Employer’s conduct careless but not bad faith: Court

Appeal court strikes down Wallace award, finding mistake-prone post-dismissal conduct wasn’t high-handed
By Jeffrey R. Smith
|hrreporter.com|Last Updated: 03/09/2009

An Ontario worker who suffered stress from his former employer’s mishandling of his termination is not entitled to Wallace damages because there was no bad faith behind it, the Ontario Court of Appeal has ruled.

The appeal court’s ruling overturned a lower court’s finding of bad faith by the employer and an extra six months’ worth of damages on top of the six months’ notice it awarded Douglas McNevan, 50, for termination without cause.

In June 2001, McNevan was hired by AmeriCredit Corp., a U.S.-based auto finance company, to be the assistant vice-president, collections, in the company’s new call centre in Peterborough, Ont. He was put in charge of departments that collected delinquent loans.

Concerned with management skills

McNevan had success with his deparments, becoming known for his hard work and teamwork. However, AmeriCredit became concerned about his leadership and time management skills, as well as the way he ran meetings. He was not given any indication of the company’s concerns as the company’s view was someone either had management skills or didn’t. By the time of McNevan’s first performance review in June 2002, it decided he didn’t have the skills required for his position and fired him.

AmeriCredit offered McNevan three months’ salary and asked him to sign a release to accept it. McNevan asked for the reasons for his dismissal and a meeting to try to work something out, but was denied both. He became depressed and more stressed when his personal belongings were damaged before being returned to him and AmeriCredit miscalculated his vacation pay, which was only corrected it when he pressed the matter. He also experienced difficulties getting his T4 and record of employment (ROE).

Trial court doubles notice award with 6 months’ bad-faith damages

The trial court found McNevan’s work experience before AmeriCredit and the responsibilities of his position gave him reason to believe he would be employed for more than one year. Given these facts and also that similar job opportunities were limited in Peterborough, the court ruled McNevan was entitled to six months’ notice.

However, the trial court also found AmeriCredit’s failure to warn McNevan his work was unsatisfactory and the abruptness of his dismissal constituted bad faith on the employer’s part. The lack of feedback on his performance, the court said, was especially unfair since the company had “an atmosphere of open communication and regular feedback,” which made McNevan’s dismissal even more shocking to him.

The court also said the lack of a letter of reference and the offer of three months’ severance conditional on his signing a release was unfair. The company’s carelessness with his personal belongings, T4 and ROE exacerbated McNevan’s indignity and stress. The court ruled the manner of McNevan’s dismissal and AmeriCredit’s conduct after the dismissal warranted a total of six months’ salary in bad-faith damages.

Court of Appeal upholds notice, strikes down bad-faith damages

The Court of Appeal agreed with the base award of six months’ notice, since McNevan was in a “responsible management position” in an area where similar job opportunities were rare, even though he was only with AmeriCredit for 13 months.

However, it disagreed with the bad-faith damages. Since AmeriCredit did not dismiss McNevan for cause, it was not necessary to give him advance notice of its performance concerns, it said. There was nothing in his employment contract that required advance notice if he was dismissed without cause and, since the company viewed him as lacking proper management skills, his firing would have happened regardless.

“Given the company’s view that there was nothing McNevan could have done to correct his problems and salvage his position with the company, a warning would have accomplished nothing other than offer McNevan the false hope that he could take steps to avoid dismissal,” the appeal court said.

The appeal court also found AmeriCredit had no legal obligation to provide a letter of reference. McNevan didn’t ask for one nor for assistance in finding another job, and the severance offer contingent on him signing a waiver, the court said, was just “wise corporate practice.”

As for AmeriCredit’s conduct after McNevan’s termination, the appeal court did not find bad faith here either. While AmeriCredit may have shown some carelessness, the court did not find it was “untruthful, misleading or unduly insensitive,” as contemplated in Wallace. As a result, it struck down the bad-faith damages, restricting the amount to the base notice award of six months’ salary.

“While there may have been some lack of care and expediency in relation to McNevan’s various entitlements arising from his employment and its termination,” the appeal court said, “it would be erroneous to characterize the company’s handling of McNevan’s vacation pay, the delivery of his T4 and ROE and the refund of deductions on his paycheque, as being high-handed or unduly insensitive.” See McNevan v. AmeriCredit Corp., 2008 CarswellOnt 7512 (Ont. C.A.).

Add Comment

  • *
  • *
  • *
  • *