Labour & Employment Law Blog

Failure to Abide by Certain Requirements Under the Employment Standards Act Leads to an Award for Moral and Punitive Damages

Failure to abide by Certain Requirements Under the Employment Standards Act Leads to an Award for Moral and Punitive Damages

In the decision of Pohl v. Hudson’s Bay Company (“Pohl”), 2022 ONSC 5230, the court made the decision to award both moral and punitive damages to a dismissed employee of Hudson’s Bay Company. This decision serves as an important warning to all employers that they must take care in how they conduct themselves during the course of dismissing an employee or risk having to pay an award of moral and / or punitive damages.

In Pohl, the plaintiff did not have a written contract of employment with the employer, Hudson’s Bay Company (“HBC”) at the time of his employment. He was 53 years-old at the time of his termination. The plaintiff had worked with HBC for 28 years and held a position that was senior and supervisory. The court went on to note that because the plaintiff was terminated during the COVID-19 pandemic, it would have been more difficult for him to have found a comparable job to mitigate his damages and that these factors would justify a longer notice period. Considering the foregoing, the court found that the plaintiff was entitled to a reasonable notice period of 24 months.

Moral Damages

To remind our readers, moral damages are available when the employer engages in a breach of the employer’s duty of good faith and fair dealing at the time of termination and that this breach causes the employee to experience mental or moral distress. The purpose of moral damages is to compensate an employee for distress beyond the usual distress associated with being terminated. Ontario courts will look at how the employer terminates the employee’s employment as well as how the employer conducted themselves after the time of termination. Examples of a breach of the duty of good faith and fair dealing would be by acting in a manner that is deceitful or deceptive or unduly insensitive. Please read at our blog What are Moral Damages if you would like more information on what moral damages are and in what situations moral damages may be claimed by the dismissed employee.

In Pohl the court set out that the facts supported an award of moral damages in the amount of $45,000. The court did not like the fact that HBC had “walked out” the plaintiff upon his termination and that action on the part of the employer was held to be inappropriate and insensitive. The court also did not like that HBC had offered a misleading sales associate job to the plaintiff framed in a way to mitigate his damages that it was “carefully designed and would have extinguished Mr. Pohl’s rights on termination.” It included a clause that would allow HBC to end certain rights which would not trigger constructive dismissal.

According to the court, HBC had also violated the Employment Standards Act (“ESA”) as they had not paid the plaintiff certain wages it owed to him in a lump sum and in the time required. The court went on the find that HBC had deliberately violated the ESA by paying out the plaintiff’s termination and severance pay by way of installments instead of a lump sum.

Finally, the court decided that HBC was required to issue a record of employment (“ROE”) to the plaintiff within 5 days after the interruption of the employment. However, HBC had issued two ROEs to the plaintiff and that each were incorrect by containing certain errors.

Punitive Damages

Punitive damages are only awarded in exceptional cases when the conduct of the employer is malicious, vindictive, harsh and high-handed. Punitive damages are awarded against parties in order to deter certain conduct that courts find egregious or outrageous. Please look at our blog Punishing your Boss with Punitive Damages for more information on what punitive damages are.

The court found in this case that the plaintiff should be awarded punitive damages of $10,000 as a result of HBC’s conduct in failing to pay wages owing to the plaintiff in a lump sum in accordance with the ESA.

Our Thoughts

The Pohl decision can be seen as a warning for employers about what can happen if they act badly toward the employee during the course of dismissal and thereafter. As such, in order to avoid an increased risk of liability for moral or punitive damages, employers should be mindful of their conduct so that they can avoid any breach of their duty of good faith and fair dealing in the manner of dismissal. Being untruthful, misleading, unduly insensitive, harsh or rude to employees will greatly increase the risk of moral (and punitive) damages.

Pohl can also serve a more specific warning about that failing to make certain requirements under the ESA upon dismissal. It is important to note the HBC in Pohl simply failed to pay certain wages in a lump sum (they had made payments in installments) and had put the wrong date on the ROE. Employers cannot risk inaccuracies and errors with respect to requirements under the ESA. These are non-negotiable and must be abided by or the employer risks award for these damages. The trend in the case law is clear: the threshold for what may constitute an award of moral damages is lowering while the quantum of said damages is increasing.

The above article is for general information purposes only, does not constitute legal advice or create a solicitor-client relationship. Because each case is unique and factually driven, 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. We represent clients in the Greater Toronto Area including Toronto, North York, Markham, Vaughan, Thornhill, Newmarket, Aurora, Brampton, Mississauga, Barrie, Ajax, Whitby, Pickering and Oshawa.