A. INTRODUCTION
In the recently decided wrongful dismissal case of Higginson
v. Babine Forest Products Ltd.(“Higginson”), a Prince George,
British Columbia jury awarded a long-time employee damages of approximately
$809,000, of which $573,000 was punitive damages, for what the jury considered
to be improper conduct by the employer leading up to the termination. This
punitive damages award is the largest in an employment law case in Canada to
date.
As employers, charities and not-for-profits need to be aware of the obligation to
treat employees fairly and respectfully in the termination process. This
Bulletin discusses how a failure to do so may result in substantial claims by
terminated employees, including claims for punitive damages.
B. THE FACTS
Larry Higginson had been employed by Babine Forest
Products Ltd. for 34 years, and had risen to the position of manager of the
electrical department, at Babine’s sawmill in Burns Lake, British Columbia. On
October 14, 2009, Higginson was dismissed without notice or any severance
package. Higginson sued, and alleged that his dismissal occurred as a result
of Hampton Lumber Mills Inc. acquiring the Burns Lake sawmill from Babine in
November 2006. In his lawsuit, Higginson alleged that in order to avoid paying
out severance packages to long term employees, Babine and Hampton instituted a
plan to create a hostile and miserable working environment in hopes that he
would quit on his own. When Higginson did not quit, he alleged that the
companies created false reasons for his dismissal “for cause”, in order to
avoid the legal obligation to provide him a reasonable termination package.
After a three week trial, the jury found that there was no just cause for
Higginson’s dismissal, and awarded him $236,000 in compensatory damages for
wrongful dismissal, and $573,000 in punitive damages.
C. WHAT ARE “PUNITIVE DAMAGES”?
While “compensatory” damages are intended to compensate a
person for their actual losses, punitive damages are directed toward punishing a
wrongdoer (including an employer) for their unjustifiable and egregious actions.
In the leading case of Whiten v. Pilot Insurance Co., the Supreme Court of Canada stated that there are three general objectives of
punitive damages: punishment (or retribution), deterrence to the wrongdoer and
others, and denunciation (how a judge or jury expresses their outrage to the
conduct).
When determining whether punitive damages should be awarded at trial, the SCC
has stated that judges and juries must only award them when it is rational to
do so, with caution and restraint, and when compensatory damages do not achieve
the above objectives.
The proportionality of an award is also important. Courts
will look at the actions of an employer and base the quantum of the award on
how reprehensible the conduct of the employer was.
Factors that will be examined are the employer’s intent and motive, whether the
employer’s actions were planned and deliberate, whether the outrageous conduct
persisted over a lengthy period of time, whether the employer attempted to
cover up its misconduct, whether the employer was aware its conduct was wrong, and
whether the employer profited from its misconduct.
In the employment context, Canadian courts have awarded
punitive damages against employers in the following circumstances:
· for offering reference letters conditional on resignation,
· withholding a paycheque without justification,
· terminating the employee without notice or pay in lieu without
reasonable justification,
· notifying members of the community of the employee’s termination
before notifying the employee,
· lying about the reason for dismissal,
· creating a perception of being dismissed for cause in the
community,
· posting negative comments about the employee on social media,
· emotionally traumatizing an employee by raising legal defences
based on lies and damaging an employee’s reputation in the community.
Employers must be aware that their actions before and
after termination could have an impact on any case brought on by a disgruntled former
employee. In order to prevent the possibility of punitive damages being
awarded, employers must ensure that they treat the employee with respect and
abide by the labour laws of their province.
D. CONCLUSION
In cases where
jurors or judges are called upon to decide wrongful dismissal lawsuits, the Higginson award illustrates that an employer’s conduct will be closely scrutinized, and
in some instances, a jury or judge’s sense of injustice may translate into very
significant punitive damage awards. For employers, cases such as Higginson demonstrate the need to treat employees fairly in the termination process. It
is important that employers know and avoid the type of conduct that may result
in punitive damage judgments. The termination of employees is not an easy
task, but adopting and following proper procedures will minimize the risks of
liability.
