Williams HR Law LLP

AIRLINE FLIES INTO EXTRAORDINARY DAMAGES: HOW NOT TO DISMISS AN EMPLOYEE

January 27, 2023

In Chu v China Southern Airlines Company Limited [Chu], the British Columbia Supreme Court (“BCSC”) awarded an employee $150,000 in extraordinary damages after his employer engaged in a broad and sustained pattern of abusive conduct, including attempting to manufacture cause for dismissal.

Facts

The employee was a 68-year-old Marketing and Business Development Manager with eight years of service beginning in 2011. In 2018, the employer hired a new General Manager (“GM”), who did not get along with the former GM. Because the new GM associated the employee with the former GM, she immediately became dismissive of the employee and secretly intended to terminate his employment. The GM embarked on a campaign to manufacture just cause to dismiss the employee.

Over the course of a year, the employer demoted the employee to entry-level customer service positions and cut his pay by 25%, but continued to rely on him to accomplish his previous senior management duties. The GM unfairly criticized and reprimanded him, including in public. After demoting the employee, the GM set the employee up to fail by giving him inadequate training and time to become familiar with the employer’s operations codes. Among other dishonest acts, the employer also compelled the employee to sign letters of reprimand he did not agree with, created a memorandum falsely claiming that the employee stated he would voluntarily resign if his performance did not improve, and incorrectly alleging in the termination letter that the employee had engaged in time theft.

Decision

The BCSC found that the employer failed to establish just cause and, as a result, the employee was wrongfully dismissed. The court awarded the employee $58,053 in damages based on a 20-month notice period, along with $50,000 in aggravated damages for the employer’s breach of the duty of good faith, and $100,000 in punitive damages for the employer’s bad faith conduct during litigation.

In assessing the notice period, the BCSC focused on the employee’s position as a Business and Development Manager, and not his roles after he had been unilaterally demoted. Further, in assessing the employee’s length of service, the court considered not just the employee’s eight years of service as an employee, the court also considered the three years the employee worked for the employer as a contractor.

In awarding aggravated damages, the BCSC considered the numerous breaches of the employer’s duty of good faith, including the acts committed by the GM to manufacture just cause for dismissal. The court found that the GM’s conduct caused the employee to suffer mental distress both during and after his dismissal.

The employee was also awarded punitive damages due to the employer’s harsh, vindictive and malicious conduct that continued into litigation, including making a number of false and damaging allegations against the employee and denying that he ever held the title of Marketing and Business Development Manager.

Takeaways for Employers

This case serves as a clear-cut example of how courts view bad faith conduct on the part of employers. Knowingly fabricating allegations of serious misconduct or incompetence to justify a dismissal for cause is viewed as highly blameworthy, reprehensible conduct that will most likely attract extraordinary damages. Employers should keep in mind that they owe all employees a duty of good faith both during and after the term of employment.

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