Employee Wrongfully Dismissed for Requesting a Raise

Written on behalf of Peter McSherry

When employees invest time and effort into supporting their employer’s business, they naturally want to be compensated for their efforts. Some employers may offer bonuses to employees for hitting certain performance metrics. But in other instances, it is up to the employee to ask for what they believe they’re worth.

In the recent decision of Humphrey v. Mene Inc. before the Ontario Court of Appeal, an employee was found to have been wrongfully dismissed when she was fired after asking for a raise.

The employee previously worked as a contractor for the company

The employee was hired in July 2016 as Director of Global Communications of Goldmoney. Between December 2016 and 2017, the employee helped the CEO of Goldmoney create a new subsidiary, an online jewellery retailer called Mene.

In September 2017, the employee became Vice President of Operations of Mene. Initially, her services were shared between Mene and Goldmoney under a Consulting Services Agreement. Her original pay was $6,250 per month, with an increase of $7,000 to $7,500 to be granted if Mene could secure additional financing.

The employee was promoted to Chief of Operations of Mene in July 2018 through an Amended Consulting Services Agreement. Her base salary increased to $90,000 per year, or $7,500 per month retroactive to December 2017. In December 2018, she signed an employment agreement with Mene. The employment agreement reflected no change in her compensation.

The employee requested a salary increase and was immediately suspended without pay

In January 2019, the employee requested a salary review from the CEO. She sought a salary increase to $165,000 annually plus additional Mene shares in the amount of $15,000. The CEO’s reply was critical of the employee for being concerned with personal compensation, which, in his view, was “premature and confabulate[d] [her] incentives with where [the company was] in the long journey of building this business into a valuable enterprise.” He advised that the Board of Directors in the Compensation Committee of Mene would have to employ a stress test for comparable hires with experience in excess of what the employee had.

The employee reiterated her commitment to Mene but asked that the Compensation Committee be made aware of her request for a salary increase. She did not hear from the CEO for three weeks, after which she sent a follow-up email. Two days later, on February 18, 2019, one of Mene’s vendors contacted the employee to tell her that they had received an email from Mene stating the employee no longer worked for Mene. It was then that the employee realized that she could no longer access her business-related accounts online.

The employee contacted the CEO, who told her that the Board of Directors would send her a letter shortly. He had also messaged all Mene employees that morning, advising them of the employee’s suspension “pending investigation into a few matters,” including recent events that the Board of Directors felt demonstrated she was the wrong person for the Chief of Operations position.

The employee was formally terminated after retaining a lawyer

On February 18, 2019, after speaking with the vendor and the CEO, the employee finally received a letter advising that Mene was removing her from the Chief of Operations position, effective immediately. She was suspended from work without pay for two weeks pending a further investigation of her performance. The final decision would be to terminate her employment or demote her to a non-executive role.

The employee sought legal representation. Her lawyer sent a letter to dispute Mene’s allegations and objected to the investigation without any input from the employee.

On February 26, 2019, Mene formally terminated the employee’s employment via email. Attached to the email was a memo written by the chairman of the Compensation Committee that addressed Mene’s Board of Directors. The memo alleged performance issues on the part of the employee and stated that her decision to have a lawyer send a letter to the Board was demonstrative of the fact that she was not a good fit for the role. 

Motion judge awarded the employee awarded 12 months of notice for wrongful dismissal

The employee filed an action for wrongful dismissal with the Ontario Superior Court in April 2019. Mene’s defence was that she was terminated for cause due to performance issues and misconduct. In response, the employee brought a motion for summary judgment.

The motion judge found that contrary to Mene’s assertion that the employee had not been trusted with the typical responsibilities of a Chief of Operations, the employee had indeed been functioning as Chief of Operations. Because of this, she would have a more challenging time finding a new position, especially after being terminated shortly after her promotion. In light of that, the motion judge held that the reasonable notice period was 12 months. However, because the employee had not mitigated her damages, her damages were reduced “by the equivalent of one month’s compensation based on [the employee’s] mitigation efforts.”

Employee granted aggravated and punitive damages by motion judge

The motion judge also found that Mene had not acted in good faith as the employee’s termination had been precipitated by her request for a salary increase. In fact, the motion judge found that the employee had been effectively set up to fail. Mene was aware of her qualifications when they promoted her and did not offer to train her to address any potential performance issues. She had never even received a performance review.

The motion judge held that the employee should receive damages to compensate for the mental distress caused by Mene’s conduct. Accordingly, the employee was awarded $50,000 in aggravated damages. The judge also awarded punitive damages of $25,000 as a result of Mene’s behaviour throughout the litigation.

Mene appealed the decision to the Ontario Court of Appeal. The employee cross-appealed to increase the punitive damages award to $100,000. Alternatively, the employee requested that in the event the appeal was allowed, her punitive damages be increased proportional to any reduction in the compensatory damages (including the aggravated damages).

Court of Appeal reduced notice period for failure to mitigate, maintained aggravated and punitive damages awards

The Court of Appeal agreed with the motion judge’s characterization of the employee’s employment. It also agreed with the motion judge’s determination of what constituted reasonable notice in this case. However, the Court of Appeal disagreed with the judge’s findings concerning the employee’s failure to mitigate her damages.

The sticking point in Mene’s argument with regard to mitigation was that the employee “unreasonably rejected a suitable comparable position seven months post-termination.” She was offered a position with a company as Vice President of E-Commerce in October 2019. The employee declined the offer as “it was not for a broad-based senior leadership role.” 

The Court of Appeal explained that the requirement to mitigate damages by finding comparable employment does not mean the employee must find identical employment. However, the position rejected by the employee came with a $125,000 base salary, at least $25,000 in options, the potential for a $75,000 bonus, and benefits. The Court held that this role would have reasonably mitigated the employee’s damages. 

For this reason, the employee’s damages were reduced to pay in lieu of six months of notice. The aggravated and punitive damages awards remained the same. The Court found no basis for increasing these awards as the reduced compensatory damages were caused by the employee’s failure to mitigate her losses.

Contact Peter A. McSherry Employment Lawyer in Guelph for Skilled Advocacy in Wrongful Dismissal Matters

Peter A. McSherry understands the stress faced by employees who have been wrongfully dismissed or pushed out of their employment. He fights for the rights of employees and helps them recover compensation after an unlawful dismissal or severance process. Our dynamic team provides clients with the resources to stand up to discriminatory corporate practices, giants of industry, and other employers who take advantage of their employees. To ensure your case is handled fairly and efficiently, contact Peter A. McSherry by phone at 519-821-5465 or reach out online.