Company 'sought to take advantage' of long-time employee 'in a moment of vulnerability'
“Employers should follow the golden rule – do unto others as you would have them do unto you.”
So says Ronald Minken, principal of Toronto-area law firm Minken Employment Lawyers, in describing the importance of good faith and fair dealing when terminating employees – something that retailer Hudson’s Bay Company (HBC) may have learned after having to pay a former worker nearly $150,000 in wrongful dismissal damages, including $55,000 in moral and punitive damages.
The worker joined HBC in 1992 and worked his way up to the role of sales manager of several departments in a Toronto store by 2012. He did not have a written employment contract.
As a sales manager, the worker had 30 sales associates reporting to him.
The worker’s duties included interviewing and hiring new sales associates, creating schedules for the team, reviewing store and department sales, responding to customer concerns, executing directions from the executive team, and running product recalls for health or other reasons.
Corporate restructuring
On Sept. 15, 2020, HBC terminated the 53-year-old worker’s employment without cause as part of a nationwide restructuring. The worker’s supervisor immediately walked him out the front door of the store after notifying him of the termination.
HBC offered the worker a voluntary separation package that included 40 weeks’ pay in lieu of notice. The worker declined, so the company paid him the minimum entitlements under the Ontario Employment Standards, Act, 2000 (ESA).
HBC paid out the termination pay in bi-weekly severance payments until December 2020, after multiple requests from the worker’s lawyer to provide his remaining wages in a lump sum – the ESA requires employers to pay out wages owed within seven days after the employment ends and the employee’s last payday.
HBC also didn’t provide a record of employment (ROE) until December, which incorrectly stated the termination was because of a “shortage of work/end of contract or season” and his expected date of recall was unknown.
Offer of continued employment
At the time of the worker’s termination, HBC offered him continued employment as an associate lead. The offer came with the stipulation that he would “voluntarily relinquish” his sales manager position, which would be a resignation and remove any entitlement to common law damages based on his service. The hours of work would vary, but there was no guarantee of a minimum amount and his maximum pay would be less than half of what he had previously earned.
In addition, HBC could terminate his employment at any time by paying the statutory minimums and it could change his employment contract at any time for any reason.
The worker was given two days to decide on the offer and he declined.
The worker began seeing his doctor about symptoms of depression in December. He was referred for counselling and his doctor told him that his depression was interfering with his job search. He started looking for work in February 2021, six months after his termination.
HBC sent the worker numerous job postings, but many of them were far away, paid significantly less than his former salary, or were unrelated to his area of expertise. The worker felt that many of the postings were of little use to him.
The worker also searched several online job sites and applied to 136 jobs that were comparable to his former position, without success. He eventually found employment 18 months after his termination.
The worker sued HBC for wrongful dismissal, claiming 28 months’ notice along with moral and punitive damages.
24 months’ reasonable notice
The court found that the worker’s rejection of the voluntary separation package did not disentitle him to his common-law reasonable notice entitlement, and the package itself was less than that entitlement.
Given the worker’s 28 years of service, his age, his management position, and the pandemic, the court determined that the worker was entitled to 24 months’ notice.
Although the court found that the worker’s position wasn’t uncommon and his skills were transferable, the availability of comparable employment was affected by the pandemic, says Tanya Sambi another lawyer at Minken Employment Lawyers.
“The court cited Yee v. Hudson’s Bay Company [2021 ONSC 387] for the position that if there's an economic downturn, that would lead to a longer notice period,” she says. “So in this case, because of the economic impact that COVID-19 had on a lot of businesses, that leads to a finding that there would have been a longer notice period because there are fewer jobs, but also because there's more people applying for those jobs – the chances of getting a new job are limited.”
HBC argued that the worker failed to mitigate his damages by declining its job offer and not applying to hundreds of job postings it shared with him, but the court found that the job offer wasn’t equivalent to the worker’s previous position. It also agreed with the worker that many of the job postings HBC sent didn’t fit with his qualifications and experience.
Mental health affected job search
The court also found that the worker’s mental health suffered from the termination and he couldn’t be expected to look for work if he was suffering from depression for which he being treated. In addition, the worker still didn’t find work for another year after he started looking, so it was unlikely he would have found work in the first six months, said the court.
Courts usually allow about three months for dismissed employees to start looking for work, but the six months the worker took in this case was acceptable due to his mental health issues, says Sambi.
“When an employee can't work because they're physically or mentally unable to work, they can't obviously be looking for a job,” she says. “So that was the reason the court said the six-month period was okay – he wasn't mentally fit to work so he wouldn't be able to look for a job anyway.”
The court also determined that HBC’s conduct warranted moral damages on top of pay in lieu of notice. Having the worker’s supervisor walk him out the door when there was no alleged misconduct was “unduly insensitive,” said the court.
Breach of good faith
In addition, the job offer breached HBC’s duty of good faith and fair dealing and was an attempt to get rid of the worker’s termination rights. It “sought to take advantage of [the worker] in a moment of extreme vulnerability,” said the court.
“I think the thing that really motivated the court was that the offer extinguished [the worker’s] common law rights,” says Minken. “There was no contract during his 28 years of employment, and this offer was carefully designed.”
In addition to trying to remove the worker’s termination rights, HBC’s job offer was a significant demotion, says Sambi.
“All in all, it was not a comparable role, but they were offering it as one,” she says. “HBC offered him nothing of substance in exchange for waiving his right to pay in lieu of notice of termination on a 28-year career, and with a forward looking-provision that permitted HBC to never schedule him for a single shift.”
Noncompliance with employment standards
The court also pointed to HBC’s breach of the ESA by not providing his owed wages in a lump sum within a week of his termination and failing to provide an accurate ROE. All of this amounted to an attempt to obtain benefits to which the company was not entitled and increased the worker’s “sense of exploitation, humiliation, and depression,” said the court in awarding the worker $45,000 in moral damages.
HBC’s failure to comply with the ESA with regards to the worker’s unpaid wages and ROE also deserved punitive damages of $10,000, said the court.
“The reason for punitive damages was essentially the failure to comply strictly with the ESA and the Employment Insurance Act – number one, the unpaid wages owing to [the worker in a lump sum],” says Minken. “And number two, issue a timely ROE – it was those two items that justified it.”
“The court was really concerned about noncompliance with the ESA and the Employment Insurance Act,” Minken adds. “So there's a takeaway for employers – always strictly comply with [employment standards and related legislation.]”
In total, after deducting the statutory entitlements already paid to the worker, HBC was ordered to pay the worker $149,662 in wrongful dismissal, moral, and punitive damages.
Minken and Sambi agree on two key elements that employers should remember when terminating employees – ensure compliance with relevant employment standards legislation and treat them well.
“Treat your employees with respect when you're terminating them and don't do it in such a way that would cause them humiliation,” says Sambi.
“The courts view employees as being vulnerable, so be cautious with how you treat them,” says Minken. “If an employee has demonstrated loyalty and trust, the last thing you want to do is to be harsh to them, because it would be completely unwarranted.”
See Pohl v. Hudson’s Bay Company, 2022 ONSC 5230.
