Court Awards Employee Costs of More Than Twice a Settlement Amount

Written on behalf of Peter McSherry

Litigation can come with high costs, especially for parties who lose at trial. While the details regarding awards for costs are not often the focal point of analysis, there are occasions on which a court highlights such details. In a recent case regarding a wrongful termination claim, the parties settled on all issues prior to trial except for costs. As the parties could not resolve this outstanding issue, the parties sought the court’s assistance in determining a costs award.

Costs awards in litigation

If a party goes to trial and loses, they are not only required to pay for all of their legal fees but they may also be ordered to pay a portion of the other (winning) side’s costs. The general rule in litigation in Ontario is that the successful (winning) party can recover some of the legal fees and disbursements they have incurred in the matter and that the unsuccessful party pays these costs.

In Ontario, the Rules of Civil Procedure generally encourage settlement between the parties by creating a cost consequence for a party who is either unsuccessful at trial or engages in what a judge believes is vexatious, frivolous, and unreasonable conduct. This type of conduct may be found if a party fails to accept a reasonable settlement offer from the other party.

Employee and employer settle wrongful dismissal claim

In the matter of Janmohamed v. Dr. M. Zia Medicine Professional Corporation, the Court noted that the parties had reached a settlement regarding damages prior to the hearing that was scheduled to resolve it. Thousands of pages of summary judgment materials and affidavit documents had been provided to the Court.

The Court acknowledged that it was not able to establish who had a moral high ground in the matter. However, the employee ultimately accepted a $15,000 settlement from the employer. During the course of negotiations, the employee accumulated significant legal costs and fees. The Court mentioned that it could not analyze either side’s strategies or what led them to spend the amounts they did. Taking this thought further, the Court could not determine why the parties settled at $15,000, noting that it cannot be said whether the plaintiff capitulated because they feared losing at trial or if it was a number she aimed to receive all along. At the same time, the Court recognized that the employer may have expected to pay far more at trial but managed to negotiate its way down to a more palatable amount.

During the negotiation period, the employer made several different offers to the employee. The employee rejected each of these offers, which decreased in value each time. However, all of the rejected offers were inclusive of costs.

Court unable to determine whether settlement was good or bad for either party

The employee told the Court that the settlement of $15,000 fell within the reasonable range of expectation. The employee claimed bad faith and discrimination against the employer. However, these claims were waived. The Court noted that this was typical in this type of litigation, and waiving these allowed the employee to qualify for summary relief. The Court also acknowledged that the employer appeared to fight this case aggressively and knew the likely outcome of the Bardal factors.

The Bardal factors are used to calculate how much common law notice an employee is entitled to; therefore, the employer had an idea as to how much they may be required to pay if the case proceeded to trial. The Bardal factors come from the decision in Bardal v. Globe & Mail Ltd., which over 80 years later, are still key considerations to determine notice calculations. These factors include:

1. The character of the employment;
2. The length of the employee’s service;
3. The employee’s age;
4. The availability of similar employment.

These factors are not exhaustive, and other considerations, such as the seniority of the employee and their work in finding employment, can also be considered. Nevertheless, they serve as a critical foundation for the Court’s analysis.

Was the employer’s conduct during negotiations fair?

In its analysis, the Court looked at each party’s position, noting that costs are typically awarded to the successful party at trial. The employer stated that it paid the employee 150% of the amount offered under the employment contract and was seeking costs because it had made several offers to the employee. However, these initial offers were inclusive of costs, whereas the final offer that the employee accepted was exclusive of costs. The Court indicated that the treatment of costs when they are left out of the offer cannot be ignored, adding that “this argument itself tells me something about the (employer’s) approach.”

The Court was critical of the employer’s argument that the majority of the costs of the proceeding were due to misrepresentation by the plaintiff or her counsel. The employee stated that she had worked a second job throughout her primary employment and continued to work at this second job following her termination by the employer. The employee maintained the position that she had not obtained “new mitigative employment,” and even though she failed to disclose this second job during negotiations, the employer knew about it. The Court found that the employer’s focus on this point was “mudslinging and focusing tightly on a single tree rather than viewing the forest as a whole.”

Court considers making no costs award

The Court initially considered making a costs award. However, because this was a case where the employee was terminated without cause, the Court acknowledged that the employee was entitled to reasonable notice. The Court went on to write that:

“Employers should not be incentivized to low-ball and then force a plaintiff to sue to obtain what everyone knows is justly due. Costs and delay are horrible risks to a plaintiff who finds herself sitting at home having to spend thousands of dollars, while unemployed and vulnerable, to chase money that is obviously due from a wellfunded employer.”

Ultimately, the Court held that the employee should be awarded 80% of the costs she incurred in the matter. The Court reviewed the employee’s claim and found that a 20% rate reduction was appropriate considering her own overkill and ordered that the employer pay the employee costs of $30,000 all-inclusive.

Contact the Employment Lawyers at Peter A. McSherry Employment Lawyer in Guelph for Skilled Representation in Wrongful Dismissal Claims

If your employment has been terminated without reasonable notice or severance from your employer, you may be entitled for damages related to wrongful dismissal. It is important to talk to an experienced employment lawyer as soon as a termination occurs. At Peter A. McSherry Employment Lawyer, our employment law team is led by Peter A. McSherry. We provide each client with a complete assessment of their case in order to determine which route will yield the best possible outcome. We help clients understand the law and their options to move forward so that they can make informed decisions each step of the way. Please call us at 519-821-5465 or contact us online to schedule a confidential consultation.