Company ordered to pay $750,000 in moral, punitive damages to former executive
An executive at Walmart Canada who suffered considerable distress in a drawn-out dismissal saw some relief recently after being awarded $750,000 in moral and punitive damages — one of the largest such awards in Canadian employment law.
“This is about how not to dismiss an employee,” said Natalie MacDonald, owner and founder of MacDonald & Associates in Toronto, who represented the plaintiff, Gail Galea.
“This is about how not to embarrass and humiliate an employee, and about how an organization must conduct itself throughout as appropriate.”
The case sends a very strong message, she said.
“If you lie and cheat with employees, you’re going to get dinged, and courts are not reserved about it anymore.”
Galea was hired by Walmart Canada in 2002 as district manager-in-training. She was promoted several times through the next eight years to district manager, regional manager, regional vice-president, general merchandise manager and vice-president of general merchandising — with expectations she would one day become chief merchandising officer.
Galea “proved herself a rising star in the (Walmart) firmament,” said the Ontario Superior Court of Justice in its Dec. 7 decision. She was asked to join several groups involving accelerated management, women leaders and executive development.
But in January 2010, as part of a restructuring, Galea was removed from her role and informed her responsibilities were changing, with the possibility of an ex-patriate assignment. And in February, she was told she would be senior vice-president of merchandising and strategic initiatives, moving from a member of the senior executive team to a supporting position.
Over the next few months, Galea’s role was never clearly defined, despite her best efforts. She also discovered her performance rating was lowered so she was no longer considered promotable. And after attending an eight-week program at Harvard University, Galea returned to find her personal effects had been moved to another office and her phone disconnected.
Finally, in November 2010, Galea was offered either a severance package or the position of senior vice-president of e-commerce, a role she did not consider comparable to her experience.
Still considering her decision, Galea was informed 10 days later her employment was terminated.
She also saw her compensation and benefits payments cut off after 11 months, despite signing a non-competition agreement that entitled her to two years’ severance pay if she was ever dismissed without just cause.
So Galea sued Walmart Canada for the remaining severance owed, and moral and punitive damages. In the end, she was awarded more than $1. 6 million in damages.
“She was made to suffer repeated humiliation,” said Justice Michael Emery. “(Walmart) built her up, only to let her down that much more. That corporate behaviour was not just unduly insensitive, it was mean.”
“(Walmart’s) conduct was misleading at best, and dishonest at worst, in the way the company treated Ms. Galea. Only (Walmart) knew that (her) career was over long before she was actually terminated. To keep her in suspended animation was unduly insensitive conduct.”
The company’s behaviour was “more egregious” than Walmart in the 2014 Boucher v. Wal-Mart Canada Corp. case, said Emery, where the plaintiff was awarded $1 million in damages by a jury (this was reduced on appeal to $100,000).
“(Emery) wasn’t swayed by the fact that Walmart is the world’s bigger retailer — he looked at denunciation and deterrence as being his major factors,” said MacDonald.
The decision definitely placed a great emphasis on the bad faith manner of dismissal, as Emery found Walmart, in implementing major personnel changes, allowed Galea “to twist in the wind,” she said.
“There’s no doubt that an employer is able to implement certain, albeit not fundamental, changes, but changes to an employee’s employment contract. But certainly you can’t carry out a change that is in bad faith, that is misrepresentative of what the employer is saying to the employee; in other words, you can’t have an employer saying one thing but turning around and doing something else, and this case really illustrates that.”
For Walmart, it wasn’t just a matter of oversight, said Andrew Vey, founding partner at Vey Willetts in Ottawa.
“They just strung her along, and that… for the court, really was the tipping point that pushed them to say, ‘This is the type of case where extraordinary damages are appropriate,’” he said.
“Sometimes when you have a broader restructuring, as seems to be the case here for Walmart, it’s possible that individual employees can get lost in the shuffle, where nobody is managing the details closely enough to realize some of the knock-on consequences on the individual level.”
Clearly, something fell apart in this situation, said Vey.
“If there is a takeaway, it’s that employers need to be more mindful than ever in terms of how they conduct themselves both during the dismissal process, and in any subsequent litigation, because if you do it wrong, you can find yourself on the end of a nasty extraordinary damages award.”
It’s possible Walmart had the idea that to dismiss Galea would have been cruel and harsh, and it was looking around for a role that was appropriate, said Erin Brandt, lawyer at Kent Employment Law in Vancouver.
“If they had decided they were going to terminate the relationship, they should have done it, ripped off the Band-Aid. Dragging it out over a period of several months is actually worse for an employee, it doesn’t allow her to leave with her head high and look for a position where she will be valued and respected. Instead, she was jerked around for months until finally Walmart said, conclusively, ‘No, this is it, we’re done.’”
And because the conduct happened at the highest executive level of the company, the court really wanted to send a strong message that the conduct was not acceptable, she said. “There’s a higher standard for the leadership, and I think the bottom line is that employers have an obligation to treat their employees fairly and honestly in the course of dismissal.”
When it comes to moral damages, it’s about the mental distress associated with the manner of dismissal, said Brandt.
“It all boiled down to the fact Walmart misled her over an extended period of time, and there were all these little pieces of it that slowly chipped away at her dignity. Each of those instances, on its own, I don’t think would have been sufficient for this kind of award, but ultimately what was important was the court said, ‘This came from the highest levels of management, this isn’t some rogue… mid-level manager or low-level supervisor who’s gone rogue and hadn’t contacted HR like they’re supposed to — this is the leadership of an incredibly large company who should have known better and they misled her and that’s not fair.”
Justice Emery made a finding that people knew what was going on but no one did anything about it, said MacDonald, “and that’s pretty tragic, for any organization… It’s the leadership, but I would put HR in there as well, I think it affects everybody.”
The moral damages given also ends the long-standing debate in Ontario, and affirms the principle, that no medical evidence is required in support of an award of moral damages, said MacDonald, author of Extraordinary Damages in Canadian Employment Law.
“Everybody is unique, and everybody’s approach to stress and anxiety and distress is different... this is very precedential.”
Moral damages are pretty rare, and often it’s about more than the average pain and depression associated with losing a job, said Vey.
“The courts recognize that you’re vulnerable in those circumstances and an employer that conducts itself particularly poorly, is unduly sensitive to you or causes you undue harm, there can be damages associated with that.”
Generally, punitive damages are there for particularly reprehensible conduct, where the court really wants to send a message to all employers to say, “This is the type of stuff you can’t do,” he said.
“It’s always a little hard to separate out some of the bad faith moral damages from punitive damages… but when you read the case from top to bottom, all 100 pages of it, you get a clear impression that the court was disgusted by how this person was treated, and the damages reflect that.”
Issues during litigation
The damages in the case also took into consideration Walmart’s behaviour during litigation.
The retailer was “either purposely dilatory in instructing its counsel to provide disclosure and to conduct examinations for discovery, including the legal obligation to provide answers and supporting documents to (fulfill) undertakings on a timely basis,” said Emery.
“Alternatively, (Walmart) was indifferent to Ms. Galea’s claims. As a result, this purposeful delay or indifference caused mental distress for Ms. Galea that exceeded the normal stress and hurt feelings that accompany a dismissal.”
“Galea was entitled to a respectful and responsive approach to defending the action while (Walmart) defended vigorously, not a deafening silence where indifference bordered on disdain towards her.”
Although the judge did not fault the retailer’s legal counsel, he found that the company delayed answering undertakings until the eve of the trial, then followed with a “torrent of productions,” said MacDonald.
“To me, it’s just such a commentary about how to not conduct oneself during litigation, and I’m not talking about the counsel for Walmart, I’m talking about Walmart and whoever was internal at that time.”
Part of the problem for an employer like this is it lends optics to the court that perhaps this is all just part of a broader hardball litigation strategy, said Vey.
“You’re trying to put screws to the employee to see if they’ll take a bad settlement.”
It is very common for employers to take a hard-line approach with employees, with the perspective they want to deter employees from bringing these kinds of claims forward, said Brandt.
“I do applaud the court in saying, ‘That’s really not fair, there’s a power imbalance here and the least you could do is defend the action with respect.’”
“Normally, conduct through litigation is awarded through costs, and there are significant court limits on what’s allowable with respect to costs,” she said. “But in this case, (it) said that (Walmart’s) conduct through litigation was all connected to the manner in which they dismissed her — those aren’t separate… and they gave her $200,000 for dismissal, and another $50,000 for litigation conduct, which is really unique. So I think that’s a warning to employers that their conduct through litigation can come back to bite them.”