In Budge v Dickie Moore Rental Inc, 2017 CanLII 468 (ON SCSM), the Ottawa Small Claims Court considered the right to punitive damages following an employer’s improper allegation of serious misconduct to support just cause dismissal.
The Plaintiff appeared to be a model employee; he never received any indication stating otherwise. However, only six months into the job, the Defendant terminated his employment.
At the exit meeting, the Defendant’s representative told the Plaintiff, for the first time, that he was subject to a six-month probationary period (although there was no employment contract), and that he was owed was just one week of pay in lieu of notice, in line with the statutory minimum required by the Employment Standards Act (“the Act”). No mention of the reason for the termination was made.
Following this, the Plaintiff sued for wrongful dismissal, arguing that he was entitled to common law notice because his termination rights were not contractually limited to the Act.
Subsequently, in its defence, the Defendant took the position, for the very first time, that the Plaintiff was terminated for “after-acquired cause” (and owed no notice accordingly), in that it discovered, following termination, that the Plaintiff:
- attempted to defraud the CRA with respect to his Indian status;
- misreported his mileage; and
- misrepresented his ability to bring in new business at the outset.
- Probation and Reasonable Notice
The court rejected the Defendant’s peculiar argument that the Plaintiff was subject to a six-month probationary period which allowed it to provide only minimum notice if the Plaintiff was dismissed within that term. The court found that a probationary term is not implied; that probation must be expressed in an employment contract, which wasn’t here. Even still, the court stressed, if there was an express probationary period, the Plaintiff would still be entitled to common-law notice, unless there was an agreement stating otherwise (i.e. a terminatio clause).
- Just Cause Termination
The court also rejected the Defendant’s allegation that it had just cause to terminate the Plaintiff without notice. It agreed that an employer may rely on after acquired cause, but found that allegations concerning dishonesty are not, by themselves, sufficient to prove just cause. The court relied on McKinley v. BC Tel (2001) 2001 SCC 38 (CanLII), in stating that the test is whether the dishonesty, (i) if proved, (ii) broke down the employment relationship such that dismissal was warranted.
With regard to the case at hand, the court found that the Defendant’s just cause allegations were suspect:
- At the exit meeting, none of the three grounds for termination alleged was mentioned;
- The Plaintiff was given one week’s pay in lieu of notice; and
- The Defendant did not do a proper investigation and presented minimal evidence demonstrating the grounds of termination.
With regard to the Defendant’s argument that it only learned of the Plaintiff’s dishonesty after the exit meeting, the court found that the Defendant’s evidence established the contrary:
- The Plaintiff honestly believed he could qualify for Indian status for tax reasons based upon previous experience, and the Defendant indicated it did not care if he made the application.
- The Plaintiff did not misrepresent his mileage; he was merely careless in calculating how much gas he had used, which the Defendant asked him to pay more attention to, and nothing more.
- When the Plaintiff was hired, there was no attempt to determine what network of contacts he actually had and no evidence was led in that regard. Furthermore, there was no standard of performance he was expected to meet, and that nevertheless, no evidence was led as to his actual performance.
It follows that the court held that each ground for termination failed; the Defendant lacked cause to terminate the Plaintiff’s employment.
- Punitive Damages
The court held that punitive damages were warranted in the circumstances. The very serious, but un-investigated and unfounded allegations of fraud, which attacked the personal character of the Plaintiff, were suspiciously first raised in response to the lawsuit being commenced. The court opined that such conduct warranted an award of punitive damages, quoting the Supreme Court of Canada in Whiten v. Pilot Insurance Co. 2002 SCC 18 (CanLII):
Punitive damages are awarded against a defendant in exceptional cases for “malicious, oppressive and high-handed” misconduct that “offends the court’s sense of decency”: Hill v. Church of Scientology of Toronto, 1995 CanLII 59 (SCC),  2 S.C.R. 1130, at para. 196. The test thus limits the award to misconduct that represents a marked departure from ordinary standards of decent behaviour.
In the result, the court awarded the Plaintiff two months’ pay in lieu of notice and $4000 in punitive damages. Unfortunately, the court did not expand on the quantum of damages, at all, other than stating that the Plaintiff himself had only pleaded for two months. Still, this is not an unreasonable sum for a six-month tenured, 48-year-old salesperson with a modest income ($36,600). The punitive damages award, however, is on the lower end. I would have expected the court to top up the damages to the $25,000 threshold of the Small Claims Court, thereby making the punitive damages approximately $15,000. After all, very recent cases have awarded punitive damages against the employer in the amount of $100,000 and $50,000. Wrong venue, I guess.
Read More: The Law of Bad Faith Damages.
Jeff is a lawyer in Toronto who works for a technology startup. Jeff is a frequent lecturer on employment law and is the author of an employment law textbook and various trade journal articles. Jeff is interested in Canadian business, technology and law, and this blog is his platform to share his views and tips in those areas.