Can an employee be awarded aggravated damages for his employer’s bad behaviour if that bad behaviour precedes his termination?
While for a long time the prevailing wisdom was that aggravated and punitive damages could only be awarded for behaviour “during the course of dismissal”- which are the words used by the Supreme Court of Canada in Wallace- recent case law seems to suggest that such timing may not be necessary.
For example, in Koshman v. Controlex Corporation, 2023 ONSC 7045, the Honourable Justice Charles T. Hackland of the Ontario Superior Court of Justice held that the employer’s bad behaviour in the two months preceding an employee’s summary dismissal could substantiate an award of aggravated damages.
And, if that wasn’t enough of a hook to get you to keep reading, what if I mentioned that the employer’s poor behaviour included its telling clients that it believed that the former employee may be implicated in murdering the company’s founder?
Facts
The case concerned a claim of wrongful dismissal with additional claims for aggravated and punitive damages.
The plaintiff, Mr. Koshman, was summarily dismissed from his employment with the defendant Controlex Corporation, on September 11, 2020. He received a letter by courier advising him of his immediate termination, with no explanation provided. He was given his base salary for eight weeks and benefit continuation for that period. The defendant did not purport to dismiss Mr. Koshman for cause, although at a later point in this litigation the defendant amended its pleadings to allege cause for dismissal.
At the date of his termination Mr. Koshman was 69 years of age and had been employed by the defendant for 18 and a half years with the title of Vice President. His salary was $228,000 per year plus benefits and a car allowance of $300 per month.
Mr. Koshman is a professional engineer by training and was recruited to the defendant by its founder, the late Peter Dent. During his tenure with the defendant Mr. Koshman directed the operational and property management functions of the business and reported directly to Mr. Dent. He worked with significant autonomy and independence and was only required to report to Mr. Dent on certain major decisions. Mr. Koshman oversaw the development and leasing of the Ottawa Train Yards, a major shopping centre in Ottawa and a principal asset of the defendant. During the plaintiff’s tenure as Vice President the land holding assets under the defendant’s control increased from those of a small land holding company to a current value in the range of $700 million.
Mr. Dent died suddenly and accidently on July 17, 2020. Mr. Dent’s wife Susan Dent, who had not previously been directly involved in the business in any substantial way, took over the business and, eight weeks after Mr. Dent’s death, summarily terminated the plaintiff on a not-for-cause basis. Mr. Koshman was initially unaware of Susan Dent’s intention to terminate his employment and was not provided the opportunity to meet with her in person subsequent to her husband’s death.
In the days following Mr. Dent’s death Susan Dent phoned Mr. Koshman to advise him that she would be running the business and that she would be the only person with signing authority for the company. She informed him that his signing authority was removed effective immediately and that he could no longer sign anything on the defendant’s behalf.
During the eight-week period following Mr. Dent’s death, it was reported to Mr. Koshman by clients of the defendant that he knew and with whom he had worked that Mrs. Dent was visiting them and making bizarre and defamatory statements about Mr. Koshman, including that he was “a nobody” and was “no good” and not to speak to him and to deal only with her.
According to Justice Hackland’s reaons for decision, Mrs Dent suggested to such client that it was possible her husband had been murdered and Mr. Koshman may have been involved, that Mr. Koshman had been taking kickbacks, and that she had fired him. Mr. Koshman found out that Mrs. Dent had offered his job to one of Mr. Koshman’s direct reports before Mr. Koshman was actually terminated. He learned of his termination from office staff well before he received the termination letter by courier. Mrs. Dent openly told employees that she did not wish to speak to Mr. Koshman.
Decision of the Ontario Superior Court
The case proceeded to trial undefended by the employer. There is some discussion in the court’s reasons for decision about the nature of the proceedings.
In addition to awarding Mr. Koshman 24 months termination pay in lieu of notice, Justice Hackland provided the following reasons for awarding Mr. Koshman an additional $50,000 in aggravated damages plus $50,000 more in punitive damages:
[20] The plaintiff seeks aggravated damages for the manner of his dismissal. It has been held that aggravated damages can be awarded in wrongful dismissal cases where an employer engages in conduct that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive. In the court’s view, the defendant exhibited bad faith toward the plaintiff in the conduct of Mrs. Susan Dent, following the death of the late Mr. Peter Dent, leading up to the plaintiff’s dismissal and in carrying out the dismissal itself.
[21] As noted previously, Mrs. Dent advised Mr. Koshman within days of assuming control of the defendant that he no longer has signing authority on the company bank accounts, which had been a key component of his administrative functions. She then personally visited customers of the defendant, telling them not to deal with the plaintiff, criticizing his character and his honesty and telling some that the plaintiff had been terminated. She offered his job to a subordinate prior to his termination, failed to meet the plaintiff even once to discuss her concerns, ostracized him from his management duties, terminated his employment by way of a letter sent by courier and providing two weeks termination pay and refusing to pay his accrued vacation pay. She suggested to clients of the firm that her husband had been murdered and suggested the plaintiff was involved. She made repeated defamatory allegations that the plaintiff was dishonest and “on the take.”
[22] It is apparent, for reasons perhaps only understood by the defendant’s new President Susan Dent, Mr. Koshman was to be terminated from the company and rather than taking appropriate steps to that end such as providing reasonable advance notice of her intentions or severance in lieu of notice, she set out to destroy his reputation. Later, in the course of this proceeding, she upgraded her attack on Mr. Koshman by advancing groundless allegations of breach of fiduciary duty, retained and then ended her relationship with four different law firms and ultimately abandoned the defence of this proceeding. The appropriate aggravated damages award in these circumstances is $50,000.
[23] The criteria for the award of punitive damages were recently summarized by the Ontario Court of Appeal in Humphrey v. Mene Inc., 2022 ONCA 531, where van Rensburg J.A. stated the following at para. 79:
Punitive damages in breach of contract or tort cases are exceptional: their purpose is to punish a defendant for conduct that is reprehensible, and a “marked departure from ordinary standards of decent behaviour”. Whereas damages for conduct in the manner of dismissal are compensatory, punitive damages are “restricted to advertent wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own”: Honda, at para. 62. They should be awarded, in addition to the compensatory damages already awarded, when rationally required to punish a defendant to meet the objectives of retribution, deterrence and denunciation, in an amount no greater than necessary to satisfy these objectives.[24] I find that the defendant’s President Susan Dent, having taken over management of the defendant corporation following her husband’s death, embarked on a malicious campaign to undermine the plaintiff’s ability to carry out his job functions and attempted to destroy his reputation with customers and clients of the defendant by making bizarre and defamatory statements about the plaintiff, accusing him of criminality and dishonesty, without a shred of justification. She then pursued a baseless counterclaim in this action and maintained her position that the plaintiff was dismissed for cause and sought repayment of the eight weeks severance the defendant paid out at the time of termination. She then caused the defendant to default on the order of this court to appoint new counsel and caused the defendant to abandon the defence of this proceeding and simply chose not to attend the trial with no communication to the court or to plaintiff’s counsel of any kind.
[25] I award the plaintiff punitive damages in the sum of $50,000.
Commentary
It has long been said that “bad facts make bad law.” While that may be true, it is certainly true that “bad facts make good blog.”
Because the defendant did not appear for trial, it is hard to understand what caused the defendant employer to make such allegations against Mr. Koshman. As Justice Hackland confirms, such allegations appear to have been made “without a shred of justification.”
While the facts of the case are salacious, what I find interesting from a jurisprudential perspective is the court’s decision to award aggravated damages for actions “leading up to” the former employee’s termination.
As noted at the outset, given the wording of the Supreme Court of Canada’s decision in Wallace, prevailing wisdom was that in order to be awarded aggravated damages, the poor conduct had to occur “during the course of dismissal” and while any poor conduct that preceded such dismissal could perhaps trigger a constructive dismissal, it could not also be used to attract aggravated damages. Moreover, aggravated damages, as I understood them, were reserved for some form of compensable injury. (With the jurisprudence then digressing into a discussion of the extent of medical evidence necessary to substantiate such an award.)
While one might be inclined to cite the fact that the matter proceeded as an undefended action, the fact remains that Ontario’s Rules of Civil Procedure confirm that, “A plaintiff is not entitled to judgment on a motion for judgment or at trial merely because the facts alleged in the statement of claim are deemed to be admitted, unless the facts entitle the plaintiff to judgment” and Justice Hackland is a highly experienced jurist with pre-appointment experience in employment law. Justice Hackland is well-versed in this area of law and knows what the court can and cannot award.
With that said, I find the court’s discussion of the reason it awarded Mr. Koshman $50,000 in aggravated damages without discussing anything about this impact it had on Mr Koshman’s health, etc. a little wanting. Perhaps the same is simply a function of an undefended action.
Takeaways for Employers
The takeaways for employers should be obvious: While Ontario law permits employers to terminate an employee’s employment for convenience, employers have a duty of good faith and honesty that prohibit them from saying malicious and salacious things about such employees without justification. Where an employer engages in such behaviour, whether at the time of dismissal or in the period leading to termination, the court may award damages in addition to what is owed for severance.
If you are an employer in Ontario and you are considering letting an employee go, it will often pay to first speak with an experienced employment lawyer who can guide you through the process. Such investment could literally save you hundreds of thousands of dollars.
Takeaways for Employees
The takeaway for employees is that there is more to employment law than the Employment Standards Act, 2000. It is worth noting that the employer in this case provided the employee with what may have been his minimum statutory entitlement. However, because Mr Koshman engaged experienced employment lawyers to assist him, he was awarded more than $500,000 more than his minimum entitlements.
If you have recently been let go from your job, or you fear that you may soon be, it will likely pay to speak with an experienced employment lawyer.
Contact Me
Sean Bawden is Experience. At Work.
I am an experienced employment lawyer and wrongful dismissal lawyer practicing with Kelly Santini LLP, which is based in Ottawa. I have appeared in courtrooms across Ontario from Stratford, to L’Orignal, to Thunder Bay.
For 2.5 years I was in-house legal counsel providing employment law advice to one of Canada’s largest corporations and appeared in labour courts and tribunals literally the world over.
I have also taught as a part-time professor at Algonquin College teaching Employment Law. I have previously also taught Trial Advocacy for Paralegals and Small Claims Court Practice.
I can be reached by email at sbawden@kellysantini.com or by phone at 613.238.6321 x233.
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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.
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