If you have been dismissed, you may be entitled to significant compensation. This can include severance pay, outstanding bonus, compensation for bonus during the severance period, benefits, pension contributions and other amounts. You might be able to get outplacement assistance paid for by the employer and some employers may even pay for your reasonable legal fees to get everything worked out. If you have been given a severance package or a termination letter, here are a few points to keep in mind:

1. Don’t Sign Anything!

Some employers will ask you to sign a severance proposal on the spot, possibly even while also making some threats about what might happen if you don’t sign. Fortunately, most employers are not that unreasonable and would prefer to allow you some time to consider an offer. Take the offer, say very little and let the employer know you will get back to them. Even if you are in a difficult economic position, you will rarely benefit from signing something on the spot at the time of dismissal.

2. Be Professional

Resist the urge to attack the employer, launch an email missive directed at company personnel or say things you might later regret. Such statements or emails are rarely helpful or productive. If you are being investigated for cause and you are being asked about certain allegations, you may have an obligation to respond. But once you have already been dismissed, there is rarely anything that you might say at a termination meeting that will help with your severance negotiations or with your future references.

3. Find Your Original Employment Contract

One of the first things you should do is find a copy of your original employment contract or offer letter. There may be a “notice clause” or a “severance clause” in the document. If your employment contract or offer letter does have this kind of clause, it may limit your entitlement to severance or notice. You might be stuck with a very limited severance payout. There are some ways around these types of agreements, but not always. This can be very technical and will almost always require professional assistance.

4. Gather Information

For the best assessment of your employment situation and potential severance, you should gather key documents and information. Your compensation information for the past three years will be crucial including a breakdown of your base salary, bonus (if any), RRSP or pension contributions, car allowance, stock options or share purchase plan amounts, and other components of your compensation. As well, it will be helpful to try to put together a narrative of what occurred that you believe led to your dismissal. If this is a complete surprise and is really just a “restructuring,” there may be no need for an accompanying narrative. You should also try to make sure that you have any relevant emails, memos, performance assessments or other documents that relate to your performance or the reasons for your dismissal. If you are being dismissed for cause, it may be important to get witness statements about what took

5. Get Expert Legal Advice

If you have been provided with a severance package or you have been dismissed “for cause,” you should get specialized legal advice as soon as possible from an employment lawyer. You may be entitled to far more than the amount that the employer has offered. The employer may be willing to pay reasonable legal fees. You might be able to get certain clauses deleted or modified. Proper legal advice in this situation will usually involve a consultation fee. But you are entitled to objective advice about the best way of dealing with your situation and sound professional advice is almost always going to involve a fee. If the advice is “free,” you should check carefully what kind of retainer you will be expected to provide afterwards or what percentage of the settlement your lawyer will take. You should also find out whether the percentage is related to the whole package or only the improvement. You should feel comfortable with the overall fee arrangements not just the initial consultation itself. You should also feel comfortable that you will get the lawyer’s full attention at the initial meeting without an artificial time constraint so that you have enough time to go over everything that may be relevant.

6. Hit the Ground Running

In most cases, the best way of dealing with a dismissal is to begin the process of finding new employment fairly quickly. You should ask your employer for a reference letter or confirmation that you will be given a positive reference if the employer is phoned. Brush off your resume and consider getting professional assistance in developing a new version of it. Start using internet sources ranging from LinkedIn and Workopolis to Facebook and Monster as you put together your job search strategy. Keep track of all of your efforts, informal and formal contacts and applications. Try to set up “informational meetings” as well as interviews. Try to take care of yourself, which might include getting some exercise, making sure to get out and staying in contact with people important to you. Having a strong support network can help you feel positive about your transition and can also produce employment

Kenneth Krupat, Barrister
2000-393 University Avenue
Toronto, ON M5G 1E6
Phone: 416-593-0400
Fax: 416-593-0668
e: kkrupat@joblaw.ca
www.joblaw.ca

At the very easy end of the constructive dismissal spectrum are cases where employers unilaterally reduce an employee’s pay, with little or no notice.  Similarly, a significant demotion for an employee, even where the overall compensation is kept intact will usually be grounds for a constructive dismissal claim.  But there are many other cases that are in a much greyer area.  The reduction of some responsibilities, a change in reporting structure and sometimes, a change to the terms of a bonus plan, are all the types of changes that may not lead to clear results.

What about geographic relocation?  Can employees be asked to move as part of their employment?  Intuitively, one might have thought the answer would usually be “no.”  Although this might often be the case, the legal answer can depend on the context and the particular background.  Has the employee moved around before as part of the position?  Is the industry one in which employees are routinely expected to relocate?  Is the employer paying for moving expenses?  Is the employer offering any other alternatives?  These are all factors to consider.

In a recent case, the Alberta Court of Appeal (Robin Brown v. Pronghorn Controls Ltd.) held that a transfer from Red Deer, Alberta to Sedgwick, Alberta, approximately two hours away, was not a constructive dismissal.  The Court held the employee would be a branch manager in both places and would be entitled to the same terms and benefits, despite the disruption to his family life.

The Court of Appeal’s view was probably influenced by the fact that the employee had also refused another alternate position with the company in Red Deer and went on to find new employment, at a higher rate of pay elsewhere, quite quickly.  The Court looked at the background and history of Brown’s employment and applied those facts to conclude that this would have been a reasonable move.  In making its decision, the Court relied on a 1989 decision of the Ontario Court of Appeal (Smith v. Viking Helicopter) in which the Court had held that it was not a constructive dismissal to require an employee to move from Ontario to Quebec in the particular facts of that case.

This recent ruling from Alberta is not necessarily a definitive statement of Canadian law.  Other courts in other jurisdictions across Canada have taken and may well continue to take different approaches.  However, in determining whether a proposed transfer is a constructive dismissal, Canadian courts are likely to look at a number of factors including the following:

1. Is there an employment contract in place?  If so, does it permit the employer to relocate the employee?
2. Has the employee moved for work purposes while working for this employer?  Has the employee moved for professional purposes in the past, with other employers?
3. Is the proposed position equivalent in compensation, benefits and opportunity?
4. Will the employer be paying for all moving costs?
5. Is there a reasonable business purpose to the proposed transfer (i.e. as opposed to some type of vindictive relocation proposal).
6. Is the employer offering an alternative?

These are some of the questions that should be considered carefully when evaluating the likely success of a constructive dismissal claim as a result of a proposed relocation.  The legal answer may not always be as predictable as one might have expected.  Setting up a proper paper trail and asking the right questions can certainly help.  But ultimately, taking the wrong steps can be risky and costly, particularly, as with many other constructive dismissal claims, if there are other reasonable alternatives.

Here are some of the key things to look for as part of a “reasonable” severance package.

Severance Pay or Salary Continuation:  It goes without saying that the most important component is usually the severance itself.  Employers can choose to pay over time, with or without some kind of claw back (or “mitigation”) clause, or in one or more lump sums.  In most cases, this is the most important part of the severance package and in many cases, different components are negotiable.  The severance must, at a minimum, include compensation for the relevant provincial employment standards amount.  For example, in Ontario, the severance package must provide for notice pay under the Ontario Employment Standards Act and severance pay, if applicable.   If you are Federally regulated employee (someone who works in a bank, telecommunications company, tv network etc.,) the Canada Labour Code would apply instead of the provincial legislation.  Beyond the employment standards amount, employees can negotiate the length of time, the trigger for mitigation, the payment schedule or other terms.  This is all aimed at ensuring that the employee is compensated as required by Ontario common law, which itself, can vary wildly for each employee.  This is the area on which appropriate legal advice should generally be obtained.  The period of time for which the employee is being compensated is generally called the notice period or severance period.  

Bonus:  Dismissed employees should usually be compensated for accrued bonus for the current year (if there has usually been an annual bonus), as well as bonus for the severance period.  Many employers are quite reluctant to include the prospective bonus as part of the severance package.  If the employee has been getting the bonus every year and can show that he or she would have continued to get a bonus if employment had continued over the severance period, the bonus should be payable.  There may be wording in the original employment contract that overrides this entitlement, but it is often worth trying.  If there is wording in an employment contract or agreement that deals with the bonus, this will be something that needs to be properly assessed and considered. Commissions and Variable Pay:  For dismissed employees with fluctuating pay, the test is what the employee would have reasonably earned over the severance period.  Of course all accrued amounts are owed to the employee, subject to the terms of the employer compensation plan.  Going forward, most dismissed employees should be paid severance on the basis of overall estimated earnings, not just base salary for the entire notice period.

Benefits, RRSP and Pension Contributions:  Severance packages should include arrangements that compensate employees for all components of their compensation.  Generally, all benefits, including extended health benefits, STD and LTD insurance, RRSP contributions, pension contributions, and other perquisites should be continue during the notice period – or the employee should be compensated for the value of any items that are not being compensated.  For example, most insurers will not allow employers to continue LTD insurance plans.  Employees should request compensation for the loss of this employment benefit.  Many employers will agree to include that compensation in the severance package.  Pension losses can be a huge component of a severance package, particularly if the employer had a defined benefit pension plan.

Car or Mileage Allowance:  If the employee had the use of a company vehicle, the general rule is that the employee is entitled to be compensated for the personal use component of the vehicle.  In other words, if the employee used the vehicle for personal use 30% of the time (and showed that on his or her taxes), employers can be required to provide compensation for this loss during the notice period.  Some employers will be more flexible in this area and will either provide employees with the use of a vehicle over the notice period or pay a reasonable estimate of the real costs of the vehicle.

Outplacement or Retraining:  Strictly speaking, an employer is not necessarily required to provide outplacement or retraining as part of a severance package.  However, an employer can be required to pay for the employee’s reasonable costs of “mitigation” if the employee incurs costs in trying to find other work.  As a result, many employers will provide direct outplacement arrangements at their expense.  Dismissed employees may be able to negotiate the type of arrangements that are being provided, the organization, location, and value of such services.  As well, dismissed employees can often arrange to have an employer pay for some upgrade or retraining courses if that will help the employee find new employment.  Though some of this may sound expensive for employers, overall, providing these arrangements may help the employer reduce the time period that it will take the employee to find new work and that might save the employer some money.

References:  Employers are not strictly required to provide helpful references though some judges may look at this down the road and award extra damages for an employer’s failure to do, even if the judge does not state that expressly.  Employees should ask for a mutually agreeable reference and an agreement that any reference requests will be answered in a manner that is consistent with the reference letter or summary provided.

Legal and/or Accounting Fees:  Most employers should be prepared to make some kind of reasonable contribution towards the legal fees of a dismissed employee.  Once a lawsuit has been commenced, the employer can be required to make these contributions if the lawsuit had merit.  Employers will often try to avoid a lawsuit by including payment for some of the legal fees in a negotiated severance package.

Waiver of Non-Competition Clauses:  Some employers may be prepared to waive or modify certain non-competition terms or clauses that were contained in a dismissed employee’s employment contract.  This can often be a tricky conversation.  It is usually more likely that employers will agree to modify a non-competition clause (that might have been unenforceable anyways) than to modify a non-solicitation clause, that may actually protect the employer’s business.  Telling an employer that you would like to go and take their clients’ business is not usually the best way to get a great severance package.  But telling an employer that you won’t be able to find any work because of an overly broad non-competition clause may be viewed as reasonable.

Other Perquisites:  Employers will sometimes provide for items like health club memberships, personal cell phone costs, professional memberships, private annual physical examinations, employer discounts and other items.  These items should be reviewed and considered individually.  Employees will also need to weigh the value of pursuing an item that may not be significant in comparison to the other items.

General Damages:  Most wrongful dismissal damages are fully taxable as if they were income.  The withholding rate may be lower (i.e. 30% if the amount is over $15,000) but at the end of the year, the employee will have to pay tax on the full annual marginal tax rate.  An exception is if there is a basis for some of the damages to be paid as “general damages,” which are non-taxable.  This, fortunately, is not applicable for most dismissals. I say fortunately because it would be a harsh world indeed if every employer who dismissed someone had also acted in a way that would warrant general damages.  Nevertheless, conduct that violates human rights legislation or  other “bad faith” conduct can warrant payment of general damages. It is very rare that employers will actually negotiate and pay these damages without an actual lawsuit or human rights complaint but it does sometimes occur.

These are some of the items to look for in a severance package, though entitlements to these items will really depend on the terms of the person’s employment, the length of service, the type of position, the existence of any employment contract or offer letter and a range of other factors.  A key factor is the likelihood of the dismissed employee finding new employment since all of these items are only really payable if they are arranged initially, or if the employee is actively looking for work and unsuccessful.  Dismissed employees who find new employment quickly may only be entitled to the applicable employment standards minimums.

There is no set formula for exact severance pay calculation.  Despite the fact that some lawyers might claim there is a very exact number if you plug a few variables into a “severance pay calculator,” that only produces a rough average, which may not even be statistically significant.  In most cases, there is a range, sometimes a fairly wide range.  Employees need to consider all of the different aspects of the proposed severance including which items are being paid and which are not, whether the severance is being paid as a continuance or a lump sum, and other related factors.

This list of items is provided only as a guideline for things that employees should consider when looking at a severance package that has been proposed.  In most cases, particularly when a number of different items are listed, employees should make the tax-deductible investment of obtaining proper legal advice from a qualified employment lawyer.

Linda Fraser had worked for UBS for more than 20 years.  She became ill after a holiday and was off work for six months on short term disability leave.  She tried to return to work but was unable to do so due to her illness, which had become more severe.  She went off again on short term disability leave for another six months.  After her second leave, Ms Fraser was off for a two year period on long term disability leave.

Most LTD policies change after two years.  For the first two years, Ms Fraser was required to show that she could not perform the duties of her employment, meaning the specific job that she had with UBS.  After two years, she was required to show that she could not perform the duties of any gainful occupation.  The insurer cut Ms Fraser off benefits when the definition changed and Ms Fraser sued the insurer to challenge that decision.  The lawsuit was totally separate from her wrongful dismissal case.

From UBS’ perspective, Ms Fraser’s disability coverage ended even though she was suing the insurer.  She was off work and no longer in receipt of benefits for a period of five months.  She did not keep UBS informed about her status.  After five months, UBS wrote to Ms Fraser and stated that her employment was being terminated.  It paid her out 8 weeks’ notice pay and 22 weeks’ severance pay under the Ontario Employment Standards Act and continued her extended health benefits for three more months.  Ms Fraser did not accept this decision and sued for wrongful dismissal.

At trial Justice Wein of the Ontario Superior Court reviewed the law of “frustration” and concluded that it applied in this case.  Ms Fraser was found to be “permanently disabled.”  The Court held that she is “totally disabled and her disability is permanent such that she will never be able to work again.”  As a result, the employment contract had ended and UBS was not required to provide any further payments.  The wrongful dismissal lawsuit was dismissed.

For employees in Ontario, the case is a reminder that employees have an obligation to keep their employers updated as to their status when they are off on a sick leave.  If disability benefits are cut off, they must provide information to their employers about their proposed actions.  If it becomes clear that the employee will not be able to return to work again, the employer may be able to conclude that the employment relationship has ended.  This will not necessarily lead to a viable wrongful dismissal lawsuit.

For employers, this type of decision is rare.  If the employee can show that he or she simply required more time to recover and kept the employer informed, the employer will not necessarily be able to rely on “frustration.”  The situation may also be different where the employee continues to receive LTD benefits.  Employers looking to rely on “frustration” will need to be reasonably sure that the employee will not be able to return to work for the foreseeable future.

The dismissed employee, Syed Hussain, was an assistant warehouse supervisor.  He had worked for the defendant Suzuki Canada for almost 36 years.  This had been his only full time job after immigrating to Canada from India in 1974.  Hussain was almost 65 at the time he was dismissed in February 2011, due to corporate restructuring.

After losing his job, Mr. Hussain took a period of time to get over the shock and to organize his efforts to find new employment.  He then applied to some 27 positions by July 2011, though his efforts were unsuccessful.

Justice Roberts, writing on behalf of the Court, noted that 24 months is usually the high end of  wrongful dismissal awards.  However, the Court held that Mr. Hussain was entitled to 26 months’ compensation due to the particular factors of his situation including his lengthy service, his age and other related factors.  The Court held that Mr. Hussain was entitled to benefits, RRSP contributions, and a discretionary bonus throughout the entire 26 month period.

Even though this wrongful dismissal case was decided only 10 months after Mr. Hussain was dismissed, the Court still awarded Mr. Hussain 25.5 months’ compensation and reduced the total notice period by only 1% for the contingent possibility that Mr. Hussain could find new employment over the remaining 16 months.

Finally, the Court ordered Suzuki Canada to reimburse Mr. Suzuki for almost $20,000 in legal fees.

This decision follows on the heels of the Ontario Court of Appeal decision in Di Tomaso v. Crown Metal Packaging, a case in which a long service mechanic was awarded 22 months’ notice in June 2011.

It is becoming quite evident in Ontario that long service employees are now entitled to notice periods at the higher end of the range, regardless of the type of position that the person held or the salary level that the employee enjoyed.

This trend is good news for Canadian employees, particularly long service employees who are not employeed in upper management positions.  Although for many years, the longest notice periods were usually awarded by courts only to the most senior employees in wrongful dismissal cases, that is now no longer an accurate summary of the law.  Age will still be a relevant consideration.  Employees who are dismissed after 20 years of service but are still in their 40’s may not be awarded the maximum amounts.  But dismissed employees in their 50’s and 60’s with many years of service will now all have a chance to obtain compensation of close to two years’ pay.

This questions was answered recently by the Ontario Court of Appeal in the case of Bowes v. Goss Power Products Ltd., a decision issues on June 21, 2012.

Peter Bowes had a written employment agreement with his employer.  The contract stated that he would receive six months’ notice or pay in lieu of notice if his employment was terminated without cause “prior to the completion of forty-eight (48) months from commencement.”  The contract said nothing about mitigation or about timing of the payment.

Mr. Bowes was dismissed without cause and he was able to find new employment after only two weeks.  His employer paid him out three weeks’ notice as required under the Ontario Employment Standards Act, but then refused to pay out the rest of the amount specified in the employment agreement.  Mr. Bowes was forced to file a lawsuit.  He was unsuccessful initially and then appealed his case to the Ontario Court of Appeal.

The Court of Appeal reviewed the case law dealing with mitigation of damages in these circumstances.  It emphasized that an employer and employee can fix an enforceable notice period which provides some certainty to both parties.  It may well be a lower amount than the employee would have otherwise been entitled to receive under common law.  However, by doing so, the employer gives up the right to the benefit of mitigation if the employee successfully mitigates damages.

In particular, the Court of Appeal stated the following, quite emphatically:

1.  “A fixed term of notice or payment in lieu is not equivalent to common law damages for reasonable notice.” and

2.  Payment in lieu of a fixed term of notice, being liquidated damages or a contractual amount is not subject to a duty to mitigate;

The Court of Appeal stated that it is unfair of an employer to draft an employment agreement with a set severance term, that is less than the employee might have had under the common law, and then try to get out of it at the point of dismissal by informing the employee “that future earnings will be deducted from the fixed amount.”

The Court decision, written by Chief Justice Winkler, on behalf of a unanimous Court of Appeal, concludes:

“Where an agreement provides for a stipulated sum upon termination without cause and is silent as to the obligation to mitigate, the employee will not be required to mitigate.”

In the present case, Mr. Bowes was awarded the full six months’ pay, as specified in employment contract, despite the fact that he found other work quickly.

This is a very important decision for Ontario employees as it clarifies an area in which there had been mixed case law.  The Ontario Court of Appeal has stated very clearly that employers must pay out fixed contractual severance amounts, even if the dismissed employee finds new employment quickly – unless the employment agreement very clearly states otherwise.

Employers can still use contracts that include mitigation provisions but these provisions must be included in the original employment agreement and must meet all of the other normal conditions of enforceability.

The Ontario Court of Appeal released its decision on August 17, 2012 in the case of Bennett v. Cunningham, as the third (and maybe final) of a series of progressively higher Court judgments in this crazy dispute between two family lawyers.  In doing so, the Court of Appeal upheld a Superior Court decision from 2006 in which Ms Bennett’s wrongful dismissal law suit had been dismissed.  After such a long, protracted dispute over a relatively small amount, it appears that the lawyers for both sides are the big winners.

The plaintiff, Dawn Bennett, was a junior family lawyer with limited experience. She began working with the defendant, Karen Cunningham, as an associate lawyer in a small law firm in Mississauga in the summer of 2002.  The arrangement was a commission based arrangement where Ms Bennett would be paid a percentage of amounts that were billed and collected.  Ms Bennett would work regular hours, in an office provided by Ms Cunningham and would have minimal expenses to look after even though she would be treated as an independent contractor.

Shortly after joining the firm, Ms Bennett had a number of complaints about the way the office was run.  According to the Trial Court Judge, some of these issues were addressed.  However, Ms Bennett was not actually getting paid for fees that she was docketing and billing, which was causing her financial difficulties and she became quite concerned about this.

Ms Bennett decided to write a four page letter which she handed to Ms Cunningham on December 21, 2002, just as Ms Cunningham was leaving for a vacation.  She also sent a copy by registered mail, even though she knew that Ms Cunningham would be away.  The letter included a litany of complaints, including a suggestion that Ms Cunningham was “dishonest and negligent” in her docketing practices.

Ms Cunningham returned from vacation and fired Ms Bennett for “just cause.”  Ms Bennett sued for wrongful dismissal.

The parties could not resolve the dispute and conducted a six day trial.  They fought over whether or not Ms Bennett was an employee or an independent contractor.  The Trial Court had little difficulty concluding that the relationship was an employment relationship, or at least an “intermediate” relationship and that Ms Bennett would be entitled to reasonable notice if she was dismissed without cause.

They also fought over unpaid commissions owing, although Ms Cunningham eventually conceded that she owed Ms Bennett about $18,000 in billings that had not yet been paid to Ms Bennett.

Neither of these findings was disturbed by the higher Courts.

But the major issue in dispute was wrongful dismissal.  The Trial Court judge held that the relationship had been irreparably damaged by Ms Bennett’s “insolence” and that there was just cause for dismissal.  On appeal, the Ontario Divisional Court, in 2011, overturned that ruling and held that Ms Bennett’s conduct did not amount to just cause.  On further appeal, in the decision released in August 2012, the Ontario Court of Appeal restored the original Trial Court ruling.  It held that the decision of the Trial Court judge was mainly a finding of fact and that the judge was best situated to make that decision.   It held that the Trial Court judge had reviewed the evidence fully and was entitled to draw the conclusion that Ms Bennett’s conduct was sufficiently inappropriate to warrant a “just cause” finding.

It is noteworthy that even if Ms Bennett had won, she would have only been awarded about $17,000 in wrongful dismissal damages because she had found new employment within a few months.  This is what makes it even more bizarre that the parties spent so much time, energy and money fighting over this case.

So after 9 years of this heated dispute, Ms Bennett wound up with an award for about $18,000 in billings owing to her (plus interest on that amount) and some of her legal costs paid for the trial.  On the other hand, she lost her wrongful dismissal case and wound up owing legal costs to Ms Cunningham for the Appeal.  She also wound up with a harsh public decision about her conduct as an Associate lawyer.

The case is really an example of how parties can become involved in a legal dispute in which legal fees amount to far more than the value of what either side can achieve.

More importantly, the case is a very serious warning message to employees who are thinking of writing complaint letters to their employers.  Employees should be very careful not to use incendiary, harsh or accusatory language, especially if they cannot support the allegations they are making.  Employees should be particularly careful not to accuse their employers of “dishonesty,” “negligence” or other forms of inappropriate conduct unless they can really back up these accusations.  Even then, this type of letter should only be a last resort after other ways of addressing problems have been exhausted.

Perhaps, most importantly, employees should run this type of complaint letter by a lawyer first before sending out an ill conceived letter that could very well result in a just cause dismissal.

In the latest example, the plaintiff, Meredith Boucher of Windsor, Ontario, was awarded $1.4 million by an Ontario jury.

Ms Boucher had brought a case for constructive dismissal.  She had alleged that she had been forced to leave Walmart after being subjected to sexual harassment and discrimination, intentional infliction of emotional suffering and other misconduct including actual physical assault.

Among other allegations, Ms Boucher had claimed that she was called a “(expletive)” idiot and that she was forced to count skids in front of others to prove that she knew how to count.

The jury of three men and three women took only 2 1/2 hours to make its decision after a two and a half week trial.  Although the jury did not award any damages for sexual harassment or discrimination, it awarded $200,000 for intentional infliction of emotional suffering, $1 million for punitive damages and $10,000 for assault.  The jury also made an award of $250,000 against the assistant manager.

Walmart will certainly appeal and it is likely that the award will be scaled back considerably, given Canadian legal precedents.   However, this type of award and the publicity that it attracts will cause dismissed employees across the country to reconsider their lawsuits and to reevaluate the potential damages that they might receive if they take their cases to trial.

It is worth remembering that these types of awards are only made in cases involving extremely inappropriate conduct. Fortunately, for Canadian employers and employees, these types of allegations are absent in most Canadian wrongful dismissal cases.

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.

In this case, a Transportation Enforcement Officer was convicted of two counts of Performing Indecent Acts.  The employee was dismissed for just cause.  The dismissed two-year employee was caught masturbating in public, on an outdoor trail in the Welland area, near a girls’ school.  Two young girls witnessed the incidents and were “traumatized.”  The grievor was not on duty at the time and was not in uniform…in fact, apparently, he was not actually wearing anything.

At the time of his arrest, and at the hearing of this matter, the grievor maintained that he harboured some animosity towards women and towards his ex-girlfriend in particular.  He was not able to provide any genuine reassurance that this conduct would not continue.  He admitted to ten previous incidents of performing indecent acts, but he had only be charged with four counts and was only convicted on two of these charges.  The grievor, of course, would be regularly required to work with women in his job, including co-employees, police officers and members of the public.  He argued that he should be reinstated and that the employer’s decision to fire for just cause should be overturned.

Arbitrator Loretta Mikus noted that the grievor chose an area that was near a girls’ school and would likely encounter young girls.  However, she found that there was no evidence that he actually assaulted anyone or that he was in possession of any kind of child pornography.  Apparently, he was acting alone at the time he was caught in the act, red-handed.  Moreover, neither the public, nor the employee’s co-workers knew about the case, which was not publicized widely.

At his criminal trial, the grievor was given a conditional discharge of his criminal convictions with a three year probation, including a condition that he stay off of any recreational waterway trails.  The arbitrator held that these acts were at the “lesser” end of acts attracting criminal sanction and that the probationary restrictions would not impede the grievor from being able to perform the duties of his job.

Ultimately, the arbitrator ordered that the grievor be returned to work without back pay.  The grievor had been first suspended in 2008 and had been on a paid leave of absence until the time of his criminal trial in 2010.  After pleading guilty, he was placed on a leave without pay by his employer for almost three years.  As a result of the arbitrator’s award, he has now been ordered back to work without any of the three years’ back pay.

Counsel for the Ministry argued that this kind of case might be quite distasteful for most members of the public who would have thought that this kind of off-duty conduct would be incompatible with the duties and responsibilities of an Enforcement Officer who is required to enforce and uphold the law.  However, the arbitrator felt that the grievor deserved a “second chance” even though he had only been with the Ministry for approximately two years.  This conduct was not “just cause.”

It remains to be seen whether the Ministry will seek judicial review of the decision.  To date, it is probably fortunate for the grievor that the case has not had nearly as much public exposure as his private parts.