“Manner Of Dismissal”: The Risks of Ill-Conceived Employer Hardball

There is a very important distinction under Canadian employment law between standing up to excessive claim, which is generally quite sensible, and refusing to comply with required statutory obligations and expected standards of honesty with employees. The disastrous consequence of the latter approach are clear from a number of recent court decisions, including an Ontario case where moral damages were awarded due to the manner of the employer’s dismissal.

In Teljeur v Aurora Hotel Group, 2023 ONSC 1234, the General Manager of a resort and conference center was terminated without cause after the defendant employer decide to retain an outside management company to manage the resort.  Had the company’s business decision been the only feature of the decision, then it’s likely that nothing about John Teljeur’s termination would have been remarkable. However, the employer made a number of mistakes in an apparent effort to drive down its severance obligation.

When they met him to terminate his employment, the company did not have a termination letter to provide to Teljeur. Instead, they advised him that they would be doing so. There was no evidence that they ever did so. Despite this failure, the company ceased paying the employee, and proceeded in the same manner as it would have if there had been a termination letter provided. This was and is a clear breach of the termination rules of the Ontario Employment Standards Act, 2000 (the “ESA”), including the specific rule that a termination is only effective if there is a specific termination date communicated in writing.

The employer also failed to provide Teljeur with his ESA entitlements within seven days after the employment ended. The company claimed that it had mailed a cheque to him approximately five weeks after the termination meeting. The dismissed employee said he never received such a cheque. A replacement cheque was then issued more than six months after termination. Even if the company had initially mailed the first cheque, that was also a clear violation of the ESA. In reviewing these facts in its decision, the Court noted that this resulted in the employee having no income during the holiday season.

A further contentious issue in the claim was the failure of the company to reimburse more than $16,500 of expenses. The company’s apparent justification about the failure to provide the reimbursement was a claim which the employee had made for interest. The Court rejected this argument, noting that the amount which had not been paid equated to more than 20% of the employee’s income. This failure to pay the expense reimbursement was also found to be an ESA breach, since the employer had not honoured its obligation to continue all terms and condition of employment during the statutory notice period, which includes the obligation to reimburse reasonable business expenses.

The catalogue of employer errors also included an express statement made during the termination meeting with respect to severance. In particular, the employer told Teljeur that it would be paying him eight weeks of severance. This amount was more than his ESA entitlements. Despite this assurance the employer limited what was paid out to the ESA requirements (and only then paid those six months late.)

When taken together, the Court found that the employer’s action were untruthful, misleading and unduly insensitive. As such, they were a breach of the employer’s duty of good faith and fair dealing in the manner of dismissal. This resulted in the Court concluded that these actions could reasonably be contemplated to cause the employee mental distress. The Court thus awarded the employee $15,000 on account of moral damages, which was addition to amounts payable on account of notice.

Takeaways for Employers

This decision reinforces the importance of following a proper and compliant process when terminating employees. While Canadian law permits organizations to terminate employees for proper business reasons, there is a core requirement to be honest with employees and to unconditionally honour statutory obligations. The basics of this process include having a written termination letter which sets out what the employer intends to do, complying without delay to statutory payment and other requirements, and proceeding in a manner which is respectful and honest. Employer who fail to follow such a process do so very much at their peril.