An Ontario employee was awarded more than $571,000 after the court found that his former employer wrongfully dismissed him and engaged in serious bad faith conduct before and after his termination.
In K. v. Controlex Corporation, 2023 ONSC 7045, the Ontario Superior Court awarded the employee 24 months of reasonable notice, $50,000 in aggravated damages and another $50,000 in punitive damages. The court found that the employer had attempted to damage the employee’s reputation by making serious allegations of dishonesty and criminal conduct without justification.
The decision shows that an employee’s rights after dismissal can extend beyond compensation for reasonable notice. The way an employer treats an employee leading up to and during a termination can also result in additional damages in particularly serious cases.
Background: Nearly 19 Years of Service Before Termination
The employee was a 69-year-old professional engineer who had worked for the defendant corporation for approximately 18.5 years. He held the position of Vice President, earned a salary of $228,000 per year plus benefits and a car allowance, and had significant responsibility for the company’s operations and property management functions.
During his employment, the employee worked closely with the company’s founder and operated with significant independence. The court noted that during his tenure, the value of the land holdings controlled by the corporation grew from those of a small landholding company to approximately $700 million.
The employment relationship changed significantly after the company’s founder died suddenly in July 2020. Approximately eight weeks later, the employee received a letter by courier advising him that his employment was terminated immediately without cause. He was provided eight weeks of base salary and benefits but no explanation for his dismissal.
Serious Allegations Were Made Before the Employee Was Fired
In the weeks before the termination, the employee’s signing authority was removed, and he was increasingly excluded from responsibilities that had previously formed an important part of his senior management role. The new president also began dealing directly with employees who normally reported to him.
More seriously, the court heard evidence that statements were made to the company’s clients questioning the employee’s honesty and reputation. He was described as being “a nobody” and “no good,” accused of taking kickbacks, and clients were told not to deal with him. The new president also suggested that the company’s former founder may have been murdered and that the employee could have been involved.
The court found that there was no justification for these allegations and characterized the conduct as part of a malicious effort to damage the employee’s reputation. The employee also learned from office staff that he was being terminated before he received his formal termination letter, and his position had been offered to one of his direct reports before he was formally dismissed.
Employee Awarded 24 Months of Reasonable Notice
There was no written employment contract limiting the employee’s entitlement to common law notice. The court therefore determined the appropriate notice period based on the circumstances of the employment relationship.
When determining reasonable notice, Ontario courts consider factors including an employee’s age, length of service, the nature of the position and the availability of similar employment. These are commonly referred to as the Bardal factors.
In this case, the employee was 69 years old, had approximately 18.5 years of service and occupied a senior Vice President position with substantial responsibility. The court also considered the effect that the employer’s allegations and counterclaim had on the employee’s ability to obtain new employment.
The court awarded a 24-month reasonable notice period and $471,461.68 in damages for salary, benefits and car allowance during that period, less amounts already paid following termination.
Employees who are dismissed without adequate notice may be entitled to substantially more than the minimum amounts required under Ontario employment standards legislation. Learn more about wrongful dismissal in Ontario and common law reasonable notice.
Part-Time Earnings Did Not Reduce the Employee’s Damages
The employee made efforts to find comparable executive employment following his dismissal but remained unable to secure a similar position for more than three years. During that period, he earned $8,842 through several part-time assignments.
The court did not deduct those earnings from his wrongful dismissal damages because the part-time assignments were not reasonably comparable to the senior management position he had lost. The court relied on the Ontario Court of Appeal’s decision in B. v. PJ-M2R Restaurant Inc. when addressing this issue.
This is an important distinction for dismissed employees. The duty to mitigate generally requires an employee to make reasonable efforts to find comparable employment, but accepting temporary or significantly different work does not necessarily mean that every dollar earned will reduce a wrongful dismissal award.
Employer Ordered to Pay $50,000 in Aggravated Damages
In addition to reasonable notice damages, the court awarded $50,000 in aggravated damages because of the manner in which the employee was treated.
Aggravated damages may be available where an employer acts in bad faith in the manner of dismissal and the employee suffers compensable harm as a result. The court considered the employer’s conduct before, during and after the termination, including removing the employee’s authority, making defamatory statements to clients, offering his position to another employee before his dismissal, refusing to meet with him and later pursuing allegations of cause and breach of fiduciary duty that the court found to be groundless.
The court concluded that the employer’s conduct justified an additional award of $50,000 in aggravated damages.
Court Also Awards $50,000 in Punitive Damages
The court separately awarded the employee $50,000 in punitive damages.
Punitive damages are exceptional. Unlike ordinary wrongful dismissal damages, which compensate an employee for losses resulting from termination without adequate notice, punitive damages are intended to punish particularly reprehensible conduct and deter similar behaviour.
The court found that the employer’s conduct represented a marked departure from ordinary standards of decent behaviour. It considered the effort to damage the employee’s reputation, unsupported allegations of criminality and dishonesty, the groundless counterclaim and the employer’s conduct during the litigation.
The defendant changed lawyers several times and ultimately failed to comply with a court order requiring it to appoint new counsel. No representative of the corporation attended the trial, and its defence and counterclaim were struck.
The court concluded that an additional $50,000 in punitive damages was warranted.
More Than $151,000 in Vacation Pay Was Initially Withheld
At the time of termination, the employer also failed to pay $151,506.89 in accrued vacation pay. That amount was eventually paid in May 2021, several months after the employee had been dismissed.
Ontario’s Employment Standards Act, 2000 establishes minimum vacation pay rights for employees. Employees are generally entitled to receive accrued vacation pay that remains owing when their employment ends. More information is available in Monkhouse Law’s guide to vacation pay in Ontario and the Ontario government’s guide to vacation and vacation pay.
What the Employee Was Awarded
The court awarded the employee a total of $571,461.68 in damages, consisting of:
- $471,461.68 in damages for the 24-month reasonable notice period;
- $50,000 in aggravated damages; and
- $50,000 in punitive damages.
The court also awarded prejudgment interest. In addition, the employer was ordered to pay $192,112.19 in legal costs and disbursements. The costs award was separate from the $571,461.68 damages award.
Key Takeaways for Employees
How an employer treats you during a dismissal can matter. Wrongful dismissal compensation is not necessarily limited to reasonable notice. In serious cases involving bad faith conduct, an employee may also be entitled to aggravated damages where the legal requirements for those damages are established.
False allegations can have serious consequences. In this case, the court considered the employer’s defamatory allegations when assessing the employee’s ability to find comparable employment and the additional damages warranted by the employer’s conduct. Employees facing serious unsubstantiated accusations around the time of termination should preserve relevant emails, messages and other evidence.
Long-service and senior employees may be entitled to substantial common law notice. The employee received 24 months of reasonable notice after approximately 18.5 years of service. Age, length of service, the nature of the position and the availability of comparable employment can all affect the appropriate notice period. Monkhouse Law provides more information about how common law notice is calculated.
Punitive damages are possible, but they are exceptional. They are not awarded simply because an employer wrongfully dismisses an employee or behaves unfairly. In this case, the court found that the employer’s conduct was sufficiently serious to justify an additional award intended to punish and deter that behaviour.
Taking temporary or lower-level work does not necessarily eliminate a wrongful dismissal claim. Employees generally have a duty to make reasonable efforts to find comparable employment after dismissal. Here, the employee earned a modest amount through part-time assignments, but the court did not deduct those earnings because the work was not reasonably comparable to his former senior management position.
Outstanding vacation pay remains payable after termination. The employer initially failed to pay more than $151,000 in accrued vacation pay. Although it was eventually paid, the case demonstrates why employees should review their final payments carefully to determine whether wages, vacation pay and other outstanding amounts have been included.
Have You Been Wrongfully Dismissed in Ontario?
This decision demonstrates why employees should not assume that the amount initially provided by an employer represents their full legal entitlement. Long service, age, seniority, the availability of comparable employment and the employer’s conduct surrounding the dismissal can all affect a wrongful dismissal claim.
If you have been terminated after long service, offered limited termination compensation or subjected to serious accusations or unfair treatment surrounding your dismissal, consider having your circumstances reviewed before signing a release.
You can learn more about wrongful dismissal in Ontario or contact Monkhouse Law for a free 30-minute phone consultation.
This article is provided for general information only and does not constitute legal advice. Employment law entitlements depend on the circumstances of each case.