Bad Faith Conduct in the Manner of Dismissal: 2019 Year in Review
This article looks at wrongful dismissal cases in 2019 to see what Ontario judges thought was bad employer behaviour (and what wasn’t) and how much it was worth.
BAD FAITH CONDUCT
Typically, dismissed employees can’t claim compensation for the disappointment, embarrassment, or other psychological effects of losing their job.
However, additional compensation can be available if the employee proves the employer engaged in “bad faith conduct in the manner of dismissal” which causes additional harm to the employee.
This article briefly reviews the cases from 2019 in which Ontario judges adjudicated bad faith conduct claims. Last year’s article looking at 2018 cases can be found here.
In 2019, there were six successful bad faith conduct claims reported and ten failed claims reported.
Successful Claims
Bad faith conduct damages are said to be “compensatory.” They compensate for actual harm proven. By contrast, the same misconduct may also result in an award of “punitive damages.” Punitive damages do not require proof of compensable harm. Punitive damages are awarded by the court to punish, deter, and denounce wrongful conduct.
Punitive damage awards must be “proportionate” to the severity of the wrongful conduct. This concept takes into account other monetary awards and punishments imposed on a defendant for the same misconduct. As such, punitive damages and bad faith conduct damages are often assessed side-by-side, and the quantum of one can impact the amount awarded for the other.
The brief summaries below outline both the bad faith conduct and punitive damages awards.
1. In one case, an employer engaged in bad faith conduct by attempting to undermine an employee’s termination entitlements. The employer missed payments of wages before termination, purported to unilaterally reduce the employee’s salary shortly before termination, tried to recharacterize the employee as an independent contractor, and then ultimately terminated the employee without any advanced notice or termination pay after having made intimations that the employee’s role with the business was secure. As a result of this unduly insensitive treatment the employee struggled with nightmares, anxiety, depression, and a loss of confidence and self-esteem. The court awarded $30,000 for bad faith conduct damages and $25,000 for punitive damages.
2. A grocery store employee was yelled at by her supervisor while he wielded a knife. The employer failed to conduct a proper investigation into this incident and other complaints of harassment and hostility. The employee’s termination was a reprisal for these complaints. The employer otherwise contrived misleading reasons for the dismissal. The employer did not give a reference letter. The employee sued in Small Claims Court for only bad faith conduct damages. She was awarded the maximum amount available within the monetary jurisdiction of the Small Claims Court, $25,000.
3. An employee was terminated amidst unsubstantiated allegations of theft which the employer formed through unproven suspicions after an incomplete, insensitive, and unfair investigation. The termination letter delivered to the employee was unduly harsh, alleging unsubstantiated fraud and dishonesty. The employer refused to provide a reference letter. This manner of dismissal caused mental distress to the employee and affected him financially through diminished prospects for reemployment. The court awarded $15,000 for mental distress and awarded $50,000 for financial losses. The court was critical of the employer’s conduct but felt no punitive damages were warranted because the conduct could not be construed as malicious.
4. A defendant employed his spouse through his small business corporation. When the couple separated, the defendant bitterly caused the company to withhold her wages, terminate her employment, and transfer the business’ assets to a related company. In an undefended action, the court awarded $75,000 for this bad faith conduct. The court declined to award additional punitive damages because the court had also ordered the individual defendant to be personally liable for the judgement, an order the court considered sufficient to meet the objectives of punishment, deterrence, and denunciation.
5. In an undefended action, the court awarded an employee $50,000 for bad faith conduct damages, citing the employer’s “neglect in the face of [the employee’s] heightened frustration and anxiety as the work environment became more toxic.” The claim arose after a 73-year-old employee complained of yelling and harassment in the workplace from a coworker which the employer did not actively investigate. In a culminating incident, the coworker slapped the employee three times in the face. The employee filed a police report, and the employer terminated her employment in retaliation. It is worth noting that the court separately awarded $15,000 as compensation for the assault itself, holding the employer vicariously liable for the assault of the coworker. The court declined to award any punitive damages, reasoning that the company was small and was already faced with significant compensatory damage awards which had the corresponding effect of retribution, deterrence, and denunciation. Additional punitive damages were therefore unnecessary.
6. An employer constructively dismissed an employee by unilaterally removing him from his sales position back to a lower-level shop floor position. The employer acted in bad faith by ignoring a “non-modification” clause which required any modifications to the employee’s letter of appointment to be by written agreement. The employer was untruthful by falsely suggesting the job change was prompted by a decline in sales when sales were in fact growing. There was no good business reason for placing undue pressure on the employee by insisting that he agree to the job change under short time constraints. The employee experienced increased mental distress by virtue of his age at the time, and his stated intention to retire from his position with the employer. He endured a demoralizing and unsuccessful job search. The employee described experiencing depression and anxiety throughout that period. The court awarded $25,000 for bad faith conduct damages.
REJECTED CLAIMS
To succeed, it is not enough to show that an employer acted badly. The employee must also prove actual harm. As such, a claim for bad faith conduct in the manner of dismissal can fail for two reasons. If the conduct was not bad, the claim will fail. If there is no harm suffered, the claim will fail.
1. An employer failed to continue employee benefits coverage after dismissal for the minimum period required by employment standards, but this was not done in bad faith and did not warrant additional compensation. Also, a coworker’s untrue comments made in a local coffee shop about the reasons for the employee’s dismissal did not warrant additional compensation. The employer could not be held responsible for the comments made by the coworker outside of work, and there was no evidence of any actual harm suffered as a result of the coffee shop comments.
2. An employer dismissed an employee without paying minimum payments owed under employment standards and without submitting a Record of Employment for employment insurance benefits. The court noted that the employer should have complied with these requirements but that this was not a basis for concluding that the defendant acted in a harsh, vindictive, reprehensible or malicious manner. Despite a two-month delay, the employer did comply when counselled to do so by their lawyer. The employee led no evidence of mental distress or of actual losses arising from the manner of dismissal. Accordingly no additional compensation was awarded.
3. The “sudden and unceremonious” termination of a company’s founder by new ownership “could have been conducted in a more sensitive manner.” The company had little regard for his relationships or reputation among other employees and clients. But, without more, the court concluded that this “manner of termination falls short of the type of bad faith that would give rise to an entitlement…”.
4. A funeral home director was constructively dismissed when the new owner terminated the director’s use of the company vehicle, recruited a lower-level employee to track the director’s time at the funeral home, withheld commissions owed, removed a photograph of the director from the funeral home, and changed the locks. But the court did not regard this as conduct “designed to cause mental distress.” The court concluded that, “although several of its actions were, in hindsight, ill-advised, those actions were not sufficiently egregious to warrant additional damages.”
5. The court found a skating club had acted dishonestly and in bad faith when it dismissed a skating coach after student registration for the season had already been completed in a deliberate effort to keep as many of the coach’s students as possible following her departure. But there was no evidence about how many more students the coach lost because of this conduct. This potential loss also overlapped with her other compensation already awarded by the court. A medical note describing “depression and anxiety” following dismissal and the skating coach’s testimony as to “lowered self-esteem” were also insufficient to warrant additional compensation. The court was not satisfied that this harm flowed from the manner of dismissal, reasoning that “depression and anxiety resulting purely from the loss of the job is not compensable.”
6. The court declined to award any additional compensation to an employee (self-represented in court) who had made inflammatory allegations of employer misconduct. The court only tersely noted that the alleged misconduct had not been proven.
7. The court declined to award additional compensation to an employee who alleged he was “humiliated” and “stressed out” by his dismissal and by criticisms he received about his work. The court reasoned that these usual hurt feelings associated with a loss of employment are not compensable. The criticisms he received of his work were not cruel and malicious but were an accurate review of his work. The court characterized this type of feedback as a commonplace “part of working for a living.” The employee had himself invited the tone of the discussion by rejecting the criticism as “crap.”
8. In a case where no additional harm was suffered, the court declined to award damages for bad faith conduct because the employee “candidly acknowledged that he did not suffer any psychological distress over and above that which would ordinarily result from dismissal.”
9. The plaintiff sought aggravated and punitive damages because the defendant failed to make certain payments of minimum termination entitlements. The court rejected this claim for additional compensation, distinguishing the case from others where courts awarded additional compensation for non-compliance with minimum employment standards. The employee here had suffered little to no harm as a result of the non-compliance which was not done with malintent.
10. The manager-chef of a restaurant was not constructively dismissed when the employer hired someone else to assist with the financial aspects of the struggling business. These steps were not designed to punish, humiliate, or demean the employee. They were not part of a surreptitious effort to force the employee out. They were legitimate business decisions implemented in a manner consistent with the employee’s employment contract. The employer was sensitive to the employee’s circumstances even after she abandoned her position and failed to communicate with the employer thereafter. Letters sent later by the Director of the company to pressure the employee to abandon her lawsuit were inappropriate and a violation of the employee’s reasonable expectations as a shareholder of the company, but it did not warrant aggravated damages.
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