Ontario employer must pay $50,000 in moral damages after misleading worker

'We're inching closer towards that duty of good faith and bargaining that we see in labour relations'

Ontario employer must pay $50,000 in moral damages after misleading worker

An Ontario employer must pay $50,000 in moral damages after it was dishonest about an employee’s job prospects in relation to the sale of its business, the Ontario Superior Court of Justice has ruled.

It’s an example of how a lack of transparency and forthrightness are becoming a new basis for moral damages in wrongful dismissal cases, says Rishi Bandhu, a labour and employment lawyer at Bandhu Professional Law in Oakville, Ont.

“Twenty or 25 years ago, it was strictly the manner of dismissal that led to moral damages – conduct like yelling at the employee, making unfounded accusations of misconduct, or just doing something insensitive,” says Bandhu. “But we're evolving now to include aspects of honesty, truthfulness, and forthrightness – not just at the time of dismissal, but months prior to dismissal.”

Mixed communication

William Gascon was hired in 2013 by gold mining company Goldcorp to be the general manager of the company’s Musslewhite Mine in Northwestern Ontario. Three years later, Goldcorp appointed him general manager of its Red Lake Mine.

In April 2019, a sale of the mine made Newmont Goldcorp the new owner. Newmont retained Gascon as the mine’s general manager.

In September 2019, Newmont’s vice-president of productivity told Gascon that other companies were interested in purchasing the mine and, if that happened, Gascon would be “going with” the Red Lake Mine.

Read more: The duty of good faith is expanding to include performing contractual obligations honestly.

In November, Newmont reached an agreement to sell the Red Lake Mine to Evolution Mining Gold Operations, with an anticipated completion date of March 31, 2020. Around the same time, Gascon received emails from Newmont’s upper management thanking him for his service and the work he had done to make the sale happen. He was also told that Newmont had expressed a positive view of him to Evolution’s CEO. Gascon took this to mean he would not be a Newmont employee after the sale was completed.

On Nov. 27, Gascon asked the VP of productivity about his future employment and the VP also said he would “go with” the mine. According to the VP, he told Gascon that Evolution would likely offer him employment but the purchasing company had not provided Newmont with firm details of its plans.

Termination delivered

By March 12, 2020, Gascon realized that he hadn’t received his annual long-term incentive (LTI) award or merit increase, which Newmont usually issued in February or early March. The VP of productivity told him that they were delayed, but Evolution “has a plan to replace them in a timely manner soon after closing.”

Gascon replied that the merit increase and LTI award were part of his compensation as a Newmont employee, but the VP of productivity then said that Newmont would not be issuing increases or LTI awards to Red Lake employees prior to the sale closing. He added that Newmont had negotiated with Evolution that the latter would provide them to applicable Red Lake employees after the sale.

Around the same time, Gascon saw a form letter drafted by Newmont’s HR department for employees who would be remaining after the sale. Gascon’s name wasn’t on the distribution list. Newmont also learned that Evolution would not be offering employment to Gascon after the mine, although it didn’t tell him.

On March 30, Newmont management met with Gascon to inform him that he would not be receiving an offer of employment from Evolution and his employment with Newmont was terminated effective March 31.

Gascon sued Newmont for wrongful dismissal, claiming that Newmont acted dishonestly and breached the duty of good faith when it misled him about the status of his employment. He argued that Newmont’s conduct warranted exemplary damages, and he was also entitled to an LTI award he should have received in March 2020 as usual.

Employer misled worker

The way Newmont handled Gascon’s queries about his employment status left the company open to liability, says Bandhu.

“The optics of it were ‘Don't worry about it, you've got a job, help us get the sale done,’” he says. “And it was misleading because they knew, or they ought to have known, that there wasn't guaranteed employment with the purchaser, so they needed to be more forthright and honest.”

Newmont acknowledged that the dismissal was without cause and they settled some of Gascon’s claims. However, Gascon applied for summary judgment on Newmont’s breach of its duty of good faith, claiming $60,000 in moral or exemplary damages, as well as the LTI award he should have received in March 2020.

The court noted that the Ontario Court of Appeal in Doyle v. Zochem Inc., 2017 ONCA 130 stated that employer conduct that was “unfair or in bad faith by being… untruthful, misleading or unduly insensitive” could warrant moral damages. In addition, the conduct didn’t have to be at the time of dismissal, but also during a period of time up to or after dismissal.

The Supreme Court of Canada confirmed the duty of good faith in Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26, stating that this included a duty of honest performance where neither party should lie or knowingly mislead the others about matters directly linked to the performance of the employment contract.

Read more: There is a difference between bad feelings from termination and a bad-faith termination that warrants extra damages, write two employment lawyers.

The court found that when Newmont told Gascon that he would be going with the mine in September 2019, Gascon assumed that it meant the company anticipated that Evolution would retain Gascon after the sale.

The court also found that the November 2019 emails from upper management indicated that it was likely Gascon’s employment with Newmont would end with the sale and they anticipated that Evolution would hire him, although nothing had been clearly expressed to him. It was at this time that the VP of productivity told him a second time that he would “go with” the mine when it was sold, but Gascon was left to speculate about his future employment for four months, said the court, adding that the VP’s statements were “clumsy attempts to placate and/or mislead” Gascon, who was essential to completing the sale.

The court also found that it was unclear when Newmont decided to terminate Gascon, but it appeared that the decision not to grant him an LTI award by mid-March 2020 was because the company knew Gascon would not be continuing as an employee. As a result, Newmont knew for some time that it would be terminating Gascon if it didn’t hire him, but it didn’t inform him and continued to imply that Evolution would be hiring him.

The duty of honest performance required Newmont to tell Gascon the truth as it was known, both in November 2019 and as the sale grew nearer, said the court. However, Newmont avoided telling Gascon the truth so he would continue with his duties facilitating the sale. This constituted “untruthful, misleading, and unduly insensitive” misconduct, said the court.

Two components to good faith

Bandhu says that there are two components to good faith – the classic one dealing with the duty to not be misleading or dishonest in the manner of termination or in the period leading up to or after termination, and a more recently established component where employers have a duty of honesty in the contractual relationship.

“[The employer] can't be untruthful about anything in relation to the contract of employment,” says Bandhu. “In this case, there's a breach because they weren’t being forthright or honest about [Gascon’s] employment when answering his very specific questions.”

The court granted summary judgment for bad-faith damages, ordering Newmont to pay $50,000 in moral or exemplary damages for breach its duty of good faith in the manner of dismissal. The court also ordered a mini trial to determine Gascon’s entitlement to an LTI award for March 2020.

Bandhu says the increasing emphasis on the duty of good faith in employment contracts and dismissals is starting to parallel the duty to bargain in good faith in the labour relations context.

“When you're negotiating a collective agreement, if the employer knows about events coming up in the future that are going to substantially impact the employment relationship, like a sale or business, they have to disclose that, they've got to be completely open and forthright about any issue that's going to affect the employment relationship,” says Bandhu.

“It seems, with every decision that interprets Matthews, we're inching closer and closer towards that duty of good faith and bargaining that we see in labour relations, if we're not there already.”

 “If in adopting that kind of a mindset, if [Newmont] had just disclosed all the information that it had available to it and had no intention of misleading and just taking care of its own interest, I think it would have been in a better position.”

See Gascon v. Newmont Goldcorp, 2022 ONSC 2511.

Latest stories