Employer's conduct at termination may increase damages

Things may not always end on the best terms at the end of an employment relationship. There may be concerns over how an employee was terminated and the employer’s conduct can play an essential role in determining the damages owed if there has been a wrongful dismissal.

If the employer acted in bad faith, it may owe the terminated employee moral damages on top of what it needed to pay as part of the reasonable notice period. Whether the employer’s conduct rises to the level of bad faith highly depends on the circumstances of the case. These additional damages can be significant, as in Teljeur v. Aurora Hotel Group, 2023 ONSC 1324, where the employer was ordered to pay $15,000 in moral damages to the employee for bad faith conduct during the termination.

What additional damages can an employee receive due to the employer’s conduct during termination?

Generally, in cases involving wrongful termination, an employee can receive pay in lieu of their reasonable notice period, which varies depending on the facts of the case. Employees are entitled to prompt payment of their minimum compensation under employment standards legislation.

Beyond these forms of compensation, the employee may also be entitled to moral or aggravated damages. Moral damages may be available if the employer acted in bad faith during termination. In particular, moral damages are only available if the employer engaged in unfair or bad faith conduct, such as being untruthful, misleading, or unduly insensitive. Given the power dynamic between employers and employees, with employees generally in a vulnerable position, the courts have recognized that moral damages may be appropriate if the employer exacerbates the difficulties arising from a termination.

Moral damages

When may an employee receive moral damages for wrongful termination? Finding grounds for moral or aggravated damages is a high bar. For instance, the employer’s conduct must have risen to the level of being unfair and in bad faith - which can include being untruthful, misleading, or unduly insensitive to the employee. While the claim may involve the employee’s mental distress, finding an independent actionable wrong is no longer necessary before moral damages can be awarded to an employee upon termination.

For wrongful dismissal cases, damages arising from an employer’s bad faith conduct should be separate from the damages as part of the reasonable notice period – i.e., courts should not extend the reasonable notice period if the employer acted in bad faith because the moral damages are to be assessed similarly to other cases that address moral damages.

Courts consider the following factors to determine if moral damages should be awarded:

• The employer has breached its duty of good faith and fair dealing in the way that the employee was dismissed.
• The employer exhibited conduct that was untruthful, misleading, or unduly insensitive during the termination.
• The employer failed to act in a way that was candid, reasonable, honest, and forthright with the employee.
• The employer would have reasonably known that the manner of dismissal would cause the employee mental distress.
• The employer’s wrongful conduct caused the employee’s mental distress beyond understandable distress and hurt feelings typically associated with a termination.
• Any other circumstances of the case warranting an award of moral damages.

Notably, not all forms of distress or discomfort arising from a termination will result in moral damages, as the court recognizes that termination will usually be difficult. Also, it can be challenging to determine when moral damages may apply as it highly depends on the facts of the case.

$15,000 for bad faith conduct during termination

In Teljeur v. Aurora Hotel Group, the employee worked as a general manager for a resort. After three years, he was terminated as the employer decided to hire an external management company in place of the employee’s role.

The court found that the employer had acted in bad faith and should pay moral damages to the employee. While the court discouraged secretly recording a termination, the employee’s surreptitious recording revealed problematic conduct by the employer during the termination.

In Ontario, the Employment Standards Act requires terminations to be produced in writing to employees. During the termination meeting, the employee asked several times for his termination to be in writing. The employer agreed, but written termination was never provided.

Further, the Act requires the employer to provide the employee with his final pay within seven days of termination or the next payday. However, the employer did not mail the final cheque until over a month after the termination meeting. When the employee claimed he still had not received the cheque, a new one was only reissued six months later. Even when accounting for when the first cheque was mailed out, there was a significant delay from when the employer was required to provide the minimum payment to the employee. As a result, the employee also did not have the benefit of pay over the holidays.

Employment standards violations, missing severance pay justified moral damages

The employee was also promised eight weeks’ severance, but this was never provided. The employer also did not reimburse the employee for out-of-pocket expenses of almost $17,000. This represented a significant portion (nearly a quarter) of the employee’s income and was considered a substantial financial burden.

Overall, the court found the circumstances and conduct demonstrated during the employee’s termination in Teljeur demonstrated such bad faith on the employer’s part that moral damages of $15,000 were warranted. As a subsequent appeal of the Teljeur decision was dismissed by the Ontario Court of Appeal, the case remains a useful anecdote when determining when courts will award moral damages for wrongful dismissal.

Paulette Haynes is the founder of Haynes Law Firm, a boutique employment law firm in Toronto.