Law Times

LaW TIMeS • NOVeMBeR 16, 2015 Page 9 www.lawtimesnews.com Judge orders $100K in punitive damages in just-cause case BY MICHAEL McKIERNAN For Law Times he stakes just went up for em- ployers that assert questionable claims of just cause after an On- tario judge handed a consulting firm a punitive damages award worth $100,000 in a wrongful dismissal case. In a decision replete with strong lan- guage, Ontario Superior Court Justice Bruce Glass branded the Altus Group Ltd. "mean and cheap" for the manner in which it fired Alan Gordon, an employee hired after selling assets to the firm. The relationship turned sour about halfway through Gordon's three-year contract when a dispute arose over the final price of the sale. The Altus Group claimed it had fired Gordon for cause and paid him noth- ing, but Glass sided with the employee in ruling there was no basis for termi- nating him. The judge ruled Gordon's contract with the company entitled him to $170,000 in damages but tacked on another $100,000 in punitive damages in order to sanction the firm for its "terrible conduct." "The conduct of the Defendant cor- poration is outrageous because Altus got mean and cheap in trying to get rid of an employee as they approached arbitration for the determination of any adjustment in the asset purchase agreement price. They had a contracted process in place and chose to park it with an unfounded allegation to fire him," wrote Glass in his Sept. 11 judgment. Phil White, a lawyer with Toronto em- ployment boutique Grosman Grosman & Gale LLP who acts for both employees and employers, says alleging just cause without a strong evidentiary foundation has a long history as a litigation tactic in employment matters. "It's certainly tempting for some em- ployers because if you're firing for cause, you're going to pay zero, which can be a huge cost saving compared with a sever- ance package," he says. Unfortunately, it has also proven to be a historically effective tactic, according to White, who says it can often scare many potential plaintiffs, already faced with unemployment, into accepting stingy settlement offers. "For every case that makes it to trial, there are 99 that don't. An allegation of cause is going to drive a lot of people away," says White. "As an employee, you have to have a backbone of steel. You might have to wait two years to get a trial, and it's a very expensive process. Many don't have the stamina to hold on, but if you do man- age it and don't give up, then that kind of tactic can come back and really hurt the employer." However, Parisa Nikfarjam, an em- ployment lawyer with Toronto law firm Rubin Thomlinson LLP, says decisions like Gordon v. Altus have helped make the practice less common over the years with employers less willing to expose them- selves to the financial and reputational hits that come with a punitive damages award. "It's a risky proposition for employers. Employee counsel have become quite ad- ept at recognizing a poor case for cause, and judges are finding against them," she says. "There is also more of a recognition from employers of the importance of be- having in good faith and the manner in which a termination is carried out." Gordon's case dates back to November 2008 when the Altus Group hired him on a three-year contract with options to re- new at around the same time as his com- pany sold assets to it in a multimillion- dollar agreement. According to the deal, the price wouldn't be final until February 2010 with an adjustment made accord- ing to the subsequent performance of the business. According to Glass' decision, the rela- tionship between the parties deteriorated as the adjustment deadline neared with the Altus Group's own calculations in- dicating it would have to knock millions of dollars off the final price. Shortly after Gordon activated an arbitration clause in the asset purchase agreement, the Al- tus Group fired him at the end of March 2010. The employment contract provided for termination with payout provisions but only in the event that the dismissal occurred without cause. The company, however, justified the firing on the basis of Gordon's "un- bearable" swearing, a conf lict of inter- est in his personal business dealings to the detriment of his employers, and his employment of an alleged fraudster. Glass viewed the matter very differ- ently, concluding that there was no record the company had ever warned Gordon about swearing and observing that the complaint "appears to have been exag- gerated after the Plaintiff was dismissed as one aspect of justification for that dis- missal." On the alleged conf lict of inter- est, the judge found Gordon had raised the issue properly and in accordance with his employee handbook and had received instructions on how to proceed from a manager. "I think that this is another ex- ample of Altus puffing up complaints to justify its peremptory dismissal of Mr. Gordon," wrote Glass. Finally, he found the issue of the em- ployee charged with fraud was a "red her- ring" and that there was no evidence of harm to the Altus Group. White says the decision in Altus matches a trend seen since the 2008 de- cision in Honda Canada Inc. v. Keays in which the Supreme Court confirmed that a breach of the contractual duty of good faith could qualify as the indepen- dent actionable wrong necessary for an award of punitive damages. "There has been increasing use of punitive damages and an increase in the quantity awarded. This decision [in Al- tus] was not out of line with other deci- sions, although the amount of punitive damages awarded certainly falls at the higher end of the range," says White. Allison Greene, a co-founder of em- ployment boutique Karimjee Greene LLP, says cause for dismissal is a difficult claim to prove. She says employers that want to succeed at trial need to have very strong records of incidents and discipline. "For performance-based dismissals, you want to see a long history of progres- sive discipline where employees are given clear objectives and metrics that show where they are falling short. Then they need to have had lots of chances to suc- ceed before dismissal. A single act can ground a just-cause claim, but those are pretty rare. It has to be very serious and well documented," says Greene. She says employers will benefit by get- ting lawyers involved before actually tak- ing the decision to terminate. "It's incumbent on us as legal advisers to explain to clients that although they may believe they have good reason to terminate a person, it doesn't necessarily mean they have just cause, and it's good to have a decision like this one to show them the risks of pursuing that defence. In some cases, the employer can feel very strongly that they have cause, but they simply lack the resources to gather the ev- idence or undertake the kind of analysis that is needed to support the claim. Then, they have a choice between investing in determining whether they have a solid case or terminating without cause. Many will opt for the latter because of the risks associated with a just-cause defence." Nikfarjam says employers with a solid case shouldn't hold back from asserting just cause. "Even if you lose, it doesn't mean you get punished automatically with punitive damages. You really need to test the al- legation and see if it stands up. This case may have a chilling effect on those grey areas where the employer may not have done all their due diligence or maybe not all the incidents were accurately record- ed. But where you think there is legiti- mate cause, employers' counsel should not be afraid to assert just cause where the evidence is there." LT FOCUS 82 Scollard Street, Toronto, Canada, M5R 1G2 Excellence in Employment & Labour Law • Counsel in Leading Cases • • Author of Leading Treatise • Wrongful Dismissal Employment Law Human Rights Post Employment Competition Civil Litigation Appellate Advocacy Disability Ball Professional Corporation Referrals on behalf of employees and employers respected Contact Stacey Ball at web: www.staceyball.com (416) 921-7997 ext. 225 or srball@82scollard.com all_LT_Nov7_11.indd 1 11-11-08 11:44 AM Employers advised to review termination clauses Evolving case law suggests increased risk of invalidation by court BY MICHAEL McKIERNAN For Law Times mployers need to review the termination clauses in their contracts to keep up with quickly evolving law on the topic, say em- ployment lawyers. According to Stuart Rudner, a founding partner of employment law boutique Rudner MacDonald LLP in Toronto, a string of decisions have gone against employers in the last few years, striking down termination provisions previously thought enforceable and breeding uncertainty about the extent to which they can rely on the existing lan- guage in clauses. "People have been surprised at how the courts have come down in some cases. Apparently minor weaknesses have been used to invalidate clauses al- together," says Rudner. Catherine Coulter, counsel at Dentons Canada LLP's Ottawa office, says lawyers representing employees have used increasing ingenuity to chal- lenge termination clauses and suggests judges in turn have become more receptive to their argu- ments in recent years. "Courts have always by and large favoured em- ployees when it comes to interpreting termination provisions. I think they see an imbalance between the parties and will look to even the playing field," she says. "What has changed, particularly since 2012, is that courts are coming up with different and more creative ways to void termination provisions." T Employers with a solid case shouldn't hold back from asserting just cause, says Parisa Nikfarjam. E See Lawyer, page 10

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