Employers should be aware of the difference between bad feelings from termination and bad-faith termination
In its 2008 decision in Honda Canada Inc. v. Keays, which built on its earlier decision in Wallace v. United Grain Growers Ltd., the Supreme Court of Canada offered some guiding principles for assessing and identifying whether an employer has discharged its duty of good faith upon termination of an employee. An employer fails to discharge its duty of good faith where, during the course of dismissal, the employer fails to be open, reasonable, truthful and forthright with the employee. An employer fails to discharge its duty where it acts in an unfair manner by being misleading or unduly insensitive.
Since then, case law has assisted with refining the above principles. Some important takeaways arise for employers and employees upon application in recent employment litigation.
Importantly, unfairness in the manner of dismissal is not enough in and of itself to warrant an award of bad-faith damages. Recently, this was reiterated in the B.C. Court of Appeal decision Cottrill v. Utopia Day Spas and Salons Ltd. The appeal court reversed the trial decision because it found that the employee did not establish that she suffered more than the normal upset and hurt feelings that are to be expected upon dismissal without cause.
To establish bad faith, an employee has the burden of proving that the employer engaged in unfair conduct upon dismissal and that the employee suffered serious, prolonged mental distress. This mental distress need not be proven by expert evidence, but the evidence must establish distress that goes farther than the regular distress upon termination that can be expected.
In Cottrill, there was no evidence from the employee or the employee’s family members, friends or third parties with respect to the alleged mental distress the employee experienced upon termination. The only evidence adduced was that the employee cried at two meetings leading up to and including the termination. This was not sufficient to establish compensable bad-faith damages.
Recent case law also establishes that a misrepresentation alone is not in and of itself enough to establish bad faith. An employer acts in bad faith where the misrepresentation leads to reputational consequences and has or could have the capacity to impact that employee’s ability to find comparable work.
In Davies v. Canada Shineray Suppliers Group Inc., for example, the court found that the employer acted in bad faith by abruptly terminating employment and damaging the employee’s reputation. The employer sent a memo to the parents of the subject daycare to which the employee was a manager. The memo falsely stated that the employee had resigned and had fraudulently taken the daycare’s equipment with her.
The employee was awarded $30,000 for bad-faith damages. The court found that this award was appropriate because the allegations attacked the employee’s social reputation and own sense of worth. The court found that the employee was emotionally devastated by the experience and the evidence proved severe mental distress caused by the manner of dismissal.
In Valle Torres v. Vancouver Native Health Society, the employee, a social services worker at the Vancouver Native Health Society was abruptly terminated and escorted out of the office. After termination, the employee was falsely accused of making defamatory statements about his replacement. The employer took the following steps that the court found caused reputational consequences and would directly impact the employee’s ability to find work in the social services community:
• Sending out an email to the Downtown Eastside social services community advising that the employee was terminated. The court found this left the impression that the employee had conducted wrongdoing.
• Serving the employee with an intimidating letter demanding that he cease and desist talking with any of the employer’s staff, while also threatening legal action.
• Making unmeritorious claims about the employee to the B.C. Labour Relations Board.
• Misrepresenting the reason for the employee’s dismissal. The real reason he was dismissed was because he was not an Indigenous Canadian.
This is a clear instance where the manner of termination and associated misrepresentations lead to direct reputational consequences and direct impact on the employee’s ability to find comparable work. In this case, the court awarded $30,000 in bad-faith damages.
An important factor mentioned in Valle Torres to justify the finding of bad faith was the litigation strategy invoked by the employer. In Avelin v Aya Lasers Inc., the court found that, in line with previous case law, the employer’s conduct in litigating the employee’s claim may be considered as an element in the court’s review of the manner of dismissal.
In Avelin, the court found that the employer, Aya Lasers, was attempting to take advantage of its strong corporate presence in Ontario by attempting to have the proceeding litigated in Ontario. The court found that this was a specific effort to take advantage of an unemployed plaintiff, who lived in B.C. and had been employed to market the employer’s products in B.C. The efforts of the employer to “take advantage of its superior resources and [the employee’s] economic vulnerability,” combined with the manner of termination itself, led to a finding of $5,000 for bad-faith damages.
While no one factor is determinative, and the test for proving bad faith in the manner of dismissal is contextual, the following principles can serve as takeaways for employees and employers alike where there are concerns with the manner of termination:
• Unfairness in the manner of dismissal is not in and of itself enough to warrant an award of bad-faith damages. The employee has a burden to establish that the manner of dismissal caused mental distress beyond the normal upset and hurt feelings that are to be expected upon dismissal without cause.
• An employee need not invoke an expert to prove mental distress, but there must be evidence, whether it be from the employee’s family members, friends or third parties, that the mental distress was serious and prolonged.
• Misrepresentation in the manner of dismissal is not alone enough to establish bad faith. An employer acts in bad faith where the misrepresentation leads to reputational consequences or could have the capacity to impact that employee’s ability to find comparable work.
• An employer’s conduct in litigating the employee’s claim may be considered as an element in the court’s review of the manner of dismissal. Where an employer pursues an aggressive litigation strategy designed to utilize superior resources and the employee’s economic vulnerability, an award of bad faith will likely be appropriate.
For more information, see:
• Honda Canada Inc. v. Keays, 2008 SCC 39 (S.C.C.).
• Wallace v. United Grain Growers Ltd., 1997 3 SCR 701 (S.C.C.).
• Cottrill v. Utopia Day Spas and Salons Ltd., 2018 BCCA 383 (B.C. C.A.).
• Davies v. Canada Shineray Suppliers Group Inc., 2017 BCSC 304 (B.C. S.C.).
• Valle Torres v. Vancouver Native Health Society, 2019 BCSC 523 (B.C. S.C.).
• Avelin v. Aya Lasers Inc., 2018 BCSC 2313 (B.C. S.C.).
Melanie Samuels is a partner with Singleton Reynolds in Vancouver and is co-chairperson of the firm’s Employment and Labour Group. She can be reached at (604) 673-7405 or [email protected]
Glen Stratton is an associate with Singleton Reynolds in Vancouver with a focus on civil litigation, employment, entertainment and construction law. He can be reached at (604) 673-7518 or [email protected]