Highest ever damages for bad faith dismissal overturned

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|Canadian HR Reporter|Last Updated: 09/04/2003

British Columbia's top court has toppled the largest “extended notice period” damages ever awarded in Canada.

Two years ago the province's supreme court awarded Colette Clendenning six months' remuneration in lieu of notice plus a whopping 36 months of extra pay for bad-faith dismissal. Such “extended notice damages” are sometimes called “Wallace damages,” after a case in which the Supreme Court of Canada extended the notice period of an employee (Wallace) after his employer was particularly thoughtless in the way it dismissed him. Clendenning’s 36-month “Wallace damages” stood as the “high-water mark” for such awards until now.

Clendenning’s employer, the insurance company Lowndes Lambert, had wrongly accused her of forgery, fraud and drug abuse. Finding that the accusations had made her a leper in the industry, the trial judge excoriated Lowndes Lambert for, in his view, over-reacting.

But two of three judges at the B.C. Court of Appeal recently held that at least some of the allegations — including those of forgery and fraud — were not frivolous. “The employer’s behaviour on this aspect indicates an honest belief in the validity of the plea,” Justice Mary Saunders wrote.

Q Should an employer pay heavy supplementary damages for wrongly accusing an employee of serious crimes?

A Justice Saunders and Justice Kenneth Mackenzie decided that the basic notice awarded by the trial judge could stand. However, they slashed the bad-faith dismissal damages to 12 months of extra notice damages. In their view, the employer did not act out of malice and therefore should not face extreme sanction.

Appeal Justice Lance Finch has disagreed with them on this issue only. Lowndes Lambert’s allegations against Clendenning were notorious in the industry, Justice Finch writes. “As one potential employer testified, it was not so much what was said, but what was not said, that concerned him.” Justice Finch would have awarded Clendenning triple-notice for bad-faith dismissal, or 18 months.

The majority notes that “damages for bad-faith dismissal (are) not intended to stand as punitive damages for actions which are harsh, vindictive, reprehensible and malicious. Nor is it a stand-alone head of damages as would be the case in a separate cause of action (for example, for mental distress). In all the circumstances, acknowledging the trial judge’s strong condemnation of the employer’s behaviour, and recognizing that Ms. Clendenning did suffer from depression for several months after dismissal, I would award 12 months’ damages in lieu of notice.”

For more information: Clendenning v. Lowndes Lambert (B.C.) Ltd., 2000 BCCA 644, Vancouver Registry Nos. CA025279 and CA024814, Nov. 27/00.

B.C. proving employer-friendly

Indeed, you might say that the B.C. Court of Appeal has been employer-friendly lately, at least given that our public discourse often concerns individual rights these days. Shortly before the Clendenning decision, the court also ruled that it was not illegal discrimination to fire somebody who couldn’t come to work because he was in jail.

The province’s Human Rights Act makes it illegal to “refuse to...continue to employ a person because...that person has been convicted of a criminal or summary conviction offence that is unrelated to the employment or to the intended employment of that person.”

A worker at Fletcher Challenge Canada pleaded guilty to sexual interference with a person under the age of 14. Fletcher Challenge continued to employ the worker, and allowed him to use all accrued leave time while he served a year’s sentence in prison. However, the worker ran out of leave while he still had almost six months left to serve in jail. Fletcher Challenge fired him, stating the reason as his inability to attend work.

In complaining to the Human Rights Commission, the worker argued that the criminal conviction was unconnected with his employment. That is, it was the offence that had to be related to the employment, not its consequences for the worker, before the employer could dismiss employees.

Q Does absenteeism caused by a prison sentence give a crime a workplace connection?

A The appeal court has affirmed that the firing did not violate the Human Rights Act. Writing for the majority, Justice Harold Hollinrake writes, “It cannot be said that the ‘offence’ is unrelated or, to put it another way, not connected with the employment when it is that offence that leads directly to the conviction and the subsequent sentence of an individual. In other words, the ‘offence’ must be one for which there is a conviction.

“Furthermore, it is the conviction and subsequent sentence that lead directly to the complainant’s being unable to meet a fundamental requirement of the employment contract — that is, showing up for work. If the offence is directly related to or connected with the conviction which it must be, and if the conviction and the resulting sentence is directly related to or connected with the failure of the complainant to show for work, it cannot reasonably be said that the offence and the conviction are ‘unrelated to the employment.’”

Justice Hollinrake reasons that his view is strongly reinforced by the fact that the code section includes “intended employment.”

“If the construction sought by the appellant were to prevail it would lead to absurd result. Under the appellant’s interpretation a person incarcerated for a criminal offence could apply for employment and the prospective employer could not refuse to hire that person because he or she was unavailable for employment due to incarceration. Instead, the employer would be required to accommodate that individual to the point of undue hardship. With respect, this result could not have been the intention of the legislature.”

The Ontario Court of Appeal has said that an employer was wrong to fire a jailed worker for absenteeism where his crime was unrelated to his work. However, in that case the human rights tribunal and courts considered whether the employer, Frito-Lay, had a duty to accommodate the worker. (The courts found that Frito-Lay could have done so without experiencing undue hardship.) In the Fletcher Challenge case, the issue of accommodation was not before the court.

For more information: McLaughlin v. Fletcher Challenge Canada Ltd., 2000 BCCA 584, Vancouver Registry No. V03536, Oct. 31/00.

Jeffrey Miller is editor of Canadian Employment Law Today. For subscription information, call (416) 609-3800 or (800) 387-5164.

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