Hicks Morley | Raising the Bar

As we welcome the holidays, we thought it would be a perfect time to share our latest edition of Raising the Bar. We hope you enjoy it and have some well-deserved time off over the holiday break.

In this issue, we review i) the threshold Ontario courts expect employers to meet in justifying terminations for just cause, ii) circumstances which may warrant a reasonable notice period award in excess of 24 months, and iii) trends regarding awards of bad faith, punitive and aggravated damages. We then shine a light on recent case law developments regarding anti-SLAPP motions in the employment law context.

Special thanks to our colleagues Eleanor Vaughan, Diane Harbin and Kelly Brennan for their contributions to this issue. And thanks as always to our great staff in Knowledge Management and Business Development & Marketing.

Part 1 – Cases You Need to Know About

Just Cause Terminations

Courts continue to impose a high threshold on employers to establish just cause for terminations. The two decisions discussed below are helpful to employers as they provide a summary of the principles of law relating to terminations for just cause. They also set out the types of actions that may amount to a finding of “just cause” under the common law and the standard of “wilful misconduct” set out in the Employment Standards Act, 2000 (ESA).

In Park v. Costco Wholesale Canada Ltd., the plaintiff had worked for Costco for approximately 20 years. He was an assistant buyer at the time of his termination. The plaintiff built a website which allowed users within the department to easily share files with one another. There was no dispute that the website was Costco property.

On two separate occasions, the plaintiff deliberately deleted the website, asserting he did so because he was angry with management’s lack of communication with respect to its intention to make use of the website. In the course of deleting the website, he also engaged in a series of emails that were insubordinate and disrespectful towards management. The plaintiff’s employment was terminated for just cause.

The Ontario Superior Court of Justice (Court) addressed the distinction between just cause and wilful misconduct under the ESA. The Court noted that the test for wilful misconduct is a higher standard and requires the employer to demonstrate that the employee deliberately and intentionally engaged in misconduct known to be serious. Careless, thoughtless, heedless or inadvertent conduct, no matter how serious, does not meet the standard of wilful misconduct.

The Court found the plaintiff’s misconduct met the standard of wilful misconduct as he intentionally and deliberately deleted Costco’s website twice, stating he was mad at his employer and wanted to ensure the website was “gone for good.” In addition, the plaintiff’s insubordinate emails were written and sent intentionally, in violation of his employment agreement. The Court noted the plaintiff was, colloquially, “being bad on purpose.”

Accordingly, the Court held that Costco’s termination of the plaintiff’s employment for just cause was a proportionate response to his misconduct, and the action was dismissed with costs in favour of Costco.

A similar result was reached in 2025925 Ontario Inc. v Maramusche Holdings Inc. The main issue before the Court was whether there was just cause for the termination of the plaintiff’s employment. The plaintiff had acted as the president and director of one of the corporations involved in the litigation and allegedly misappropriated and embezzled corporate funds.

More specifically, the plaintiff caused the corporation to incur costs for labour and supplies for his own personal benefit when he took customers’ cash payments and did not reimburse the corporation for its costs. The Court concluded the plaintiff improperly received approximately $295,000 in cash payments. In addition, the plaintiff redirected rebates in the amount of approximately $175,000 to himself instead of to the corporation and its shareholders. The plaintiff did not disclose the cash jobs he was completing or the redirection of rebates to the other shareholders and officers.

The Court found that the plaintiff breached his fiduciary duties to the corporation by completing cash jobs and directing rebates to himself. When assessing the nature and extent of the misconduct, the Court stated the plaintiff’s actions were intentional and numerous and occurred over a long period of time. The Court weighed the proportionality of the plaintiff’s misconduct, concluding that his actions were in conflict with the best interests of the corporation and could not be reconciled with his fiduciary obligations to the corporation.

The Court determined that the employment relationship was irreparable and held that the corporation had just cause to dismiss the plaintiff from his employment. The Court ordered the plaintiff to repay to the corporation the several hundred thousand dollars he had redirected to himself and ordered the plaintiff to pay punitive damages.

It is clear from these decisions that courts are willing to uphold terminations for just cause when the employee’s misconduct goes to the heart of the employment relationship and the employment relationship cannot be repaired.

Extended Notice Periods

In two recent decisions, the Court of Appeal for Ontario upheld awards of reasonable notice periods in excess of 24 months. The Court of Appeal reiterated that while there is no “cap” on notice periods, exceeding 24 months’ notice should be done only when there are exceptional circumstances to necessitate such a notice period.

The two decisions discussed below illustrate that exceptionally long service in a specialized role geared towards the employer’s operations may, depending on the facts, justify exceeding the 24-month cap when it comes to reasonable notice.

In Milwid v. IBM Canada Ltd., the Court of Appeal upheld a 27-month notice period, which included a one-month bump for COVID-19’s impact on the plaintiff’s mitigation opportunities. The plaintiff had approximately 38 years of service at the time his employment was terminated. This service formed the vast majority of his working life and was inclusive of all his working experience in Canada. The plaintiff was 62 years old at the time his employment was terminated, and he held a managerial role which was just below the employer’s executive team. His position was considered highly “technical and specialized” and geared towards the employer’s operations.

The Court of Appeal emphasized the motion judge’s finding that the specialization of the plaintiff’s skill set to the employer’s operations and products hindered how transferable his work experience and skills were. The Court held that this degree of specialization was an exceptional circumstance not covered by the Bardal factors which warranted a notice period exceeding 24 months.

The Court also held that the one additional month awarded by the motion judge for the impact of the COVID-19 pandemic was supported by the evidence. The plaintiff’s employment was terminated two months into the pandemic, when Ontario was in a state of emergency and a province-wide shutdown.

In Lynch v. Avaya Canada Corporation, the Court of Appeal upheld a 30-month notice period. The plaintiff had 38.5 years of service, was nearing his 64^th birthday when his employment was terminated and had a position which was “unique and specialized” to the employer and its operational needs.

The Court pointed to the specialized and unique nature of the plaintiff’s skill set, his length of employment, and that he was a “key performer” who developed one or two patents each year. In addition, the plaintiff had spent nearly the last 40 years in Belleville, Ontario, where there were likely to be fewer comparable positions for the plaintiff.

Both decisions make clear that in order to exceed a 24-month notice period, there must be exceptional circumstances which warrant such an award. In both cases, exceptionally long service in positions which were specialized to the employers’ operations justified exceeding the 24-month “cap.”

Trends in Bad Faith, Punitive and Aggravated Damages

In addition to damages for wrongful dismissal, employers may also be ordered to pay dismissed employees aggravated and/or punitive damages in appropriate circumstances.

Aggravated damages may arise where the employer engages in bad faith conduct in the manner of dismissal. To recover such damages, an employee must prove that, due to the manner of dismissal, they suffered mental distress which was in the contemplation of the parties when they entered into the employment contract.

Whereas aggravated damages are compensatory, punitive damages are intended to punish a defendant for conduct that is reprehensible and a marked departure from the ordinary standards of decent behaviour. Punitive damages are reserved for exceptional cases where an employer engaged in conduct that was harsh, vindictive, reprehensible or malicious. Such damages require an independent actionable wrong on the part of the defendant and should not be based on the same conduct that gives rise to aggravated damages.

Two Ontario cases of note highlight the types of improper employer conduct that will warrant significant punitive and aggravated damages to terminated employees.

Aggravated Damages

In Humphrey v. Mene Inc., the Court of Appeal for Ontario upheld an award of bad faith damages in the amount of $50,000. The respondent had approximately three years’ service and was employed as the chief operating officer at the time of her dismissal. She was terminated, allegedly for just cause, shortly after requesting a raise. The employer later withdrew the formal defence of just cause, though it continued to insist through the proceedings that performance issues justified the termination.

On a motion for summary judgment, the motion judge found the employer engaged in bad faith conduct by:

terminating the respondent’s employment for alleged performance issues shortly after she requested a raise
setting the respondent up to fail in her position
notifying clients and other employees of her dismissal before informing the respondent herself
continuing to insist it had just cause for her dismissal, despite being unable to provide supporting documentation

The Court of Appeal found there was no basis to interfere with the motion judge’s decision to award the respondent aggravated damages.

Punitive Damages

In Chalmers v. Airways Transit Service Ltd. and Badder Capital Group Ltd., the Ontario Superior Court of Justice awarded a plaintiff punitive damages in the amount of $30,000. The employer, which ran an airport shuttle service, laid off all of its employees, including the plaintiff, as a result of the COVID-19 pandemic. While the rest of the management team had been recalled to work as of June 2020, the plaintiff was never recalled, and eventually commenced a claim seeking damages for constructive dismissal as well as punitive and aggravated damages.

On a motion for summary judgment, the Court concluded the plaintiff had been constructively dismissed. Faced with conflicting lines of case law (which we discussed in a previous edition of Raising the Bar), the Court found O. Reg. 228/20 did not preclude an employee from pursuing an action at common law due to a COVID-19 pandemic-related layoff during the relevant statutorily defined period. In any event, the plaintiff’s layoff was neither temporary nor for reasons related to COVID-19. Almost three years had passed since the plaintiff had been laid off and the evidence indicated the employer simply believed the plaintiff earned too high a salary to recall him to work. The Court awarded the plaintiff, a 53-year-old vice-president with 28 years’ service, a total of 25 months’ notice, inclusive of a one-month “COVID bump,” as damages for constructive dismissal.

The Court declined to award the plaintiff aggravated damages as there was no evidence he had suffered mental anguish over and above the ordinary distress and hurt feelings which result from a dismissal. The Court did, however, find the manner in which the employer had treated him was sufficiently harsh and outrageous to merit an award of punitive damages. Specifically, the Court found the employer had used the COVID-19 pandemic as an “excuse” not to recall the plaintiff. The employer had been unresponsive to the plaintiff’s requests to return to work, for updates on his employment status or for payment of his outstanding statutory entitlements including vacation pay. The Court also found the employer’s conduct in the course of litigation was malicious, oppressive and high-handed, specifically in refusing to consent to an adjournment after it was late in serving its summary judgment materials.

The cases discussed above highlight the high threshold required of employers in establishing just cause for termination, the exceptional circumstances that may give rise to notice period awards in excess of 24 months, and recent trends in bad faith, aggravated, and punitive damages. If you have any questions regarding how these important issues may impact your workplace, we are happy to help.

Part 2 – Shine a Light on…SLAPPs and Anti-SLAPP Motions

Strategic lawsuits against public participation (SLAPPs) are actions that seek to suppress expression on matters of public interest. Employers may find themselves in situations where they have to defend an anti-SLAPP motion or are considering bringing one. In this section, we highlight some of the key features of an anti-SLAPP motion and review some recent case law developments from the appellate courts.

What Is a SLAPP? What Is an Anti-SLAPP Motion?

The defining feature of a SLAPP, as expressed by the Supreme Court of Canada in 1704604 Ontario Ltd. v. Pointes Protection Association, is that the primary purpose of the action is silencing contrary viewpoints as opposed to redressing a legal wrong.

Ontario has anti-SLAPP legislation which creates a procedure to screen out SLAPPs at an early stage in the litigation process. Under s. 137.1 of the Courts of Justice Act, a defendant to a proceeding can bring a motion seeking to dismiss the action as a SLAPP.

A motion under s. 137.1 has shifting burdens. First, the moving party must prove to the court that the proceeding arises from an expression by the moving party that relates to a matter of public interest.

If the moving party discharges this burden, s. 137.1(4) provides that the proceeding shall continue if the responding party can establish all of the following:

The proceeding has substantial merit: It must be proven there are grounds to believe that the underlying claim is legally tenable and supported by evidence that is reasonably capable of belief such that the claim can be said to have a real prospect of success.
The moving party has no valid defence: It must be shown there are grounds to believe that any defences put forward by the moving party have no real prospect of success.
The public interest in permitting the proceeding to continue outweighs the public interest in protecting that expression: The respondent must establish (a) it likely has suffered or will suffer harm caused by the expression in question and (b) the corresponding public interest in allowing the underlying proceeding to continue outweighs the negative effects on expression and public participation. As discussed by the Supreme Court in Pointes Protection, this weighing exercise is the crux of the analysis and allows courts to assess “what is really going on” in a particular case.

Employment Litigation and Anti-SLAPP Motions

In Boyer v. Callidus Capital Corporation, the plaintiff alleged constructive dismissal due to a toxic work environment. His employer counterclaimed for $150 million alleging the plaintiff breached his fiduciary duties during his employment. The plaintiff brought a motion to dismiss the counterclaim as a SLAPP.

The motion judge dismissed the motion on the basis that the plaintiff had not discharged his initial burden of establishing that the counterclaim arose from an expression of public interest. In particular, the motion judge held the employer’s counterclaim did not “arise from” the expression at issue (i.e., the allegations of a toxic workplace).

The Court of Appeal for Ontario overturned this decision and dismissed the counterclaim as a SLAPP. The Court of Appeal considered the context in which the counterclaim was brought and found the counterclaim did “arise from” the expression at issue. The Court of Appeal relied on the fact the counterclaim was based on information the employer had known about for years and was brought only once allegations of a toxic work environment were made public.

The Court of Appeal then found the employer failed to meet any of its burdens under s. 137.1(4). The claim did not have substantial merit because the employer failed to plead the required elements at law for breach of fiduciary duty or any facts to support the counterclaim. The employer also failed to demonstrate there were grounds to believe the defences put in play had no prospect of success. In its weighing analysis, the Court of Appeal found “what was really going on” was “an attempt to silence a former employee seeking recovery in his wrongful dismissal claim and create a chilling effect for other employees.”

In contrast, the Court of Appeal dismissed an anti-SLAPP motion in 2110120 Ontario Inc. v. Buttar. The appellants in this case had worked for the respondent, a trucking company, as drivers. The appellants had brought statutory complaints under the Canada Labour Code, alleging they were entitled to be paid as employees rather than independent contractors.

While these proceedings were ongoing, the appellants, along with community groups, organized rallies at the respondent’s place of business and in front of the residence of one of the personal respondents—an owner of the company. During these rallies, the owner was referred to as a “wage thief.” The respondents commenced an action claiming, among other things, damages for defamation. The appellants brought an anti-SLAPP motion.

The motion judge dismissed the anti-SLAPP motion and allowed the action to continue. He found the expressions in issue (e.g., referring to the respondent as a “wage thief”) were attempts to circumvent the ongoing legal process and force the company to pay the appellants. The motion judge concluded the proceedings did not arise from expressions relating to “a matter of public interest.”

The Court of Appeal found the expression in question did relate to the public interest. The Court of Appeal explained the expressions were about the business practices of the company and its principals and whether they were engaging in unfair, exploitative or illegal labour practices. When viewed objectively, there was public interest in these practices and by extension other businesses engaging vulnerable workers.

However, the Court of Appeal found the respondents satisfied their burden under s. 137.1(4). The Court of Appeal reasoned that statements such as “wage thief” supported the necessary elements of a defamation claim as they suggested the company and its owner engaged in the practice of not paying their drivers for their work. Additionally, the Court of Appeal found there was reason to believe the appellants’ defences of justification, fair comment and responsible communication on a matter of public interest would not succeed.

Finally, the Court of Appeal found the public interest in permitting the proceeding to continue outweighed the public interest in protecting that expression. The Court of Appeal explained that while the expression in question related to a matter of public interest, employing personal attacks and making allegations of criminality lowered the public interest in protecting the expression. “What was really going on,” in the Court of Appeal’s view, was the company commenced an action for the valid reasons of stopping the expressions and obtaining compensation for the harm caused.

These cases demonstrate the importance of the weighing analysis in an anti-SLAPP motion. In deciding whether to dismiss an action as a SLAPP, courts will look at the circumstances of the case before them to consider if the purpose of the action in question is to right a legal wrong or merely to silence an individual’s expression.

Anti-SLAPP motions are complex and will continue to play an increasingly important role within the employment litigation context. We are here to ensure that employers make informed decisions when deciding to bring an anti-SLAPP motion, and to provide strategic advice and advocacy for employers faced with responding to such motions.

The article in this client update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Hicks Morley Hamilton Stewart Storie LLP and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Hicks Morley Hamilton Stewart Storie LLP. ©

Raising the Bar

Raising the Bar – Year-End Edition