Law Times

Law Times • November 28, 2016 Page 7 www.lawtimesnews.com Punitive damages in just cause dismissals BY NIKOLAY CHSHERBININ A dismissal for just cause is a matter of substance, not form. An unsubstantiated allegation of cause could result in punitive damages for corporate employers. A recent employment case in point is Morison v. Ergo-Industrial Seating Sys- tems Inc., 2016 ONSC 6725, where Justice P.E. Roger ordered the employer to pay $50,000 in punitive damages for breach- ing its duty of good faith by asserting just cause for tactical and financial gains. The employer's intentional delay in providing the employee his record of employment and paying amounts owing under the Employment Standards Act, 2000 were factors that underlay the award of punitive damages, causing the judge to send a clear message to employers that they would not be allowed to behave in such a fashion. In Morison, 58-year-old Tom Morison was dismissed for cause after eight years of employment as Ergo-Industrial Seat- ing Systems Inc.'s regional sales manager. On Oct. 22, 2012, Ergo's president called Morison during which he alluded that his employment may be terminated for cause, but he offered him five months' notice, which included one month of working notice. Morison refused to accept Ergo's sev- erance package and argued that allega- tions of cause were made in bad faith to facilitate a more favourable settlement for Ergo. Ergo retorted that it had a bona fide belief of cause relating to an alleged mis- managed demo chair account, failing to properly market the health-care line of products and difficulties with co-operating positively with his immediate supervisor. However, in the judge's view, the evidence was clear that Morison was not a good fit with his new supervisor and that the dismissal date was arrived at simply in an effort to accommodate the starting date of the hired replacement. Morison sued for wrong- ful dismissal. Having initially alleged cause, Ergo subse- quently abandoned it. Roger awarded $98,939.32 in wages, calculated on the basis of Morison's com- missions to which he would have been entitled during the 12 months' notice period. Dealing with moral damages, Roger reminded that they are compensatory in nature, awarded if an employee can prove that the manner of dismissal caused men- tal distress and are to ref lect the actual damages sustained. Morison's evidence on this cause of action was superficial and lacked particulars. It did not allow the judge to disassoci- ate the evidence of mental distress caused by the bad faith manner of dismissal from the evidence of normal distress and hurt feelings resulting from losing a job. Consequently, he refused to award moral damages. Notably, Roger was not concerned with the lack of medical evidence. His po- sition adds to a growing trend that medi- cal evidence is not mandatory to success- fully claim moral damages. What is man- datory is the evidence of mental suffering. Relying on the Federal Court's decision in Canada (A.G.) v. Robitaille, 2011 FC 1218, Roger observed that in the ab- sence of medical evidence, the employee's testimony may be sufficient to establish moral damages, as long as there is evidence of such damages and evidence of a causal connec- tion between the moral injury and the wrongful conduct. While medical evidence is not an essential ingredient in a claim for moral damages, its availability could be particu- larly helpful for employees who seek to recover substantial moral damages. In awarding Morison $50,000 in pu- nitive damages, Roger concluded that Ergo committed an independent action- able wrong, being the breach of its duty of good faith. Not only did Ergo assert cause, when there was no reasonable basis for such an assertion, it delayed in providing Morison his record of employment and significantly delayed in paying amounts owing under the ESA. The judge determined that Ergo knew of Morison's precarious financial circum- stances and that its conduct of delayed payment of statutory amounts was inten- tional and financially impacted Morison, who had to cash significant amounts of his RRSP and sell his house. Roger further found that Ergo's allegations of cause were made for tactical and financial gain con- sideration and with a view to financially benefit it. He was troubled by the lack of any warning and of any investigation on Ergo's part, prior to Morison's summary dismissal. Ultimately, Roger found Ergo's conduct to be reprehensible, exceeding what might be considered as ill advised and, thereby, meriting an award of puni- tive damages. It might be helpful to keep in mind that the purpose of punitive damages is to punish an offending employer. They are awarded only where com- pensatory damages are insufficient to accomplish the objectives of retribution, deterrence and denunciation and are given in an amount that is no greater than necessary to rationally accomplish their purpose. Arguably, the distinction between moral and punitive damages could be blurred whenever the same misconduct underlies the employee's claims for both damages. However, in allocating the pu- nitive damages, the focus is on an em- ployer's misconduct, not on an employee's actual loss. Morison illustrates that whenever an employer deploys an allegation of just for tactical and financial gains or with no other reason than to make the dismissed employee's case more difficult than it should have been, the courts would not hesitate to award substantially higher punitive damages than would otherwise be the case. Abandoning an allegation of cause at any stage, in the course of the ac- tion, is grounds for augmented damages and costs. LT u Nikolay Chsherbinin is an employment and immigration lawyer and author of The Law of Inducement in Canadian Employment Law. He can be reached at 416-907-2587 or by visiting nclaw.ca. COMMENT Facing climate change BY ROBERT SHIRKEY A recent burst of unseasonably warm weather led many to joke that the effects of climate change are favourable to Ca- nadians. But the scientific realities facing our planet are downright scary. Our burning of fos- sil fuels has altered the basic chemistry of our planet. Global commitments to reduce greenhouse gas emis- sions fall disastrously short of meaningful action. A recent Léger survey found that "40 per cent of Canadians believe the science behind climate change is still unclear or unsettled." James Hansen, one of the most prominent climate scientists in the world, decries the "huge gap between the public's understanding of the situation and the scientific understanding." He argues that helping the public to "connect the dots" is critical because "political leaders are not independent of public opinion." Fortunately, several governments across North America are taking steps to help us connect the dots by mandating climate change and air pollution dis- closures or "warning labels" for gas pumps like those found on tobacco packaging. I am a lawyer and the founder of Our Horizon, a non-profit organization that is calling on governments to implement the labels. The concept helps to close the experiential gap between our use of fossil fuels and their impacts to create greater social impetus to address the challenge. In Ontario, municipal councils in Oakville, Water- loo, Kitchener, Guelph and Pickering have all passed resolutions calling on the provincial or federal govern- ment to implement the idea. But municipalities need not wait for other orders of government to act. Van- couver-based law firm Lidstone & Company reviewed our legal research for British Columbia municipalities and concluded: "In our opinion, a requirement to place labels on gas nozzles could be validly imposed pursu- ant to a municipality's power to regulate business." Lo- cal governments in Ontario can similarly legislate the warning labels under the Municipal Act, 2001 and use existing case law to support their efforts. Municipal governments in Ontario have been granted broad authority to govern their affairs. In To- ronto Livery Association v. Toronto (City), 2009, the Court of Appeal noted that this authority is "far-reach- ing" and that "[i]t applies to the City's general power to make by-laws . . . and its specific power . . . to establish business licensing systems." Courts have also shown a deferential approach to decisions of municipal govern- ment. In 2001, the City of Toronto relied on these powers to require restaurant owners to place notices on their entrances that communicate the results of health in- spections. Toronto's bylaw was challenged by the On- tario Restaurant Hotel & Motel Association and up- held by the Superior Court and the Court of Appeal. The courts concluded that the notices did not infringe on the licence holders' freedom of expression rights, which, even if it did, was held to be justifiable given that the notices were "clearly attributed to the City of Toronto and not to the individual restaurant owner." The bylaw was also found to be rooted in "significant public health and consumer protection imperatives" and merely required the licence holder to disclose risks to the consumer. The climate change and air pollution labels are rooted in similar concerns and merely re- quire retailers to disclose risks to the end users of their product. In Spraytech v. Hudson, 2001, the Supreme Court of Canada acknowledged that "protection of our en- vironment . . . requires action by governments at all levels" and that "local governments [should be] empowered to exceed, but not to lower, national norms." The reduction of greenhouse gas emissions is an effort that needs to be undertaken by all levels of gov- ernment. This view is consistent with provincial and federal messaging on climate change and long-stand- ing practice in cities and towns across Canada. There is a tremendous inertia to the incumbent en- ergy system. A fossil fuel-based economy is all we have ever known and the simple act of gassing up has been normalized for several generations. The labels take this habitual, automatic behaviour and de-normalize it. Challenging the status quo in this way will stimulate broader demand for alternatives and accelerate their delivery to market. This, in turn, will hasten our tran- sition off fossil fuels. The province of Ontario and local governments are now positioned to create examples for the world to follow. And Canadians have led the way with similar disclosures: We were the first country in the world to implement pictorial warnings on tobacco packages. Studies have shown that such labels help to change at- titudes and behaviour and, with the tobacco warnings all over the world, these climate change disclosures have been primed to go global. American author and activist James Baldwin once wrote, "Not everything that is faced can be changed, but nothing can be changed until it is faced." This is exactly what the disclosure labels ensure we do. The first step in addressing any challenge is to hon- estly face it. Let us have the courage to face our chal- lenge so that we can begin to address it in a more mean- ingful way. LT u Robert Shirkey is a lawyer and founder of Our Horizon. A full legal report is available at www.ourhorizon.org. u SPEAKER'S CORNER Labour Pains Nikolay Chsherbinin

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