The recent decision of Teljeur v Aurora Hotel Group [Teljeur] is a stark reminder that employers must fulfill their duty of good faith and statutory obligations when dismissing an employee failing which they may be liable for moral damages.
The employee worked as a General Manager at a resort and conference centre for just over three years, but his employment was terminated without cause after the employer decided to retain an external management company to manage the resort. At the termination meeting, the employee was told he would receive eight weeks of severance and reimbursement for out-of-pocket expenses he incurred on the employer’s behalf. The employer did not give the employee notice of termination in writing, despite agreeing to do so after receiving multiple requests by the employee. Further, the employer did not pay the employee until a significant period of time after the termination date, and the payment amounted to just three weeks’ pay instead of the eight weeks’ pay that was originally promised. Finally, the employer failed to reimburse the employee for any of the business expenses he incurred. Unbeknownst to the employer, the employee recorded the termination meeting (which the employee later relied on in his claim for moral damages).
The employee filed a wrongful dismissal claim with the Ontario Superior Court of Justice (“ONSC”), seeking ten months of reasonable notice, reimbursement for his business expenses, and $20,000 in moral damages for the employer’s bad faith conduct.
The ONSC awarded the employee seven months’ reasonable notice and full reimbursement of his out-of-pocket business expenses. The Court awarded an additional $15,000 in moral damages as a result of the employer’s bad faith in the manner of dismissal, relying to a great extent on the employee’s surreptitious recording of the termination meeting. In assessing the issue of moral damages, the Court made the following findings:
- The employer failed to provide the employee notice of termination in writing, as required by section 54 of the Employment Standards Act, 2000 [ESA].
- The employer failed to give termination pay to the employee within the prescribed timeline under the ESA, namely, by the later of seven days after the employment ends and the employee’s next regular pay day.
- The employer failed to give the employee the eight weeks of pay it originally promised him and, instead, gave him three weeks of pay.
- The employer failed to maintain the terms and conditions of the employee’s employment during the notice period by not reimbursing the employee for his out-of-pocket business expenses (amounting to $16,680.03), which, as the Court noted, posed a significant financial burden to the employee as it accounted for 23% of his annual income.
- During the termination meeting, the employer encouraged the employee to resign from his employment by telling him, “[I]t is better off for you to do it”, seemingly to limit its exposure in a wrongful dismissal claim – although the Court did not factor this possibility into its assessment of the employee’s mental distress claim.
- The employer’s “untruthful, misleading or unduly insensitive” actions during and after the termination was in breach of its duty of good faith and fair dealing and caused the employee mental distress.
Takeaways for Employers
Although terminating an employee is never easy, it can quickly become even more complicated and costly when employers breach their statutory obligations and duty of good faith and fair dealing. As a result of the employer’s breach of these duties in Teljeur, the employer was ordered to pay $15,000 in moral damages that it would not otherwise be liable to pay. That was the $15,000 lesson learned by the employer in Teljeur. To avoid similar consequences when terminating an employment relationship, employers should:
- Comply with their obligations under the ESA, such as providing the employee with notice of termination in writing, paying termination pay within the prescribed time limits, and maintaining the employee’s terms and conditions of employment during the notice period;
- Be truthful and transparent in communications with the employee during the termination process, and avoid making false or misleading statements or promises without following through;
- Avoid pressuring or coercing the employee to resign or to accept a lower termination package than previously agreed upon;
- Proactively address the risk that the employee may surreptitiously record a meeting through appropriate workplace policies; and
- Pre-plan the termination entitlements to be offered to the employee and be prepared to provide those entitlements if the employee accepts.