. As she tried to find a new role, the president of Walmart Canada labelled her as “not promotable.” She was later moved to a new office without her knowledge and then offered a choice to either work for an executive who didn’t want her or accepting a severance package. When she tried to discuss things with the president, her employment was terminated. The Ontario Superior Court of Justice awarded the worker $750,000 in moral and punitive damages and more than $400,000 in wrongful dismissal damages.

Another Ontario employer got dinged for serious bad-faith damages in 2018 not necessarily for how it handled a worker’s dismissal, but rather for how it responded to a wrongful dismissal claim. It filed a $1.7-million counter-claim intended to intimidate the worker and made allegations of cause that it couldn’t prove. The Ontario Court of Appeal didn’t look kindly on the employer’s behaviour and awarded the worker 19 months’ pay in lieu of notice, $25,000 in moral damages, $100,000 in punitive damages, and more than half a million dollars in costs.

Claims struck down

Of course, a worker feeling bad about a termination is natural and it doesn’t always mean the employer acted poorly — or at least to the point that it caused unwarranted damage. The Ontario Court of Appeal struck down a claim for bad-faith damages in 2008 after an employer failed to provide advance notice of without-cause dismissal or a letter of reference — these are not legally required. It also found that the employer demonstrated some carelessness and lack of expediency in providing the worker’s termination entitlements, but these weren’t “high-handed or unduly sensitive.”

Similarly, the B.C. Court of Appeal overturned an award of bad-faith damages in 2018 when there was no proof that the mental distress an employee suffered was beyond that of what is expected from a normal termination of employment.

When an employer is considering dismissing an employee, there’s no escaping that it will be bad news for the employee and it’s going to have some negative effects on them. However, it’s wise to avoid making it any worse than it needs to be, or else the damages might pile up.