In most wrongful dismissal cases, while the Courts recognize that termination has a significant impact on an employee’s well-being, employers are permitted to terminate employees without attracting aggravated or punitive damages. However, employees may be entitled to these additional damages where the employer engages in misconduct or bad faith during the termination process. Ruston v. Keddco MFG. (2011) Ltd., 2019 ONCA 125, a recent Ontario Court of Appeal decision, shows how the Courts determine whether an employer’s conduct during termination warrants awards of aggravated and punitive damages.

Ruston had worked for his employer for more than a decade when he was called into a meeting, accused of committing fraud and terminated with cause. At this meeting, the employer attempted to intimidate Ruston and threatened to sue him if he commenced a wrongful dismissal action. Further, the employer refused to tell Ruston what the basis of the for-cause termination was or any details regarding the allegations of fraud.

Ruston sought legal advice regarding his termination with cause and commenced litigation for wrongful dismissal on the basis that there was no cause for termination. As a 54-year old executive with 11 years of service, Mr. Ruston sought significant damages for wrongful dismissal as well as aggravated and punitive damages.

The trial judge found that the termination was without cause and determined the applicable notice period to be 19 months.  Further, the trial judge awarded the plaintiff $25,000 for aggravated/moral damages and $100,000 in punitive damages.

On appeal by the employer, the Ontario Court of Appeal upheld the entire decision of the trial judge, and then awarded the respondent employee $35,000 in costs on the appeal. This costs award was in addition to the costs award for the trial of over $500,000.

Employers have an obligation of good faith and fair dealing in the manner of dismissal. The Court of Appeal confirmed that aggravated damages are a compensatory award that may be available to a dismissed employee where “… an employer’s pre and post termination conduct may be relevant to the moral damage analysis if such conduct is a component of the manner of dismissal.”

What in the employer’s conduct did the trial judge find warranted an award of aggravated and punitive damages on top of a lengthy period for reasonable notice?

The trial judge found that the plaintiff employee was entitled to both aggravated ($25,000) and punitive damages ($100,000) for the following reasons:

1. The employer threatened the employee with a lawsuit during the termination meeting if the employee filed a wrongful dismissal claim, and the employer followed through with their threat and counter-sued;
2. The employer had a habit of threatening employees at termination meetings;
3. The employer took efforts to intimidate the employee at the termination meeting;
4. The employer prolonged the litigation process and made it considerably more expensive;
5. The employer declined to advise the employee as to what it was relying on in its for-cause termination at the time of termination;
6. The employer dropped its counter-suit for damages only after trial had significantly progressed, which led the judge to conclude the counter-claim was an intimidation factor;
7. The employer alleged fraud but then declined to lead any evidence; and
8. The serious allegations against the defendant were all unfounded.

Aggravated damages and punitive damages are awarded for separate and distinct purposes despite often flowing from the same misconduct. Aggravated damages are awarded where the employer’s conduct personally, and detrimentally, affects an employee far beyond the general impact that termination inevitably has on one’s well-being. Alternatively, punitive damages are not intended to compensate the employee but rather are awarded to punish the employer for its reprehensible conduct.

In the Ruston case, the employer was ordered to pay $125,000 in additional damages on top of damages for wrongful dismissal for its termination and post-termination conduct toward the employee.

Ruston follows recent judicial trends of examining an employer’s termination conduct and the Court’s willingness to award aggravated and punitive damages in appropriate cases. For example, in 2017, the Ontario Superior Court of Justice awarded $750,000 in aggravated and punitive damages in Galea v Wal-Mart Canada Corp., 2017 ONSC 245. There is growing caselaw in the employment litigation context to provide a severe warning to employers to maintain good faith and conduct in terminations and post-termination litigation conduct.

If you think you have been subjected to bad faith in the manner of dismissal, please contact one of our experience employment lawyers to learn more about your rights.