Termination and Bad Faith
Update by Parmvir Padda, Lawyer and Erin Brandt, Cofounder
In Bailey v Service Corporation International (Canada) ULC, 2018 BCSC 235 (“Bailey”), the British Columbia Supreme Court (the “BCSC”) reminded employers that bad faith conduct when terminating employees will be scrutinized, and may attract a significant damages award to deter such behaviour in the future.
Background
Mr. Bailey was a salesman for the Service Corporation International (“SCI”) for 17 years when his employment came to an end. Prior to his dismissal, Mr. Bailey went on a medical leave from work, and submitted a claim for disability benefits through his employer’s benefit provider, which was denied. Mr. Bailey appealed this decision.
While Mr. Bailey’s appeal was ongoing, Mr. Bailey’s wife attempted to submit a claim to the benefits provider, but was informed that Mr. Bailey was no longer an employee. Mr. Bailey then learned that:
SCI had terminated him without cause; and
SCI had back-dated Mr. Bailey’s dismissal to the beginning of his medical leave.
Mr. Bailey commenced a legal action against SCI alleging wrongful dismissal.
Decision
SCI claimed that Mr. Bailey had abandoned his job, but the BCSC found otherwise; specifically, that Mr. Bailey had been on a leave dealing with a legitimate medical issue. Accordingly, the BCSC found that Mr. Bailey had been dismissed without cause and was therefore entitled to severance pay in lieu of reasonable notice.
Additionally, the BCSC awarded Mr. Bailey $25,000 in aggravated and $110,000 in punitive damages for the bad faith manner in which SCI dismissed him.
Aggravated damages are awarded where the manner of dismissal causes an employee mental distress above and beyond what would normally be expected under the circumstances (see Lau v Royal Bank of Canada, 2017 BCCA 253 for further discussion).
Punitive damages are awarded in exceptional circumstances to punish an employer for conduct that is extreme, harsh and vindictive (see Honda Canada Inc. v Keays, 2008 SCC 39 for further discussion).
In Mr. Bailey’s case, the BCSC found that there were a number of reasons both aggravated and punitive damages were warranted, the most problematic conduct being:
(a) SCI’s dismissal of Mr. Bailey when he was known to be ill;
(b) SCI’s failure to take Mr. Bailey’s years of service into account;
(c) SCI’s failure to tell Mr. Bailey that his employment had been terminated; and
(d) SCI’s false allegations post-dismissal that there was just cause to dismiss Mr. Bailey.
After his dismissal, Mr. Bailey became extremely anxious, depressed and suicidal. The BCSC acknowledged that, while Mr. Bailey struggled with anxiety before the dismissal, the manner of termination significantly exacerbated his mental distress.
Key Take Away for Employees
Losing one’s job is never easy. However, employees should expect to be treated fairly and with dignity in the manner of dismissal. Extreme, harsh and/or vindictive conduct by an employer and/or conduct by an employer that causes prolonged and excessive mental distress may be grounds for aggravated and/or punitive damages.
Key Take Away for Employers
For employers, Bailey is a reminder that even where usual severance obligations may be minimal, poor behaviour in dismissing an employee can significantly increase the cost of the dismissal. Employers are held to a high standard in their dealings with employees, and the courts will not hesitate to admonish a cruel or insensitive employer.
