Disability management has become increasingly tricky terrain for employers to navigate. This trend continued in Krmpotic v Thunder Bay Electronics Limited [Krmpotic], a recent decision of the Ontario Court of Appeal (the “Court”), in which the Court upheld an award of 24 months’ notice and $50,000 in aggravated damages to an employee who had been dismissed mere hours after returning to work from a medical leave of absence.

Background

The employee, a Building Maintenance Supervisor, worked for the employer for nearly 30 years. He took a medical leave of absence to undergo back surgery in April 2016 for injuries he sustained throughout the course of his employment. He was dismissed without cause in June, less than two hours after returning to work. The employee rejected the severance package offered and initiated a wrongful dismissal action.

Decision

Wrongful Dismissal

The employee was entitled to common law reasonable notice, as there was no written employment agreement limiting his termination entitlements. Accordingly, the trial judge awarded a notice period of 24 months, which exceeded the employer’s 16-month offer at the time of dismissal.

Mitigation

The employer argued that the employee’s notice period should be reduced due to his failure to mitigate damages post-dismissal.

The Court reiterated that dismissed employees have a duty to take reasonable steps to mitigate their damages by searching for comparable alternate employment within the reasonable notice period. However, the onus is on the employer to prove that the employee failed to take reasonable steps to mitigate, and that they could have secured comparable employment if they had taken such steps.

The Court also agreed with the trial judge’s finding that the employee did not breach his duty to mitigate, despite that the employee’s attempts to find alternate employment immediately following dismissal were “scant at best”. In coming to this finding, the trial judge considered the employee’s age (59 years old) and that he could not have “undertake[n] comparable employment during the notice period” while recovering from surgery, as this significantly limited his ability to perform the physical labour required in his occupation. For instance, following the employee’s dismissal, he relocated for a new work opportunity, but ultimately lost the opportunity because he had not sufficiently recovered.

Aggravated Damages

In assessing whether to award aggravated damages, the trial judge considered the employer’s duty to exercise good faith in the manner of dismissal, which prohibits “untruthful, misleading or unduly insensitive” conduct.

As the employer’s conduct was antithetical to this duty, the trial judge awarded the employee $50,000 in aggravated damages. In making this award, the trial judge considered the following conduct:

• the employer refused to produce financial statements supporting its claim that they dismissed the employee for financial reasons;
• the employer dismissed the employee due to his physical limitations;
• during the termination meeting, the employer was “misleading, unduly insensitive, and not candid or forthright” with the employee; and
• the employee was dismissed within two hours of returning to work after back surgery.

Notwithstanding the absence of medical evidence, the trial judge also considered that the employee suffered back pain, anxiety, depression, and mental distress after he was dismissed.

On appeal, the Court rejected the employer’s argument that the employee had to prove he suffered a diagnosable psychological injury to be awarded aggravated damages. Notably, the Court explained that there is “a spectrum along which a person can suffer mental distress as a result of the manner of dismissal”. While employees will not be awarded damages for experiencing the “normal distress and hurt feelings” resulting from dismissal, employees do not need to suffer from a diagnosable condition to be awarded aggravated damages.

Takeaways

While the employer was unsuccessful on appeal, Krmpotic serves as useful guidance for employers regarding best practices:

• Conduct Terminations With Appropriate Sensitivity: Employers should carry out dismissals in a manner that respects the employee’s dignity and responds to their individual circumstances. Failure to do so increases the risk that an employer will be liable for aggravated damages. This risk only increases after Krmpotic, as the Court has made clear that employees need not provide evidence of a diagnosable mental distress to receive aggravated damages. Employers should be particularly cautious when dismissing an employee returning from a leave of absence or requiring accommodation. In addition to awarding aggravated damages, adjudicators may also closely scrutinize such dismissals to determine whether discrimination occurred.
• Mitigation: Krmpotic serves as yet another example of the high threshold courts require to prove that a former employee failed to uphold their duty to mitigate. Accordingly, prudent employers should gather evidence that comparable positions were available during the employee’s notice period. Such evidence should capture details of job openings, including the date on which the job was posted, the qualifications required for the position, and details regarding compensation. For more information regarding mitigation, see our recent blog on the Jimmy How Tein Fat v PRGX Canada Corp decision.
• Enter Into Written Employment Contracts: To avoid being liable to provide employees with their greater termination entitlements under the common law, as was the case in Krmpotic, employers should ensure they have written employment contracts with enforceable termination clauses in place. For more information about limiting termination entitlements to the minimum amounts under the Employment Standards Act, 2000, see our recent blog on the Dufault v The Corporation of the Township of Ignace decision.

For assistance in developing legally compliant and operationally suitable employment agreements and/or termination plans, contact our lawyers.

This blog is provided as an information service and summary of workplace legal issues.

This information is not intended as legal advice.