As we reported in an article last year, courts across the country are generally following the Supreme Court of Canada’s decision in Keays v. Honda Canada: Punitive damages should be awarded only in exceptional cases, and moral damages should be limited to actual losses resulting from the employer’s conduct. That has left Canadian courts assessing employees’ actual losses. But the result can be a double-edged sword. Other damages may flow â€“ as was the case when the British Columbia Court of Appeal ruled in Marchen v. Dams Ford Lincoln Sales Ltd. that an apprentice who was wrongfully dismissed was entitled to $25,000 for loss of his apprenticeship.
In November 2002, Dams Ford Lincoln Sales Ltd. (Dams) entered into an apprenticeship agreement with a Mr. Marchen. Under the agreement, Marchen was to work and take courses to become a qualified automobile collision repair journeyman. In exchange, Dams was to provide adequate training, so far as the facilities and the scope of the business would permit. The training program was expected to take approximately four years. Dams wasn’t required to keep Marchen employed for the entire period but only so long as work was available.
Suspicion of criminal activity
Marchen’s older brother was also employed by Dams, in its parts department. However, in the summer of 2004, he confessed to stealing parts to support a drug habit. His employment ceased. Dams also learned that Marchen’s brother had been convicted of possessing a stolen vehicle and that the stolen vehicle had been repainted in the Dams body shop. Dams suspected that Marchen also might have been involved in criminal activity.
As a result of their suspicions, Dams terminated Marchen’s employment and apprenticeship. But Dams’s suspicions were never substantiated, and Marchen sued for wrongful dismissal. Dams claimed that the termination was because of downsizing of the body shop, although the evidence suggested that the downsizing didn’t take place until 10 months later.
The trial judge awarded Marchen wages for the roughly two years remaining on the apprenticeship agreement along with $25,000 in damages for the loss of apprenticeship. The judge wasn’t pleased that Dams maintained that the reason for termination was downsizing and awarded special costs and $100,000 in punitive damages as a result.
Court of Appeal upholds damages
Following Keays, the Court of Appeal overturned the punitive damages award. The award of special costs was upheld.
This left the apprenticeship issue. The court observed that damages in wrongful dismissal cases are no longer limited solely to pay in lieu of notice. The type of damages available to an employee depends on what the contract promises and what is in the reasonable contemplation of the parties at the time the contract of employment was entered into.
In this case, the Court of Appeal said it was clear that the parties anticipated that Marchen would earn the status of journeyman, provided that he completed his courses and continued to work at the body shop. It was reasonable to assume that if Dams breached the agreement, Marchen would suffer a significant setback in his attempt to earn his journeyman certificate.
Although Marchen subsequently completed all of the required course work, he was unable to earn his journeyman certificate â€“ he couldn’t obtain the necessary hours or experience. Marchen was thus awarded damages for the loss of opportunity to achieve journeyman status and the higher wage such status entailed. The trial judge estimated this loss at $25,000, and the Court of Appeal saw no reason to disturb this finding.
Lessons for employers
Although the Keays decision has reduced punitive damages awards in wrongful dismissal lawsuits, Canadian courts may be willing to entertain claims for additional damages on top of traditional pay in lieu of notice of termination, where actual loss can be proven. When firing employees, employers should therefore consider whether the contract of employment might include “promises” that could lead to additional claims.
While an apprenticeship agreement is not your typical employment agreement, it’s not unusual for employers to support employees’ attempts to further their educational qualifications. In such circumstances, Canadian employers may wish to ensure that any agreement regarding such support specifically sets out what will happen when the employment relationship ends.