The British Columbia Supreme Court recently awarded damages for mental distress in the context of a termination for cause. The decision in George v. Cowichan Tribes signals that it may be easier to establish such a claim when there is a just cause allegation that fails, compared with terminations without cause. It confirms that employers in Canada need to be very careful when alleging cause.
Termination of employment is often upsetting. But since employment contracts may always be brought to an end, the normal distress and hurt feelings are not compensable. Damages in wrongful dismissal lawsuits in Canada are typically limited to compensation for reasonable notice of termination.
In Honda v. Keays, the Supreme Court of Canada considered when aggravated damages—that is, additional damages for mental distress—may be available in wrongful dismissal actions. Employers have an obligation of good faith and fair dealing in the manner of dismissal. A failure to act in good faith in the manner of termination may give rise to foreseeable harm beyond the normal distress. If so, aggravated damages may be ordered. The onus is on the employee to present evidence (usually medical) of the harm suffered as a result of the breach of the employer’s duty.
What type of conduct may be a breach of the duty of good faith? Examples may include lying about the reason for termination, alleging cause knowing there are no grounds to do so, and conducting the termination meeting at a particularly insensitive time.
Recent British Columbia case
In the George case, the employee had been a long-term employee of the Cowichan Tribe. She had a good work record, but there was an incident at a bar outside of work hours. She made an unprofessional statement to a fellow employee, and there were allegations of other forms of harassment, including slapping. It was messy.
The tribe hired an independent investigator. The investigator concluded that some allegations had merit, some had not, and some were unresolved. He found certain serious allegations against George to be true.
The tribe considered the investigator’s report. Without putting the investigator’s conclusions to her, it terminated George’s employment for cause.
At the ensuing trial, the court heard evidence about the events and reached a different conclusion from the investigator. The trial judge found George and her evidence were credible, and that the other evidence was not. There was no cause for termination.
The court concluded that George was entitled to aggravated damages. The primary basis was that neither the investigator nor the employer had put one of the serious allegations clearly to her, and she did not have an opportunity to respond. The court concluded that the employer acted on incomplete and inaccurate information and in a “cavalier, reckless and negligent” manner, in breach of its duty of good faith.
George testified that the dismissal was devastating to her. It appears there was no supporting medical evidence.
The court awarded $35,000 in aggravated damages. The court relied on earlier decisions, including Ogden v. Canadian Imperial Bank of Commerce, for the proposition that cavalier, reckless conduct supports a claim for aggravated damages and thus breaches the duty of good faith. It relied on the decision in Vernon v. British Columbia (Liquor Distribution Branch) in support of the amount of the award.
Two points may be made:
1. In Ogden, the court ruled that the defendants were “motivated to fire an unhappy employee before she quit thus ensuring they were in the best position to retain the entirety of her $233 million portfolio.” Arguably, it was that objective that tainted the termination and attracted the conclusion that the defendants had breached their duty of good faith. But in George, there was no discussion of an improper purpose for the termination.
2. In Vernon, the court awarded $35,000 in aggravated damages on the basis that the termination caused “serious harm,” which was supported by medical evidence of mental distress. It does not appear that any medical evidence was led in George.
The requirements for establishing a claim for aggravated damages may be different in “for cause” terminations, at least as a practical matter.
The court in George, in effect, held that a breach of the rules of procedural fairness (the failure to put the allegation clearly to George) was a breach of the duty of good faith. This seems contrary to earlier case law.
As regards proof of harm, it appears that the court in this case did not require medical evidence and awarded damages based only on the employee’s testimony that she was devastated by the termination.
This is yet another reason for employers to be careful in considering whether to terminate for cause.