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A cautionary, and costly, tale of what happens when you mistreat employees during termination

A recent British Columbia court decision is a good example of how not to treat employees during termination. Canadian courts have increasingly recognized the importance of holding employers to an obligation of good faith and fair dealing in the manner of dismissal.

As courts continue to scrutinize the behaviour of employers that subject employees to callous and insensitive treatment during their dismissal, the damages awarded for such treatment continue to trend upwards.

In the decision of Chu v. China Southern Airlines Company Limited, what could have been a relatively modest wrongful dismissal award ended up costing an employer an additional $150,000 due its conduct during the termination, as well as the litigation process. This decision provides employers with a clear roadmap of missteps to avoid when dismissing employees.

Background

The plaintiff, Mr. Paul Chu, worked for the defendant, China Southern Airlines Company Limited (CSA), as a contractor for about three years prior to formally becoming an employee. The plaintiff was formally hired as a Marketing and Business Development Manager in February 2011.

CSA had no complaints about the plaintiff’s work prior to the arrival of the new GM, Ms. Zhang, in January 2018. From that point onward, CSA began criticizing the plaintiff’s work, issuing reprimands accompanied by threats of dismissal, and carefully documenting disciplinary measures with self-serving records.

In March 2018, the plaintiff was unilaterally transferred to a front-line service position in the sales department, as a customer service representative. He was told his title was “Account Manager,” however he was placed under the authority of the sales department manager, a former co-level manager. CSA also unilaterally reduced the plaintiff’s salary from $3,890 per month to $2,940 per month, a reduction of about 25 per cent.

In his new customer service position, he was required to learn and apply CSA’s complex ticketing system, which he had no experience with. The plaintiff was given “thick codebooks and told to learn them.” With limited training and time to learn, this was an impossible task.

In October 2018, the plaintiff was yet again demoted — without consultation — and worked as an airport operations worker, another front-line service position. The airport work involved intense time pressure, and the plaintiff was criticized for “not being able to run to the gate to help with onboarding or other urgent matters.”

In January 2019, the plaintiff’s employment was now subject to probation for 3 months. He was told he would receive further training, but never received this training. The employer dismissed the plaintiff on Feb. 1, 2019. He was 68 years old at the time of his dismissal. At the time of the litigation proceedings, the plaintiff was 71 years of age and was working as a driver for the restaurant meal delivery service, DoorDash.

The court’s decision

Reasonable Notice

Based on a common legal principle known as the Bardal factors – which takes into consideration the employee’s age, length of service, character of employer, and the availability of similar employment – the court awarded the plaintiff 20 months’ pay in lieu of reasonable notice amounting to approximately $58,000.

In calculating reasonable notice of termination, the court considered the demotions near the end of the employee’s employment to be part of the process of termination and chose the plaintiff’s position prior to the demotions (when he was employed as the Marketing and Business Development Manager) as the relevant role for the purpose of determining the “character of employment.” Further, the court noted that the plaintiff was an employee for 8 years but took into account the fact that he had been a contractor for approximately 3 years prior to that, for the purpose of calculating “length of service.” Moreover, the court took into consideration that the plaintiff’s experience was in a relatively niche area, thus there was no reasonably comparable employment available to him.

Bad-faith damages

Moral (or aggravated) damages are intended to compensate employees for losses incurred as a result of an employer’s bad faith conduct. Punitive damages, on the other hand, are meant to punish the employer for malicious, oppressive, or high-handed behaviour.

The court accepted the plaintiff’s evidence that “he suffered from mental distress from March 2018, well before he was terminated, and then for approximately one year post-termination.” The court had “no difficulty concluding that CSA breached its duty of good faith and fair dealing in the manner of the plaintiff’s dismissal.” CSA’s conduct merited an award to the plaintiff of $50,000 for aggravated damages.

The court then considered the issue of punitive damages. The court found that the defendant’s actions were highly blameworthy, the employee was a vulnerable individual who experienced profound harm as a result of the defendant’s actions, the employer was a very large corporation, and deterrence and denouncement were necessary. The court awarded punitive damages in the amount of $100,000 to the plaintiff.

Bottom Line

This case is a stunning example of what an employer should not do when terminating an employee. Employers are subject to a duty of good faith and fair dealing in the manner of dismissal – a duty that extends to both pre- and post-termination conduct. Although moral and punitive damages are generally awarded only in extraordinary circumstances, Canadian courts have increasingly showed their willingness to compensate employees, and punish employers, for conduct that falls short of good faith.

Treating employees well – even if they aren’t performing to an employer’s expectations – is an excellent strategy to avoid costly, unnecessary legal battles. Being unfair in the lead up to a termination, taking steps designed to force an employee to resign, and acting in a manner which is insensitive or resulting in humiliation of the employee, may very well lead to an award of enhanced damages in a wrongful dismissal claim.

It is important to get legal advice and representation when going through the process of terminating an employee. It is not uncommon for parties to represent themselves, but they do so at their own peril.

John Hyde is the managing partner at Hyde HR Law in Toronto. He advises management on all aspects of employment and labour law, including representation before administrative tribunals, collective agreement negotiation, arbitrations, wrongful dismissal defence and human rights.