Employer Misconduct Results in Moral Damages

October 30, 2017

The Ontario Court of Appeal in Doyle v. Zochem Inc., 2017 ONCA 130 recently upheld an award of $60,000 in “moral damages” to a former employee for the bad faith manner in which she was dismissed. For employers, this case offers two crucial lessons regarding the importance of their conduct with respect to employment relations. First, complaints of workplace sexual harassment and discrimination must be taken seriously and handled appropriately. Second, the employer’s duty of good faith in the manner of employee dismissal does not come to an end when the employee has been terminated. Post-termination bad faith conduct by a former employer is a valid consideration in assessing an employee’s entitlement to “moral damages”.

The Facts

The employee had worked for the employer for nine years as a plant supervisor. She was the only female employee. For a number of years, the employee was sexually harassed by the male plant maintenance manager. Because of his role in the organization, the employee felt that she had to tolerate the manager’s behavior.

During a production meeting, the employee raised a series of safety concerns that she felt needed to be addressed. Unbeknownst to the employee, prior to this meeting, the decision had been made to terminate her employment. At the production meeting, the manager and another employee, who were both aware of the employee’s upcoming termination, responded to the concerns raised by the employee by demeaning and belittling her in front of her co-workers. The employee left the meeting in tears. Unaware that she was soon to be terminated, the employee filed a complaint of sexual harassment.

The employer’s investigation into the complaint involved a “cursory” conversation with the manager and no follow up with employee. The employer’s investigation was described by the Court as “insensitive to the point of cruelty”.

Approximately one week after having filed the complaint of sexual harassment, the employee was terminated without cause. The employee filed a wrongful dismissal action, seeking pay in lieu of notice and damages for the both sexual harassment and “moral damages” for the infliction of mental distress.

The Court assessed the employer’s conduct both before and after termination, including the following:

  • The employer’s cursory investigation and the insensitive dismissal of her sexual harassment complaint;
  • The employer’s disingenuous advice to the employee that her employment was not in jeopardy following the complaint even though the decision to terminate her employment had already been made;
  • The employer’s after-the-fact attempts to justify the termination on the grounds of poor performance; and
  • The denial of the employee’s short-term disability benefits (which were self-funded by the employer) despite having received medical documentation confirming that she qualified for benefits.

The evidence established that the above-noted conduct resulted in the employee suffering significant mental distress. The employee was awarded $25,000 for sexual harassment under the Human Rights Code, $60,000 for “moral damages”, 10 months’ pay in lieu of notice and $40,000 in costs.

What This Means for Employers

Employers have a duty of good faith in the manner of dismissal of employees. Moral damages, also known as aggravated damages, are awarded as a result of the manner of dismissal, where the employer “engages in conduct during the course of dismissal that is unfair or is in bad faith”.

The decision reinforces that both pre- and post-termination conduct of the employer will be considered, and may give rise to, an award of moral damages if the conduct is related to the manner of dismissal. In order to comply with their duty of good faith, employers should ensure that they engage in behavior that is respectful when carrying out the termination of an employee.

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