The Ontario Court of Appeal in Ruston v. Keddco Mfg (2011) Ltd., 2019 ONCA 125, upheld the lower court’s decision awarding over $1.1 million in damages in a wrongful dismissal action.
Mr. Ruston, the President of Keddco, was terminated after 11 years of service. At the termination meeting, Mr. Ruston was advised that his employment was terminated for cause because he had committed fraud, but no specifics were provided by Keddco.
In response to Mr. Ruston advising that he was going to consult a lawyer, Keddco threatened that it would counter-claim for fraud and that it would be very expensive for Mr. Ruston. Indeed, when Mr. Ruston commenced a wrongful dismissal action, Keddco filed a statement of defence making numerous allegations of cause and including a counter-claim for $1,700,000 in damages based in unjust enrichment, breach of fiduciary duty and civil fraud. At trial, Keddco led no evidence with respect to many of its allegations of cause and on the seventh day of trial dropped its damages claim from $1,700,000 to $1.
The trial judge held that Keddco’s counter claim was a strategy designed to intimidate Mr. Ruston to drop his claim and that the serious allegations Keddco made against Mr. Ruston were entirely unfounded. These findings led to damages of:
- 19 months’ pay in lieu of notice including bonus and benefits;
- aggravated or moral damages of $25,000;
- punitive damages of $100,000; and
- legal costs on a substantial indemnity basis amounting to over $540,000.
Court of Appeal
The Court of Appeal upheld the lower court’s award in its entirety. The Court of Appeal found that the trial judge gave careful and cogent reasons for awarding a 19-month notice period and expressly noted that the serious allegations of cause and refusal of Keddco to provide a reference letter limited Mr. Ruston’s ability to secure similar employment. On the issue of aggravated and punitive damages, the Court of Appeal found that the trial judge did not err in awarding both damages because they serve different purposes. Aggravated damages aim to compensate the employee for heightened damages caused by the employer's breach of its duty of good faith and fair dealing in the manner of dismissal, while punitive damages punish and denunciate inappropriate or unfair conduct. Similarly, although the costs award was unusually high, the award was fair and reasonable in the circumstances of the case.
This decision is an important reminder of the employer’s duty of good faith and fair dealing.
When alleging just cause, employers should not: (i) allege cause without a reasonable basis and evidence to support the allegation of cause; or (ii) threaten cause or a counterclaim to intimidate the employee or dissuade the employee from seeking legal counsel.
These tactics rarely result in employees not pursuing legal action or favourable settlements but may, as this case illustrates, result in significant damage awards against the employer.
If you have any questions, please contact a member of Labour, Employment & Human Rights Group.
Nicole practises in all areas of labour and employment law, including advising clients on wrongful dismissal, labour relations, human rights and privacy issues.
Nicole has represented clients in matters involving labour ...
Deborah practises labour and employment law, advising clients on a range of matters including wrongful dismissal, employment standards, business immigration, labour relations, and human rights issues.
Deborah attended law ...
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