B.C. case highlights importance of treating employees right in a dismissal
Normally, I would say that the best way for employers to minimize their severance costs is through well-drafted and properly implemented employment agreements with enforceable termination clauses. However, even if those exist, it is possible for an employer to dramatically increase their severance costs in the way they treat an employee in the course of dismissal.
Case in point: A recent British Columbia wrongful dismissal case in which an employee received $5,660 in lieu of notice and an additional $60,000 in aggravated and punitive damages.
What did the employer do?
In Fobert v. MCRCI Medicinal Cannabis Resource Centre Inc., the employer epitomized bad faith in the course of dismissal.
After a change in ownership, a restructuring took place. Carly Fobert was one of the employees let go on May 24, 2019, and although her contract provided 30 days’ notice of termination or pay in lieu for termination without cause, she was only offered two weeks.
Fobert responded reasonably by sending a copy of her employment agreement, and was then told that she would be paid out. Things seemed to be proceeding as they should, but then everything went sideways.
First, the company advised that it needed a little more time to sort things out but that she would be paid. However, Fobert and all other dismissed employees were subsequently advised that there was a lack of funds and all payments had to be approved. Then, Fobert was invited to a meeting on June 6 where she was met with allegations of wrongdoing and accusations that she and others had “misplaced a lot of money”.
The company then stated that it was going to take an aggressive stance, that it was prepared to commence a lawsuit and to defend any legal action she or others might commence, and that it had “endless resources” to do so.
The company lied and said that all other employees had agreed to go away without any severance and then offered Fobert “an extra 500 bucks and that’s it.” They refused to put the offer in writing, and told her it would be revoked after the meeting. When she asked about contact information, the response was “I’m not you[r] legal counsel. Go find the guy, 500 bucks an hour, to tell you”.
As regular readers will know, a clause that breaches or has the potential to breach applicable employment standards will not be enforceable. In this case, if Fobert worked more than a few years, her statutory entitlement would exceed the 30 days in the contract, so this clause was void. As a result, the Supreme Court of British Columbia assessed her common law entitlement and awarded eight weeks of pay in lieu of notice after only one-and-a-half years of employment.
More significantly, the court went on to award additional damages due to the way in which the company behaved. These are some of the more relevant excerpts from the judgment:
“I view Mr. Liu’s conduct during the June 6 meeting as appalling, harsh and reprehensible. He made false and serious allegations of financial impropriety, used aggressive and intimidating language and repeatedly engaged in a range of bullying tactics. Further, although he did not yell, his tone and manner of communicating were intimidating
Mr. Liu alleged more than once that Ms. Fobert was part of a group of employees who had engaged in the misuse of enormous amounts of money although she never had any spending authority. In an obvious attempt to intimidate, he told her that the rest of the group had signed off without any severance. He made it clear the defendants were willing to sue and withstand being sued, emphasizing their financial advantage and his own. After indicating she would be offered nothing, he offered $500 severance, an amount well below her statutory entitlement. Mr. Liu then pressured Ms. Fobert into accepting the offer immediately, telling her it would be revoked after the meeting and refusing to put it in writing. He also commented that meeting over such a minor financial matter was not worth his time, which was disparaging if not contemptuous. The same is true of his response to a perfectly reasonable question about contact information, ‘I’m not you legal counsel. Go find the guy, 500 bucks an hour, to tell you.’”
The company’s conduct during litigation was also considered:
“Ms. Fobert also relies on the defendants’ conduct in the litigation, namely making allegations of serious misconduct in the response to [the] civil claim, despite admitting she was dismissed without cause. The pleaded allegations include Ms. Fobert breaching a non-competition term in the Employment Agreement by accepting employment with an MCRCI competitor ‘immediately subsequent to her termination’; and disparaging the defendants and their directors to four MCRCI employees around the time of termination, which caused lost business and the resignation of employees. None of the allegations were even raised at the trial.”
As a result, Fobert was awarded $25,000 in aggravated damages and $35,000 in punitive damages.
When do employees get these additional damages?
We all know that employers have a duty to treat an employee in good faith in the course of dismissal. Whether it is punitive damages, aggravated damages, moral/bad faith damages (which I still occasionally refer to as “The Damages Formerly Known as Wallace”), courts will penalize employers that behave in a manner that they find to be unnecessarily harsh, vindictive, or just plain mean.
That includes conduct leading up to dismissal, during the dismissal meeting, and afterward; as we have seen, it even includes conduct during litigation.
Aggravated and moral damages are intended to compensate the plaintiff for a loss or injury, whereas punitive damages are intended to penalize the defendant. In this case, there was evidence that Fobert had an anxiety attack after the June 6 meeting and had other issues with anxiety, which she had not experienced prior to the dismissal. That was sufficient to justify compensation.
To make a fairly obvious point: by acting in such an unnecessarily aggressive and reprehensible manner, presumably to try to reduce its severance obligations, this company ended up paying far more severance than the contract provided for plus an additional $60,000 in additional damages, in addition to all of its legal costs, reimbursement for a portion of the plaintiff’s legal costs, and the needless expenditure of time and resources on this litigation.
If it had provided the 30 days required by the contract, the employee probably would have taken it and that would have been the end of the matter. Instead, this cost the company exponentially more money, as well as the loss of goodwill and hit to its reputation.
The bottom line is that it can be extremely shortsighted to behave as this company did.