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Ending an employment relationship is an unpleasant task for employers, who are forced to make difficult decisions to protect their company’s interests, just as it is distressing for the employee who may have dedicated years of their life to an organization.

That said, how a termination is carried out, and not necessarily the fact of termination, can lead to serious consequences for employers and open the door to a moral damages award for employees. Employers who do not carry out this sensitive task carefully can find themselves on the hook for moral damages, on top of paying out other termination entitlements to their former employees.

What are Moral Damages?

Courts can award compensation for employees terminated by an employer who has been unduly insensitive, misleading, or even untruthful in its manner of termination. If the employer’s behavior causes distress, beyond the understandable distress and hurt feelings normally accompanied with a dismissal, Courts may award moral damages to an employee.

What Sort of Behaviors Attract Moral Damages Awards?

In Pohl v. Hudson’s Bay Company, a case heard in August 2022, the Court awarded $45,000 in moral damages to a dismissed employee, Mr. Pohl. In that case, Mr. Pohl was terminated without cause from the Hudson’s Bay Company (“HBC”), after28 years of loyal service. Upon termination HBC instructed Mr. Pohl’s supervisor to immediately walk him out the front door. Mr. Pohl sued for wrongful dismissal and moral damages, amongst other items.

Four different events led to the Court’s conclusion that moral damages were appropriate in those circumstances.

  1. Walking Mr. Pohl out the Door was Insensitive

First, the Court found that there was no reason to walk Mr. Pohl out the front door of the building immediately following his termination. It pointed out that there was no reason to treat Mr. Pohl so insensitively given that he was a longstanding employee, and that he had not committed any misconduct.

  1. The Employer Attempted to Trick or Induce Mr. Pohl Into Waiving his Rights

While HBC terminated Mr. Pohl’s employment, it also offered him a sales associate job. However, the offer was carefully crafted so that Mr. Pohl would be prevented from claiming a constructive dismissal (i.e. a disguised termination) if HBC ever made changes to his new contract. The Court was not impressed, explaining:

HBC’s decision to include a clause that would allow it in the future to gut Mr. Pohl’s contract while purportedly not triggering a constructive dismissal says the quiet part out loud. HBC offered him nothing of substance in exchange for waiving his right to pay in lieu of notice of termination on a 28-year career, and forward-looking provisions that would have permitted HBC to never schedule him for a single shift.

The Court accepted that this left Mr. Pohl feeling humiliated, diminished his self-worth, deepened his anxiety and caused him to feel depressed. As such, HBC’s actions were deemed a breach of its duty of good faith and fair dealing towards Mr. Pohl.

  1. HBC Failed to Pay ESA Amounts Promptly

Third, HBC failed to pay Mr. Pohl his statutory termination pay under the Employment Standards Act (“ESA”) within seven (7) days of termination. Instead, it paid Mr. Pohl’s ESA amounts by way of instalment instead of in a lump sum. The Court ruled, “HBC is not at liberty to improve its cash flow by withholding money it was statutory obliged to have paid to Mr. Pohl and turning him into an unsecured creditor.”

  1. HBC Did not Provide a Correct and Timely Record of Employment

Finally, HBC also did not provide Mr. Pohl with a timely and accurate Record of Employment, as required by the ESA.

Together, the four events described above justified a moral damages award (and a punitive damages award, amongst other heads of damages).

This decision reminds us that ending an employment relationship is a delicate matter that should be handled with sensitivity, honesty and forthrightness.

If you are an employer requiring assistance with the manner of termination, or an employee who has recently been terminated, reach out to one of our experienced employment lawyers.

 

Author(s)

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2021 Nelligan O’Brien Payne LLP.

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