It is now easier for employees to successfully claim aggravated damages related to the manner of termination of their employment.
In the Ontario Court of Appeal’s recent decision in the case of Krmpotic v. Thunder Bay Electronics Limited[1] (Krmpotic), the court found that significant aggravated damages can be awarded without medical evidence of mental distress or a diagnosable psychological condition. Instead, the employer’s conduct at the termination meeting, combined with mental distress that was more than normal distress or hurt feelings, was enough to support the CA$50,000 awarded in aggravated damages by the lower court.
What happened?
Mr. Krmpotic worked as a carpenter for Thunder Bay Electronics Limited for almost 30 years. At the time of termination he was 59 years old and had been on medical leave to recover from back surgery. The back surgery was necessary because of a number of workplace injuries that Mr. Krmpotic had suffered while working for Thunder Bay Electronics.
At termination, Mr. Krmpotic was offered 16 months’ salary. Even though Mr. Krmpotic refused this offer, Thunder Bay Electronics continued to pay him his regular salary and maintained his benefits for 16 months.
Thunder Bay Electronics’ conduct at termination was the subject of significant scrutiny. In particular, the Court found:
- The employer told Mr. Krmpotic that he was being dismissed for financial reasons and that the financial statements would support this claim, but then refused to produce the financial statements;
- The employer was untruthful with Mr. Krmpotic about the reasons for termination, with the Court ultimately concluding that he was terminated because of his physical limitations related to his back surgery; and
- Mr. Krmpotic was terminated within two hours of returning from his medical leave for back surgery.
Following termination, Mr. Krmpotic alleged that he suffered back pain, knee pain, anxiety, depression, fear, mental distress, confused emotions, anger, disturbed sleep, worry, frustration, helplessness and defeat. Mr. Krmpotic did not provide medical evidence to support his allegations.
Decision at trial
The trial judge awarded Mr. Krmpotic 24 months of notice, the maximum allowed by the Courts, barring exceptional circumstances.
However, based on the lack of medical evidence, the trial judge also dismissed Mr. Krmpotic’s claim for mental distress related to the manner of termination. The trial judge noted that without medical evidence, he was unable to conclude whether the symptoms were because of termination or because of Mr. Krmpotic’s physical disabilities and their impact on his employment. However, the trial judge found that the termination of Mr. Krmpotic’s employment was “the antithesis of an employer’s duty” to be candid, reasonable, honest and forthright, and to “refrain from engaging in conduct that is unfair or in bad faith by being untruthful, misleading or unduly insensitive.” As a result, the trial judge awarded CA$50,000 in aggravated/moral damages.
Medical evidence unnecessary for aggravated damages
Thunder Bay Electronics appealed the decision, alleging that the court could only award aggravated damages when there was evidence of: 1) mental distress; and 2) that the mental distress was caused by the manner of dismissal. The employer took the position that once the trial judge rejected Mr. Krmpotic’s claim for mental distress on the lack of medical evidence, it had no grounds to award the CA$50,000 in aggravated damages. The Court of Appeal disagreed.
The Court of Appeal noted that employer’s obligations on termination are clear. Employers have a duty of good faith and cannot act an unfair, untruthful, misleading or unduly insensitive manner. Normal distress and hurt feelings are not compensable but aggravated damages are available “where the employer engages in conduct that is unfair or amounts to bad faith during the dismissal process by being untruthful, misleading or unduly insensitive, and the employee suffers damages as a consequence.”
The damages that an employee may suffer from a bad faith termination include mental distress damages. The Court of Appeal went on to find that mental distress includes, but is not limited to, diagnosable psychological conditions. Accordingly, employees can suffer mental distress damages without proving that they have a diagnosable condition. Instead, some evidence of mental distress beyond normal distress and hurt feelings is enough, In this case, the evidence of Mr. Krmpotic, his wife and his son, was that the employer’s conduct resulted in mental distress that was beyond the normal distress and hurt feelings, and the Court of Appeal upheld the aggravated damages award of the lower court.
Takeaway
Employers must continue to be careful to be honest and to not be unduly callous during termination meetings. In light of this decision and the new trend to record termination meetings, employers must approach termination meetings with extra caution. Courts will scrutinize an employer’s conduct in the termination meetings and will award significant penalties for conduct that it finds untruthful, misleading or unduly insensitive. The Krmpotic decision makes it easier for Courts to award aggravated damages to employees and as a result, employers should expect that many wrongful dismissal claims going forward will include a claim for aggravated damages.
For further information in relation to this decision, please contact Kyle Isherwood or Catherine Coulter of the Dentons Employment and Labour group.
[1] 2024 ONCA 332
