In a recent decision, the Ontario Superior Court of Justice sent a reminder to Ontario employers to settle valid claims or be prepared to accept the cost consequences.
The plaintiff employee in Lemyre v. Residential Energy Savings Products Inc. (2020 ONSC 7866) successfully brought a claim for wrongful dismissal damages against her former employer. At trial, the court awarded to the plaintiff $41,000.00 in damages.
Prior to trial, the plaintiff had offered to settle the matter for $32,000.00 inclusive of legal fees. To that end, the plaintiff served on the defendant a written settlement offer (pursuant to Rule 49 of the Ontario Rules of Civil Procedure) which was left open for the defendant to accept until the commencement of trial.
Following her successful result at trial, the plaintiff sought $41,520.19 in costs (consisting of $35,000 in legal costs plus HST and disbursements). The defendant employer argued in reply that the costs sought by the plaintiff were excessive, alleging that the plaintiff’s legal counsel “spent too much time on the file” and the plaintiff “did not do better than her offer because after tax she will get less than $32,000.”
The court rejected the defendant’s submissions in this regard and awarded costs as sought by the plaintiff. In reaching this decision, Justice Ramsay made the following important observations:
- The tax consequences for the damages award are irrelevant. As far as a Rule 49 settlement offer is concerned, the court looks solely at the quantum of the gross damages awarded, rather than any tax deductions that may be required; and
- The defendant “never counter offered a dime”. This finding underlines the value for employers in including a reasonable Rule 49 settlement offer as part of their strategy in responding to an employee’s wrongful dismissal claim. From a practical standpoint, it will demonstrate to the court that the defendant was taking practical steps to try and resolve the matter rather than adopting a “scorched earth” tactic and forcing the employee to proceed through to trial.
There is often an inherent power imbalance in wrongful dismissal actions. Frequently, the damages being sought by the plaintiff will be relatively modest – while the costs of litigation can be significant. As such, some employers may opt for a hardline strategy designed to make the court process more challenging, protracted, and expensive for the individual plaintiff. While employers are free to adopt such an approach, they should do so with caution. In this case, Justice Ramsay noted that:
“Employers should have an incentive to settle valid claims. The damages are never very much compared to the cost of litigation. It is easy for an employer to use its advantage to grind down a plaintiff with technical arguments.”
This observation offers some insight into how the courts may view hardline litigation tactics and the cost implications that may result for defendant employers. Accordingly, employers should plan carefully when formulating their response to routine wrongful dismissal litigation.