Court Awards Punitive and Aggravated Damages for Wrongful Dismissal

Written on behalf of Peter McSherry

Once a court determines that a person has been wrongfully terminated from their employment, the next step is to assess the damages to which that person is entitled as a result of the wrongful action of the employer. Typically, the court assesses “reasonable notice damages”, which is the number of months of salary that the court orders the employer to pay the wrongfully terminated employee. In some cases, a court may also conclude that aggravated and/or punitive damages are also owed to the employee. The award of such damages in wrongful termination cases is rare and requires that the court implement a special test to determine whether such damages are warranted in the circumstances. The case of Koshman v Controlex Corporation explores how the court goes about assessing whether, and in what amount, the award of such damages is reasonable and necessary.

Employer Declines to Defend Wrongful Termination Claim

The case of Kohsman v Controlex Corporation involved a claim made by the plaintiff (“MK”) that he had been wrongfully terminated from his employment with the defendant employer, Controlex Corporation (the “employer”). Specifically, MK claimed that, on September 11, 2020, he received a letter by courier that advised him of the immediate termination of his employment with the employer without further explanation. MK was provided his salary for the ensuing eight weeks, as well as continuation of his work-related health and insurance benefits, for the same period. Given that he was provided no explanation for his termination and cause was not alleged, MK commenced a lawsuit alleging that he had been wrongfully terminated and was owed damages as a result.

While the employer did file a Statement of Defense to the claim, it did not appear at the trial. The matter had been originally scheduled to begin on March 6, 2023, however, the employer claimed on that date that it had to retain new counsel in respect of this matter, which caused the court to adjourn the trial. On November 14, 2023, the employer’s counsel appeared before the Court to request permission to withdraw as counsel of record for the employer on the basis that they were unable to obtain instruction from the employer. As a result, the Court ordered the employer to serve a notice on MK and the Court appointed a new solicitor of record. The Court further ordered that a trial in respect of this matter would proceed on December 4, 2023, peremptory to the employer.

Employee Summarily Dismissed from Employment Without Cause

The employer never bothered to file or serve the notice in respect of new counsel and neither the employer nor any representative on its behalf appeared for the trial. As a result, the Court ordered for the employer’s Statement of Defense to be struck and ordered that all of the allegations contained in MK’s Statement of Claim were deemed to be true. The case was then assessed on the basis of MK’s testimony and evidence alone.

The Court quickly concluded that MK’s employment had been terminated without cause or explanation. The Court was satisfied that there was no justification for MK’s termination, and therefore, it had been wrongful. However, the Court further concluded that MK “was treated in a highly disrespectful and offensive manner by the defendant’s President and controlling shareholder Susan Dent in the two months leading to his summary dismissal and I find this to be a case in which an award of aggravated and punitive damages is manifestly justified”.

The Circumstances Preceding Termination

Determination of whether aggravated and/or punitive damages were warranted in this case required the court to consider all of the circumstances that led to the termination of MK’s employment. To that end, the Court noted that MK had been 69 years old at the time of his termination, at which point he had been employed by the employer as their Vice President for 18.5 years. MK had joined the company at the behest of its late founder, Peter Dent. During his tenure with the employer, MK was found by the Court to have enjoyed “significant autonomy and independence and was only required to report to Mr. Dent on certain major decisions”. MK testified that he and Peter Dent had informally discussed his retirement, and he asserted that it had been his intention to remain with the employer until the age of 75.

Peter Dent died very suddenly as the result of an accident on July 17, 2020. His wife, “Susan Dent, who had not previously been directly involved in the business in any substantial way, took over the business”. In the ensuing days, she telephoned MK to advise him that she would now be running the business and would be the only person with signing authority for the company, effectively removing MK as a signatory of the employer. She further advised MK that he could not send her any documents for review or signature, as she did not have access to email and would only conduct business with the employer’s lawyer and accountant, in her home, privately. In the eight weeks after Peter Dent’s death, Susan Dent contacted multiple clients of the employer to make “bizarre and defamatory statements” about MK, including that he had engaged in fraud and taken kickbacks and that he may have been involved in the murder of her husband.

The Award of Aggravated Damages

The Court was guided by the principle that “aggravated damages can be awarded in wrongful dismissal cases where an employer engages in conduct that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive”. In this case, the Court was satisfied that the employer had “exhibited bad faith toward” MK in that Susan Dent had, within days of assuming control over the company, revoked his signing authority, “which had been a key component of his administrative functions” and then she visited with clients of the company for the sole purpose of assassinating MK’s character and advising people not to deal with him. Susan Dent had gone so far as to suggest that MK had been involved in her husband’s death, and she refused to meet with MK at any point to discuss the business. In these circumstances, the Court was satisfied that an award of $50,000 in aggravated damages was justified.

Court Awards Punitive Damages

The Court noted that an award of punitive damages in a wrongful termination case is exceptional, as the purpose of such damages is to “punish a defendant for conduct that is reprehensible, and a ‘marked departure from ordinary standards of decent behaviour’”. The Court further noted that such damages are not compensatory but rather are intended to punish a party who behaved maliciously or wrongfully such that they are deserving of punishment. Punitive damages are only to be awarded in wrongful termination cases where “rationally required to punish a defendant to meet the objectives of retribution, deterrence and denunciation, in an amount no greater than necessary to satisfy these objectives”.

In this case, the Court determined that the fact that Susan Dent had “embarked on a malicious campaign to undermine the plaintiff’s ability to carry out his job functions and attempted to destroy his reputation with customers and clients … by making bizarre and defamatory statements about the plaintiff… without a shred of justification” constituted the sort of reprehensible behaviour that was worthy of sanction. It was also observed that Susan Dent had caused the employer to default on the order of the Court to retain new counsel and to defend this proceeding, choosing instead to ignore any communications of the Court, MK or his counsel. In the result, a further $50,000 was awarded under this head of damage.

Contact Guelph Employment Lawyer Peter A. McSherry for Your Employment Law Needs

If you have been wrongfully terminated from your employment, you may be entitled to recover damages. However, depending upon the circumstances of your termination and the events leading up to it, you may also be entitled to recover further damages for the manner in which your termination was carried out. If you have questions about wrongful termination or constructive dismissal, or are unclear on the terms of your severance package, the trusted and knowledgeable employment law team at Peter a McSherry Employment Lawyer can help. Contact us today online or by telephone at 519-821-5465, to schedule a confidential consultation and learn how we can assist you.