Court of Appeal upholds $50k aggravated damages award to long-term employee

Employers should be prepared to back up their reasons for dismissing an employee or risk leaving themselves open to a claim for aggravated damages, says Toronto civil litigator Stephany Mandin.

In Krmpotic v. Thunder Bay Electronics Limited, the Court of Appeal for Ontario upheld a trial judge’s decision to award a fired building maintenance supervisor $50,000 in aggravated damages, concluding that the lower court judge was within his rights to find that the employer had breached its duty of good faith in the manner of the worker’s dismissal.

Key to the case was a termination meeting at which the employee’s boss explained that he was being let go for financial reasons. However, the employer refused to produce the financial statements that he said would support the claim. The trial judge went on to find that the firing was actually a result of the worker’s physical limitations, labelling the employer’s conduct the “antithesis” of a good faith dismissal.

Regardless of their reasons for a specific dismissal, Mandin, principal of Mandin Law, says the decision should serve as a warning for all employers to be candid, reasonable, forthright and honest with their terminated employees.

“If, for example, you say that a termination is because of a company reorganization or downsizing, then you’ve got to be prepared, when push comes to shove, to demonstrate evidence that what you’re saying is legitimate,” she says. “Otherwise, it could look like you are acting in bad faith.”

According to the appeal court decision, the plaintiff started out working as a carpenter back in 1976, later becoming a journeyman, before he joined the defendant in 1987 as a building. He held the same role at the firm until 2016, when he was terminated at the age of 59.

The dismissal came just hours after the employee had returned from back surgery required as a result of several workplace injuries suffered during his employment. The firm continued to pay its former worker for 16 months after his termination and extended his benefits for a number of years, but he proceeded with a claim for wrongful dismissal.

At trial, the judge found that the employee was entitled to a reasonable notice period of 24 months, ordering just under $50,000 in damages based on an additional eight months of his $73,000 annual salary, noting that he had been a “loyal, responsible and trusted employee” who the firm had relied on to perform a broad range of tasks during his 29 years of service.

But it wasn’t all good news for the worker. The trial judge dismissed his claim for mental distress damages due to a lack of medical evidence tying his symptoms to the manner of his dismissal specifically, as opposed to his broader inability to work in his chosen field as a result of his physical disabilities.

However, the Court of Appeal found that the lack of medical evidence was no barrier to an award of aggravated damages, writing that a diagnosable psychological injury is not necessary to prove that an employee has suffered harm “beyond the normal distress and hurt feelings arising from dismissal” as a result of the employer’s breach of good faith.

The employer’s appeal also challenged the trial judge rejection of their claims that the notice period should be reduced since the worker had failed to make reasonable efforts to mitigate his damages by finding a new job. But the unanimous three-judge panel found no reason to interfere with the lower court’s conclusion that his physical incapacity prevented him from working in a similar job.

According to Mandin, the appeal decision offers a useful summation of the law of mitigation and the court’s expectations of all parties.

“The duty to mitigate is the employee’s, but that doesn’t mean going out and looking for just any old job. It’s about making reasonable efforts to find comparable employment within the notice period,” she explains.

For employers who want to argue a lack of mitigation, “the onus is on them to show that the employee has not made reasonable efforts,” Mandin adds.

“Another thing that emerges from this case is the importance of reviewing and updating employment agreements, particularly in the case of long-term,” Mandin says, noting that the absence of an employment agreement between the parties in this case is typical of many employment disputes involving long-term employees.

She says it is often in employers’ interests to have employees sign contracts that are in compliance with Ontario’s Employment Standards Act, since the minimum entitlements required by the Act on termination are typically much less generous compared with those available under the common law.