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Employee Awarded $55k in Punitive and Moral Damages: What Lessons Can Employers Pohl from the Case?

A recent decision, Pohl v Hudson Bay Company, 2022 ONSC 5230, offers a few lessons about proper conduct during termination. The decision arose after the Hudson Bay Company (HBC) terminated a 28-year Sales Manager during the beginning of the COVID-19 pandemic. The employee was terminated without cause due to a restructuring that eliminated his position. The employee sued HBC for wrongful dismissal.

Reasonable Notice Award

The Ontario Superior Court of Justice awarded the employee a 24-month notice period. While it is a lengthy notice period, it is not controversial. The employee did not have a written employment contract with HBC, therefore his notice period entitlements were not limited to the Employment Standards Act, 2000 (ESA). Additionally, he was awarded a longer notice period due to his lengthy tenure with the employer; the nature of his employment which was integral to his store location and included significant responsibilities; his age as he was towards the end of his working career; and the limited availability of comparable employment. Due to those factors it is not surprising that the Court awarded a 24-month notice period. What is notable is how the Court valued the group benefits for that 24-month notice period.

The employee submit that HBC contributed $193 per month to his pension and obtained a quote of $351.38 for similar medical and dental plans. HBC submit that the plaintiff contributed $89.23 a month towards his pension plan and $22.92 a month towards his medical and dental benefits. The Court noted that HBC’s submissions were not useful as they only provided the cost the employee paid for group benefits and failed to provide any evidence of what the employer pays towards group benefits. As damages are meant to put the employee in the position they would have been in had the company provided reasonable notice, it is illogical to base damages on what the employee pays, not the company. Therefore, the Court chose to calculate the damages for benefits based on the quote that the employee obtained.

Moral and Punitive damages

Perhaps the biggest employer lesson arises out of the Court’s decision to award $55,000 to the employee for moral and punitive damages. Justice Centa based the moral and punitive damages awards off four reasons, those being:

1. HBC’s unduly insensitive decision to walk the employee out the door at the time of his termination. The employee’s position was eliminated as a part of an economic decision in a nation-wide restructuring. There was no misconduct on the employee’s part and no need to treat him insensitively.
2. HBC offered the employee a position of a sales associate job at the time of his termination. However, the offer was misleading and a breach of duty and good faith and fair dealing. The offer itself was designed to eliminate any rights the employee had regarding termination as the new offer would not recognize his 28-years of service.
3. HBC violated the ESA by not paying out the wages it owed to the employee in a lump sum. Subsection 11(5) provides that the employer must pay any wages to which the employee is entitled to in a lump sum no later than the later of seven days after the employment ends and would have been the employee’s next pay day. Pursuant to s. 66(1) employer’s may only make payments in installments with employee consent or Director approval. Instead HBC made the ESA payments via salary payments. HBC took two months and multiple request from the employee before it chose to comply with this requirement.
4. HBC failed to properly issue a record of employment (ROE) within five days after the interruption of his employment. The employee was terminated in September 2020 and HBC did not issue a ROE until December 2020. HBC finally issued two ROE’s to the employee but both incorrectly described the reason for issuing the document. The Court accepted that the failure to issue a ROE was HBC placing its interest above of the employee.

Employer Takeaways

There are several crucial takeaways that the employer can glean from the moral and punitive damage award. The first being the impact of employer conduct during termination. Employers should be careful to avoid acting insensitively when terminating an employee without cause. It may be common practice to escort terminated employees off premise, however, this case seems to be raising the bar for employer conduct during termination.

Another employer takeaway arises from the treatment of the incorrect ROE. ROE errors can be quite common, however, it seemed to play a central role in Justice Centa’s reasoning for moral and punitive damages. This can serve as a cautionary tale for employers to take the time prepare a proper ROE.

Finally, the Court justified the moral and punitive damages for HBC’s failure to pay the ESA entitlements in a lump sum within seven days. As noted above, employers can make the payments via salary continuance with employee consent. Employers can avoid this issue and retain the option to make a lump sum payment or installments by addressing this through an employment agreement. The employment agreement would qualify as the employee’s consent under s. 66 of the ESA.

Much of the above could have been avoided if HBC had a reliable employment contract with the employee. If you require assistance drafting employment contracts the team at CCPartners would be happy to assist you.

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