‘Damages formerly known as Wallace’ (Legal view)

Employer’s conduct in firing worker careless, but not bad faith: Court
By Jeffrey R. Smith
|Canadian HR Reporter|Last Updated: 02/06/2009

In early 2008, the Ontario Court of Appeal addressed the concern that bad-faith damages — often referred to as Wallace damages — were being awarded too easily in its ruling in Mulvihill v. Ottawa (City).

It started a trend — which the Supreme Court of Canada reaffirmed later in 2008 in both Keays v. Honda Canada Inc. and Syndicat des employé-e-s de techniques professionnelles & de bureau d’Hydro-Québec, section 2000 (SCFP-FTQ) c. Corbeil — where bad-faith damages are less likely to be awarded, even in cases where an employer’s actions are genuinely unfair.

“Even where bad faith is found to exist, the Supreme Court in Keays added the additional requirement that employees prove they have suffered damages as a result of the bad faith before there will be any compensation,” said Stuart Rudner, a partner with Miller Thomson in Toronto who practices employment law and commercial litigation.

“The end result is that it is definitely becoming more difficult for employees to obtain ‘the damages formerly known as Wallace,’ as I like to call them.”

Courts show no sign of abandoning this type of thinking. The Ontario Court of Appeal added more fuel to the fire in a recent decision, finding a company mishandled a termination without cause of a 50-year-old worker, but no extra damages were warranted. In doing so, it overturned a lower court’s ruling that had awarded him six months’ damages on top of six months’ reasonable notice.

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

AmeriCredit became concerned about his leadership and time management skills, as well as the way he ran departmental meetings. But McNevan was not given any indication of the company’s concerns, as its view was a person either had management skills or didn’t. By the time of his first performance review in June 2002, the company decided he didn’t have the skills needed and fired him.

AmeriCredit offered McNevan three months’ salary after he signed a release. McNevan asked for the reasons for his dismissal and requested 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, only correcting it when he pressed the matter. He also experienced difficulties obtaining his T4 and record of employment (ROE).

Trial court doubled notice award with bad-faith damages

McNevan’s experience and responsibilities entitled him to six months’ notice for dismissal, ruled the court. It also found AmeriCredit’s failure to warn McNevan his work was unsatisfactory and the abrupt dismissal constituted bad faith. The lack of feedback, said the court, was especially unfair since the company had “an atmosphere of open communication and regular feedback,” which made McNevan’s dismissal all the more shocking to him.

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

Court of Appeal disagrees

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 felt he lacked proper management skills, his firing would have happened regardless.

Conduct wasn’t ‘high-handed or unduly insensitive’

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

As for AmeriCredit’s conduct after McNevan’s termination, the appeal court did not find bad faith there either. While the company may have been careless and a little slow, the court did not find it was “untruthful, misleading or unduly insensitive.

“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, 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,” said the Court of Appeal.

The appeal court struck down the bad-faith award, restricting the damages to the base award of six months’ salary in lieu of notice.

For more information see:

McNevan v. AmeriCredit Corp., 2008 CarswellOnt 7512 (Ont. C.A.).

Keays v. Honda Canada Inc., 2008 CarswellOnt 3743 (S.C.C.).

Syndicat des employé-e-s de techniques professionnelles & de bureau d’Hydro-Québec, section 2000 (SCFP-FTQ) c. Corbeil, 2008 CarswellQue 6436 (S.C.C.).

Jeffrey R. Smith is the editor of Canadian Employment Law Today, a sister publication to Canadian HR Reporter that looks at employment law from a business perspective. For more information, visit employmentlawtoday.com.

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