Promises, promises: Moral damages awarded to GM who recorded termination

A 2023 Superior Court decision served as a reminder to employers to maintain integrity while terminating employees. A hotel manager was awarded $15,000 in moral damages plus other compensation for a termination he said was done in bad faith and that put his family in a vulnerable position, causing stress.

The employee had been working for three years as the General Manager of the defendants, a resort and conference centre in Haliburton, Ontario, when he was let go with no cause. At the time he was told the reason for his termination was due to the resort’s decision to retain outside management.

The employee secretly recorded the termination meeting, which was submitted as evidence in his wrongful dismissal claim.

Employment lawyer Erin Minuk of Miller Thomson in Toronto told HRD that while the recording played a part in the judge’s decision, it was the employers’ failure to comply with some basic requirements outlined in the Employment Standards Act (ESA) that influenced the court’s decision.

“It all does boil down to just complying and being really familiar with the ESA or the relevant applicable Employment Standards legislation, because that's where the courts are really going to look to see if you comply with your obligations. And it's an easy way for them to say ‘no, you didn't,’” said Minuk.

Insensitivity, untruthfulness led to moral damages

The moral damages stemmed from unpaid ESA minimums which meant the employee was without income for several months, including over the Christmas holiday.

In his affidavit the employee stated: “The company’s failure to pay my ESA minimums, the company’s mislabelling of my ROE and the ensuing delay in collecting EI benefits put me and my family in an exceptionally vulnerable position. This added significant stress to my life, on top of the stress I was experiencing as a result of being terminated.”

In a summary judgement, the court agreed, finding the employers’ actions had been a breach of their duty of good faith, and that they had been “unduly insensitive”, untruthful and misleading. The decision also hinged on it being within their “reasonable contemplation” that the actions would cause undue distress to the employee.

Unpaid ESA entitlements led to moral damages

“Before you even get to the termination stage, make sure that your employees are trained on how to conduct termination meetings, because that's going to be the best way to prevent any conduct that would amount to moral damages,” Minuk said.

“It's not just how much an employee is entitled to, but also making sure that your HR and payroll know exactly when they have to pay out these amounts … so making sure you're tying up all the loose ends.”

The employee was owed almost $17,000 in reimbursement of out-of-pocket expenses; a “very significant financial burden” the court noted, considering his annual income of $72,000. The employee was told at the termination meeting that this amount would be paid out “before the next week or so”, but he did not receive payment until almost six months later.

The ESA requires employers to pay entitlements to terminated employees of over three months within seven days or at the next pay day, which the employers in this case did not. It also requires employers to provide written notice of termination to employees of over three months. In the recorded meeting, the employee asked for written notice three times, which was never provided.

Moral damages from broken promise of higher ESA payout

The recorded meeting also heard the employer telling the terminated employee that they would pay him a higher ESA entitlement than they were required, which they did not follow through on.

The employer stated:  “The way we’re going to do it…you need 8 weeks severance and obviously we’ll still pay you for the rest of this week on top of that. You are going back and forth this week, right? So, I’m not expecting you to do that stuff for free so that’s also going to get paid. I’m gonna put your termination date as of like Friday, so that you will still get paid for this whole week, and then you have another 8 other weeks of severance. It’s really 9 weeks, almost, or 8 ½ weeks, right?”

The employer also encouraged the employee to resign, stating in the recording, “You don’t have to resign. I’m saying it is better off for you to do it. They’re offering for you to do that.”

The judge did not include the resignation comments in his moral damages decision, but did acknowledge that it couldn’t be ruled out that they were meant to lessen the strength of a possible wrongful dismissal claim.

The statements weren’t damning but were still “not a good look” in the eyes of the court, said Minuk.

“What's interesting in this case is that this termination meeting was recorded and was actually admitted through evidence,” she said. “Employees are now aware of that tool, which may be admitted as evidence. I think it's something that HR professionals should definitely be mindful of – treat every termination meeting as if it's being recorded. Because it is possible that it might be.”

Best practices for HR to avoid causing moral damages

While moral damages claims can be proven with medical evidence, this case was decided on the employer’s failure to comply with minimum ESA requirements, as proven by the recording. The employer attempted to argue that the employee had not done his due diligence in mitigating damages by seeking other employment, but the court disagreed.

Minuk recommended using a script during termination meetings to avoid any rambling or saying anything that could be misconstrued or used later in a wrongful dismissal claim.

To avoid the question of “undue sensitivity”, remain neutral and professional, she said. But most of all, maintain humanity.

“What's important to remember during these meetings is that the termination of employment, regardless of the reason, is never an easy thing for people to go through,” Minuk said. “I would encourage anyone who's conducting a termination meeting to remember that this is a former employee, they are people with families, they’re people at the end of the day, and you want to treat them as such.”