Canadian Employment Law Today

September 13, 2017

Focuses on human resources law from a business perspective, featuring news and cases from the courts, in-depth articles on legal trends and insights from top employment lawyers across Canada.

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Canadian Employment Law Today | 3 Canadian HR Reporter, a Thomson Reuters business 2017 Cases and Trends Dismissal itself is not unfair Unfairness or bad faith in the manner of dismissal is required in order to receive an award of aggravated damages BY RONALD MINKEN AGGRAVATED DAMAGES from the ter- mination of employment do not arise just because the employee is upset about the dismissal — there needs to be unfairness or bad faith in the manner of the dismissal. is was the notion that was upheld in the recent British Columbia Court of Appeal case, Lau v. Royal Bank of Canada. Marco Lau worked as an account manager for the Royal Bank of Canada (RBC) and was sponsored by Royal Mutual Funds (RMFI) to sell mutual funds. After a client complained about Lau not following instructions, RBC launched an internal investigation. What it found was that Lau had been incorrectly tracking his sales in order to increase his sales numbers. In addition, RBC determined that Lau had lied about the details of his meeting with the client who complained. After an investigation, RBC terminated Lau's employment for cause. He was dis- missed during a meeting with his branch manager and the regional vice-president, in which he was provided with a termination letter. Lau was offered an employee assis- tance program for three months, which he declined. He was also given the opportunity to clear out his desk at a later time but he chose to do so right away. In response, Lau brought a wrongful dis- missal action against both RBC and RMFI. e trial judge found that Lau was wrong- fully dismissed and ordered damages in lieu of notice and aggravated damages for men- tal distress arising out of the manner of dis- missal. RBC and RMFI appealed the award of aggravated damages. Wallace and Honda tests e Court of Appeal followed the leading Supreme Court of Canada decisions Wal- lace v. United Grain Growers Ltd. and Keays v. Honda Canada Inc. in holding that aggra- vated damages should be awarded when: • e employer breaches its duty of good faith and fair dealing in the manner of dis- missal • e employee suffers damage as a result of that breach. In Honda, the Supreme Court gave ex- amples of unfair or bad-faith dealing in the manner of dismissal as conduct that is "un- truthful, misleading or unduly insensitive." e appeal court remarked that in both Wallace and Honda, "the courts noted that the ordinary psychological impact of ter- mination is not compensable because the contract of employment is, by its very terms, subject to cancellation on reasonable notice." Lau claimed he was entitled to an award of mental distress for aggravated damages in regards to his manner of termination. However, during the trial Lau presented no evidence from friends, family, or medical ex- perts relating to the impact of the termina- tion on his mental state. ere was only his own testimony that he experienced a "horri- ble feeling, "disappointment," and felt "lost." On its own, Lau's testimony was not enough evidence for the Court of Appeal to find an award for aggravated damages. While expert testimony is not required for a determination of damages for mental dis- tress, it is certainly helpful. In support of this principle, the appeal court applied the Su- preme Court decision Saadati v. Moorhead, where the top court specifically rejected the notion that legally compensable mental inju- ry must rest on the claimant proving a recog- nized psychiatric illness. Rather, the claim- ant must prove a "serious and prolonged disruption that transcended ordinary emo- tional upset or distress." Although Saadati is a tort decision, the appeal court determined that it is applicable in contract cases that deal with proving mental injury. Lau also argued he was entitled to aggra- vated damages for the intangible effects of his bad-faith termination. However, he did not present any evidence to demonstrate that there were intangible effects or there was a connection to the manner in which he was terminated. In order to get an award for aggravated damages for intangible effects, the employee must demonstrate that not only was there harm — such as the loss of reputation — but that the harm was related to the manner of dismissal. e general difficulty associ- ated with finding a new job after a termina- tion is not considered harm for aggravated damages since the difficulty is compensated through the reasonable notice period, re- employment being one of the factors consid- ered when the courts determine the amount of notice to award. Lau's final argument for an award of ag- gravated damages was the fact that RMFI filed a Form 33, Notice of Termination, with the British Columbia Securities Commis- sion, which is a regulatory requirement. Lau was concerned that the Notice of Termina- tion would prevent him from finding a job in the financial sector. However, there was no evidence that RBC or RMFI informed any prospective employer about the Notice of Termination. Consequently, the appeal court did not find anything regarding how the Form 33 was filed to give rise to an award of aggravated damages. Lessons for employers As an employer, if you wish to terminate the employment of an employee, you should en- sure the termination is done in good faith and the employee is dealt with fairly. In Wallace, the Supreme Court defines good faith in the manner of termination as: can- did and forthright; honest, truthful and not misleading; fair and reasonable; and sensi- tive. Some examples of bad-faith dismissal are outlined in Honda where: the employer makes declarations that result in an attack on the employee's reputation at the time of the dismissal; the employer misrepresents the employee's reason for leaving; and the dismissal is meant to deprive the employee of a pension benefit or other right, such as permanent status. For more information see: • Lau v. Royal Bank of Canada, 2017 Car- swellBC 1838 (B.C. C.A.). • Wallace v. United Grain Growers Ltd., 1997 CarswellMan 455 (S.C.C.). • Keays v. Honda Canada Inc., 2008 Car- swellOnt 3743 (S.C.C.). • Saadati v. Moorhead, 2017 CarswellBC 1446 (S.C.C.). ABOUT THE AUTHOR RONALD S. MINKEN Ronald S. Minken is a senior lawyer and mediator at Minken Employment Lawyers, an employment law boutique in Markham, Ont. He can be reached at Ron gratefully acknowledges Aneesha Lewis for her assistance in preparation of this article.

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