AGGRAVATED DAMAGES: WHEN EMPLOYEES ARE ENTITLED TO DAMAGES FOR AN EMPLOYER’S BAD FAITH CONDUCT.
August 12, 2019 – By Sebastian Chern, Lawrence Smith and Daniel Sorensen
Termination can be difficult for any employee. It puts tremendous emotional, personal, and financial stress on an individual, particularly where they are not provided with adequate reasonable notice or pay in lieu of reasonable notice. However, termination, in and of itself, does not entitle an employee to compensation for that stress or harm.
That said, an employer has an obligation of good faith and fair dealing in the manner of dismissal. An employer cannot terminate an employee in a manner that is untruthful, misleading or unduly insensitive. Other examples include maintaining wrongful allegations of dishonest conduct, misrepresenting the reason for the termination, and firing an employee who is on disability leave. Employers who do so may be required to compensate employees for harms experienced from that conduct. These are referred to as aggravated damages or, alternatively, moral damages for bad faith conduct.
Aggravated damages are compensatory based on the foreseeable injury for breach of the duty of good faith and fairness. Injuries can include mental distress or intangible effects such as damage to reputation. The employee must establish that the employer’s conduct is the cause of the injury.
In the case of mental distress, the employee must have evidence that the harm transcends ordinary upset or distress and does not need to produce medical evidence to justify an award for aggravated damages. Courts have accepted evidence from the employee and family members or friends.
The employer’s conduct after the dismissal, including during litigation, may be considered in the court’s assessment of aggravated damages.
Recent Cases involving Aggravated Damages
Avelin v Aya Lasers Inc., 2018 BCSC 2313:
The plaintiff was a sales representative for the defendant. The plaintiff was responsible for sales in BC. The defendant was based in Ontario. As part of her employment, she was required to upload contact information for any leads that she acquired. Prior to her dismissal, a potential customer that she had met at a trade show contacted her to tell her that they were purchasing one of the defendant’s products. However, the customer advised that they had received a call from another representative from the defendant. That representative indicated that they were taking over the BC accounts. The plaintiff contacted the defendant’s president, who advised the plaintiff that she was fired and that the defendant had been planning on firing her.
After the plaintiff had started an action in BC, the defendant initiated their own action in Ontario, alleging, among other things, that the plaintiff had deleted company information from her company laptop and phone. The defendant explained that it was more convenient for it to litigate that matter in Ontario, rather than BC.
The plaintiff gave evidence that the termination had put her into an extremely stressful situation. She stated that she felt humiliated and embarrassed by the firing. She also stated that she had suffered anxiety, loss of sleep, and upset as a result of the termination.
The BC Supreme Court found that the way the defendant terminated the plaintiff was insensitive and that its “aggressive and improper” litigation strategy was an attempt to take advantage of the plaintiff’s economic vulnerability. The court awarded Ms. Avelin $5,000 for aggravated damages.
Bailey v Service Corporation International (Canada) ULC, 2018 BCSC 235:
The plaintiff in this case began experiencing health problems in the summer of 2013 and took an unpaid leave in September of that year. During his leave, the defendant allegedly assumed that the plaintiff had abandoned his employment. The defendant terminated the plaintiff without advising him, and the plaintiff did not learn of the termination until his wife had discovered their medical benefits had been cut off. The defendant maintained an allegation of cause, stating that the plaintiff had not been ill and that he had been working as a real estate agent during his leave.
Although the plaintiff had been mentally distressed prior to the termination, he became extremely depressed afterwards, to the point that he would not get out of bed or interact with his family.
The court noted that it would be difficult to parse out the cause of the plaintiff’s mental distress and stated that it would not award a “significant sum”. Despite that, the court found that the appropriate award of aggravated damages was $25,000.
O.W.L. (Orphaned Wildlife) Rehabilitation Society v Day, 2018 BCSC 1724:
In this case, the employer had filed a claim against the former employee alleging that they had misappropriated funds. The employee counterclaimed for wrongful dismissal. The employer maintained that the allegation of financial mismanagement and stated that it had just cause to terminate the employee. The court found that the employer’s claim was meritless and had been advanced without conducting an adequate investigation. The employer maintained the allegation through to the conclusion of trial, despite the lack of evidence and its own documents. The court found that the employee’s life’s work and purpose were intimately tied with her employment, which contributed to her vulnerability at the time of termination. The court accepted her evidence regarding the emotional and physical distress she experienced, as well as the way it impacted her relationship with her husband.
The court awarded $30,000 for aggravated damages, while also taking into consideration the employee’s pre-existing distress caused by her own personal circumstances unrelated to the dismissal.
Valle Torres v Vancouver Native Health Society, 2019 BCSC 523:
The plaintiff in this case was terminated abruptly and without notice and immediately escorted from the defendant’s office. The defendant then sent out an email to the local social services community advising that the plaintiff was no longer employed by or associated with them, which the court found gave an impression that the plaintiff had engaged in some wrongdoing or impropriety. Additionally, the defendant served the plaintiff with an intimidating lawyer’s letter demanding that he cease and desist from communicating with the defendant’s employees. It was also revealed to the plaintiff at trial that the true reason for his termination was that he was not Indigenous Canadian.
The plaintiff testified that, because of the termination, he had experienced trouble sleeping, loss of energy, and now took medication for anxiety and sleep. He stated that it would take a long time to recover from his termination and that it was not easy because he felt betrayed, particularly as he had given the defendant the “best years of [his] life”. His wife also gave evidence that the plaintiff had become depressed, sad, and anxious. She stated that he stays at home and does not want to be seen in public. She said that he refused to go grocery shopping in fear of running into someone he knows.
The court awarded $30,000 in aggravated damages for the harm caused to the plaintiff.
Several lessons for employers arise from the cases above:
- Take care in raising allegations of dishonesty or theft against an employee.
- Before raising an allegation, consider whether an adequate and thorough investigation has been conducted.
- Do not raise or maintain an allegation if it is meritless or untrue.
- Do not misrepresent the true reason for an employee’s dismissal.
- If you must disclose the employee’s termination to other employees or the public, avoid language that might disparage or defame the employee.
- When pursuing an aggressive litigation strategy, consider what effect it may have on the employee.
- In determining the manner of termination, consider an employee’s personal circumstances, particularly their emotional, physical and financial vulnerability.
The above cases are an important reminder that employers need to be delicate in the manner that they terminate employees. While employers have the right to terminate employees without cause if they provide adequate reasonable notice, they must do so in good faith. Failure to do so may cause substantial hardship for the employee, which could, in turn, result in compensation for aggravated damages.
Similarly, if you are an employee who has been terminated in an untruthful, misleading or unduly insensitive manner, and have experienced distress as a result, you may be entitled to compensation for aggravated damages.
If you have any questions or concerns about aggravated damages or find yourself in a situation involving bad faith conduct during termination, whether as an employer or employee, we recommend that you seek independent legal advice because the existence of certain facts may change how the law is applied and some of the principles referenced above. If you do have questions or concerns, please contact us at 604-705-0022 for a consultation and we will be happy to assist you.