Ontario: Courts Side With Employees in Unjust Termination Cases

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By Peter Menyasz

Aug. 23—Ontario courts continue to hammer employers in unjust dismissal cases, awarding employees large damages to counter the long-term effects of unfair treatment.

The Ontario Court of Appeal, for example, recently required an employer to pay a bonus an unjustly terminated employee would have earned during the notice period set by the courts, awarded a deaf employee more than C$240,000 ($185,000), ordered full compensation for the remainder of a five-year fixed-term contract and directed reinstatement of an employee whose disability was not accommodated.

Carefully Drafted Policies Required

In the most recent ruling in Paquette v. TeraGo Networks Inc., the court found Aug. 9 that an unjustly terminated employee was entitled to bonuses he would have earned during a 17-month notice period. The trial judge had ruled against recovery of the bonus, finding that the employee was not “actively employed” at the time it would have been earned. The appellate court disagreed, applying a “but for” test to find that if the employer had given reasonable notice, the employee would have been actively employed when the bonus was due. The employee claimed about C$29,000 ($22,500) in damages, and the appellate court directed the trial judge to decide on the actual compensation owed.

The ruling confirms that employers who want to avoid having to pay bonuses during notice periods should carefully draft bonus policies and clauses with unambiguous language that limits employees’ common law entitlements, George Waggott, a partner with McMillan LLP in Toronto, and Kyle Lambert, an associate with the firm, said in an analysis of the ruling.

‘Profound and Prolonged' Discrimination

In Strudwick v. Applied Consumer & Clinical Evaluations Inc. , the Court of Appeal more than doubled—to C$246,049 ($191,098)—the unjust dismissal damages awarded to a 15-year employee who became deaf in 2010 at 56 years of age and was dismissed in May 2011 after continued abusive and malicious treatment from her supervisor and the company’s general manager. In increasing the damages awarded by a lower court for violations of Ontario’s Human Rights Code, the appeals court cited the “profound and prolonged” discrimination by the employee’s superiors, which the court viewed as misconduct well beyond a failure to accommodate a disability. The court imposed additional damages to cover therapy costs and pain and suffering, increased the aggravated damages and more than tripled punitive damages to C$55,000 ($43,000).

The employer was lucky the court did not allow the employee to increase her initial damages claim from C$240,000 ($187,000) to C$1 million ($780,000), as it would otherwise have likely made an even larger award, said David Elenbaas, a partner in McMillan LLP’s Toronto office. It was notable that the misconduct occurred while the owner/manager was absent due to medical issues, Elenbaas said in an analysis.

“The lesson would appear to be: know who is running your business and be sure you can trust them to behave in a professional and lawful manner,” he said.

Beware ‘Employee-Friendly' Courts

The Court of Appeal has also addressed the issue of unjust dismissal of fixed-contract employees. In Howard v. Benson Group Inc., it awarded a truck shop manager dismissed only 23 months into a five-year fixed-term contract the full value of the contract. The contract included a specific clause covering early termination without cause, but the lower court found it too ambiguous to be enforceable. The appellate court agreed, but found that without that clause the contract’s notice period was the full duration of five years.

The appellate court rejected the employer’s argument that this would provide an unfair windfall for the employee, finding that the employer was a sophisticated party that could have contracted out of the obligation. The court also noted that there is no duty for a wrongfully dismissed employee working under a fixed-term contract to mitigate his or her losses by finding other work.

The ruling demonstrates that termination clauses should be drafted carefully, particularly in an environment where courts are clearly “employee friendly,” said Jacqueline Gant, an associate in the Vancouver office of Fasken Martineau DuMoulin LLP. It also confirms that employers should be careful in terminating fixed-term employees without cause, Gant said in an analysis.

Case-by-Case Basis

Finally, in Hamilton-Wentworth District School Board v. Fair, the appellate court upheld a 2013 order from the Ontario Human Rights Tribunal, previously upheld by a lower court, directing the school board to reinstate an employee whose depression and post-traumatic stress disorder it failed to accommodate. The appellate court’s ruling came nearly 15 years after the termination.

The Court of Appeal stressed that accommodation is intended to prevent unfair exclusion of employees when appropriate replacement work is available without significant hardship and supported reinstatement as an appropriate remedy. While reinstatement is not a common remedy in such cases, there was no evidence that the employer-employee relationship had been ”fractured.”

Employers should note that the duty to accommodate an employee can include transfer to another position or creation of a new position, said Jennifer Bernardo, an associate with the Toronto office of Baker McKenzie LLP.

The ruling also confirms, however, that there may be circumstances where reinstatement may be inappropriate, particularly in industries and positions that involve constantly changing skill sets and capabilities, Bernardo said in an analysis.

“Employers must assess each accommodation request on a case-by-case basis, with an open mind to all reasonable solutions,” she said.

To contact the reporter on this story: Peter Menyasz in Ottawa at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For More Information

The ruling in Paquette v. TeraGo Networks Inc. is available here, the ruling in Strudwick v. Applied Consumer & Clinical Evaluations Inc. here, the ruling in Howard v. Benson Group Inc. here and the ruling in Hamilton-Wentworth District School Board v. Fairhere.

For more information on Ontario HR law and regulation, see the Ontario primer.

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