'I can't think of many other more serious allegations that you can make against an employee,' says lawyer providing insights
“Employers are wise to remember that their pre-termination conduct will be scrutinized, and will be taken into account in any award of damages by the courts, so they need to be aware that all of the actions that they take vis-a-vis the employee will have an impact on any awards that are made to the employee at the end of a trial.”
So says Christopher Andree, partner and past co-leader of the Employment, Labour and Equalities Practice Group at Gowlings in Kitchener, Ont., after an Ontario employer was ordered to pay a fired employee more than half-a-million dollars in wrongful dismissal damages including aggravated and punitive damages.
The now 72-year-old worker was the vice-president of Controlex Corporation, a real estate development and property management company, in Ottawa. He joined Controlex in 2002, when the company’s founder recruited him, and he had no written employment contract.
During his more than 18 years with Controlex, the worker reported directly to the owner and was responsible for the operational and property management functions of the business. He had a significant amount of autonomy in his role and only consulted the owner for certain major decisions. Over this time, Controlex grew from a small land holding company to a business worth about $700 million.
According to the worker, he got along well with the owner and they had informally discussed him retiring around the age of 75.
Problems with new company president
However, the owner passed away suddenly in July 2020 and the owner’s wife assumed control of Controlex. She hadn’t previously been directly involved in the business and she didn’t meet with the worker in person at any point after her husband’s death. However, she called the worker and told him that she was removing his signing authority for the company. She also began to instruct the worker’s direct reports without his knowledge.
Over the next eight weeks, the worker learned that the new president was visiting clients and making “bizarre and defamatory statements” about him, such as that he was “no good” and they should only deal directly with her. She also suggested to them that her husband had been murdered and the worker may have been involved, the worker was receiving kickbacks, and the worker had already been fired. In addition, she offered the worker’s job to one of his direct reports.
One client reported that the new president instructed him to tell others that she believed that her husband had been murdered and the worker was “on the take.”
In September 2020, the worker heard from office staff that his employment was being terminated. On Sept. 11, he received a termination letter by courier advising that he was terminated effective immediately, although no reason was provided. Controlex paid him salary and benefits for eight weeks.
The worker looked for other work but only found a few part-time assignments that weren’t comparable to his senior management role with Controlex. He sued Controlex for wrongful dismissal. After Controlex changed its counsel multiple times, the trial proceeded without the company attending. As a result, the worker’s allegations in his statement of claim were deemed to be true by the court.
Substantial notice period
The Ontario Superior Court of Justice noted that the worker was 69 years old at the time of his termination, he had more than 18 years of service, and he was in a senior management position. These factors all pointed to a longer notice period, said the court in determining that the worker was entitled to 24 months’ salary, benefits, and car allowance.
“There's nothing unusual about a 24-month award to this individual, primarily because of his age,” says Andree. “It might be considered a little high in light of the [18 years] of service, but he was a very senior employee and he was 69 years old.”
The court also found that the worker’s treatment leading up to his dismissal and the dismissal itself was in bad faith. The actions of the new president after she took over Controlex – removing management duties, not meeting with him, making defamatory comments about him with clients, going behind his back with his direct reports, and letting others know of his dismissal before him – likely caused the worker distress beyond what would normally be expected from termination of employment. As a result, the worker was entitled to $50,000 in aggravated damages, said the court.
The court’s language in this regard was somewhat out of date, which may be partly because Controlex opted to not participate in the trial, according to Andree.
“’Aggravated damages’ is not the language that is used in 2023 - the language used now is ‘moral damages,’ which stems from Keyes v. Honda Canada case, which is about 15 years old or so,” he says. “The language used demonstrates to me that the case was not argued with full case law and full canvassing of all of the issues as it would be if facing a defense counsel.”
‘Malicious campaign’ warranted punitive damages
The court also found that the owner’s wife, after she assumed the president role, “embarked on a malicious campaign to undermine the [worker’s] ability to carry out his job functions and attempted to destroy his reputation.” In addition, Controlex caused problems during the litigation process and failed to attend the trial, said the court in determining that the company’s conduct was a “marked departure from ordinary standards of decent behaviour” that warranted punitive damages of $50,000.
The aggravated and punitive damages awards seem modest given the employer’s behaviour in this case and two notable cases of similar employer bad-faith conduct - Galea v. Walmart, 2017 ONSC 245, that awarded $250,000 in moral damages and $500,000 in punitive damages, and Pate Estate v. Galway-Cavendish and Harvey (Township), 2013 ONCA 669, that awarded $450,000 in punitive damages, says Andree.
“The [worker] was alleged to have participated in the murder of the principal of the company by the widow, who also told business colleagues that he was ‘on the take,’ which you would presume means engaging in fraudulent behavior - I can't think of many other more serious allegations that you can make against an employee,” he says. “A $50,000 punitive damages award may have a significant impact on a small corporation, but in this case [Controlex] had a $700-million value - I would have thought that [the damages] would at least have been as impactful as on that small municipality [in Pate].”
Controlex was ordered to pay the worker 24 months’ pay in lieu of notice, aggravated and punitive damages. Less the eight weeks’ salary already paid to the worker, the total damages amounted to $571,461.68 plus costs.
Termination obligations
In Canada, compared to many other countries, it’s fairly easy to terminate an employee’s employment as long as reasonable notice is provided, so Controlex dug a deep hole for itself with false accusations and treating the worker poorly, says Andree.
“The idea of engaging in this kind of behaviour, it's totally unnecessary,” he says. “Many employers get motivated by a desire to avoid the requirement to provide pay in lieu of notice, but the courts have made it very difficult to avoid that obligation.
“Employers should fulfill their legal obligations rather than taking dramatic steps to avoid them, because often those steps will lead not only to the award that they were trying so hard to avoid, but also additional damages, both moral and punitive.”
