Play nice or pay the punitive price: When an employer haunts an employee

Courts have shown little patience for employers that don’t treat employees properly during termination. But they have even less patience for employers that act vindictively after the termination. The Bank of Nova Scotia was ordered to pay one of its former branch managers $25,000 in punitive damages on top of 30 months’ pay in lieu of notice by an Ontario court

Courts have shown little patience for employers that don’t treat employees properly during termination. Since the Supreme Court’s landmark Wallace decision in 1997, courts have been punishing rogue employers for bad-faith in the manner a termination is handled.

But sometimes employers can’t resist taking jabs even after the termination is over, haunting former employees and interfering in their lives as they attempt to move on. Courts take an even dimmer view of this. A recent issue of Canadian Employment Law Today examined a case where a manager with the county of Lennox and Addington in Ontario vigorously pursued a worker he fired, interfering in his attempts to find another job and damaging his reputation. In that case the court tacked on $100,000 in punitive damages. (See Judge blasts county for firing worker.)

Justice Romain Pitt of the Ontario Superior Court of Justice recently blasted the Bank of Nova Scotia for the way it handled an investigation into wrongdoing and the manner in which it terminated a long-serving branch manager. On top of a high reasonable notice period and Wallace damages, he tacked on punitive damages. It’s a lesson for employers to play nice or pay the punitive price.

A long career at the bank

Amy Mastrogiuseppe started working for the Bank of Nova Scotia in 1974, fresh out of high school, at a salary of about $18,000.

She held a number of junior positions over the years and was eventually promoted to manager of a branch in Richmond Hill, Ont., in 1995. By 2000, her base salary was about $80,000.

Between 1995 and 2000, her employment record was marked by regular accolades and incentive payments. By all accounts, she was doing a great job.

In 2000 there was a significant change in bank policy that resulted in changes to the duties of branch managers. Mastrogiuseppe characterized the changes as significant, but a bank representative said they were minor. Either way, the court said she felt she had more responsibility with less help. With the changes, she felt a greater need to increase the flow of business to the bank. In particular, she felt the need to cultivate relationships with real estate agents, accountants and mortgage brokers.

But some of the senior employees at the branch had formed the opinion that Mastrogiuseppe had more than a professional relationship with a mortgage broker. It was her association with the mortgage broker, more than anything else, that was responsible for her dismissal after almost 29 years of service with neither notice or salary in lieu of notice, the court said.

This is a complicated case involving quite a bit of alleged wrongdoing on Mastrogiuseppe’s part. She was suspended with pay on June 12, 2003, pending an investigation. Among other things, it is alleged that she was:

•dealing with mortgage brokers in violation of bank policy;

•an active participant with a third party and misleading bank customers with regards to “cash back” mortgages;

•did an early renewal of her own mortgage, waiving the penalty and involving a subordinate in that regard;

•placed the bank at risk with respect to breaching the privacy rights of both customers and non-customers by accessing their credit bureaus without their specific consent;

•approved loans for family members in a non-arm’s length transaction; and

•breached customer privacy by accessing profiles when there was no specific reason to do so.

Those were some of the conclusions in a 10-page report prepared by David Ing, the manager of employee relations. In the wake of the report, Mastrogiuseppe was terminated without notice on July 10, 2003.

Court blasts investigation

The court wasted little time in blasting the investigation and the report. Andrew Siu, the district vice-president for the Bank of Nova Scotia, simply accepted it at face value and he should not have, said Justice Pitt. While the document might have been adequate as a basis for progressive discipline, it deserved closer scrutiny from Siu.

The court said Ing had only been in his position for 10 months and was “obviously quite rigid and somewhat judgmental.” The report lacked context, was not nuanced and some of its assumptions and conclusions were wrong.

Justice Pitt took aim at a conclusion in Ing’s report that Mastrogiuseppe had a personal relationship with a mortgage broker. The report said: “Although there is no direct evidence to suggest a personal relationship, based on staff observations and Ms. Mastrogiuseppe’s responses to the questions, it is believed that there are personal relations between the two.”

Justice Pitt said though it wasn’t clear what the phrase “personal relationship” was intended to convey, it was clear to the court that it meant a romantic relationship.

“In my view, Mr. Ing’s conclusion betrays an unfortunate acceptance of the myth that friendly relations between two persons of the opposite sex must always be romantic,” said Justice Pitt. Ing gave little consideration to the reasonable explanation given by Mastrogiuseppe that the relationship was based on her perceived need to generate business and in her interest in the Bahai faith to which the mortgage broker had introduced her.

The court was also critical of other facets of the report. But, generally, it said Mastrogiuseppe’s long and distinguished service with the bank was ignored as a factor that should have mitigated the penalty against her. Instead of getting credit for her long, outstanding service the bank chose to hold it against her and use it as justification — the “she should have known better” argument.

And there was absolutely no reference in the report to the radical change in her job conditions in 2000 that required her to be more proactive, and less conservative, in generating business. It was these changes that presented her with conflicts that would make decision-making more difficult, the court said.

Justice Pitt said Siu overlooked what seems, objectively, to be the most significant characteristic of Mastrogiuseppe’s wrongdoing: That she was having some difficulty exercising power that contained broad discretion in potentially conflicting circumstances, with fuzzy and regularly changing guidelines.

The court pointed out there was no evidence of any specific training offered by the bank following the change in 2000.

“An employee, who had provided valuable and faithful service for 28 years, suddenly displayed some troublesome tendencies that could reasonably have been traced to a recent change in the employee’s job requirements,” said Justice Pitt. “Warnings, setting out the performance problem, the actions required to improve to an acceptable level and the consequences of failing to improve, were required.”

The court said a meeting between Mastrogiuseppe and Siu to discuss the problems and come up with a plan to deal with them, could have saved her career. Justice Pitt said the bank owed at least that to Mastrogiuseppe. Therefore, she had been wrongfully dismissed and was entitled to notice.

Court tacks on Wallace damages

The court said this was a case that, given the worker’s age (47), her time with the bank and the fact she had built up considerable seniority, called for a longer period of notice. It settled on a period of 22 months.

It then tacked on an additional eight months’ notice in Wallace damages for the way the bank handled the termination.

“I find that the manner of dismissal caused (Mastrogiuseppe) to suffer stress and humiliation, and damaged her reputation in the banking community in such a manner that will impair her ability to find equivalent employment,” said Justice Pitt. He listed five factors that led him to this conclusion:

•The bank alleged dishonest conduct and improper personal relations with a mortgage broker. Neither allegation was correct as a matter of law. Both allegations led to suspicion and rumours concerning her dismissal and will likely damage her reputation in the banking community. Furthermore, the court said the notion that friendly relations between members of the opposite sex must always be romantic was a stereotype reflecting an outdated view of gender relations that could raise a human rights dimension and was demeaning to her dignity.

•She was dismissed by letter that did not give reasons for the dismissal. No reasons were given in her suspension letter, nor were oral discussions sufficient to communicate the reasons for her dismissal. The dismissal was cavalier and caused her significant stress.

•A letter written by Ing was composed as if judgment had already been rendered by a court of law against Mastrogiuseppe on all issues raised in his report. The court said its impact must have been intended to be devastating to her pursuit of employment insurance benefits and re-employment.

•Despite her years of excellent service, the bank refused to provide her with a letter of reference.

•The bank refused to permit her to re-enter the branch (even after hours) to collect her personal belongings. The court said there would most likely have been sentimental and very personal things in her office that might not have come to her mind until she had actually seen them.

The court acknowledged that the total notice period, 30 months, was above average but said it was warranted in this case.

Punitive damages

Justice Pitt said punitive damages were appropriate largely for the same reasons Wallace damages were awarded. But he pointed to a couple of additional factors.

First, the bank went beyond recommendations made by an auditor and blacklisted all of Mastrogiuseppe’s family members who were customers of the bank. Second, and most important, after having dismissed her without notice the bank almost doubled the rate of interest and monthly payments on personal loans she had with the bank, in what the court called “a unilateral and dubious interpretation of the loan agreement.”

Then the bank proceeded to unlawfully use a direction signed by Mastrogiuseppe authorizing the bank to deduct mortgage payments from a different bank, and continued to use the authorization even after she protested.

“The result was (Mastrogiuseppe’s) cheques were returned nonnegotiable and (her) credit rating was adversely affected as she was effectively denied credit specifically as a result of her having ‘issued NSF cheques.’”

This sort of treatment was inexcusable for an employee who had served well and faithfully for 28 years and was deserving of punishment, the court said.

“Furthermore, where an employee is dismissed without notice or a payment of salary in lieu of notice, the employee must find alternative work without a source of income,” said Justice Pitt. “The bank then, in connection with (her) personal loans, acted questionably, placing their own financial interests ahead of (Mastrogiuseppe) in a situation where she was most vulnerable. Having created the vulnerability, the bank worsened (her) financial circumstances by improperly withdrawing loan payments from (her) account. The result was an adverse affect on (her) credit rating, which further exacerbated the financial difficulties she faced in supporting herself during the search for alternate employment.”

Taking into account the lengthy notice period he had already awarded, Justice Pitt settled on a figure of $25,000, an amount he called the “minimum” capable of deterring and denouncing the bank’s conduct.

For more information see:

Mastrogiuseppe v Bank of Nova Scotia, 2005 CarswellOnt 7607 (Ont. S.C.J.)

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Click here to read the full text of letters from the bank, including the termination letter and portions of the report.

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