In a recent case, Pohl v. Hudson’s Bay Company, 2022 ONSC 5230 (CanLII),an employer was ordered to pay a long service employee the equivalent of about 3 years pay and contribute about $ 35 000 to his legal fees. Although this was a without cause termination case, it was anything but a simple case. It addressed some of the litigation risk inherent in wrongful dismissal litigation.
Here are some of the issues that were decided:
1. What was the appropriate notice period for a 53 year old with 28 years service who did not sign an employment contract? Few employment lawyers would be surprised to hear that the judge awarded a 24 month notice period.
2. Did the employee fail to mitigate his damages by refusing an offer of alternative employment and for failing to apply for another vacant position and for not applying for enough vacant positions? The court concluded neither alternative position was comparable and so the employee had no obligation to accept them. The court concluded that applying for 136 jobs that were comparable to his former position satisfied the employee’s duty to mitigate.
3. How to value employee benefits during the notice period. The judge calculated the value of lost employee benefits based on a quote the employee received from Manulife Financial of $351.38 per month which was considerably more than the employer’s cost to obtain comparable benefits. The decision does not state whether the employee actually purchased this insurance and if not whether he incurred any out of pocket medical or dental costs.
4. Was the employee entitled to moral damages for moral distress beyond the usual distress and hurt feelings associated with being dismissed? The court ordered the employer to pay $ 45 000 for: walking the employee out the door; offering him a job that would take away his rights; not paying him the monies he was owed under the Employment Standards Act (ESA) in a timely manner; submitting a late and incorrect Record of Employment (ROE). The damage award here shows the litigation risk related to this kind of damage claim. I don’t think some judges hearing this case would have awarded ANY moral damages.
5. Was the employee entitled to punitive damages for malicious, oppressive, and high-handed conduct that offends the court’s sense of decency and is deserving of punishment.The court ordered the employer to pay $10 000 for the failure to pay out the wages owing to the employee in accordance with the ESA (or upon repeated demand by his counsel) and the failure to issue a timely or correct ROE. It appears that the judge awarded punitive damages and moral damages for the same conduct contrary to the Supreme Court of Canada’s decision in Wallace. Punitive damages are rarely awarded and usually the conduct considered is much more egregious. This damage award was unexpected.
6. Was the employer required to pay some of the employee’s legal fees? Normally an unsuccessful party is required to pay some of the legal costs of the successful party. Prior to the summary judgment motion, the employee offered to accept a full settlement in the amount of $90,766.94, plus partial indemnity costs to the date of the offer and substantial indemnity costs thereafter. Since the employee did considerably better at the motion the employee sought about $ 42000 in costs and was awarded $ 35000. The employer’s bill of costs was almost $ 49000. I don’t think this cost order would surprise many employment lawyers. If anything I suspect some judges would have awarded substantial indemnity costs which would have been about $ 38000 in this case.
How to Mitigate Litigation Risk
At the time of a without cause termination of a long-term employee who has not signed an employment contract, the two big unknowns that an employer must consider when making a settlement offer is (i) how long it will likely take for the employee to find re-employment; and (ii) whether a judge will find the employer’s conduct should attract moral/punitive damages.
An employer can control its conduct and mitigate this litigation risk. The employer can also mitigate the risk of a long period of unemployment by helping the terminated employee find alternative employment by, among other things, purchasing outplacement counseling for the employee, and providing a positive verbal and written reference.
The best way to minimize termination costs is by requiring an employee to sign an employment contract with an enforceable termination clause that provides the employee with less than common law reasonable notice of termination and simply comply with the terms of the termination clause. In this case, the employee’s salary was about $ 60 000. If he had signed a contract providing for 2 weeks termination/severance pay for each year of service he would have been entitled to receive about 56 weeks pay or about $ 32000 instead of the almost $ 225000 the court ordered the employer to pay.
For the past 30 years, Doug MacLeod has been advising and representing employers in all aspects of the employment relationship. If you have any questions, you can contact him at 416 417-9894 or at [email protected].