Employer on the hook for 26 months notice plus aggravated damages for making assumptions about mismanagement without investigating
A wildlife charity must pay its former executive director and long-time employee more than $90,000 in lost salary and aggravated damages after it unceremoniously dumped the employee for financial mismanagement without a proper investigation, the British Columbia Supreme Court has ruled.
O.W.L. is a charitable society devoted to rescuing and caring for injured raptors — such as owls and eagles — and promoting their return to the wild. Beverly Day, who founded O.W.L. in 1985 and was its longstanding executive director, was dismissed by its board of directors on Oct. 23, 2014, without notice, allegedly for just cause.
O.W.L.’s just-cause dismissal of Day centered on allegations that she misappropriated its funds to pay for the cost of her housing. It also related to Day’s decision to dismiss one O.W.L. employee and inappropriate remarks to another.
In January 2015, O.W.L. commenced a lawsuit against Day asserting that her failure to ensure O.W.L.’s bookkeeper deduct her rent from her pay constituted a deliberate misuse of the charity’s funds, and it sought reimbursement of those monies. The action was driven by O.W.L.’s president, Karen Wheatley, with support from its board of directors.
Day denied the allegations and filed a counterclaim against O.W.L. seeking damages for wrongful dismissal, including aggravated and punitive damages.
In response, O.W.L. attempted to bolster its claim by alleging unjust enrichment and insubordination as further grounds in support of Day’s just-cause dismissal, with further clarification that just cause arose from the cumulative effect of all of these issues as well as a determination that Day could not be trusted.
Although Day’s written employment agreement could not be found, the court was able to determine the material terms of her employment from various sources — such as board meeting minutes — which included:
• Working at least five days per week and being on call nearly 24 hours a day, seven days a week
• Unfettered authority to hire, fire and discipline employees
• Residing in a separate accommodation location onsite (at the request of O.W.L.’s board of directors)
• Reporting to the board at regularly scheduled meetings and as required in the interim.
Unauthorized payments
The critical issue at trial was whether O.W.L. was obligated to cover Day’s rent, because her failure to reimburse the charity was the foundation of its claim. O.W.L.’s lease with its landlord required someone to remain onsite at all times and Day did so at the request of the board, living in a small house on the property.
It was in October 2014 when Wheatley learned that Day’s rent was not being deducted from her paycheque. At trial, O.W.L.’s evidence regarding this issue was largely based on oral testimony from O.W.L. president Wheatley and another board member.
The court rebuked their evidence as it contradicted that of four previous board members and O.W.L.’s board meeting minutes. It found that Wheatley “simply presumed” Day was responsible to pay her rent and “jumped to the conclusion that Day was guilty of financial mismanagement without conducting an investigation.”
As a result, it found O.W.L. was obligated to cover Day’s rent as a term of her employment.
O.W.L. also pursued allegations of unauthorized increases in salary and vacation pay, which the court similarly noted ignored the evidence of its own bookkeepers and the board’s meeting minutes.
Day’s wrongful dismissal claim
O.W.L. terminated Day’s employment after approximately 30 years of service — including 18 years as its paid executive director in charge of all of its operations.
The court quickly determined that O.W.L.’s alleged grounds for termination did not amount to just cause, which it characterized as either “factually incorrect” or “having no merit.”
Given the extended length of her employment, responsibility to manage the overall operations of O.W.L., age at the time of dismissal (63), and narrow field of expertise, the court found Day’s case to fit within the category of exceptional cases, justifying an award beyond two years. The court awarded Day 26 months’ pay in lieu of notice, but slightly reduced it to 24 months to account for her admitted intention to reduce her hours over time because of her husband’s medical condition, which the court found as a “likely contingency.”
Interestingly, notwithstanding Day’s candid admission that she did not look for subsequent employment, the court did not further deduct from her award because O.W.L. did not establish that Day rejected job offers of suitable employment.
In summary, Day was awarded:
• $41,424, representing lost salary over 24 months, plus six per cent vacation pay
• $750 per month, representing loss of rent paid for premises during the 26-month notice period, for each month that she was able to establish a loss
• $650, representing lost Internet access for 26 months
• $936, representing employer-paid contributions for medical benefits for 26 months.
Aggravated damages
The court also awarded Day $30,000 in aggravated damages for the mental distress she suffered due to O.W.L.’s conduct in the manner of dismissal. The court’s list of reasons to justify the award included:
• Accusing Day of dishonest conduct when claiming that she misappropriated O.W.L.’s funds without conducting an investigation
• Pursuing the misappropriation claim until closing submissions, when it abandoned the claim and sought to recast it as financial mismanagement
• Publicly asserting unfounded allegations of poor performance and intentional misconduct that cast a shadow on her character and reputation
• Encouraging Day to take time off work and using her proposed absences as a ground for dismissal
• Persisting in its allegations that Day failed to investigate when it dismissed another employee for just cause and neglected her duties in a “thoughtless” and “reckless” manner
• Advancing numerous other allegations in its trial brief without any basis for doing so.
Advice to employers
This case has some key lessons for employers.
First, in response to possible misconduct, it is always appropriate to conduct an investigation to determine the facts. O.W.L.'s conclusion that Day had been wrongly benefiting from the charity paying her rent was based entirely on assumptions. Simply reviewing the board’s meeting minutes would have clarified this issue.
Second, even if an investigation uncovers misconduct, employers must examine the circumstances, including the suitability of lesser discipline, to determine if it amounts to just cause. Although the court found Day to have engaged in some misconduct, it held that a warning should have been given and the board’s decision to dismiss her for just cause was excessive.
Third, for employers to discharge their onus that an employee failed to mitigate, they must offer some evidence of available employment or labour market opportunities.
For more information see:
• O.W.L. (Orphaned Wildlife) Rehabilitation Society v. Day, 2018 CarswellBC 2646 (B.C. S.C.).
David J. Master is an associate lawyer working at Littler LLP and advises employers on the full spectrum of employment and labour law issues. He can be reached at (647) 256-4536 or [email protected].
