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$110,000 in punitive damages for fabricating reasons for dismissal

B.C. Supreme Court says a significant award of punitive damages was necessary to deter an employer from treating employees maliciously and callously
Donald Bailey was employed by Service Corporation International (SCI), for 17 years as a salesman for funeral-related products and services. Google Street View

By Stuart Rudner and Anique Dublin

In the case of Bailey v. Service Corporation International (Canada) ULC, the British Columbia Supreme Court concluded that a significant award of punitive damages was necessary to deter an employer from treating employees maliciously and callously when terminating their employment.

In the summer of 2013, Bailey experienced health problems which resulted in him having to take medical leave from work. His claim for short-term disability benefits was denied and he was in the process of appealing this decision when he became aware that his employment had been terminated.

Bailey discovered the termination when his wife was denied a claim for medical-related benefits and was informed that they were no longer covered because Bailey was no longer an employee of SCI.

Bailey’s termination of employment was treated as retroactive to the last day he worked for SCI. He was 60 years old at the time of his termination.        

Bailey brought an action seeking damages for dismissal without notice and without cause. SCI defended the claim on the grounds that Bailey was dismissed for cause. They alleged that by taking time off work, he had abandoned his employment.

Decision

The court held that SCI did not have just cause to terminate Bailey’s employment because he was on an approved leave of absence from work due to illness and, therefore, he did not abandon his job.

The court concluded that the termination clause in Bailey’s employment contract was enforceable and displaced the common presumption of reasonable notice. For an employee with Bailey’s length of service, the employment contract limited the period of notice for dismissal without cause to eight weeks.  

Bailey was awarded $25,000 for aggravated damages. The court found that Bailey had become severely mentally distressed before his employment was terminated and that was in part the reason for his medical leave.

The court also found that the denial of his benefits claims would have caused him further upset and distress. And the court held that Bailey had proven that the manner of his termination had “exacerbated his mental distress beyond that which could be expected from ordinary termination.”

It was foreseeable that the manner of termination would have worsened the mental health of someone in Bailey’s fragile state. However, due to the difficulty in parsing out the causes of his mental distress, the court only awarded him $25,000.

Punitive damages

The court had no difficulty in concluding that this case was exceptional and punitive damages were necessary and just.

In arriving at its decision to award Bailey $110,000 in punitive damages, the court considered the decision by the Supreme Court of Canada in Honda Canada Inc. v. Keays. In that case, it was confirmed that punitive damages should “receive the most careful consideration and the discretion to award (punitive damages) should be cautiously exercised.”

The case also made it clear that courts should only resort to punitive damages in exceptional cases where it is necessary to condemn or punish conduct considered to be harsh, vindictive, reprehensive and malicious.

The court held that an award of punitive damages was necessary and just for the following reasons:

  • Bailey was terminated because he attributed some of this mental stress to the management style of one of SCI’s managers. That same manager was responsible for making the decision to terminate his employment and he was dishonest about the reasons for the termination.

  • SCI knew Bailey was suffering from mental distress and instead of dealing with him sensitively, it chose to treat him cruelly.  

  • The award for aggravated damages did not meet the goals of retribution, deterrence and denunciation because it was limited due to Bailey’s pre-existing mental distress.

The court found that SCI’s employment contracts contained ungenerous termination clauses. These clauses allowed SCI to make calculated decisions to treat employees abusively when terminating their employment, as employees would not be willing to risk the costs of litigation.

The court held that there needed to be a meaningful award of punitive damages to deter SCI from treating any other employee as maliciously and callously as it did Bailey.

The court concluded that the award of $110,000 was not disproportionate and excessive because Bailey’s total award for damages was less than he would have likely received in general damages had the common law regarding reasonable notice applied.

The court also concluded that if not for the limitation of notice in Bailey’s employment contract, he would have been entitled to reasonable notice or damages in lieu of notice in the range of 18 to 24 months.   

Anique Dublin is a law clerk and billing clerk at Ruder Law in Toronto.

© Copyright Canadian HR Reporter, HAB Press. All rights reserved.

Stuart Rudner

Stuart Rudner, Employment Lawyer and MediatorStuart Rudner is the founder of Rudner Law (RudnerLaw.ca), a firm specializing in Employment Law and Mediation. He can be reached at stuart@rudnerlaw.ca, (416) 864-8500 or (905) 209-6999, and you can follow on Twitter @RudnerLaw.
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