Punitive Damages: Canadian Employers Beware!
Sometimes, what we hear about on TV is actually not fake. Even though many Canadian employers often dismiss concerns about punitive damages as being an American concept which is “not made in Canada”, there are real legal risks that cases which are handled poorly may result in a substantial increase to employee damages claims.
In Pohl v. Hudson’s Bay Company, 2022 ONSC 5230, the Court awarded a dismissed sales manager $55,000 in punitive and moral damages.
Darren Pohl had worked for Hudson’s Bay Company (HBC) for 28 years, and was terminated at the beginning of the Covid-19 pandemic. The termination by HBC was without cause, and Pohl sued for wrongful dismissal and other damages.
The Ontario Superior Court of Justice held that HBC breached its legal duty of good faith to Pohl based on how it handled his termination. The decision provides helpful insights for employers.
As an initial point, the Court awarded 24 months notice to Pohl. This was not necessarily a ground-breaking ruling – there was not a valid employment contract in place, and the Court accepted that the notice must be at the “top end” of the applicable range based on the usual factors, including Pohl’s substantial length of service, age, and the lack of available comparable employment.
The more interesting analysis in the decision focussed on a series of actions taken by HBC which were strongly criticized.
When HBC provided Pohl with notice of termination, it offered him the opportunity to remain employed with the company in a lesser-paid role as a sales associate. This position would have paid him substantially less money and did not offer guaranteed hours of work. The Court was not convinced that this offer was genuine, finding that it was actually a strategic attempt to “gut Mr. Pohl’s contract”. In this regard, it was notable that the “new and improved” employment offer contained a clause which would have essentially prevent Pohl from later claiming constructive dismissal if further changes were made to his role. Simply put, there was not proper reason for Pohl to have been expected to accept this offer, and the Court ultimately found that the employer was worse off by making the offer, since it was at best a misleading attempt to claim that it wished to retain the employee and help minimize the impact of termination.
HBC also failed to pay Pohl his minimum statutory entitlements in a timely manner as required by law – the required Ontario Employment Standards Act were not paid until two months following termination. This was despite a number of request from Pohl’s counsel that these amounts be paid unconditionally. There was no answer which HBC could provide about failing to honour statutory obligations without delay. If this approach was being used as a tactic, it backfired.
In addition to being slow to pay Pohl his ESA entitlements, HBC also breached its obligations to issue a timely and accurate Record of Employment (ROE), which is required to file a claim for Employment Insurance (EI). The ROE which was issued came two years after the termination, and it described Pohl’s termination as a “layoff” with an unexpected date of recall. None of this was accurate, and the Court’s decision implied that this was yet another tactic by a large employer which appeared to have knowingly disregarded its non-negotiable requirements.
The Court also put specific emphasis on the employer’s decision to immediately walk Pohl out of the company’s premises after the termination meeting. In addition to this action being found to be insensitive, this was hardly consistent with a case where the employer later claimed in the ROE that there was some expectation of a future return to work. Even though many employers will be sure to “exit and cut off” departing employees, there is a need to handle departures with sensitivity and diplomacy, and organizations may be called out for actual or perceived harsh treatment, especially in cases where involve long-time loyal employees who are terminated as part of a corporate restructuring.
Employer Takeaways
This decision may involve what was essentially a perfect storm for the employee – the employer seemed to have made “rookie mistakes” at every turn. However, these situations can be avoided if the employer has a proper process for dealing with terminations. Even if there is a basis to be tough with employee claims for excessive severance, close attention must be paid to statutory compliance and the need to be respectful of departing employees. The following steps are recommended:
Employees should be unconditionally paid outstanding wages, including vacation pay or other accrued pay or leave.
Any required statutory amounts (termination pay, and in Ontario, severance pay) should also be paid without treating these items as bargaining chips.
Benefits should be continued as required by law, again without condition.
The employer should issue a timely and accurate ROE, and respond promptly and fairly to any requests relating to EI.
Termination letters should clearly delineate what is and is not conditional upon the employee signing a release.
If there is a different role being offered to the employee, then it should be clearly explained to the employee, who must be given an opportunity to properly consider the role and make an informed decision about whether or not to accept it.
The specific approach to having the employee no longer attend at work needs to be carefully considered, especially if misconduct is not alleged.