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Employer whose conduct was “outrageous,” “cheap,” and “mean” ordered to pay terminated employee $100,000 in punitive damages

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When I first started practising employment law many years ago, there was a phenomenon known as “building a case for cause”.  When you represented an employee, as I often did at the time, you could always tell when an employer was trying to do this.  After a lengthy and often unblemished tenure of employment, your employee client was presented with a laundry list of behavioural deficiencies and performance problems.  This would occur either immediately before the employee’s termination, or shortly after it.  These allegations were largely trumped up, and employers would attempt to build a case for cause to frighten the employee from pursuing a wrongful dismissal case, or to back up a “low ball” settlement offer.

Fighting such a case was always an unpleasant task, as it took a tremendous toll – financial, emotional and otherwise, on the employee client.   You’d often have to fight long and hard for these clients and in my experience, these cases often settled at the very last minute, literally at the steps of the courthouse, when the employer felt that it had sufficiently tested the employee’s mettle, and the futility of pursuing a cause termination had finally sunk in.

I am happy to report that over the years, this strategy has, for the most part, fallen by the wayside. This is largely because of a steady stream of employment law cases from legal decision makers of all kinds, and from across the country.  These cases have emphasized the consequences of pursuing a case for cause that is without foundation, the unique aspects of the employment relationship, and the harm that can come to an employee whose termination was unfair.

And so, it is deeply disappointing to read the facts of a recent decision by Mr. Justice Glass of the Ontario Superior Court of Justice, Gordon v Altus Group Limited 2015 ONSC 5663.  The case is a sad reminder of how litigating these cases used to be, with an employer acting very aggressively to deprive a terminated employee of what was legitimately owing to him at law.

In this case, the plaintiff, Alan Gordon, sold assets of a business to the defendant corporation, Altus Group Limited (“Altus”) on November 1, 2008. The sale agreement allowed for an adjustment to the sale proceeds in February 2010. Following the sale, Mr. Gordon was hired by Altus on a 3-year employment contract (with provision for renewals).  As the adjustment deadline of February 2010 approached and it appeared that the parties were headed to arbitration on that issue, the employment relationship between Altus and Mr. Gordon seemed to have come under “stress”.

At the end of March 2010, Mr. Gordon and his wife were both fired. The latter received a severance package but Mr. Gordon was fired for “cause”, based on alleged workplace behaviour such as being an unpleasant colleague, speaking in a derogatory manner about senior personnel, swearing excessively, engaging in a conflict of interest to harm Altus, and employing a colleague who had been charged with fraud.  While it is not clear whether all of the allegations were made before or after Mr. Gordon’s dismissal, Justice Glass did connect the advancement of the allegations with Mr. Gordon’s decision to arbitrate the adjustment issue. He noted that Mr. Glass had not been put on notice of any performance deficiencies prior to his termination, nor was he given any warning.

Justice Glass found “no basis” for Mr. Gordon’s dismissal, having found that the allegations made against Mr. Gordon were either inaccurate or examples of “Altus puffing up complaints to justify its peremptory dismissal of Mr. Gordon”.  Calling the employer’s actions “outrageous”, “mean and cheap” (among other things), Justice Glass awarded $100,000 in punitive damages, citing that the employer had “failed to perform honestly the employment contract”. Justice Glass also noted that if there was any improper behaviour by Mr. Gordon, Altus ought to have exercised its progressive discipline process as detailed in its employee handbook. This would have included meeting with Mr. Gordon about complaints relating to his behaviour and providing written warning and guidance for improvement. Justice Glass held that had Altus done so, it might have “avoided stumbling into the problems” that arose at trial.

Employer counsel should take particular note of this case.  Next time a client asks you if it should fire an employee for cause, critically examine the existence of solid facts and solid evidence to substantiate the claim, as well as your client’s motives.  Also consider whether the client followed the procedural steps required of it, such as providing the employee with a warning of the problematic behaviour before the termination occurs. There will be occasions when your client can proceed to terminate for cause with minimal risk because the problematic behaviour is very serious, has been documented, and the employee in question has been clearly warned that his or her job is in jeopardy.  Moreover, there will be no extraneous circumstances that put into question the employer’s intentions. However, if what you hear from your  client sounds “trumped up” or just doesn’t pass the smell test, use this case to persuade them of a different course, and use this case to demonstrate the heavy cost the client may pay if it proceeds down the wrong path.

Janice Rubin and Parisa Nikfarjam

Janice Rubin

About the Author: Toronto Employment Lawyer, Janice Rubin, is a co-founder and co-managing partner at Rubin Thomlinson LLP. Janice regularly appears on Best Lawyers and Leading Practioners lists in Canada and is considered one of the country’s foremost experts on employment law.

Parisa Nikfarjam

About the Author: Toronto Employment Lawyer Parisa Nikfarjam regularly speaks to human resources professionals, educators, and business owners about employment law and workplace human rights issues. Parisa has designed and delivers interactive workshops on such topics as youth employment, harassment and bullying, and social media in the workplace.