The recent decision of Griffon Integrated Security Technologies et al. v. Valley Associates Inc. et al. (“Valley Associates”) by the Ontario Superior Court of Justice (“ONSC”) is an important reminder for employers to show good-faith conduct when dismissing an employee and responding to any ensuing litigation brought by the employee, as doing otherwise can result in significant punitive damages from the courts.

Background

The plaintiff employee was the Vice-President and General Manager for the defendant employer. The employee had been working for the defendant for over 12 years, originally starting his employment on a two-year term that later evolved into an indefinite term contract. At the time of dismissal, which was not prompted by a particular event, the employee was in between chemotherapy treatments for colon cancer—a diagnosis the employer was aware of—and the employee had no performance issues or prior warnings leading to the dismissal. Consequently, the employee filed a claim for wrongful dismissal and punitive damages against the employer.

The employer defended the claim by using what the ONSC described as a “scorched earth” strategy—accusing the employee of financial irregularities and arguing after-acquired cause for the dismissal without any merit or proof, as well as launching a “spurious” counterclaim accusing the employee of breach of contract, fraud and defamation, among other acts. In fact, at one point, the employer’s lawyer withdrew from the case and the employer’s statement of defense was later struck out and the counterclaim was dismissed.

The Superior Court of Justice Decision

The ONSC accepted the employee’s claim for 20 months’ reasonable notice and awarded this amount, which the ONSC held was at the high end of the appropriate range, in consideration of multiple factors including the employee’s age, health condition, length of service with the employer, limited availability of similar employment, the employer’s knowledge that the employee was in financial difficulty at the time of dismissal because the employer had not paid him accrued bonuses and commissions, and the brutality of the dismissal because the “completely unfounded allegations of dishonesty would have rendered it far more difficult for the plaintiff to find alternative employment.” The Court also awarded $75,000 in punitive damages as a result of the employer’s “scorched earth” strategy that was founded on a baseless defence and counterclaim.

Takeaways for Employers

The decision of Valley Associates follows a pattern by the Courts (see also our previous posts on Pohl and Teljeru) of denouncing bad faith conduct by employers during the dismissal of employees and in the events thereafter, and awarding either moral or punitive damages as a result.

Considering the delicate and risky matter of dismissing employees and any potential ensuing litigation, employers should follow best practices such as the following:

1.   Avoid making false or baseless allegations against an employee and engaging in unnecessary litigation. As an employer, there is a duty to act in good faith towards an employee during and after termination of employment, including in any subsequent related litigation proceedings.

2.   Comply with the termination notice period set out in an employment contract when dismissing an employee and ensure that all outstanding entitlements, such as any bonuses and commissions owing, are paid to the employee.

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

This information is not intended as legal advice.