Court of Appeal Upholds $60,000 Award in Defamation Damages After Employer Sent Out Letter Bad-Mouthing Former Employee

Written on behalf of Peter McSherry
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A recent Alberta Court of Appeal decision should serve as a warning to employers, after the court upheld an award of $60,000 in defamation damages against the employer for sending out a letter bad-mouthing a former employee.

Employer Sends Out Defamatory Letter About Employee 

The employer hired the employee to sell computer products without a written contract. However, the employer did not possess the promised computer equipment at the time the employee was hired. Tensions mounted over several months, leading to a heated meeting between the employer and employee. The meeting ended abruptly when the employee exclaimed “I quit!” and walked out of the room. The employee only worked for the employer for six and a half months.

Following his departure, the employer sent a letter tonumerous businesses in the community which read:

“Dear Customer,

As of September 2, 2009 [the employee] is no longer employed with [the employer]. We regret [the employee]’s decision to leave, but wish him well in any future endeavours. It has, however, come to our attention that he has approached many of our clientele, which is a breach of fiduciary trust and as such our lawyers are issuing him a cease and desist letter. We are sending you this letter to inform you that [the employee] is legally obligated under common law to cease all services and solicitation with you as a client.”

Additionally, the employer sued the employee and his newly formed company alleging breach of fiduciary duty, breach of confidentiality, and inducement of breach of contract with the employer’s customers.

In turn, the employee counterclaimed against the employer, claiming damages for constructive dismissal and defamation.

Lower Court Finds in Favour of Employee

The trial judge dismissed the employer’s claims and found in favour of the employee. The trial judge concluded that the employee had been induced into employment with the employer and subsequently constructively dismissed. Additionally, the trial judge held that the employer had defamed the employee by sending the letter. The trial judge applied the relevant legal test for a finding of defamation, which requires proof that the words communicated:

1) Are defamatory, in the sense they would tend to lower the claimant’s reputation in the eyes of a reasonable person;

2) Refer in fact to the claimant; and

3) Were published, meaning that they were communicated to at least one other person.

The trial judge found that all three elements had been proven and rejected the employer’s defence of justification, finding that the allegations contained in the letter were untrue and were not identifiable as reasonably grounded opinion. The trial judge also dismissed the employer’s defence of qualified privilege.

Further, the employee was awarded $60,000 in defamation damages. The trial judge found that the employee’s business prospects had been prejudiced by the letter and his unsuccessful attempt to start a new business was attributable to the letter. In awarding the damages, the trial judge found that the employee had lost business opportunities and the ability to get traction in starting his new business due to the employer’s “actions in having the letters sent and which besmirched his reputation in the community”. The trial judge stated:

“Based on the evidence before me, I conclude that the September Letter was sent out in an effort to prevent [the employee] from obtaining clients in the Grande Prairie area and to ensure he could not compete with [the employer]. In implying that [the employee] was untrustworthy and unethical, and in stating that he had acted contrary to his obligations and the law, [the employer’s] conduct in sending the September Letter was egregious.”

The employer appealed several of the trial judge’s conclusions, including the finding of defamation and the amount of defamation damages.

Court of Appeal Dismisses Employer’s Appeal

The Court of Appeal dismissed all of the employer’s grounds of appeal. On the issue of defamation, the court concluded:

“The September letter about [the employee] did not merely characterize him as an unsatisfactory or ineffective employee. He was accused of illegal and disloyal conduct…. The letter would “lower [his] reputation in the eyes of a reasonable person” and … clearly did so.

The trial judge’s finding that the letter was defamatory was reasonable and no basis for appellate intervention on this finding has been demonstrated. The three criteria … were plainly met.”

Additionally, the court rejected the employer’s claim of qualified privilege as a defence, stating:

“Qualified privilege is not a license for an employer to bad mouth a former employee to people with which that former employee might attempt to engage in business.”

Finally, the court found no error in the amount of defamation damages awarded by the trial judge.

As a result, the employer’s appeal was dismissed on all grounds.

Get Help

Constructive dismissal is a fundamental change to an employee’s current job that results in a diminishment of your role or position. A change in status or responsibilities can be embarrassing. It may make you feel unwanted or underappreciated. Employees in Ontario must be treated with decency, civility and dignity. If your employment contract is violated or your human rights are violated, you may have the basis for a claim and negotiations with your employer.

Seeking qualified, knowledgeable and experienced legal advice from an Ontario employment lawyer should be your first step. Since 1997, I have provided employment law legal services to people throughout southern Ontario. From Peter A. McSherry Employment Lawyer in Guelph, I have helped them pursue recourse in a range of situations and industries throughout the province. When you are my client, I will work diligently to protect your rights and ensure your working conditions are not only legal, but free of discrimination and harassment. Contact me to discuss the facts of your case, discover the options you have and assess potential damages. Call me in Guelph at 519-821-5465 or by e-mail to schedule a consultation.