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Judge refuses to award legal fees to employee for wasting court’s time, resources

An Ontario employee — who was recently awarded about $16,000 in wrongful dismissal damages against her employer — ended up “losing” in the end when the court refused to order her employer to reimburse her for legal fees exceeding $55,000.

Background: The 2022 decision

The plaintiff, Caroline Chin, worked for a company called Premier Salons from 1999 to 2013. Premier Salons went bankrupt in 2013 and, following the bankruptcy, the plaintiff worked for Beauty Express Canada from 2013 to 2019 in the same location.

Notably, she performed the same job for the same management team for the entire 20-year period (from 1999 to 2019), performing identical job functions for both employers. The plaintiff was terminated without cause in 2019 and was provided about 11 weeks of working notice.

The court awarded the plaintiff about 10 months of termination pay — less the nearly 3 months of working notice that the plaintiff had already received — finding that her experience with Premier Salons ought to be a factor in assessing her notice period. The court ruled that her experience with Premier Salons made her a more valuable employee with Beauty Express, saving the new employer the time and expense of having to train a new employee.

The defendant employer was ordered to pay the plaintiff approximately $16,000 in wrongful dismissal damages.

At the conclusion of the proceedings, the court invited the parties to make written submissions on costs. Usually, costs are awarded to the successful party following trial, in order to reimburse the party for their legal fees.

The 2023 decision

The plaintiff sought about $55,000 in costs. The plaintiff also pointed out that the final award of nearly $16,000 was greater than the offer to settle that she received from the defendant employer (an important factor for the court to award costs).

On the other hand, the defendant employer pointed out that the sum of the plaintiff’s final award was well under the Small Claims Court limit of $35,000 (the action was brought before a higher court). Therefore, the defendant argued that the court should exercise its discretion to not award any costs to the plaintiff, because her monetary recovery would put the claim within the Small Claims Courts jurisdiction, pursuant to Rule 57.05. (Essentially, this important court rule states that, if you bring a lawsuit in the Superior Court of Justice when it ought to have been brought in the Small Claims Court instead, the court, at its discretion, can refuse to award costs to the successful party).

Of note, the final award of $16,000 was considerably less than the plaintiff’s claim of about $200,000. The claim included aggravated and punitive damages, as well as a claim under the Human Rights Code. The trial judge dismissed those aspects of the claim in their entirety.

Relying on Rule 57.05, the court decided not to award any legal costs to either party, despite the plaintiff’s success. The court characterized this trial “as an unfortunate waste of the parties’ resources” and further stated that “had the plaintiff been more realistic in assessing the merits of her case, that controversy could have, and should have, been resolved in a far more efficient Small Claims Court hearing.”

The court further stated that “but for the Plaintiff’s rather large overreach, the entire litigation would have been far more expeditiously and inexpensively pursued in Small Claims Court.”

The bottom line

This decision is a cautionary tale of the perils of choosing to pursue a lawsuit in the wrong court and provides some ammunition to employers who wish to resist frivolous or “far reaching” claims from former employees.

Prior to litigation, it is important to consider the likelihood of success on each aspect of the damages being sought and, most of all, to seek advice from experienced employment counsel.

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.