Denying an employee their basic ESA rights can be costly

Employment/Labour /
Ellen Low
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By Tony Poland, LegalMatters Staff • Employers who fail to follow the letter of the law ­when terminating a worker could find themselves paying hefty moral damage awards, says Toronto employment lawyer Ellen Low.

Denying an employee their basic statutory rights under the Employment Standards Act, 2000 (ESA), even inadvertently, can be costly, says Low, principal of Ellen Low & Co. 

“Moral damage awards are not uncommon as a source of moral or aggravated damages,” she tells LegalMattersCanada.ca. “Moral and aggravated damages have been around for quite some time. They can be awarded in cases where the employer engages in conduct in the course of dismissal that is unfair or if they act in bad faith by being untruthful, misleading or unduly insensitive.”

Low points to Teljeur v. Aurora Hotel Group, a recent Ontario Superior Court of Justice decision that awarded $15,000 in moral damages to a former senior manager who was dismissed without cause.

Among the “disturbing aspects” of the termination, Justice Michael McKelvey stated, was that there was no evidence that Aurora Hotel Group provided John Teljeur with written notice of termination despite at least three requests to do so. According to s.54 of the Employment Standards Act, no employer shall terminate a worker who has been continuously employed for three months or more without written notice.

Employers failed to deliver ESA entitlement within seven days

McKelvey ruled the employer also failed to deliver Teljeur’s ESA entitlement in the seven days after the employment ended or the next pay day in accordance with s.11(5) of the Act.

As well, the court found the company owed Teljeur $16,680 for out-of-pocket business incurred on behalf of his employer expenses.

“The principal amount, in this case, represents approximately 23 per cent of the plaintiff’s annual income and is a very significant financial burden for him to carry since the date of his termination, especially given that he has not been successful in obtaining alternate employment,” McKelvey ruled.

In the termination meeting, which Teljeur surreptitiously recorded, he was told he would receive eight-week’s severance. However, the employer limited the amount paid to his Employment Standards Act entitlement. At the same meeting, the employee was encouraged to resign and was told “it is better off for you to do it.”

McKelvey stated “it is not clear from the meeting whether the encouragement to resign was designed to limit the employer’s exposure in a wrongful dismissal claim. However, that possibility cannot be ruled out.”

Actions were ‘untruthful, misleading or unduly insensitive’

He found the combined behaviour amounted to “actions by the employer which were untruthful, misleading or unduly insensitive.”

“They constitute a breach by the employer of their duty of good faith and fair dealing in the manner in which the employee was dismissed.”  McKelvey ruled. “I have also concluded that it would be within the reasonable contemplation of the employer that its manner of the dismissal would cause the employee mental distress.”

Low, who was not involved in the case but comments generally, says the decision is another reminder to employers about the importance of due diligence.

“Just looking at the language in this decision makes it crystal clear that at minimum terminated employees should reasonably anticipate full compliance with the ESA and the Employment Insurance Act,” she says. “It is only fair. These people have just been fired. They are trying to figure out how to pay for groceries and their mortgage. And, in some cases, they are dealing with large, formal, sophisticated institutions who have not paid the minimum entitlements.”

Courts have historically come down hard on employers who fail to recognize workers’ rights, she says, using Pohl v. Hudson’s Bay Company as an example.

In that case, a 28-year employee of Hudson Bay was awarded $55,000 in moral damages.  Justice Robert Centa noted the company treated Darren Pohl insensitively by walking him out the door even though there was no proof of any misconduct on his part. Hudson Bay also failed to issue a record of employment within five days of termination and neglected to pay the employee his owed wages in a lump sum.

Employers will face consequences, judge warns

Centra ruled that “employers are required to comply with the ESA and should not be surprised when they face consequences if they fail to do so.”

“I find that HBC deliberately violated the ESA by paying out Mr. Pohl’s termination and severance pay by way of instalment instead of in a lump sum. HBC’s conduct is entirely unacceptable,” Centa wrote. “It is a large, sophisticated employer and there is no excuse for it not complying with its obligations under the ESA. HBC is not at liberty to improve its cash flow by withholding money it was statutorily obliged to have paid to Mr. Pohl and turning him into an unsecured creditor.”

Low says Galea v. Walmart Canada Corp. sets out factors to be considered in assessing a claim for moral or aggravated damages. Noting the grounds for moral damages must be assessed on a case-by-case basis, the judgment found the plaintiff may be entitled to an award if:

  • an employer has breached its duty of good faith and fair dealing in the manner in which the employee was dismissed;
  • there is conduct that could qualify as an employer’s breach of good faith or the failure to deal fairly in the course of a dismissal includes an employer’s conduct that is untruthful, misleading or unduly insensitive, and a failure to be candid, reasonable, honest and forthright with the employee;
  • it was within the reasonable contemplation of the employer that the manner of dismissal would cause the employee mental distress; and
  • the wrongful conduct of an employer must cause the employee mental distress beyond the understandable distress and hurt feelings that normally accompany a dismissal.

In Honda Canada Inc. v. Keays, the Supreme Court of Canada stated that conduct meriting punitive damages awards must be “harsh, vindictive, reprehensible and malicious,” as well as “extreme in its nature and such that by any reasonable standard it is deserving of full condemnation and punishment.”

Even an honest mistake can lead to damages

However, Lows says employers who make an honest mistake can still be held liable. She says in Moffatt v. ProsperaCredit Union, the company accidentally miscalculated amounts that were owed in termination letters. 

“Even though that miscalculation was brought to their attention and they immediately corrected, it, it warranted an additional award of moral or aggravated damages,” Low says.

She says the while Employment Standards Act is complex it is still incumbent on the employer to understand their obligations.

“As an employer, it can be distressing that even a mistake can lead to massive awards,” says Low. “I tell employers to do their best and correct their mistakes as soon as become aware of them. And, not to be trite, but get competent employment advice because even inadvertent non-compliance may result in large damages awards.”