Employers beware: how a termination is conducted just as important as why

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Breaching the ESA’s post-termination payment schedule can now lead to moral and punitive damage awards in wrongful dismissal cases, as the recent Pohl v. Hudson’s Bay Company case described below demonstrates.  

 

There are specific rules for the payment of termination and/or severance pay under the Ontario Employment Standards Act, 2000 and its regulations (collectively the “ESA”).

  • Termination and/or severance pay must be paid to an employee either seven days after the employee’s employment is terminated or on the employee’s next regular pay date, whichever is later (the presumption and overriding rule).  
  • Only where an employer has an electronic or written (and signed) agreement of the employee or the approval of the Director of Employment Standards, Ministry of Labour, Immigration, Training and Skills Development may an employer may pay termination and/or severance pay in installments.
  • Any such installment plan cannot be for more than three years. 
  • If there is an installment plan and the employer fails to make a scheduled payment, all of the employee’s severance pay becomes due immediately (i.e., defaults back to the first and overriding rule).  

In the September 15, 2022 decision in Pohl v. Hudson’s Bay Company (2022 ONSC 5230) the Ontario Superior Court of Justice on summary judgment motions awarded Mr. Pohl, a 53-year-old sales manager with 28 years service to the Hudson’s Bay Company, a notice period of 24 months, which is the upper limit where there are not extraordinary circumstances, less the amounts already paid to him. 

As part of this award the Court held that Mr. Pohl is entitled to damages equal to the cost to him of replacing an equivalent basket of benefits and the employer’s contribution to his pension for 24 months, less the period of time for which he received post-termination benefits. The termination was part of a massive restructuring arising out of the pandemic. This part of the award is not surprising.  

What was surprising was the award of $45,000 for moral damages and $10,000 for punitive damages based on what is in part pretty common employer conduct. The conduct was:

  1. Mr. Pohl was walked out the door after his termination even though no misconduct was alleged – very standard conduct. This factor was relied on to justify the moral damages award, which I assess as a stretch.  
  2. HBC tried, unsuccessfully, to trick Mr. Pohl into accepting a lower rated position of associate lead and/or Customer Site Experience Manager that would have: (a) eliminated his ESA entitlements if it was found to be a reasonable offer of alternate employment (which it was not); and (b) reduced his common law entitlements to reasonable notice through mitigation (i.e., the employer gets dollar for dollar credit for the employee’s earnings in his new employment).  When Mr. Pohl did not accept a lower position, HBC attempted to argue a failure to mitigate, which the Court rejected. In relation to these facts, the Court asserts that they demonstrated that HBC sought to take advantage of Mr. Pohl at a moment of extreme vulnerability and supported an award of moral damages. This factor was relied on to justify the moral damages award – and I thought would have also been relied on to justify a punitive damages award.  
  3. HBC did not pay Mr. Pohl’s severance pay within the later of seven days or next payroll period as required by the ESA despite being repeatedly asked to, but rather paid it out on salary continuation for two months before finally paying out the balance as a lump sum. This factor was relied on to justify moral damages and punitive damage awards. In so holding the Court emphasized: “Compliance with the ESAis not optional. HBC did not require a direction from Mr. Pohl to comply with the law” and that its conduct “is entirely unacceptable. It is a large, sophisticated employer and there is no excuse for it not complying with its obligations under the ESA.” 
  4. Instead of issuing the ROE immediately HBC delayed providing it until the end of the salary continuation period and then made several mistakes in the form – also incredibly common employer conduct/misadventure. Statutorily employers are required to provide ROEs to employees within five business days of the termination of their employment. A lot of employers mistakenly believe they can avoid doing an ROE and/or a supplemental ROE (i.e., in the latter case where a settlement agreement for greater than the contractual or statutory minimum that is paid out in first instance is reached after the statutory payment is made). This factor was relied on to justify moral damages and punitive damage awards. 

Bottomline: How a termination is conducted is just as important as “why” it was conducted in determining employer liability.   

 

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