Employers, hold on to your wallets

The employment law pendulum has swung in the employees’ favour and legislative changes have opened the door to higher damages

On the employment law scene, 2007 could prove to be a very interesting year, particularly in Ontario. In December last year, two significant changes came into force in the province — the abolition of mandatory retirement and sweeping changes to human rights legislation.

The former means no employer may rely on a mandatory retirement policy unless it has a specific bona fide reason for doing so. Further, no employee 65 or older will be without recourse under the province’s Human Rights Code given that the age cap has been eliminated in the legislation.

The latter, in the form of Bill 107, could significantly alter the landscape, but it’s too early to tell how courts will interpret the specific amendments. The most critical change relates to the powers granted to courts when a human rights infringement is brought before them. In the event a court finds an employee has suffered a human rights infringement, the courts have all the same powers available to a human rights tribunal to order both monetary and non-monetary remedies.

Whether the ability to reinstate an employee is one of those powers has yet to be seen. However, in light of the fact human rights infringements may now be brought in concert with a civil action for wrongful dismissal, this will undoubtedly open the floodgates for employees to plead human rights complaints in wrongful dismissal actions and request remedies available both under the code as well as in a wrongful dismissal action.

But those aren’t the only forces that could make 2007 an interesting year. Those changes, coupled with the evolution in monetary damages which courts are beginning to award in relation to punitive and aggravated damages, will make wrongful dismissal litigation much more meaningful for employees and employers. If a 65-year-old worker terminated after 25 years alleges age discrimination and files a wrongful dismissal lawsuit, and age discrimination is found, the damages could be staggering.

Employers will, therefore, have to be extremely careful in how they dismiss employees and in their behaviour both before and after termination to avoid the significant damages which could be awarded as a result.

After all, courts haven’t pulled any punches in punishing employers who behave badly. Wallace damages — awarded for bad faith in the way the dismissal was handled — seemed to spike significantly last year. A jury in Nova Scotia awarded a woman an additional 48 months pay on top of her reasonable notice for what it considered to be a breach of the employer’s duty of good faith and fair dealing when it failed to provide the worker with a promised reference letter and delayed her record of employment. While the Nova Scotia Court of Appeal found the 48-month extension was unreasonable, it still awarded a nine-month Wallace extension for the bad faith demonstrated by the employer.

More importantly, courts have shown a willingness to award much more money in the form of aggravated and punitive damages.

Aggravated damages are damages assessed at a higher level than usual for the type of injury suffered in order to compensate the victim for injury to feelings, dignity, pride and self-respect resulting from the manner in which the injury was inflicted. Punitive damages are not meant to compensate the victim, but are meant to punish the party who inflicted the injury and to act as a deterrent to others.

One of the most significant decisions last year was the case involving Honda Canada and Kevin Keays. At trial, $500,000 in punitive damages was awarded to Keays, a worker who suffered from chronic fatigue syndrome. Honda appealed the decision, and the Ontario Court of Appeal reduced the amount to $100,000 — still a significant amount. In that case, the court made it clear that violations of the Human Rights Code could provide the basis for punitive damages in wrongful dismissal claims despite the fact that no tort of discrimination existed in law.

Another significant decision in 2006 came in Sulz v. Canada (Attorney General) where the British Columbia Supreme Court awarded $125,000 for general damages. The court said Nancy Sulz, a former member of the RCMP, had been subjected to intentional or negligent harassment by her immediate supervisors to the extent that she became clinically depressed and had no choice but to accept a medical discharge. The B.C. Supreme Court found her case should be compared to personal injury cases where plaintiffs had been inflicted with life-long physical handicaps.

For years, the Supreme Court of Canada has recognized the very special characteristics of the employment relationship, and the unique position of the employer-employee relationship — mainly, that there’s an imbalance of power in the relationship. After all, the employer really holds all the cards. But despite this fact, the damages awarded to employees prior to the last two years were not as significant and extraordinary damages were limited to cases where the courts found a separate action from the wrongful dismissal itself. But that’s changing.

The late Justice Robert Dickson of the Supreme Court of Canada once said: “Work is one of the most fundamental aspects in a person’s life, providing the individual with a means of financial support and, as importantly, a contributory role in society. A person’s employment is an essential component of his or her sense of identity, self-worth and emotional well-being.”

Courts and legislatures appear willing to scrutinize the employment relationship like never before, taking the words of Justice Dickson to heart in providing employees with a stronger voice.

For more information see:

Keays v. Honda Canada Inc., 2006 CarswellOnt 5885, 52 C.C.E.L. (3d) 165 (Ont. C.A.).

Sulz v. Canada (Attorney General), 2006 CarswellBC 3137 (B.C. C.A.).

County dinged for bad behaviour

Another example of how the pendulum has swung in favour of employees comes in the case of Downham v. Lennox & Addington (County). In that 2005 ruling, the Ontario Superior Court of Justice found an employer’s conduct in dismissing an employee caused humiliation, embarrassment and loss of self-esteem as well as damage to his position in the community and prospects of employment in the social services field.

The court ruled the employer’s actions were worthy of compensation for both aggravated and punitive damages. It found the losses were not temporary and continued for the better part of four years up to the time of trial. Though the court found that losses would be diminished by the judgment in the case, it continued to find there would be a lingering loss and assessed it at $50,000.

The court in Downham also found the employee had suffered damage to his physical and mental health and the employer had engaged in the tort of intentional infliction of mental suffering, assessing these damages at $20,000. Finally, as a result of numerous acts of misconduct up to the trial, the court awarded punitive damages of $100,000.

Downham had been terminated for cause for helping his friend find non-profit housing, which his employer contended was a conflict of interest given that the plaintiff was the manager of the county’s non-profit housing project.

The employer conducted an investigation and made certain defamatory allegations leading to Downham’s termination, including conflict of interest and breach of trust. Downham experienced severe psychological distress and was put on medication and referred to a psychologist. He also had thoughts of suicide at one point after the termination.

The court found the investigation process was mismanaged and basing Downham’s termination on the report was a fundamentally flawed decision. Additionally, the court found the county’s assessment of the degree of conflict of interest was grossly distorted and its reliance on rules and policies governing the employee’s conduct to justify its actions but completely failing to follow its own rules about handling the conduct was egregious.

For more information see:

Downham v. Lennox & Addington (County), 2005 CarswellOnt 7034 (Ont. S.C.J.).

Natalie Macdonald is a partner with Grosman, Grosman and Gale in Toronto. She can be reached at (416) 364-9599 or by e-mail at nmacdonald@grosman.com.

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