Whether you are a valued employee dismissed for wrongful reasons, or an employer who has essentially been forced to dismiss an employee without any bad faith, Coppola v Capital Pontiac Buick Cadillac Gmc Ltd (2011 SKQB) and Rodrigues v Shendon Enterprises Ltd. (2010 BCSC) show that there are four (4) points to consider about all wrongful dismissal cases.
1. The Dismissal:
When dismissing an employee, an employer should either (a) dismiss the employee with just cause, or (b) dismiss the employee without cause, but with reasonable notice of termination.
Just cause requires employee behavior to be seriously incompatible with the employee’s duties, such that it fundamentally strikes at the employment relationship and results in a breach of employment contract.
Reasonable notice is to be determined on a case-by-case basis, based on four factors set out in Bardal v. The Globe & Mail Ltd., 1960 Ont. S.C. (most recently applied by the Supreme Court of Canada (SCC) in Honda Canada Inc. v. Keays, 2008):
a) The character of the employment - the employee’s experience and qualifications is what matters, and may trump the employee’s position in the management hierarchy.
b) The length of service – the general rule is to award one month of notice for each year of service. However, to avoid giving this factor disproportionate weight, considerations such as whether the employee had been enticed to leave secure employment or if the employee had been made to believe that his/her position was secure have been factored in to avoid unfair punishment of short service employees.
c) The age of the employed - the availability of similar employment, having regard to the experience, training and qualifications of the servant.
2. Terminating an employment relationship without just cause and without proper notice of termination constitutes a wrongful dismissal, and a breach of the employment contract.
This is because the law has long recognized that all employment contracts include an implied term of proper notice of termination. To compensate the employee for the breach of contract, the employer must pay the employee an amount that substitutes for a reasonable notice.
3. The Employee’s Mitigation:
Just like any other breach of contract situation, a wrongfully dismissed employee has a duty to take all reasonable steps to mitigate the loss consequent to the employer’s breach. Therefore, a wrongfully dismissed employee should attempt to secure subsequent employment, the earnings of which would reduce the damages the employee would receive for the wrongful dismissal.
4. The Potential Damages:
In addition to the compensatory damage for the breach of the employment contract, an employer who has wrongfully dismissed an employee may also be subject to compensatory damages for mental distress that it caused the employee, and/or punitive damages.
Compensatory damages for mental distress will be awarded if a wrongfully dismissed employee can prove that the manner of the dismissal (a) caused the employee mental distress, and (b) may reasonably be contemplated by the parties at the formation of the contract to result in the damages. This is limited to situations where the employer engaged in unfair or bad faith conduct during the course of dismissal, such as falsely accusing the employee of fraudulent conduct and misrepresenting the reason for the dismissal. A lack of bad faith in an employer’s actions during a wrongful dismissal would not give rise to this type of damage.
Punitive damages will be awarded only if the employer’s conduct in dismissal was so extreme that damages in addition to compensatory damages are necessary for the purpose of deterrence, denunciation and retribution.
Key Takeaway
- An employer has an obligation to terminate an employee either based on (i) just cause; or (ii) without cause and with reasonable notice
- An employee has an obligation to mitigate the losses consequent to an employer’s breach
- An employee who has been wrongfully dismissed may receive compensatory damages for the breach of contract, for potential mental distress, and punitive damages.