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When will a Court award Punitive Damages, but not Aggravated Damages against an Employer?

The Ontario Superior Court decision of Morison v Ergo-Industrial Seating Systems Inc., 2016 ONSC 6725

Background

Tom Morison (“Morison”) brought an action for wrongful dismissal against Ergo-Industrial Seating Systems Inc. (the “Employer”). The relationship between the Employer and the Employee began in August 2004.
 
Morison was dismissed on October 22, 2012. The dismissal was done without prior warning. At the time of the dismissal of Morison was fifty-eight (58) years old, was a top salesperson with no prior disciplinary infractions. Upon termination, Morison was given a letter from the Employer offering five (5) months’ notice and stating he had been terminated for just cause. As such, Morison was upset and distressed by the news.
 
Morison’s action sought damages for reasonable notice, aggravated damages for alleged breaches for duty of good faith and punitive damages for alleged high-handed treatment of Morison by the Employer.

Issues

The issues for the Court to consider were as follows:
  1. the amount of compensatory damages in lieu of notice for wrongful dismissal;
  2. whether aggravated damages were available; and
  3. whether punitive damages are available.

Decision of the Ontario Superior Court of Justice

Issue 1
 
Relying on Honda Canada Inc. v. Keays, 2008 SCC 39 and the principles outlined in Bardal v. Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.), the Court found that based on Morison’s age (58 years old) at the time of termination, his length of service (8 years), the character of his employment (sales manager) and the availability of similar employment (low, because the market was determined to be somewhat complex) the reasonable notice period for Morison was twelve (12) months.
 
Issue 2
 
With respect to aggravated damages, the Court first noted that:
 
In an action for wrongful dismissal, the general rule is that damages are limited to those resulting from the employer’s failure to give proper notice (in breach of the implied obligation in the employment contract to give reasonable notice in the absence of just cause), and that no damages are available to the employee for the actual loss of his or her employment or for the pain and distress that may have been suffered as a result of being terminated. That is because, at the time the contract of employment was formed, psychological damages would not have been in the contemplation of both parties as a result of the dismissal, as the dismissal was always a clear legal possibility. (para 30)
 
As such, the Court held that Morison did not present sufficient evidence that he suffered actual harm resulting from the manner in which he was dismissed, despite the Employer’s disingenuous allegations that Morison was dismissed for just cause. Rather, Morison failed point to anything that was “more to do with the ordinary pain, distress, and financial stress associated with losing a job, rather than that which might result from the manner of dismissal.” (para 31).
 
Issue 3
 
With respect to punitive damages, the Court first reflected on Boucher v. Wal-Mart Canada Corp., 2014 ONSC 419, highlighting the basic requirements needed to be established to award punitive damages:
 
  1. That the defendant’s conduct is reprehensible, “malicious, oppressive and high-handed”, and “a marked departure from ordinary standards of decent behaviour”.
  2. That a punitive damages award, when added to any compensatory award, is rationally required to punish the defendant and to meet the objectives of retribution, deterrence, and denunciation.
  3. That the defendant committed an actionable wrong independent of the underlying claim for damages for breach of contract (in this case, something other than breach of the implied notice provision). A breach of the defendant’s duty of good faith and fair dealings would constitute an independent actionable wrong. (para 49, citing paras 78-92 of Boucher v. Wal-Mart).
The Court found that the Employer’s conduct towards Morison amounted to a breach of its duty of good faith and fair dealings. In a careful consideration of the evidence presented, including the manner of Morison’s dismissal, the lack of warning of the investigation into Morison and the allegations of just cause for dismissal, the Court found that “an award of punitive damages is rationally required to punish the defendant and to meet the objectives of retribution, deterrence, and denunciation. Employers cannot be allowed to behave in such a fashion without a clear message being sent by this Court that this is not acceptable.” (para 56).

Our Thoughts

The above case serves as a good example of how the court assesses and awards damages with respect to wrongful dismissal of an employee. Aggravated damages are compensatory for bad faith conduct in the manner of dismissal which results in actual harm to the dismissed employee. Conversely, punitive damages sever a dual purpose, to punish an employer’s misconduct and to deter other employers from conducting themselves in this kind of misconduct. However, a court awarding punitive damages is not common in employment actions.
 
The above case can be taken as a warning to employers about how to conduct themselves during the termination process of an employee. It is advisable to treat the employee with fairness throughout the termination process. The above case also outlines to terminated employees the possible recourses available to them if their former employer is behaving high-handedly and/or unfairly during the dismissal process.
 
The above article is for general information purposes only and does not constitute legal advice. If you have concerns with regard to the foregoing issues, please make an appointment with one of our lawyers or a qualified legal practitioner elsewhere.