Columns/Blogs Employee Activism Legal Terminations/Wrongful Dismissal
Employer punished for dishonesty and knowingly misleading employee

Terminations are inherently upsetting, particularly for long-term employees. Although courts do not compensate employees for their general “hurt feelings” upon termination, companies who terminate employees in a dishonest or insensitive manner can be on the hook for “moral damages,” in addition to severance pay.

“Moral damages” are available to employees where the employer engages in conduct during the course of dismissing an employee that is unfair, or is in “bad faith” by being, for example, untruthful, misleading or unduly insensitive.

That is precisely what occurred in the recent Ontario decision of Gascon v. Newmont Goldcorp, in which the General Manager of Red Lake Mine (the “Mine”) was led to believe that his employment would continue with the new employer after the Mine was sold.

Background

In August 2019, one of Newmont Goldcorp’s Vice Presidents, Mr. David Thornton, advised the plaintiff, Mr. William Gascon, that Newmont was entertaining the sale of the Mine to potential purchasers.

In September 2019, Mr. Thornton informed Mr. Gascon that he would be “going with” the Mine when it was sold. Mr. Gascon understood this comment to mean that Mr. Thornton anticipated his employment at the Mine would continue with the purchaser of the Mine – the purchaser eventually being Evolution Mining (“Evolution”).

In November 2019, Mr. Gascon received an email from the Chief Operating Officer (“COO”) for Newmont, wishing Mr. Gascon “every success in the future” and thanked him for his “time and service with Newmont Goldcorp.” Mr. Gascon inferred that these comments meant he may no longer be an employee with Newmont once the transaction with Evolution was completed.

Shortly after, Mr. Gascon asked Mr. Thornton about the COO’s comments and what the COO meant by them. Mr. Thornton reassured Mr. Gascon that he would “go with” the Mine when it was sold.

In mid-March 2020, Newmont learned that Evolution would not be making an offer of employment to Mr. Gascon, and on March 30, 2020, Newmont informed Mr. Gascon that he would be terminated effective March 31, 2020.

Consequently, Mr. Gascon brought a wrongful dismissal action against Newmont stating that between November 2019 and March 30, 2020, Newmont misled him, acted dishonestly, and breached the duty of good faith owed to him when he repeatedly and reasonably inquired about the status of his employment with Newmont following the sale of the Mine to Evolution.

The Court’s decision

The Court agreed with Mr. Gascon and found that Mr. Thornton’s conduct in the months leading up to the closing of the transaction was untruthful, misleading, and unduly sensitive. In the Court’s view, Mr. Thornton must have known well prior to early March 2020 that Newmont would be terminating Mr. Gascon if Evolution did not hire him.

As a result of Newmont’s failure to fulfill its common law duty of good faith and honest performance, the Court ordered Newmont to pay the employee $50,000 in moral or exemplary damages.

Bottom Line

Employers considering a sale and purchase of a business should consult an experienced employment lawyer regarding their common law obligations, especially to long-term employees.

Sellers may encounter uncertainty during the sale process with respect to whether their employees will remain employed by the purchaser after closing. However, as soon as details about employee retention emerge, sellers have a duty to be truthful with employees about their future employment prospects.

Moreover, sellers must always be mindful of their duty of good faith, honesty, and fairness toward an employee, especially when it is known that the purchaser will not be retaining any (or some) of the seller’s employees, thus triggering the termination process. This includes, among other things, the reasons for termination, the decision-making process, and how the dismissal itself is communicated and carried out.

On the flip side, a potential purchaser of a business must carefully consider whether and on what terms to offer employment to any existing employees of the seller. Such terms should be made express in written employment contracts and work to limit or exclude consideration of employees’ past service, except as may be required under employment standards legislation. Failure to implement a sufficiently scrupulous employment agreement may result in employers finding themselves liable to pay significant employee entitlements at common law.

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.