In wrongful dismissal cases, dismissed employees are often interested in suing personal defendants in their lawsuits (as well as the company) in an effort to pressure the defendants into settling. While this strategy sometimes works, it often causes the defendants to dig their heels in and fight back with a particularly aggressive defence. It can also get quite expensive.
The recent Ontario Court of Appeal decision in Richards v. Media Experts is an example of the extent to which a proceeding can become costly and prolonged as a result of a decision to include a personal defendant.
The plaintiff sued the corporate defendant for wrongful dismissal. She also named her former boss, the executive chairman of the company in a suit for intentional and negligent infliction of nervous shock.
The Ontario Court of Appeal upheld a motions Court decision to dismiss the claim against the personal defendant for two reasons:
1. The employee had signed an employment contract with a limitation clause, which barred these types of claims from being brought against the company and its officers and directors. Perhaps surprisingly the Court of Appeal agreed with this argument;
2. More importantly, the Court of Appeal held that the material facts, as included in the Statement of Claim, showed that the personal defendant was acting on behalf of the company when he fired the employee. In other words, the allegations of misconduct or improper treatment did not demonstrate that the executive chairman was acting outside of the scope of his employment. There was an allegation that he was off on a “frolic of his own” but this was not sufficient to show that he was personally responsible.
In dismissing the case against the personal defendant, the Court of Appeal ordered the plaintiff to pay $15,000 in legal costs.
This decision is a reminder that plaintiffs should be very careful in deciding whether or not to sue personal defendants. The claim must show that the individuals were acting outside of the scope of their employment. Some examples could include fraud, harassment, conspiracy or other outrageous conduct. But normally, just because a boss makes a decision to let someone go, that will not be the basis for personal liability on the part of the boss.
The decision also reinforces the importance of employment contracts. Employment contracts can specify termination arrangements that will be made at the conclusion of employment and can broadly exclude other types of claims. This case suggests that courts will be quite deferential in upholding these clauses if they are crafted properly.