The British Columbia Supreme Court recently awarded <i>Wallace</i> damages to a worker who was fired, despite the fact that — for the most part — the employer handled the termination properly. What this judgment shows is that even a little bad faith on the part of employers won’t go unnoticed or unpunished by the courts.
Employers have a duty to behave in good faith when firing a worker. The Supreme Court of Canada, in its 1997 decision in Wallace v. United Grain Growers, opened the door for courts across the country to punish employers who behave in a callous manner during terminations.
The British Columbia Supreme Court recently awarded Wallace damages to a worker who was fired, despite the fact that — for the most part — the employer handled the termination properly. What this judgment shows is that even a little bad faith on the part of employers won’t go unnoticed or unpunished by the courts.
The case: Hill v. Johnson Controls L.P.
Peter Hill, 50, was professional engineer who worked as a salesperson for Johnson Controls from July 2001 until he was fired on March 28, 2005. His base salary was $68,808 and he earned commissions of $59,607, resulting in a total income for the year of $128,415. The employer did not allege cause in dismissing Hill.
The termination letter offered six weeks’ severance pay plus any unused accrued vacation.
Employer’s conduct reasonable, for the most part
In this case, the court said the employer’s conduct was in many ways appropriate and reasonably sensitive. The supervisor intended to travel from Toronto to Vancouver to tell Hill in person that he was being fired. But when Hill pressed for an explanation from the supervisor for the purpose of his visit, he told him over the phone that he was being fired.
The dismissal letter stated that the termination came as a result of an evaluation of all aspects of the business. There was no attempt to link the dismissal to any deficiencies in Hill’s performance or to allege cause. He was also offered outplacement assistance.
But the employer made one stumble that was enough to attract the court’s attention and to award Wallace damages to Hill.
Justice Nathan Smith said the Supreme Court of Canada’s ruling in Wallace does not suggest that an employer’s conduct must show bad faith “in all respects” in order to attract the additional sanction of an increased notice period.
“In the course of what was otherwise appropriate conduct, (the employer) took one unreasonable position that it knew or ought to have known would be particularly upsetting and insulting to (Hill) in the circumstances,” said Justice Smith. “The March 28 dismissal letter contained an offer of six weeks’ pay and stated that was all (Hill) was entitled to ‘under the employment law upon termination of employment.’”
No commission paid
Hill had earned commissions in March of $13,905. Under the terms of the employer’s incentive plan, only employees who are actually working for the company on the last working day of the month are eligible for the incentive pay earnings for that month.
“(Hill) says he was particularly angry that (his employer) did not wait three days so he would be eligible for that commission,” said Justice Smith. “He believed (his employer) was reaping the benefits of his work while he was being cut off. That is an entirely understandable reaction.”
The court pointed out that it is well settled in law that a dismissed employee is entitled to receive what he would have earned had he worked through the notice period.
“The (employer) initially said (Hill) was entitled to pay for a period of six weeks’ notice, indicating it had turned its mind to what it believed to be (Hill’s) entitlement,” the court said. “If it had done so fully and in complete good faith, it would have realized that (he) was also entitled to any commissions that would be payable during those six weeks.”
Error corrected, but damage was done
About a month after the dismissal, the employer agreed to pay the $13,905 commission for March.
“(The employer) obviously realized the error of its initial position, but not before it had needlessly and unreasonably added to the stress and anguish that inevitably accompanies any dismissal,” said Justice Smith. “I therefore find that (Hill) is entitled to some, albeit relatively small, increase in the notice period based on bad faith.”
The court settled on a reasonable notice period of 12 months, including the bad faith. Unfortunately, Justice Smith didn’t specify exactly how much time he added to the notice period for bad faith in his written decision. In total, the court awarded Hill $60,870 for reasonable notice, $1,658 in special damages and mitigation expenses and $130,917 in commission, but it left the door open for the employer to make further submissions on the calculation of the commission.
For more information see:
• Hill v. Johnson Controls L.P., 2006 CarswellBC 1321 (B.C. S.C.)
Wallace’s role in reasonable notice
When courts calculate reasonable notice period, they turn to the 1960 Ontario High Court decision in Bardal v. Globe & Mail Ltd. In that case, the court laid out factors to be determined in calculating the notice period.
“There can be no catalogue laid down as to what is reasonable notice in particular classes of cases,” the court said in Bardal. “The reasonableness of the notice must be deducted with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant.”
In 1997, the Supreme Court of Canada made it clear that the Bardal factors were not an exhaustive list in its decision in Wallace. There were other factors to be considered, including whether the employee had been induced to leave secure employment and the employer’s conduct at the time of termination. In that case, the court said:
“The point at which the employment relationship ruptures is the time when the employee is most vulnerable and hence, most in need of protection. In recognition of this need, the law ought to encourage conduct that minimizes the damage and dislocation (both economic and personal) that result from dismissal. In Machtinger, supra, it was noted that the manner in which employment can be terminated is equally important to an individual’s identity as the work itself. By way of expanding upon this statement, I note that the loss of one’s job is always a traumatic event. However, when termination is accompanied by acts of bad faith in the manner of discharge, the results can be especially devastating. In my opinion, to ensure that employees receive adequate protection, employers ought to be held to an obligation of good faith and fair dealing in the manner of dismissal, the breach of which will be compensated for by adding to the length of the notice period.”
In his ruling in Hill, Justice Nathan Smith of the B.C. Supreme Court said that Wallace didn’t suggest that an employer’s conduct must show bad faith “in all respects” in order to attract the additional sanction of an increased notice period. He said the Supreme Court of Canada explicitly recognized that there can be varying degrees of bad faith, with varying impacts on the notice period, in the Wallace ruling. In that decision the court said:
“The obligation of good faith and fair dealing is incapable of precise definition. However, at a minimum, I believe that in the course of dismissal employers ought to be candid, reasonable, honest and forthright with their employees and should refrain from engaging in conduct that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive … I note that, depending on the circumstances of the individual case, not all acts of bad faith or unfair dealing will be equally injurious and thus, the amount by which the notice period is extended will vary. Furthermore, I do not intend to advocate anything akin to an automatic claim for damages under this heading in every case of dismissal. In each case, the trial judge must examine the nature of the bad faith conduct and its impact on the circumstances.”
For more information see:
• Bardal v. Globe & Mail Ltd., 1960 CarswellOnt 144, 24 D.L.R. (2d) 140 (Ont. H.C.)
• Wallace v. United Grain Growers Ltd., 1997 CarswellMan 455, 36 C.C.E.L (2d) 1 (S.C.C.)
Calculating notice for sales staff
In the Hill decision, the B.C. Supreme Court put notice periods for salespeople under the microscope.
In the 1998 B.C. Supreme Court decision in Husband v. Labatt Brewing Co. the court said notice for salespeople should be relatively short, equal to about two-and-a-half to three weeks for every year of service because sales skills are more readily transferable and, therefore, it’s easier for such employees to find another job after being dismissed.
However, it’s not an absolute rule and courts will look at the worker’s actual duties and responsibilities, not just the title held.
The British Columbia Supreme Court recently awarded Wallace damages to a worker who was fired, despite the fact that — for the most part — the employer handled the termination properly. What this judgment shows is that even a little bad faith on the part of employers won’t go unnoticed or unpunished by the courts.
The case: Hill v. Johnson Controls L.P.
Peter Hill, 50, was professional engineer who worked as a salesperson for Johnson Controls from July 2001 until he was fired on March 28, 2005. His base salary was $68,808 and he earned commissions of $59,607, resulting in a total income for the year of $128,415. The employer did not allege cause in dismissing Hill.
The termination letter offered six weeks’ severance pay plus any unused accrued vacation.
Employer’s conduct reasonable, for the most part
In this case, the court said the employer’s conduct was in many ways appropriate and reasonably sensitive. The supervisor intended to travel from Toronto to Vancouver to tell Hill in person that he was being fired. But when Hill pressed for an explanation from the supervisor for the purpose of his visit, he told him over the phone that he was being fired.
The dismissal letter stated that the termination came as a result of an evaluation of all aspects of the business. There was no attempt to link the dismissal to any deficiencies in Hill’s performance or to allege cause. He was also offered outplacement assistance.
But the employer made one stumble that was enough to attract the court’s attention and to award Wallace damages to Hill.
Justice Nathan Smith said the Supreme Court of Canada’s ruling in Wallace does not suggest that an employer’s conduct must show bad faith “in all respects” in order to attract the additional sanction of an increased notice period.
“In the course of what was otherwise appropriate conduct, (the employer) took one unreasonable position that it knew or ought to have known would be particularly upsetting and insulting to (Hill) in the circumstances,” said Justice Smith. “The March 28 dismissal letter contained an offer of six weeks’ pay and stated that was all (Hill) was entitled to ‘under the employment law upon termination of employment.’”
No commission paid
Hill had earned commissions in March of $13,905. Under the terms of the employer’s incentive plan, only employees who are actually working for the company on the last working day of the month are eligible for the incentive pay earnings for that month.
“(Hill) says he was particularly angry that (his employer) did not wait three days so he would be eligible for that commission,” said Justice Smith. “He believed (his employer) was reaping the benefits of his work while he was being cut off. That is an entirely understandable reaction.”
The court pointed out that it is well settled in law that a dismissed employee is entitled to receive what he would have earned had he worked through the notice period.
“The (employer) initially said (Hill) was entitled to pay for a period of six weeks’ notice, indicating it had turned its mind to what it believed to be (Hill’s) entitlement,” the court said. “If it had done so fully and in complete good faith, it would have realized that (he) was also entitled to any commissions that would be payable during those six weeks.”
Error corrected, but damage was done
About a month after the dismissal, the employer agreed to pay the $13,905 commission for March.
“(The employer) obviously realized the error of its initial position, but not before it had needlessly and unreasonably added to the stress and anguish that inevitably accompanies any dismissal,” said Justice Smith. “I therefore find that (Hill) is entitled to some, albeit relatively small, increase in the notice period based on bad faith.”
The court settled on a reasonable notice period of 12 months, including the bad faith. Unfortunately, Justice Smith didn’t specify exactly how much time he added to the notice period for bad faith in his written decision. In total, the court awarded Hill $60,870 for reasonable notice, $1,658 in special damages and mitigation expenses and $130,917 in commission, but it left the door open for the employer to make further submissions on the calculation of the commission.
For more information see:
• Hill v. Johnson Controls L.P., 2006 CarswellBC 1321 (B.C. S.C.)
Wallace’s role in reasonable notice
When courts calculate reasonable notice period, they turn to the 1960 Ontario High Court decision in Bardal v. Globe & Mail Ltd. In that case, the court laid out factors to be determined in calculating the notice period.
“There can be no catalogue laid down as to what is reasonable notice in particular classes of cases,” the court said in Bardal. “The reasonableness of the notice must be deducted with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant.”
In 1997, the Supreme Court of Canada made it clear that the Bardal factors were not an exhaustive list in its decision in Wallace. There were other factors to be considered, including whether the employee had been induced to leave secure employment and the employer’s conduct at the time of termination. In that case, the court said:
“The point at which the employment relationship ruptures is the time when the employee is most vulnerable and hence, most in need of protection. In recognition of this need, the law ought to encourage conduct that minimizes the damage and dislocation (both economic and personal) that result from dismissal. In Machtinger, supra, it was noted that the manner in which employment can be terminated is equally important to an individual’s identity as the work itself. By way of expanding upon this statement, I note that the loss of one’s job is always a traumatic event. However, when termination is accompanied by acts of bad faith in the manner of discharge, the results can be especially devastating. In my opinion, to ensure that employees receive adequate protection, employers ought to be held to an obligation of good faith and fair dealing in the manner of dismissal, the breach of which will be compensated for by adding to the length of the notice period.”
In his ruling in Hill, Justice Nathan Smith of the B.C. Supreme Court said that Wallace didn’t suggest that an employer’s conduct must show bad faith “in all respects” in order to attract the additional sanction of an increased notice period. He said the Supreme Court of Canada explicitly recognized that there can be varying degrees of bad faith, with varying impacts on the notice period, in the Wallace ruling. In that decision the court said:
“The obligation of good faith and fair dealing is incapable of precise definition. However, at a minimum, I believe that in the course of dismissal employers ought to be candid, reasonable, honest and forthright with their employees and should refrain from engaging in conduct that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive … I note that, depending on the circumstances of the individual case, not all acts of bad faith or unfair dealing will be equally injurious and thus, the amount by which the notice period is extended will vary. Furthermore, I do not intend to advocate anything akin to an automatic claim for damages under this heading in every case of dismissal. In each case, the trial judge must examine the nature of the bad faith conduct and its impact on the circumstances.”
For more information see:
• Bardal v. Globe & Mail Ltd., 1960 CarswellOnt 144, 24 D.L.R. (2d) 140 (Ont. H.C.)
• Wallace v. United Grain Growers Ltd., 1997 CarswellMan 455, 36 C.C.E.L (2d) 1 (S.C.C.)
Calculating notice for sales staff
In the Hill decision, the B.C. Supreme Court put notice periods for salespeople under the microscope.
In the 1998 B.C. Supreme Court decision in Husband v. Labatt Brewing Co. the court said notice for salespeople should be relatively short, equal to about two-and-a-half to three weeks for every year of service because sales skills are more readily transferable and, therefore, it’s easier for such employees to find another job after being dismissed.
However, it’s not an absolute rule and courts will look at the worker’s actual duties and responsibilities, not just the title held.
