Wrongful Dismissal Damages in Employment Law

When a dismissed employee sues their former employer the potential cost to the employer can often be estimated early on in the process. This can help both the employee and the employer reach a satisfactory settlement. In certain cases however the unexpected happens and an employee’s claim becomes far greater than originally anticipated. The recent employment law case of Brito v. Canac Kitchens demonstrates how an employee’s damages can expand in a wrongful dismissal claim.

In the majority of cases an employee who is wrongfully dismissed by their employer is entitled to reasonable notice damages. These damages represent the amount of notice that the employer should have given to the employee that they were going to lose their job. In most wrongful dismissal cases the majority of the damages awarded are reasonable notice damages in the form of a continuing salary during the notice period. The notice period may last anywhere from a few weeks to 24 months. During the notice period employers are responsible not only for an employee’s salary but also for the other benefits an employee received, including long-term disability benefits if applicable.

In the Canac Kitchens case, about 16 months after being laid off, the plaintiff, a dismissed employee of Canac Kitchens, underwent surgery for laryngeal cancer and would have became eligible for the long-term disability benefits formerly provided by his employer. At trial, the judge found that the plaintiff had become disabled during the reasonable notice period that his employer ought to have, but did not, provide. Because the employer had chosen not to continue the plaintiff’s long-term disability benefits during the notice period the employer was held liable to compensate the employee for his lost benefits. This finding by the judge more than doubled the damages award provided to the employee. In addition, the judge described Canac’s conduct as “reckless, outrageous, and high-handed” and an additional award of $15,000 was provided to the plaintiff as ancillary damages. The Canac Kitchens case is an excellent example of how what may seem to be a simple dismissal case can become very costly to an employer when an employee becomes disabled during the notice period. To read the entirety of the decision click here.

Frequently Asked Questions

Short-Term Disability Insurance: What should you do when a claim is denied?

I have been off work since May 2016 and have been trying to obtain short-term disability insurance since then. My doctor has provided me with three sick notes since then and at our last appointment she told me not to work. However, my application for short-term disability insurance has been denied. I’ve given the disability insurer the notes from my doctor and I’ve gone through the appeal process but have been denied again. My employer is now asking when I will return and I’ve booked an appointment with my doctor to see what she thinks. What should I do?

‍It is not uncommon for disability insurers to deny an initial application for short-term disability benefits. Often the reason cited for the denial is a lack of medical evidence of a disability. If the only documentation you have provided to the insurer are sick notes from your doctor it is usually of assistance to obtain further medical records from your doctor including something documenting your diagnosis. Often, after receiving such additional documentation an insurer will approve an application for disability benefits. If you continue to be denied benefits, it is likely time to consult with legal counsel. Also short-term disability benefits typically end within 6 months even if you are approved. Ensure you know when these benefits end and decide with your doctor whether you should be applying for long-term disability benefits if they are available to you.

With respect to returning to work you are entitled to rely on your doctor’s advice. If your doctor tells you not to work this should be documented in a doctor’s note and provided to your employer. Forcing you to return to work when your doctor says you’re sick is in breach of human rights legislation and it’s unlikely that your employer will insist on your return to work in the face of your doctor’s advice.

Fired without Cause - Should you take the offer?

I was fired without cause. My employer has given me an offer. Should I take it?

Answer: Employers aren’t handcuffed to their employees. If they act in accordance with their statutory and common law obligations, employers are free to part ways with employees without cause. Typically, the employer is obliged to provide statutory or common law reasonable notice or payment in lieu of notice. Costs, benefits, risks and reward of bringing legal action, should all be considered, prior to starting a claim.

Needlessly pursuing litigation could potentially prejudice the employee. You could delay the settlement and run the risk of losing a fair offer. You may find another job in the weeks following termination. If this happens, then the employer’s settlement may be subject to mitigation which means that they are credited the wages you obtain from that new job. You may also pay more in legal fees then the additional notice you should have received.

There are cases where employees are grossly underpaid when it comes to severance, so I do advocate that everyone who faces termination seek counsel to go over any severance offer. Do not sign it blindly. Speak to a Lawyer and make sure the offer is fair. Employers will often expect and, if prudent, will insist that their past employees reach out to counsel when deciding to sign a severance offer. You should do so as soon as possible after receiving the offer.

Resources:

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I was just let go "without cause", what does this mean?

I was just let go "without cause". What does this mean?

Prior to engaging in any litigious action, clients should have a grasp of not only their rights but those of the employer as well. What may not appear fair, maybe either contractually or legally legitimate. The term "without cause" is seen in most termination letters. There's a very clear reason for this.

The threshold for cause is high and, if the employer is unsuccessful in meeting that threshold, they then risk being subject to damages for wrongful termination inclusive of not only proper notice, but aggravated and punitive damages as well.

A prime example of this risk coming to fruition is seen in Ruston v. Keddco MFG. (2011) Ltd., 2019 ONCA 125. Ruston, former president of Keddco, was fired for cause. Keddco alleged that Ruston committed fraud. When Ruston indicated that he would be retaining legal counsel, Keddco advised him that, if he hired a Lawyer, it would counter-claim against him. They warned that the costs of litigation would be extreme to both parties.

Ruston ignored the threat and filed a claim against Keddco. Keddco followed-up on their promise and brought a counterclaim for $1.7 million. The lower court found that the allegations of fraud could not be proven. It was held that Ruston was wrongfully dismissed. He was awarded 19 months termination pay, in addition to $100,000 in punitive damages and $25,000 in moral damages. The costs award was $546,684. The total award, including payment in lieu of notice, was just below $1 million. The Ontario Court of Appeal dismissed the employer's appeal and withheld the lower courts ruling on these matters. Keddco's total losses would have far exceeded $1 million with their legal costs included.

Had Keddco simply terminated the employment without cause and relied on a properly drafted termination provision, Ruston's damages could have topped out at the Employment Standards Act entitlements. Without a contract, common law notice would have been subject to the soft cap of 24 months and early settlement would have been possible. Without the allegation of fraud and the subsequent counterclaim, Keddco's worst-case scenario would have likely been much better than the current end result.

This is an example of why employers are often advised to dismiss without cause, asserting the employer's right to do so and relying on properly drafted contract provisions to navigate the employees' entitlements upon termination.

So what does this mean for employees? Firstly, do not assume that your performance can no longer be factored into an award for termination pay. The employer can always argue "near cause" which has reduced awards in past decisions. Understand, however, that the most prevalent dispute in a without cause dismissal is the employee's entitlement, by contract and by law.

Employees who are terminated without cause, need to acknowledge that the employer has the right to do so. Nonetheless, they must do so while preserving your entitlements. Those entitlements should not be assessed by yourself or your employer. All aspects governing the employment relationship should be forwarded to a competent employment Lawyer. The employment Lawyer will indicate your entitlements and provide an honest opinion on the viability of disputing the package that was offered.

What does this mean for Employees and Employers?

Employees: Once terminated without cause, do not sign a full and final release without having a Lawyer review the employment relationship and confirm your actual entitlements.

Employers: Asserting cause is a risky position to take. Cost-benefit might weigh in favour of dismissing the employee "without cause." The allegation of cause cannot be retracted. Counsel should be sought prior to alleging cause.

Sources:

Ruston v. Keddco MFG. (2011) Ltd., 2019 ONCA 125 (CanLII)

Ruston v. Keddco Mfg. (2011) Ltd., 2018 ONSC 2919 (CanLII)

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