A new standard for punitive damages in wrongful dismissal?

The Toronto Star is reporting on a recent decision of a jury trial in B.C. which awarded a long service (34 years) electrical manager significant punitive damages at trial ($573k).

http://www.moneyville.ca/article/1254936–jury-awards-809-000-in-record-wrongful-dismissal-case

The decision is unique not only because of the size of the award, but also because the employee elected to try the case by jury, rather than judge alone.

The article identifies that the case was uniquely suited to a jury trial on account of the fact that the business in question was the largest single employer in a small town, and it was thought a jury of the employee’s peers would better understand the undercurrents that resulted in the termination (the power imbalance between employer and employee).

While it is hard to imagine that this decision on its own will be representative of a new standard for punitive damages, it is noteworthy for the fact that a jury felt the employer’s actions warranted such severe condemnation.

Brown Litigation regularly assists employers and employees in employment disputes through strategies aimed at mitigating risk, minimizing cost, and ensuring favourable outcomes.

Posted by D. Jared Brown – Lead Counsel

 

Employer assistance for the terminated employee (Mitigation)

Mitigation is a two-way street.  While we have discussed in a previous blog post the employee’s duty to mitigate when terminated, the duty to mitigate is a concept that should resonate with employers as well.

While most employers want to use an employee’s apparent failure to take reasonable steps to find alternative employment post-termination as a defence to a wrongful dismissal claim, prudent employers recognize that assisting employees to mitigate can reduce the overall risks associated with wrongful dismissal claims.

When representing employers who have made the decision to terminate an individual, we typically recommend offering post-employment support and outreach to the employee to assist the employee in their mitigation efforts.  Offering services such as outplacement counseling to the departed employee ensures that the employee begins the job search in a timely way, and further has all necessary tools and skills to ensure a successful job search.      As mitigation earnings can set off against entitlements to reasonable notice, timely re-employment (particularly during any period of reasonable notice) ensures cost and risk containment for the employer.

Further, offering post-employment assistance to transitioning employees evidences an employer acting in good faith during the termination process, with due regard to the sensitivities and issues inherent in an employee termination.

In certain situations, it may be appropriate for the employer to offer a new position in the organization to the departing employee either in a different department or geographic region.  In some court cases, the employee’s failure to accept a reasonable offer of alternative employment from the same employer, was ruled to be an unreasonable rejection of an opportunity to mitigate by the departing employee thereby reducing the employee’s entitlement to reasonable notice.

Whether these employer strategies (and the myriad of others available) are appropriate depend upon the circumstances in each case, including the employee in question, the personal relationships at stake, and the anticipated duration of the notice entitlement.

Posted by D. Jared Brown – Lead Counsel

Fired? Get a Job!

If you have been dismissed from your job, there is a duty in contract law which states that you have an obligation to mitigate your damages.  This doctrine means that a dismissed employee must take steps to minimize the losses they suffered as a result of losing their job.  Basically, this means that you need to take steps to look for another job.

The leading case on the duty to mitigate is the Supreme Court of Canada decision of Red Deer College v. Michaels.  In this case, the Supreme Court explained the duty to mitigate as follows:

The primary rule in breach of contract cases, that a wronged plaintiff is entitled to be put in as good a position as he would have been in if there had been proper performance by the defendant, is subject to the qualification that the defendant cannot be called upon to pay for avoidable losses which would result in an increase in the quantum of damages payable to the plaintiff.  There reference in the case law to a “duty” to mitigate should be understood in this sense.

The Court held that the burden is on the defendant to provide proof that the plaintiff failed to mitigate her/her damages:

It seems to be the generally accepted rule that the burden of proof is upon the defendant to show that the plaintiff either found, or, by the exercise of proper industry in the search, could have procured other employment of an approximately similar kind reasonably adapted to his abilities, and that in absence of such proof the plaintiff is entitled to recover the salary fixed by contract.

The Court went on to emphasize that the onus on the employer is heavy, citing a previous decision, because “the burden which lies on the defendant of proving that the plaintiff has failed in his duty of mitigation is by no means a light one, for this is a case where a party already in breach of a contract demands positive action from one who is often innocent of blame.”

Despite the burden being on the defendant to show that efforts were made, plaintiffs have been criticized by the courts for not making enough of an effort. In Chambers v. Axia Netmedia Corp., it was held:

Clearly, the efforts of Mr. Chambers [the plaintiff] were to a large extent confined to reading the local newspaper and forwarding his resume to employers. Although commendable, I am satisfied, by restricting his search to this one vehicle, the effort was too limited. Although there is no evidence as to whether these other efforts would necessarily have produced a positive result, earlier than he was able to find the employment he did, I am satisfied there was, to some extent at least, a failure to take all reasonable steps to mitigate

There are simple steps that a plaintiff can take to demonstrate that they attempted to mitigate their damages in an attempt to avoid an adverse decision like the one in Chambers.  We counsel our clients to keep a running log or mitigation journal outlining all the key events, dates, and information related to their job search post-termination including identifying job search efforts, networking, applications, and other career building steps.  This is typically done in the form of a diary or a calendar.  Second, retain copies of the letters, emails, or any other correspondence you sent in an attempt to secure a position.  Third, diversify your search.  You don’t need to limit to just one means.  You could add yourself to the social networking site LinkedIn, search on websites such as Workopolis, scan the newspapers and attend local networking events in your city.  Further, Human Resources Development Canada (“HRDC”) offers a range of free networking, job search, and outplacement services for qualifying dismissed individuals.  All of these steps will assist you in demonstrating that a genuine effort was made to secure new employment.

Posted by D. Jared Brown – Lead Counsel

Employee Non-Competition and Non-Solicitation Covenants: Where are we at?

The departure of an employee from a business can result in harm to the business when that former employee begins to either compete and/or approach the customers and contacts of the business with an eye to securing the business relationships for themselves.

Many employers have developed contracts which contain post employment covenants on the part of the employee, whereby the employer attempts to secure the employees agreement to refrain from competing against and/or soliciting the employer’s customers for a period of time post-departure.

The Canadian courts have repeatedly held that restrictive covenants in the nature of non-competition are considered a restraint of trade and accordingly are contrary to public policy and generally not enforceable.

However, there are some circumstances in which these covenants may be enforced, but those situations are few and far between.

In the Court of Appeal case of Mason v. Chem-Trend Limited, the court of appeal summarized the principles that will be utilized when determining whether to enforce the restrictive covenants in a written employment contract.

These principles are:

1.         To be enforceable the clause must be reasonable as between the parties and with reference to the public interest;

2.         The clause must balance the general public policy in favour of open competition, with the right of the employer to the protection of trade secrets, confidential information and trade protections; and,

3.         The court must engage in a review of the surrounding circumstances when analyzing the reasonableness and enforceability of the restrictive covenant in question.

The court then went on to identify the 3 main areas of consideration in determining when to enforce restrictive covenants.

A.        Did the employer have a proprietary interest entitled to protection?

B.        Are the temporal (time) or spatial limits (geographic distance) to broad?

C.        Is the covenant overly broad in the activity it prohibits because it prohibits competition generally and not the solicitation of the employer’s customers specifically?

In Mason v. Chem-Trend Limited the court of appeal made particular note of the fact that the employee in question was not a senior level employee or officer, but rather part of the sales force operating within a small sales territory.  The contract in question went beyond prohibiting the solicitation of former customers but also prohibited the employee from dealing with any of them in competition with Chem-Trend.  Further, the court noted the contract attempted to prohibit the employee from doing business with potential customers of Chem-Trend, something that would be very difficult if not impossible for the employee in question to know when they had run afoul of the prohibition period.  As a result of the foregoing analysis the court of appeal concluded that the restrictive covenant was unreasonable and unenforceable.

The prevailing case law which trends against the enforcement of restrictive covenants means employers and employees are best advised to seek out proper legal advice prior to drafting and entering into agreements that contain restrictive covenants. While it is entirely possible to craft a fully enforceable restrictive covenant that protects the legitimate proprietary interests of the employer these types of covenants and contracts must be carefully scrutinized to ensure that the result in Mason v. Chem-Trend Limited does not occur.

Posted by D. Jared Brown – Team Lead