A just-released decision of Ontario’s Superior Court of Justice has given employers some very clear examples of what NOT to say or do during a termination of an employee.
The Background
The employee was named J.P (Scott) Ruston, and he had been employed for 11 years by Keddco Mfg. At the time of termination, the employee held the position of President (but had started as a sales rep) and was earning roughly $300,000 annually at the time of termination.
At the end of the trial, the judge awarded the terminated employee 19 months compensation (wages, benefits, and bonuses) for wrongful dismissal.
The Decision
The more important part of the award was that the judge forced the former employer to pay the terminated president even more money!
The judge forced the employer to pay $25,000 for moral/aggravated damages (for unfair conduct at the time of termination and the manner in which the lawsuit was defended) AND a further $100,000 for punitive damages.
The Offensive Conduct
Why would a judge in Ontario make such a decision? Well, it turns out that the conduct of the employer during the termination was… unsavoury to say the least. These are the facts from during and after the termination that showed the employer deserved to be punished (or in other words, here’s what not to do or say during a termination of an employee):
- At the time of termination, the employer told the employee: ‘If you sue, we will sue you back for $1.7 million on the basis of fraud’
- At the trial, the employer admitted under oath that it had previously said the same thing to another employee;
- The court said the employer was “not candid” with the employee at the termination meeting
- In the employer’s statement of defence, it made personal attacks against the employee and only dropped those baseless allegations after the trial was complete
- At the time of termination, the employer told the employee that he should be aware of how much lawyers cost (specifically, the employer said “I mean going through a lawsuit is probably very stressful and costly.”)
- The employer told the employee’s lawyer and the court that it would call 25 witnesses to the trial. Then they changed it to 5 right before the trial. Then at the trial, they only called 3 witnesses. (A quick note: there are very rarely any surprises in court, so this is significant).
- Even though the employer did not allege just cause when they terminated the employee, after the employee sued, the employer said it had just cause to terminate (it didn’t);
- The employer followed through with its counter claim of $1.7 million, but at the trial, it didn’t bring forward any evidence to support its claims.
- Inexplicably, after the employer’s own expert testified, it dropped its counterclaim from $1.7 million to one dollar – yes $1.00 (that goes to show you how strongly they felt about the case).
- The employer admitted at the trial that facing a public claim of financial fraud would negatively affect the former president employee, and those unfounded allegations would follow the employee for the rest of his life.
- A claim of fraud for $1.7 million against you understandably weighs on a terminated employee and this increased the damages against the employer.
After viewing all of the evidence, the court came down hard on the employer. The court concluded that the employer had no real intent of trying to show they had a real claim of fraud against its former president; it only did so to intimidate the employee.
Ouch, that hurts
The employer was forced to pay the former employee over $600,000. That’s gotta hurt. Notably, the award of punitive damages are extremely rare and unusual, since they are reserved to punish a party for deliberate, malicious or reckless behaviour.
And to think, it could have been avoided had the employer got reasonable advice and realized that the employer has to treat its employees fairly during and after a termination (that isn’t rocket science).
We don’t know how much the full legal costs will be (we will keep you posted), but you can imagine that an 11-day trial, with all the above hijinx, will cost a lot (remember: the loser usually pays part of the winner’s legal fees). And on top of that, since the employer acted so badly, they will probably pay between 80-90% of the winner’s legal fees!
How to Avoid This Pain
This is an easy one – get good, solid, and reasonable legal advice when you are terminating an employee, and stay reasonable even when you think going low will get you high and dry.
