Courts will 'punish' employers who engage in bad faith: lawyer
“At the end of the day, treating employees fairly and respectfully is not just a morally right thing to do - it’s a very effective legal and risk management strategy.”
So says Nicole Toye, partner at Harris and Company in Vancouver, after the British Columbia Supreme Court dinged an airline for more than $200,000 – including $150,000 in aggravated and punitive damages - for its poor treatment and dismissal of a worker.
“Courts are going to require that employers do not engage in trying to build a case [for dismissal] where it doesn't exist or other bad-faith conduct,” says Toye. “Where that occurs, there are certainly mechanisms available for the court to further punish that conduct.”
China Southern Airlines (CSA) is a Chinese airline. In 2008, CSA’s general manager in BC recruited the worker, now 72, to help establish an office in Vancouver.
In 2011, the worker became a full-time marketing and business development manager. The job involved building CSA’s business in Canada through networking, marketing, and media relations.
New general manager was dismissive
In January 2018, CSA appointed a new Vancouver general manager who didn’t get along with the worker. She was dismissive of the worker’s role and responsibilities and soon started excluding him from management meetings. She also dissolved the marketing department that the worker headed.
One month later, CSA began criticizing the worker’s performance and issued reprimands threatening dismissal. The worker had not previously had any performance issues.
CSA also disciplined the worker for attending industry events without prior approval, although he had attended these events in the past.
In March 2018, CSA transferred the worker to a front-line customer service representative position in the sales department with a salary reduction of 25 per cent.
CSA gave the worker a codebook to learn the airline’s complex ticketing system, but the worker had difficulty with it. CSA disciplined him again and then demoted him to the position of airport operations worker at the Vancouver airport – a job he also had no experience with.
The worker was criticized for being too slow in the airport job and failed two competency tests. In January 2019, he was told that he was not performing up to standards and he was being placed on probation for three months. The worker requested further training and they agreed to test him again the following month.
However, CSA didn’t provide further training and, on Feb. 1, it terminated his employment. The termination letter cited time theft and “completely unacceptable performance,” referring to four examples of errors or failures in his airport job.
The worker was unable to find comparable employment and eventually started working as a restaurant meal delivery driver.
An Ontario company that exacerbated an employee’s harassment by firing her had to pay $85,000 in moral damages.
Allegations for cause
The worker sued CSA for wrongful dismissal. The airline responded by claiming that the worker was never in a management position and his duties before his demotions involved “attending to the personal needs of the former GM.” The airline provided a long list of allegations including dishonesty and that he couldn’t perform his duties at the airport. It later abandoned most of the list, but it continued to assert just cause due to incompetence, misconduct, and unauthorized absences from work.
CSA also maintained that, with the reorganization of its operations under the new general manager, the worker’s position was made redundant and he was offered alternative employment. The worker was unable to perform the duties of either position he was given, said the airline.
The court noted that just cause based upon incompetence for a long-term employee with a good performance record was particularly difficult to prove. To justify dismissal, the issues would have to go to the root of the employment contract and be more than “mere dissatisfaction” with the worker’s performance, the court said.
The court found that the worker had no relevant experience for either position to which he was demoted and he received inadequate training. He also didn’t receive job descriptions or specific criticism about his work, the court said.
Unfairness or bad faith in the manner of dismissal is required to warrant aggravated damages; dismissal itself is not unfair, says an employment lawyer.
Set up to fail
The court also found that only the worker’s performance in the airport job was relevant, since that was his position at the time of dismissal. While he made mistakes, his age and lack of experience made it unlikely he would succeed, said the court, noting that the examples in the termination letter were “minor, unintentional mistakes.”
The court noted that after the worker failed the competency tests, he was told that he would receive more training. However, he was fired instead and CSA could not have expected any other result in assigning the worker to the airport job, the court said.
The court also found that the evidence indicated that the unauthorized absences were related to the fact that the worker worked irregular hours in his original position due to meeting with industry people and attending events, which was not time theft.
The court determined that CSA failed to establish just cause for dismissal and, although the worker was in a low-level position at the time of dismissal, CSA had started the process of dismissal when he was in the business development manager job. He was unfairly demoted to jobs for which he wasn’t suited, so his prior experience was relevant, said the court.
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Previous role considered
“One of the interesting parts of this analysis is that the court said that it's not totally appropriate to just focus on the position that he held at the at the end of his employment - that's typically how you would do it, what was the nature of the position held at the time,” says Toye. “But the court said that we should be looking at the position that he held [before the unfair demotions], that was his actual position in a more senior marketing role rather than these customer service roles at the end.”
The court also considered the worker’s eight years of service and relatively advanced age, along with the low likelihood of finding comparable employment. It noted that CSA benefitted from having the notice period calculated at the lower salary of the airport job and determined that the notice period should be 20 months.
The court found that CSA breached its duty of good faith and fair dealing by unfairly disciplining the worker and setting him up to fail with demotions to jobs that he could not do. The entire process involved “steps to manufacture cause for dismissal or to induce the [worker] to resign,” said the court in awarding $50,000 in aggravated damages.
The court also found that CSA made false allegations of cause once the worker sued for wrongful dismissal. Given that the compensatory damages were “relatively modest” – due to the reduced salary after the demotions - and the seriousness of CSA’s conduct, the court determined that punitive damages of $100,000 would ensure that CSA did not benefit from its wrongful conduct.
CSA was ordered to pay the worker a total of $208,053 for 20 months’ pay in lieu of notice plus aggravated and punitive damages.
Bad-faith claims are concerned with the events leading up to dismissal, the dismissal itself, and the way the dismissal is conducted, says an employment lawyer.
Bad-faith just cause case
The overarching narrative was that there was a concerted effort to push the worker out and manufacture a case for cause in bad faith, says Toye.
“[There was] a lot of smaller actions by the employer, like taking disciplinary action for conduct that wasn’t really warranted or disciplining him for his failings without providing the proper training but, on the whole, we see this pattern of bad-faith conduct in the way that they were managing his performance,” she says. “You can see the court show a real willingness to award aggravated and punitive damages to deter that kind of conduct for employers.”
Toye notes that circumstances where an employee may have become redundant or isn’t working out isn’t uncommon, but there is a high threshold to prove just cause.
“As employers, we don't want to be alleging cause where we don't have the foundation for it, because doing so can expose not only the risk of a significant legal dispute and reputational damage, but can in the end lead to significant liability for the employer well beyond what it would have cost to just provide the person with their reasonable notice entitlements or actual working notice in accordance with their common law requirements,” she says. “By engaging in that kind of behavior, you just expose yourself to exceptional legal risks and also treat somebody quite poorly in the process.”
See Chu v. China Southern Airlines Company Limited, 2023 BCSC 21.