In the years following the Supreme Court of Canada’s decision in Vorvis v. ICBC , practitioners of employment law generally thought that an award of punitive damages in an employment case would be rarer than a hatless head at a royal wedding.
Plaintiffs’ lawyers alleged defamation and all manner of other torts against former employers, straining to find the “independent actionable wrong” understood to be prerequisite to an award of punitive damages.
By the late 1990s, the Supreme Court of Canada – attempting to address the real issue of egregious conduct by certain employers – fashioned a new remedy with a lower threshold than that required to merit an award of punitive damages. In Wallace v. United Grain Growers, the Court made it clear to Canadian employers that “bad faith” or unduly harsh conduct directed towards an employee at the time of dismissal could result in an additional award of damages against the employer. These damages, which became known as “Wallace Damages”, were to be awarded and calculated as an extension of the normal reasonable notice period.
Wallace Damages as a notice period extension was an unusual and problematic concept – uncomfortably straddling the fence between compensatory damages and punitive damages. Courts did not regularly demand proof of actual damage from the Plaintiff before awarding Wallace Damages. And the lower Courts struggled with questions related to the nature of Wallace Damages as a notice period extension. Could Wallace Damages be reduced through the Plaintiff’s mitigation prior to the end of the notice period? Could Wallace Damages be eliminated by legislation capping notice periods for public employees?
Honda v. Keays
In 2008 the Supreme Court of Canada put an end to the notice period extension framework in Honda Canada Inc. v. Keays . The Court continued to recognize the significance of bad faith and unduly harsh conduct by employers at the time of dismissal; however, the Court established a more rational method for assessing damages arising from such conduct, as follows:
…Damages attributable to conduct in the manner of dismissal are always to be awarded under the Hadley principle. Moreover, in cases where damages are awarded, no extension of the notice period is to be used to determine the proper amount to be paid. The amount is to be fixed according to the same principles and in the same way as in all other cases dealing with moral damages. Thus, if the employee can prove that the manner of dismissal caused mental distress that was in the contemplation of the parties, those damages will be awarded not through an arbitrary extension of the notice period, but through an award that reflects the actual damages…
Accordingly, the Court made it very clear in Keays that in future cases, damages that previously would have been awarded as “Wallace Damages” should henceforth be awarded as compensatory damages – foreseeable damages proven before the Court. [For the purposes of the remainder of this paper, I will refer to these damages as “Keays Damages”.]
The Court also effectively streamlined the heads of damages available to a Plaintiff in a wrongful dismissal case by clarifying the place of aggravated damages claims within the wrongful dismissal context, as follows:
To be perfectly clear, I will conclude this analysis of our jurisprudence by saying that there is no reason to retain the distinction between “true aggravated damages” resulting from a separate cause of action and moral damages resulting from conduct in the manner of termination. Damages attributable to conduct in the manner of dismissal are always to be awarded under the Hadley principle.
The elimination of a separate additional head of aggravated damages in this practice area is a welcome development. Aggravated damages had historically been widely misunderstood and often confused with punitive damages by counsel and Courts alike. It will be much easier in future to deal with the compensatory aspects of the manner of dismissal solely within the confines of a Keays Damages analysis.
In Keays, the Court also provided valuable guidance regarding punitive damages in employment cases. The Court confirmed that punitive damages are available in the employment law context in “exceptional cases”. The Court reiterated that a finding of an actionable wrong is necessary for an award of punitive damages, and further held as follows:
…conduct meriting punitive damages awards must be “harsh, vindictive, reprehensible and malicious”, as well as “extreme in its nature and such that by any reasonable standard it is deserving of full condemnation and punishment”…
The Court made it clear that it is possible to award both compensatory and punitive damages in respect of the same egregious conduct by the employer, but Courts must be careful to consider whether punitive damages – over and above the compensatory damages award – are necessary for condemnation, deterrence and punishment in the circumstances of the case.
The purpose of this paper is to provide an update on how the Courts of several Canadian provinces have been applying this framework through brief summaries of selected recent decisions.
I. British Columbia
There have been several important decisions from our Supreme Court and Court of Appeal in the last couple of years concerning awards of punitive damages and other damages for the egregious behaviour of employers.
Nishina v. Azuma Foods (Canada) Co. Ltd. – $20,000.00 in punitive damages awarded, Keays Damages/aggravated damages refused – the Court reviewed the circumstances surrounding dismissal in detail. The Court drew a distinction between Keays Damages and punitive damages, as follows:
[251] Ms. Nishina claims that Azuma Foods dismissed her in bad faith, and seeks $25,000 in damages for mental distress. The bad faith she alleges is based on what Mr. Tamura told her: if she worked in Canada for two or three years, she could return to California and he would help her apply for a green card. She argues that promise was a term of her contract of employment.
[252] I do not find whatever Mr. Tamura may have said amounted to a contractual term. However, I do find that Azuma Foods breached its obligation to act in good faith when dismissing Ms. Nishina: the company ought to have known that the manner of dismissal was unduly insensitive, especially given its knowledge that termination would cause Ms. Nishina grave difficulties. Although I have concluded that Ms. Nishina is not entitled to damages for mental distress, Azuma Foods’ breach of its implied obligation to act in good faith in the manner of dismissal forms the basis for an award of punitive damages, which I will discuss next.
[…]
[255] The grounds put forward by Azuma Foods as establishing cause for dismissing Ms. Nishina without notice were weak; the company’s response to Ms. Nishina’s conduct was out of proportion with her actions. Azuma Foods’ conduct during its termination of Ms. Nishina’s employment showed a lack of good faith and fair dealing, which I will explain in the next section of these reasons. However, I cannot say that its conduct grounds an award of aggravated damages: although Ms. Nishina was clearly distressed, the evidence did not establish that she suffered quantifiable mental distress (or that it was caused by the manner of dismissal rather than the dismissal itself) to ground an award of aggravated damages.
[…]
[261] In Honda v. Keays, the Supreme Court of Canada considered the narrow issue of whether punitive damages could be grounded in a breach of human rights legislation, but confirmed that Whiten v. Pilot Insurance Co., 2002 SCC 18 (CanLII), 2002 SCC 18, [2002] 1 S.C.R. 595, remains the leading case on punitive damages. In Whiten, the Supreme Court of Canada clarified that the independent actionable wrong necessary to ground punitive damages may be established not only by a tort, but also by breach of a separate contractual provision or other obligation. Wallace confirmed an employer’s obligation of good faith in the manner of dismissal; this obligation carried through in Honda v. Keays, though now damages to compensate for bad faith in dismissal are awarded as a separate lump sum rather than as an extension of the period of reasonable notice. Following Honda, bad faith dismissal is capable of grounding a cause of action in damages, not just an additional factor to be considered under another head of damages.
[…]
[264] Not only did Azuma Foods fail to adequately establish that there was cause to terminate Ms. Nishina’s employment without notice, it failed to adequately investigate each of the incidents it relies on to establish cause. It rarely occurred to Ms. Nishina’s employer to ask her about the instances of alleged misconduct; when it did ask, it discounted what seemed to be reasonable explanations, preferring instead to view her as disrespectful, untrustworthy, or guilty. Azuma Foods’ response and sanction to the instances of Ms. Nishina’s alleged misconduct was out of any reasonable, objective sense of proportion. Azuma Foods’ conduct at the point of termination reveals a shocking disregard for Ms. Nishina’s vulnerability as an employee, and shows a significant lack of good faith.
[…]
[268] Unlike damages in lieu of reasonable notice or aggravated damages for mental distress, which are compensatory in nature, punitive damages “are restricted to advertent wrongful acts that are … deserving of punishment on their own”: Honda at para. 62. In Whiten, the Court reviewed the award of punitive damages by considering whether it was a rational response to the misconduct at issue—that is, whether it was proportionate to the defendant’s blameworthiness, the plaintiff’s vulnerability, the harm caused, and to the need for deterrence (among other factors). Mr. Justice Binnie writing for the majority noted that while an insurer has the right to investigate and exercise caution, “[t]here is a difference between due diligence and wilful tunnel vision” (para. 103). Similarly, in the case at bar, Azuma Foods was entitled to investigate the allegations of misconduct it harboured against Ms. Nishina, but what it was not entitled to do was to simply assume she was wrong and then assert that it had grounds for dismissal for cause.
Marchen v. Dams Ford Lincoln Sales Ltd. – Court of Appeal set aside trial judge’s award of $100,000 in punitive damages – The Plaintiff was an apprentice employed pursuant to a four-year apprenticeship agreement. The Defendant terminated the Plaintiff’s employment early and summarily without explanation. Almost 6 months later, after litigation was underway, the Defendant took the position that the termination was because of a decision to downsize the shop. The trial judge found that this was untrue. The real reason for the termination was that the Defendant had an unfounded suspicion that the Plaintiff was somehow involved in his brother’s criminal activities.
At trial, the Plaintiff’s claim for Keays Damages was refused, but the Plaintiff received an award of $100,000 as punitive damages. The trial judge, in refusing the Keays Damages, held that the Defendant’s “conduct at the time of termination was not unfair, unfaithful, misleading or unduly insensitive”. He also held that Mr. Marchen did not suffer undue distress.
The trial judge awarded punitive damages on the basis that the Defendant attempted to cover up the real reasons for the dismissal, continuing right through the litigation – the conduct was planned, deliberate and intended to mislead the Court.
The Court of Appeal overturned the award of punitive damages on the basis of the trial judge’s findings in the case that the Defendant’s conduct at the time of dismissal was not egregious and the Plaintiff did not suffer undue distress. The Court of Appeal clarified that the Defendant’s conduct through the litigation was properly to be considered in an award of special costs. In an assessment of punitive damages, the breach of contract and the conduct of the parties at the time of the breach must be examined.
Kelowna Flightcraft Air Charter Ltd. v. Buchanan – Small Claims Court award of $8,500 as “aggravated or punitive damages” upheld as Keays Damages on appeal to Supreme Court – the Supreme Court first sought to clarify the difference between punitive damages and aggravated damages through a consideration of Keays. Then the Court went on to find no basis for punitive damages, but sufficient evidence of insensitivity and lack of candour on the part of the employer and damage to the Plaintiff to warrant the $8,500 award:
[12] The reasons for judgment in this case do not specify if the trial judge was awarding aggravated damages, punitive damages, or some combination of the two. They are not the same thing, although the Supreme Court of Canada noted in Honda Canada Inc. v. Keays, 2008 SCC 39 (CanLII), 2008 SCC 39 [Keays] at para. 60 that confusion between them in the context of wrongful dismissal cases is “unsurprising”.
[13] Punitive damages are awarded for “wrongful acts that are so malicious and outrageous they are deserving of punishment on their own,” while the term aggravated damages is used (although perhaps not with strict accuracy) to refer to compensatory damages flowing from the manner in which employment is terminated: Keays at para. 62. […]
[19] I agree with the appellant that there was no evidence in this case of any of the outrageous or malicious conduct by the employer that might result in an award of punitive damages. However, the trial judge found:
• In the year before his dismissal, Mr. Buchanan did not receive performance reviews, and he was denied a scheduled pay raise;
• Mr. Buchanan was asked to train a new employee who was kept on after Mr. Buchanan was laid off;
• Mr. Buchanan was deprived a chance at the 2006 bonus, for which he would have qualified had he been kept on for even a few more days;
• Upon his dismissal, Mr. Buchanan was escorted off company property in a way that was degrading (there was no evidence of any specific security or personal concerns that required Mr. Buchanan to be escorted off the premises); and
• Mr. Buchanan was unable to get a reference from Kelowna Flightcraft.
[20] Those findings of fact were supported by evidence. On review of the trial judge’s findings and reasons in light of the evidence and the applicable law, it is clear that he found that there was, at least, an insensitivity and a lack of candour on the part of the employer in the way it went about ending Mr. Buchanan’s employment. […]
The evidence showed that this conduct caused the Plaintiff mental distress.
Beggs v. Westport Foods Ltd. – trial judge’s $20,000 award of Keays Damages to the Plaintiff for insensitive behaviour overturned by the Court of Appeal on the basis of insufficient evidence of bad faith, and no link between conduct and damage suffered – At trial, the judge considered claims brought by a 52 year old employee of a grocery store. The Plaintiff experienced a fire which destroyed her home. She advised the employer that she was not sure when she would be able to return to work. There was no communication between the parties for almost a month, following which the employer prepared an ROE document that indicated the Plaintiff had quit. Managers at the employer’s business assumed the Plaintiff had quit. The employer was unaware that the Plaintiff was now suffering from anxiety and depression. After an absence of around 7 weeks, the Plaintiff called the employer to request a medical ROE. She was advised that an ROE had already been prepared and she could come to pick it up. When she saw that the ROE indicated “quit” the Plainitff was greatly upset. The employer later learned more about the Plaintiff’s medical condition, but maintained that the Plaintiff had quit.
The trial judge found that the employer did not act in good faith. The Court held that the employer should have made a genuine attempt to contact the employee, knowing of the fire. The judge also took issue with the employer’s conduct – the lack of sensitivity – after the dismissal and after the employer learned more about the Plaintiff’s medical condition. The trial judge awarded $20,000 in Keays Damages.
In the following analysis, the Court of Appeal overturned the award of Keays Damages, finding insufficient evidence of bad faith, and furthermore, no proven link between the manner of the Plaintiff’s dismissal and her health deterioration:
[49] …[I]f an employee can establish that he or she suffered mental distress that was caused by conduct in the manner of dismissal, which conduct is found to be “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive”, the employee may be able to recover compensatory damages (Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (S.C.C.), [1997] 3 S.C.R. 701 at para. 98).
[…]
[51] Compensatory damages for mental distress caused by conduct in dismissal are to be distinguished from the “ordinary psychological impact” of the dismissal or “[t]he normal distress and hurt feelings resulting from dismissal”, which are not recoverable (Honda at para. 56).
[52] In this case, the trial judge relied only on the respondent’s evidence to support a finding that the appellant had acted in bad faith in the manner of her “dismissal”, and in granting the respondent compensatory damages. By adopting a one-sided approach to the evidence, in my view the trial judge erred in her application of the Honda test for compensatory damages. The appellant’s evidence, which the trial judge accepted, demonstrated that it was unaware of the respondent’s reason for her continued absence from the workplace after the fire. It was only because of the respondent’s lack of explanation for her absence that the ROE was issued indicating the respondent had quit. There is no evidence to support a finding that the appellant intentionally issued an incorrect ROE and therefore no evidence of bad faith or unfair dealings with the respondent. The trial judge’s acceptance of the evidence of Mr. Ward and Mr. Book as “truthful and candid” can only mean that she accepted their assertions that they honestly believed the respondent had quit. In short, both parties contributed to the unfortunate circumstances that ended the employment relationship.
[53] Furthermore, the medical evidence tendered by the respondent does not establish a link between the manner of her “dismissal” and the anxiety and depression she subsequently experienced. The evidence merely demonstrates a link between the respondent’s mental distress (her anxiety and depression), and the loss of her home and job. As was noted in Honda, normal distress and hurt feelings over the loss of a job is not compensable.
[54] I see no evidentiary basis for an award of compensatory damages and would allow this ground of appeal.
Bru v. AGM Enterprises Inc. – punitive damages refused, but Keays Damages for mental distress awarded in the amount of $12,000 – In this case a 59 year old female employee sought damages for wrongful dismissal, Keays Damages and punitive damages against her former employer. There was a dispute between the parties whether the Plaintiff had called in sick to work or quit her job. The following day, the Plaintiff tried to clarify that she had not intended to quit. Nonetheless, the employer purported to have accepted her resignation, and would not consider taking her back as an employee.
The trial judge did not find the malicious intent or callous disregard required to award punitive damages. However the judge found unfairness and insensitivity in the employer’s treatment of the Plaintiff, causing health damage quantified at $12,000:
[136] As will be quite clear from my findings within the context of the plaintiff’s resignation, I concluded that the defendant Market did not treat Ms. Bru fairly in dealing with her statement of resignation, especially in what could be called their stone walling in response to her statements that she had not quit. While Ms. Bru did speak those words on November 13, subsequent statements she made indicated that she did not mean them.
[137] It was unfair and insensitive of the Market to fail to communicate with Ms. Bru in a meaningful way following her statements on November 14, especially considering their knowledge of her financial and emotional vulnerability. Their failed obligation to act fairly and sensitively are the foundation of an award of Wallace damages in this case.
[138] More specifically, the offending conduct of the defendant Market can be found in the following:
a) The refusal to communicate with Ms. Bru in any meaningful way about her true intentions about leaving the Market;
b) The failure to inquire after her emotional state in any way;
c) Mr. Schwab’s stern rebuke when he called Ms. Bru on November 15. This was a time for calm and respectful communication, not a stern rebuke despite Mr. Schwab’s understandable annoyance. I find that this conversation was one of the factors contributing to the onset of Ms. Bru’s reactive depression – as opposed to mere emotional upset from the loss of the job;
d) The failure to give any consideration at all to Ms. Bru’s financial, emotional, and situational vulnerability. Mr. Schwab knew that Ms. Bru lived, like other deli clerks, from pay cheque to pay cheque. He knew she lived in low-income housing. The defendant Market knew that Ms. Bru would not be eligible for EI benefits if she were to be designated an employee who had quit without notice. The defendant Market knew that Ms. Bru had been under a lot of stress for many months because not only of the nature of her work, but also staff conflict and stressor’s outside work. The employer is not responsible for these, but they are circumstances that should have alerted the defendant Market to Ms. Bru’s vulnerability and the pressing need for calm communication marked by openness, candour and reasonableness.
e) The failure to give regard to the fact that Ms. Bru had worked hard for the defendant Market in what was a demanding fast-paced position, especially for a 59 year old woman. She had given 100% effort to a position that tended to “burn out people” working in that position, in the words of Mr. Schwab. More of a response was required than Ms. Morton’s: “She’s a 59 year old woman and can look after herself” and then brushing off Ms. Bru’s subsequent entreaties.
[139] Having said this, I emphasize my view that no one connected with the defendant Market acted with any degree of malicious intent or callous disregard for Ms. Bru. In fact, I find that they scarcely put their mind to Ms. Bru’s situation and all her circumstances at the time. However, they were obligated to do so. […]
[168] I find that Ms. Bru’s reactive depression arose soon after November 14, 2007, and in response to the refusal of the defendant Market to respond in any way to her statements that she had not in effect intended to quit; and in some measure to the telephone call of Mr. Schwab on November 15 and his stern rebuke. I also find that her reactive depression was primarily a response to her feelings of financial vulnerability and helplessness experienced by her when she realized that the Market had dismissed her, accentuated by her later realization that she would not be eligible for EI benefits in the circumstances. I find that these events caused the plaintiff’s reactive depression and other related ill effects.
[In two other cases – Devlin v. NEMI and Renard v. Facet Decision Systems Inc. – punitive damages and Keays Damages were refused as the circumstances of the dismissals – the employers’ actions -in those cases were not found to be severe enough to merit such awards.]
II. Alberta
Merrill Lynch Canada Inc. v. Soost case – the Alberta Court of Appeal overturned the lower Court’s large award of $1.6 million in Keays Damages – The Plaintiff was a high-performing investment advisor at the time his employer dismissed him. The trial Court awarded him $600,000 as one year’s notice plus another $1.6 million for damage to his reputation and his book of business caused by the dismissal.
The Court of Appeal held that the award of $1.6 million had no basis in law or on the facts of the case. Essentially the Court below mistakenly believed damages over-and-above a notice award could flow from the fact of a dismissal, rather than any particular egregious conduct by the employer at the time of dismissal. And the award had an element of double-counting, as the notice award already covered future earnings (ie. the book of business) for the reasonable notice period.
Elgert v. Home Hardware Stores Limited case – in this jury decision (which is under appeal) the jury awarded the Plaintiff $300,000 in punitive damages and an additional $200,000 to supplement the 24 month notice award. The Plaintiff was wrongfully dismissed, and the employer made a false allegation of sexual harassment against the Plaintiff. Of particular interest in this case is the judge’s charge to the jury, as set out in a subsequent decision in the case:
[61] On the issue of punitive damages, the Charge to the Jury followed the specific guidelines set by the Supreme Court of Canada in Whiten v. Pilot Insurance Co. The Guidelines and Restrictions were stated painstakingly with many warnings given to the Jury. My Charge to the Jury at pages 20 – 21 reads as follows:–
72. You may also choose to award Dan Elgert punitive damages if you find that Home Hardware’s conduct in dismissing him was harsh, vindictive, reprehensible, and malicious; that is, deserving of full condemnation and punishment. Punitive damages should only be awarded in exceptional cases where the employer’s conduct was egregious or outrageous, and where the compensatory damages already awarded do not carry the necessary element of deterrence. These facts must be kept in mind in deciding whether to award punitive damages:
(a) Punitive damages are the exception, not the rule;
(b) There must be a marked departure from the ordinary standards of decent behaviour by the defendant;
(c) If punitive damages are awarded, they should be proportionate to the harm caused by the defendant, the degree of misconduct, the degree of vulnerability of the plaintiff, and any advantage gained by the defendant;
(d) Whether or not the Defendant has paid any other fines or penalties;
(e) Whether other penalties are available, and if so, are they adequate?
(f) The purpose of punitive damages is not to compensate the plaintiff;
(g) But, the purpose is to punish the defendant’s conduct so as to act as a deterrent and a mark of the community’s condemnation;
(h) They should only be awarded where compensatory damages cannot accomplish these objectives;
(i) The amount must not be greater than what was needed to accomplish its purpose;
(j) The State normally receives these fines, but in this case, punitive damages will be a windfall to Dan Elgert; and
(k) Moderate damages are usually sufficient because of the stigma an award of punitive damages creates in the community.
73. You must be cautious to avoid unnecessary duplication in the award of damages. If you find that Home Hardware is liable for punitive damages, any award you make should be fair and reasonable to both Dan Elgert and Home Hardware. The amount of damages is for you to decide, but must fall within the range of $0 to $400,000.
[62] On aggravated damages, the Charge to the Jury reflected an employer’s obligation of good faith and fair dealing and the recognition that when an employment relationship ruptures, the employee is at his most vulnerable and in most need of protection. This was described in my Charge to the Jury at pages 19 – 20 which reads:–
69. As stated earlier, an employer has a duty of good faith and fair dealing to its employee, both during employment and during termination. An employer also has a duty to be candid, reasonable, honest and forthright in the course of dismissal and refrain from untruthful, misleading or unduly insensitive behavior. If the employer engages in bad faith conduct during the course of employment or during dismissal, that may entitle the employee to additional damages. These damages are known as aggravated damages.
70. The law also recognizes that employees are to be treated with dignity and respect because employment relationships help define an individual employee’s self worth. If an employee suffers humiliation, embarrassment or damage to self esteem over and above the usual hurt feelings any employee would feel when dismissed, that employee may be entitled to additional damages over and above the notice period. Note that an employee’s normal distress and hurt feelings resulting from dismissal are not compensable by aggravated damages. Aggravated damages are meant to address tangible and intangible losses flowing from bad faith acts of the employer or unduly insensitive dealing by the employer.
71. If you find that Home Hardware is liable for aggravated damages, any award you make should be fair and reasonable to both Dan Elgert and Home Hardware. The amount of damages is for you to decide, but must fall within the range of $0 to $200,000.
Pawlett v. Dominion Protection Services Ltd. – the Alberta Court of Appeal rolled back the $50,000 trial award of punitive damages to $5,000 – In this case, the trial Court found that the Plaintiff was constructively dismissed as a result of sexual harassment and assault by her supervisor. The lower Court awarded her notice, Keays Damages (awarded as “Wallace Damages”), punitive damages, and damages for the tort of sexual battery.
The Court of Appeal found duplication in the awards from the Court below. The Court found that the same conduct was relied upon to support the sexual battery award, the Keays Damages, and the punitive damages award. Also the Court held that the $25,000 in tort damages served a denunciatory purpose, so the additional punitive damages were reduced to $5,000.
III. Ontario
Piresferreira v. Ayotte – the Ontario Court of Appeal considered the lower Court’s general tort damages award to the Plaintiff and restructured the award to fit within the framework established in Keays – After trial, the lower Court awarded the Plainitff damages totalling $500,955, which included general damages for the torts of battery and intentional and negligent infliction of mental suffering. The trial judge would have awarded $45,000 for damages flowing from the manner of dismissal, but did not do so in light of the tort awards made.
The Court of Appeal held that the tort damages awarded by the lower Court for negligent and intentional infliction of mental suffering had no basis – those awards were set aside. However, the Court of Appeal agreed with the trial judge’s assessment of damages flowing from the manner of dismissal, and accordingly ordered an award of $45,000 in Keays Damages on that basis.
Altman v. Steve’s Music – the Ontario Superior Court of Justice awarded $35,000 for mental distress (clarified to be for the manner of termination, or Keays Damages), and a further $20,000 for punitive damages – In this case the Plaintiff was a 59 year old woman who worked for the employer for more than 30 years. She was ill and off work on leave several times. The employer took the position that her illness had frustrated the employment contract and terminated her employment without any compensation.
The Court rejected the employer’s frustration argument and awarded the Plaintiff 22 months notice. The Court additionally awarded $35,000 as Keays Damages and $20,000 as punitive damages, finding as follows:
[131] Steve’s treatment of Ms. Altman was callous and insensitive. She was a 30-year employee who had been treated like family, and who worked for Steve’s as if she were a member of the family. She deserved to be treated better than twice having a bailiff deliver her a letter replete with mistruths from Steve’s lawyers – especially when Steve’s knew she was recovering from cancer treatment. No one in the management of Steve’s had the decency or courtesy to speak to her personally to express their dissatisfaction with the work arrangement to which they had previously agreed. I conclude that once Steve’s decided that Ms. Altman had become more of a liability than an asset to the organization because of her cancer, they abandoned her to be dealt with by their lawyers. These letters devastated Ms. Altman and caused her significant mental distress to the point of clinical depression. Ms. Altman’s mental distress has been long lasting and is ongoing.
[132] I award Ms. Altman damages in the amount of $35,000.00 as compensatory damages as a result of Steve’s breach of its duty to deal with Ms. Altman in good faith and with fairness in the manner in which they terminated her employment.
[…]
[135] I am required by the Honda decision to focus on the misconduct of Steve’s Music, rather than on the loss suffered by Ms. Altman in determining whether to award punitive damages.
[136] In my view, the following conduct on the part of Steve’s Music calls for an award of punitive damages:
a. Steve’s refused to pay Ms. Altman the statutory minimum termination pay set out in the Act until Ms. Altman brought an application for summary judgment in December 2010, 20 months after her employment was terminated. Steve’s was ordered to pay the statutory minimum by Conway J.
b. Steve’s has improperly withheld wages Ms. Altman earned, contrary to the Act.
c. Steve’s failed to provide Ms. Altman an accounting of the amount held for her in the deferred profit sharing plan, contrary to the order made by Conway J. on December 29, 2010.
d. Steve’s used Ms. Altman’s vacation bank to reimburse itself for time Ms. Altman was absent. This factor is particularly important given that at all times, Steve’s led Ms. Altman to believe that she was being paid her full salary and never informed her it would use the time she had accrued in her vacation bank. This was done in the face of section 40 of the Act, which deems employers to hold all vacation pay accruing to employees in trust for the employees.
e. Despite numerous attempts by Ms. Altman, and others on her behalf, to have Steve’s complete the Policyholder’s Statement in the Standard Life claim form, Steve’s failed to do so until more than one year after Ms. Altman went on medical leave, and more than six months after it terminated Ms. Altman’s employment. Ms. Altman was unable to receive the disability benefits she had paid for because of Steve’s failure to complete this form. She ultimately received benefits in December 2009 retroactively.
f. Ms. Altman was required to retain counsel to obtain her Record of Employment that would permit her to receive Employment Insurance Benefits. Her counsel received the Record of Employment on December 1, 2008. Michael Kirman’s only explanation for this delay was that the Record of Employment must have been lost in the mail. Steve’s failure to provide Ms. Altman with this document meant that Ms. Altman had no income whatsoever between October 18 and December 18, 2008.
[137] Steve’s violations of the Employment Standards Act amount to an independent actionable wrong, separate from its breach of the employment contract in not providing Ms. Altman reasonable notice of termination.
[…]
[139] Steve’s conduct must be viewed in the totality of Ms. Altman’s circumstances. In October 2008, Ms. Altman had just completed very intensive cancer treatment. Steve’s did not pay her during her medical leave, which began on October 17, 2008. In fact, Steve’s did not pay her for the hours she had worked that week. Ms. Altman had no source of income. Steve’s failure to honour its statutory obligations to pay her termination pay, to provide her with a Record of Employment to allow her to obtain Employment Insurance benefits, to comply with an order made by Conway J. to provide Ms. Altman with an accounting of her share of the deferred profit sharing plan, together with the other misconduct listed in paragraph 136 is reprehensible and high handed conduct that is deserving of this court’s denunciation.
[140] Punitive damages must serve a rational purpose. They must be rationally required to serve as a deterrent. “This rationality test applies to the question of whether the award should be made at all and to the question of the amount:” Whiten v. Pilot Insurance Co.[45] In Whiten, Binnie J. held that proportionality is the “key to the permissible quantum of punitive damages.”[46] To determine proportionality, Binnie J. listed a number of factors to consider, including, the blameworthiness of the defendant’s conduct, the degree of vulnerability of the plaintiff, the harm directed specifically at the plaintiff and the need for deterrence.
[…]
[144] The conduct on the part of Steve’s Music that I have outlined above as worthy of punitive damages is different from the conduct that serves as the foundation for the award of damages for mental distress. The compensatory damages awarded Ms. Altman for her mental distress are not sufficient to avoid a repetition of this conduct or to express the court’s repugnance at the conduct. In the circumstances, I award Ms. Altman $20,000.00 in punitive damages.
CONCLUSION:
In the author’s view, since the Supreme Court of Canada’s decision in Keays, the Courts in British Columbia and other provinces have been carefully attempting to follow the paradigm established by the SCC in awarding damages for egregious conduct by employers at the time of employee dismissals.
One significant result is that Plaintiff’s counsel seeking an award of Keays Damages must be sure to lead evidence showing the bad faith or egregious conduct of the employer, showing the damage to the Plaintiff, and establishing a clear causation link between the egregious conduct and the damage suffered.
In cases where multiple heads of damage are claimed on the basis of egregious employer conduct, counsel on both sides must be prepared to address the issue of whether awards on multiple heads would constitute double-counting.