'Misleading, insensitive' dismissal costs HBC more than $185,000
If any employer is looking for best practices on how to handle a termination, they may want to look at a recent decision out of Ontario.
The case concerned a long-time employee of Hudson’s Bay Company (HBC) who was terminated in the midst of the pandemic. In the end, he was awarded $150,000 by the Ontario Superior Court of Justice for wrongful termination — including moral damages for $45,000 and punitive damages for $10,000 — along with more than $35,000 in legal costs.
“There's been a couple of cases like this, where employers are trying to do something and the employee is smart enough to say no. And then they get punished for even trying,” says Barry Fisher of Barry Fisher Arbitration and Mediation in Toronto.
“It's really [sending a message] to employers: ‘Don't play games.’”
Sales manager in Toronto
Darren Pohl worked for Hudson’s Bay Company (HBC) for more than 28 years, working as a sales manager in Toronto. Roughly 30 sales associates reported to him.
On Sept. 15, 2020, the company terminated his employment without cause.
Pohl did not have a written contract of employment but HBC offered a voluntary separation package that would provide 40 weeks of pay in lieu of notice of termination, inclusive of statutory entitlements including notice of termination and severance pay.
When Pohl did not accept that offer, HBC provided his minimum entitlements under the Employment Standards Act (ESA). The company later said the supports at termination “met or exceeded his legal entitlements” and a reasonable notice period was 14 to 18 months.
“This is far in excess of the 40 weeks’ pay in lieu of notice HBC offered to Mr. Pohl at the time it terminated his employment,” said the court in the Sept. 15, 2022 decision Pohl v. Hudson’s Bay Company, 2022.
The severance package did not fall within the range of reasonable notice, said the court, and HBC did not provide a single case that indicated that 40 weeks was the appropriate amount of pay in lieu of notice in these circumstances.
Considering the four Bardal factors and recalling that the reasonableness of the notice period must be decided with reference to each particular case, the court found that Pohl was entitled to a reasonable notice period of 24 months.
HBC’s only hope of not having to pay a great deal more than that would have been if they succeeded in their mitigation recommendations, says Robert Tanner, founding partner of Tanner & Guiney in Toronto, who represented Pohl.
“I can't imagine that they really thought, absent of the mitigation issue, that a 28-year employee in a management position… was going to get 40 weeks. That's just not on. And that was essentially the judge’s response too.”
The court weighed various factors in making its decision, such as Pohl’s continued employment, mitigation efforts and treatment by HBC upon termination.
Continued employment
Pohl held the position of sales manager or customer experience manager, and it was a “senior, supervisory position in the store,” said Justice Robert Centa.
When terminated, he was offered “continued employment” as an associate lead — which he declined — so the company said he “completely failed to mitigate his losses by refusing to accept HBC’s offer” and was, therefore, entitled to no damages beyond the ESA minimums.
But the offer of a sales associate job “was misleading and a breach of the duty of good faith and fair dealing,” said Centa.
Pohl held a full-time position that paid him $61,000 plus pension contributions and other benefits. HBC’s offer would require him to “voluntarily relinquish” his current job and transition a position with much lower pay. At law, this would be a resignation, which would eliminate his entitlement to common law damages for the termination of his employment based on 28 years of service, said the court.
“Assuming Mr. Pohl could work 40 hours a week for 48 weeks per year, he would earn $34,560, which would be a significant reduction in income compared to his former salary,” said Centa.
“HBC offered Mr. Pohl nothing of substance in exchange for extinguishing his employment law claims. HBC now submits that because Mr. Pohl did not accept its offer, he should be denied all compensation beyond ESA minimums. I decline to do so. HBC’s offer was unreasonable. No reasonable person would have accepted this offer.”
It seemed like the court really didn't like when HBC tried to have Pohl take a lower-rated position, says Fisher.
“From what I can tell, it looks like they were trying to have him sign a new contract which would wipe notice periods and give him statutory minimums.”
It was abundantly clear that the new role at HBC wasn’t the same position, says Tanner.
“It was a position for which my client clearly lacked the qualifications or experience,” he says.
“The effect, presumably by design, was that if my clients had — in his distressed, vulnerable state at the time of termination — accepted the offer, he would have thereby waived all of the rights that arose on termination — salary in lieu of notice and other rights — for really no consideration at all.”
Mitigation efforts
HBC said “there were an abundance of retail manager or assistant manager opportunities available” to Pohl at the time of his termination. The company also identified 907 jobs for which it said he would be qualified.
But Pohl identified 136 jobs that were comparable to his former position and said he applied to every single one of them, with a spreadsheet detailing his efforts.
And the court rejected HBC’s “grossly inflated” claim that it identified over 900 comparable and available jobs: “HBC’s count contains many duplicate entries and entries that are entirely inappropriate in these circumstances.”
The last gasp of most employers is to complain about mitigations, says Fisher.
“In my experience, the employers who complain most about failure to mitigate have done the least to help the guy,” he says.
“It's a very difficult argument from the employer, because the employer has to prove a negative — it's almost impossible: ‘If he had done this, he probably would have got a job’ — it’s very hard for them to prove that, but they tried.”
Moral damages
“HBC was untruthful, misleading, and unduly insensitive,” said the court. “I find that the wrongful conduct of HBC caused Mr. Pohl mental distress beyond the understandable distress and hurt feelings normally accompanying a dismissal.”
In awarding $45,000 for moral damages, the court took several factors into consideration. For one, it said HBC’s decision to walk Pohl out the door was “unduly insensitive” for a loyal, 28-year employee who had committed no misconduct.
This kind of approach should only be done when necessary, such as dismissal for cause or if the worker did something improper and you want him off the premises immediately, says Tanner.
“To treat an employee that way is, in my view, just inviting punitive damages and moral damages as well, because [there is a] likelihood that an employee — and especially a long-term, committed employee like Mr. Pohl… is going to have a negative reaction to that kind of treatment,” he says.
“You give your life to an employer, and then they not only terminate you without notice, without adequate compensation, they march you out the front door.”
But this practice is pretty standard, says Fisher, because “there's always some horrible story of the person who went back and trashed their computer and all that.”
The offer of a sales associate job was also misleading and a breach of the duty of good faith and fair dealing, said the court: “This offer was carefully designed and would have extinguished Mr. Pohl’s rights on termination.”
In addition, HBC violated the ESA by not paying out the wages it owed to Pohl in a lump sum within the required period of time.
The employer also deliberately violated the ESA by paying the termination and severance pay by way of instalment instead of a lump sum.
“HBC’s conduct is entirely unacceptable. It is a large, sophisticated employer and there is no excuse for it not complying with its obligations under the ESA,” said Centa.
Paying by instalment could help HBC with its cash flow over a period of several weeks, says Tanner.
“Whether they were also taking advantage of it in order to maximize their benefits that they were getting under the CEWS [Canadian Emergency Wage Subsidy] program, I don't know, for certain — that could be a reason.”
Technically speaking, an employee can insist on being paid a lump sum, says Fisher.
“They may want to RRSP it, for instance, because if you haven't been paid a salary continuance, Revenue Canada does not consider it a retirement allowance, and therefore you can alter it into an RSP. So that's often why employees would say, ‘I want my pay.’”
Finally, the retailer failed to issue a record of employment (ROE) to Pohl within five days after the interruption of his employment, and it breached the duty of good faith and fair dealing at the time of termination.
The company issued two ROEs and both were incorrect, says Tanner.
“It said that the reason he was being issued was a lack of work, and that his date of return was unknown… that is clearly false,” he says. “One can only speculate on what their reasons were for doing so but, again, [there is] the whole question of whether or not that would have been advantageous to them with respect to eligibility for CEWS payments.”
An ROE should be issued when the earnings stop, so if a person is on salary continuation, that doesn’t happen until the payments stop “and then he receives his EI from that point forward,” says Fisher.
However, because of interim orders during the pandemic, terminated employees receiving a lump-sum severance payment could also collect their EI benefits.
Read more: 6 key questions about ROEs and dismissals
Nevertheless, HBC was hit with damages totally $150,000 that included two years’ salary of $61,000, the cost of replacement benefits ($7,800), employer contributions to a pension ($4,400), moral damages ($45,000) and punitive damages ($10,000) subtracting $40,000 for ESA entitlements already paid.
And on Oct. 3, Pohl was also awarded more than $35,000 in legal costs.
