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Employers Need to be Careful When Posting Reasons for Termination

In Hampton Securities Limited v. Dean 2018 ONSC 101, the Ontario Superior Court of Justice made the unusual decision to award an employee punitive and defamatory damages in the employment law context.  This decision serves as an important warning to employers that if they release or disclose reasons to the public upon terminating an employee for cause, the employee may be entitled to significant damages against that employer if those reasons are not reasonable and supported by evidence.

FACTS

As a proprietary trader, the Defendant, Christina Nicole Dean (“Ms. Dean”), was responsible for trading securities on behalf of her employer, the Plaintiff, Hampton Securities Limited (“Hampton”) with whom she had a signed employment contract. Ms. Dean kept a reserve account of her own funds from which Hampton could withdraw to offset her trading losses. About a year into her employment with Hampton, Ms. Dean was presented with a challenging ultimatum: to either increase the reserve account by $50,000 within 24 hours or to be terminated.
 
Ms. Dean claimed that she’d been constructively dismissed and on the following day handed Hampton a letter advising of her departure from the company. Hours later, Hampton handed Ms. Dean a letter by which it claimed she was terminated for cause. In an unusual move, Hampton then posted a Notice of Termination (“NOT”) for Ms. Dean on a database maintained by the national regulatory body for proprietary traders in Canada, the Investment Industry Regulatory Organization of Canada (“IIROC”). In the NOT, Hampton alleged that Ms. Dean was terminated because she’d engaged in unauthorized trading and failed to follow trading policies. Obviously, the NOT had a debilitating effect on Ms. Dean’s reputation and career prospects. Hampton did not stop there but also commenced a lawsuit against Ms. Dean for losses she incurred during her employment with Hampton. Ms. Dean counterclaimed for constructive dismissal and defamation.  

SUPERIOR COURT OF JUSTICE

Incurred Losses & Constructive Dismissal
 
After engaging in an analysis of Ms. Dean’s employment contract to determine whether she was been responsible for all of her losses while trading for Hampton, or just 60%, as per her defense, the court interpreted the contract in favor of Ms. Dean and found that she did not owe Hampton any money.
 
The court then turned to the issue of whether Ms. Dean had been terminated for cause because she did not increase her reserve account by $50,000 within 24 hours as instructed. Hampton relied on a provision in Ms. Dean’s contract by which it purportedly reserved the right to “increase reserve requirements at its sole discretion.” However, after reading this clause together with the rest of Ms. Dean’s contract in a “harmonious” manner, the court found that Hampton’s right to demand an increase was still ambiguous. Using principles applicable to the interpretation of employment contracts as set forth in the case Wood v. Fred Deeley Imports Ltd., the court interpreted the ambiguity in Ms. Dean’s favor and found that such demands could only be made within reasonable limits. As such, failing to increase her reserve fund by $50,000 within 24 hours did not constitute cause. Had Hampton originally sought the right to execute such a “dire” consequence on Ms. Hampton, it would have clearly set it out in her contract at the outset of her employment. 
 
The court rejected Hampton’s allegations that Ms. Dean failed to follow trading policies and that she had engaged in unauthorized trading. Hampton’s evidence was insufficient and consisted of an email that the court characterized as a “soft suggestion about trading strategy” and other conversations during which traders for Hampton were merely encouraged to keep their losses at a minimum. Further, Hampton had failed to prove through Ms. Dean’s capital reports that she had violated her capital limits and could not recall any conversations during which it warned Ms. Dean of violating trading policies. 
 
Hampton’s demand that Ms. Dean increase her reserve fund by $50,000 within 24 hours was a fundamental change to a term of her employment contract and had been made without providing reasonable notice. As such, the court found that Ms. Dean had been wrongfully terminated and awarded her six months’ notice, two of which were in recognition of the difficulty she would face in finding work due to Hampton’s unfounded allegations in the NOT.
 
Defamation & Punitive Damages
 
As noted above, the court deemed Hampton’s allegations of unauthorized trading and not following trading policies baseless and untrue. The court also recognized that a reputation for partaking in the alleged conduct could have a catastrophic effect on a professional trader’s career. Because the securities trading industry is known for being highly regulated, only a “foolhardy” employer would hire an applicant with such allegations on her record. Therefore, there was no doubt that statements made in the NOT were defamatory in nature and Hampton’s defense of justification, i.e. that the statement made in the NOT were substantially true, was categorically rejected.
 
Hampton’s second line of defense, that the statements made in the NOT fell under the category of Qualified Privilege, was also rejected. Qualified Privilege applies when the statement-maker and its recipient have interests in its communication, even if the statement’s contents are untrue. Hampton’s interest in making the statement was to comply with the regulations by informing the IIROC of reasons for Ms. Dean’s departure. However, drawing on the case of Botiuk v. Toronto Free Press Publications Ltd., the court ruled that the immunity of Qualified Privilege did not apply to Hampton’s statements because they were made in malice and were not reasonably appropriate or made in good faith.
 
Due to the severity of Hampton’s statements, the “devastating” effect on Ms. Dean’s reputation and Hampton’s failure to retract the statements, the court awarded Ms. Dean with $25,000 in general damages, an amount the court considered to be “more than reasonable”. Hampton was also ordered to file a notice of correction with the IIROC. Notably, the court did not award Ms. Dean Wallace damages for mental distress because Ms. Dean had not sought professional assistance or therapy for her distress. There was also concern about overlap between Ms. Dean’s claim for defamation and her claim for Wallace damages.  
 
Finally, the court ordered that Hampton pay Ms. Dean punitive damages in the amount of $25,000. The court found that Hampton’s posting of the NOT constituted an independent actionable wrong. Hampton’s conduct was also “highly blameworthy,” and such a description easily satisfied the requirement for punitive damages that conduct be a “marked departure from ordinary standards of decent behavior.” Finally, the quantum claimed by Ms. Dean was rational, proportionate and modest when compared to the level of reprehensibility attached to Hampton’s conduct.      

OUR THOUGHTS

It comes as a surprise that Ms. Dean only claimed $25,000 for defamation. Hampton’s statements in the NOT were made in malice, deemed completely false and would have been extremely damaging to anyone’s reputation and career. The court’s comment that damages of $25,000 was “more than reasonable” implies that Ms. Dean could been awarded a significantly higher quantum for defamation, had she only claimed it.
 
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.