Legal Costs in Wrongful Dismissal Cases: Beware of Losing the Forest for the Trees

Jul 18, 2014

Damages for Most Wrongfully Dismissed Employees are usually less than $ 50 000

Most terminated employees cannot prove more than $ 50 000 damages in a wrongful dismissal action. Why? Because a court will deduct any income the person earns during the notice period from the wrongful dismissal damages owing.

For more information on wrongful dismissal law in Ontario, click here.

Let’s say a 40 year old employee is fired from an $80 000 job after nine years. A court concludes that she should have received 9 months notice of termination, and she obtains a job paying the same salary after 6 months. Her wrongful dismissal damages are therefore $ 60 000 less the $ 20 000 she earned in the new job or, in other words, $ 40 000.

Until recently, employees would accept much less than they were entitled to receive in court because of the time, emotions and costs associated with a trial. It would often take more than a year to get to trial and the legal bill would often be more than $ 20 000.

A New Summary Process for Deciding Wrongful Dismissal Claims

Now there is a quick court process to obtain wrongful dismissal damages. It is called a motion for summary judgment. The cost to get a quick decision is now much less than proceeding through the entire court process to trial.

For more information on the summary judgment process, click here.

Three Wrongful Dismissal Cases that were decided by Summary Judgment Motions

Here are three cases where employees used the summary judgment motion to their benefit:

A number of wrongful dismissal actions were filed by former Canac Kitchen employees under Rule 76 of the Simplified Rules of Procedure in connection with a plant closure. The court indicated: “This was not a complicated or complex matter.  The motion materials submitted were uncomplicated.” There were no cross-examinations on the affiants.

In one Canac case, Moldovanyi v. Canac Kitchens Ltd. (Kohler Ltd.), 2009 CanLII 9369 (ON SC), http://canlii.ca/t/22p3m, the plaintiff’s motion summary judgment was successful and the defendant was ordered to pay the plaintiff$27,422.46 in wrongful dismissal damages. Because the plaintiff’s offer to settle that was less than $ 27 422.46 the plaintiff sought costs on a substantial indemnity basis in the amount of $18,968.98. The defendant suggested costs be fixed on a partial indemnity basis in the amount of $5,934.00 for fees and $489.99 for disbursements. The court awarded costs in the amount of $9,500.

Adjemian v. Brook Crompton North America, 2008 CanLII 27469 (ON SC), http://canlii.ca/t/1x5pg alsoinvolved a wrongful dismissal action filed under Rule 76 of the Simplified Rules. The plaintiff’s motion for summary judgment was successful and the defendant was ordered to pay $ 50 000 damages. The plaintiff’s counsel provided the court with a draft bills of costs seeking $14,157.64 in legal costs on a partial indemnity basis all inclusive of counsel fee, disbursements and GST. The court ordered the defendant to pay this amount.

In Boland v. APV Canada Ltd., 2005 CanLII 11980 (ON SCDC), http://canlii.ca/t/1k5wq the plaintiff claimed damages for, among other things, her minimum entitlements to termination pay under the Employment Standards Act. The plaintiff claimed the employer could not deduct any mitigation income she earned from the ESA termination pay. The plaintiff brought a motion for summary judgment and she was successful. The employer’s appeal was denied. The plaintiff’s lawyer requested the court to order the employer to pay$28,805 for fees plus $919 in disbursements. The employer’s counsel countered with $ 5000. The judge concluded: “I think that a reasonable figure in this case is $4,500 for the motion and $6,000 for the appeal (plus $ 919 disbursement and GST), bearing in mind the additional work of being appellant and the cost of dealing with correspondence and review of materials connected to the intervention.”

For more information on Ontario’s Employment Standards Act, click here.

Employer takeaway

An employer should think twice before rejecting a reasonable settlement offer in a wrongful dismissal action when damages are less than $ 50 000 because legal costs will likely drive up total costs significantly.

If an employee’s lawyer is incurring $ 15 000 to $ 20 000 in legal costs in these kinds of cases as indicated above, then legal fees for the employer are likely the same or more.

This means if an employer loses a summary motion then he employer could very well be ordered to pay the employee wrongful dismissal damages of $ 40 000 in my example above plus $ 25 000 or more in legal costs. This amount assumes the court orders the employer to pay $ 10 000 of the $ 15000 to $ 20 000 of the plaintiff’s legal costs, and its own lawyer’s fees are $ 15 000 to $ 20 000.

For the past 25 years, Doug MacLeod of the MacLeod Law Firm has been advising and representing employers in connection with employee terminations. If you have any questions, you can contact him at 416 317-9894 or at [email protected]

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

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