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Employers beware: Punitive damages for improper just cause allegations

improper just cause allegationsTwo recent Small Claims Court cases demonstrate the courts’ willingness to sanction employers for improper just cause allegations. These cases highlight the fact that employers need to be cautious in asserting just cause. If employers make a just cause allegation that they shouldn’t have, they could be on the hook for $10,000 in extra punitive damages (and this is just at the Small Claims Court where the cap is $25,000 globally – punitive damages at the superior courts could be and have been far higher).

Case # 1

In Barry v Certified Equipment Sales Services and Rental Ltd., 2017 CanLII 77433 (ON SCSM), the Toronto Small Claims Court awarded the employee $10,000 in punitive damages after her employer wrongfully alleged it had just cause to terminate her employment without notice.

Angela Barry (“Barry”) sued Certified Equipment Sales Services and Rental Ltd., (“Certified”) for wrongful dismissal. Barry was terminated very shortly after an incident at work (unrelated to her) that resulted in the termination of 3 other employees of the small employer Certified (so small in fact that later terminating Barry would have removed all employees from this department). Barry was later asked by Certified to prepare and organize the files of the 3 terminated employees. Upon completion, however, Certified alleged that some files were apparently missing (following its own haphazard investigation), and Barry was subsequently terminated, ostensibly for just cause.

In the result, the court found that Barry had been wrongfully dismissed, and awarded her reasonable notice. Plus, the court found that Certified’s actions showed a “high-handed attitude worthy of being sanctioned” to the tune of $10,000 in punitive damages.

The Court found that punitive damages were warranted considering Barry’s termination was constructed by Certified in order to give itself a ‘clean slate’ of all new employees (for free); that the investigation was likely made after the decision to terminate Barry; that Certified’s finding about the missing employee files were inconsistent and unproven; and that Certified had never shown an interest or reliance on these employee files before anyway.

Case # 2

The Toronto Small Claims Court’s award of punitive damages for improper just cause allegations noted-above echo a recent case from the Ottawa Small Claims Court. There, in Budge v Dickie Moore Rental Inc2017 CanLII 468 (ON SCSM), the employee (“Budge”) appeared to be a model employee. However, only six months into the job, his employer (“Dickie Moore”) terminated his employment, at the time without just cause.

Following this, Budge sued for wrongful dismissal. Later, in its defence, Dickie Moore took the surprising position, for the first time, that Budge was actually terminated for “after acquired cause”, in that it discovered, following his employment’s termination without cause, that he:

  • attempted to defraud the CRA with respect to his Indian status;
  • misreported his gas mileage; and
  • misrepresented at the time of hire his ability to bring in new business.

Nevertheless, the court rejected Dickie Moore’s allegation that it had after acquired just cause to terminate Budge without notice. The court agreed that an employer may rely on after acquired cause in some cases, but did not find it applicable here. The court found that the Dickie Moore’s just cause allegations were suspect:

  • Budge honestly believed he could qualify for Indian status for tax reasons based upon previous experience, and Dickie Moore indicated it did not care if he made the application.
  • Budge did not misrepresent his mileage; he was merely careless in calculating how much gas he had used, which Dickie Moore asked him to pay more attention to, and nothing more.
  • When Budge was hired, there was no attempt to determine what network of contacts he actually had. Furthermore, there was no standard of performance he was expected to meet.

The court held that punitive damages ($4000) 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 only first raised in response to the lawsuit being commenced.

What this means for employers: Before an employer terminates an employee for just cause, it should first complete a bona fide investigation, and then it should consult an employment lawyer to determine if the misconduct (if found in the investigation) is serious enough to allege just cause. A consultation with an employment lawyer would cost a fraction of what it could cost an employer who made an improper allegation of just cause at the Small Claims Court. Many employment lawyers charge just $300 – $500 for the hour or so that it would take to consult on whether simple facts of an apparent misconduct scenario equate to just cause.

Jeff Dutton

Employment Lawyer at Dutton Employment Law
Jeff is a leading employment lawyer in Toronto. He represents both individual employees and management in all matters. Prior to founding Dutton Employment Law, Jeff was a prosecutor for the Ministry of Labour. He has been successful at the Ontario Labour Relations Board, Ontario Court of Justice and the Ontario Superior Court. Jeff is a frequent lecturer on employment law matters and has been widely published in newspapers and trade journals. Read more.
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