Employment & Labour

Landmark moral damages decision continues to make waves

By AdvocateDaily.com Staff

Almost a year on from a landmark ruling on moral and punitive damages, the reverberations continue to be felt, Toronto employment lawyer Natalie MacDonald tells AdvocateDaily.com.

MacDonald, principal of MacDonald & Associates, acted for the successful plaintiff in the case, in which a major retailer was ordered to pay a former high-ranking employee an extraordinarily high damage award of $750,000. That total included $250,000 for moral damages to cover aggravated damages and damages for mental distress, plus a further $500,000 in punitive damages.

“From what I’ve heard from lawyers in the field, the decision is cited in every plaintiff’s brief of documents when claiming extraordinary damages,” MacDonald says. “It’s still regarded as a huge case, and I think it will continue to be for some time.”

The decision was also a key factor in MacDonald’s recent recognition as Employment Lawyer of the Year at Thomson Reuters’ National HR Awards.

“I’m very excited and very humbled by the award,” MacDonald says. “It’s a huge honour.”

The case has its roots in the retailer’s recruitment of the woman in 2002. Following a string of promotions at the Canadian arm of the international giant, and recognition from the firm’s global head office in the U.S., she quickly became regarded as a rising star in the corporation’s boardroom, according to Ontario Superior Court Justice Michael Emery’s decision.

However, her fortunes changed in early 2010 when the president and CEO of the Canadian division told her she was being removed from her senior management position but was promised a new role. The president also downgraded her performance rating without telling her, the decision says.

She wasn’t formally terminated until November of that year, after being left to “twist in the wind” for 10 months, prompting the judge to label the company’s conduct “callous, high-handed, insensitive and reprehensible.”

He also condemned the company’s post-termination conduct, which included cutting off the woman’s salary and benefits after less than a year following her departure, despite previously agreeing to pay her for a full two years as part of a non-compete agreement to keep her out of work in the same industry.

After a review of the case law on point, Emery also confirmed that “the state of the law in Ontario does not require a plaintiff to lead medical evidence to make out a case for damages for mental distress in an employment context.”

Instead, he found a claim for aggravated or moral damages “should be available to a claimant on all of the evidence given, including the subjective evidence of the plaintiff,” so long as other required elements of the claim are present.

MacDonald says there are four main reasons why the case has made such an impact on the employment law bar.

  • The size of the award: “It’s the highest amount of extraordinary damages awarded in Canada in any employment law case,” MacDonald says. “A subset of that is the moral damages award, which was not well considered by courts before this decision. Courts would also shy away from awarding both moral and punitive damages, and when awards were made for moral damages, they were much lower than $250,000.”

  • Post-termination misconduct: “The decision firmly entrenched the idea in assessing moral damages that pre- and post-termination conduct will be considered,” MacDonald says. “Justice Emery split the award for moral damages accordingly, with $200,000 for pre-termination conduct and $50,000 for post-termination.”

  • Litigation misconduct: “This is the first case to consider the issue of litigation misconduct in the context of a bad faith dismissal,” she says. “That serves as a huge lesson for employers, who must realize that every step they take in the litigation process could be assessed by a court moving forward.”

  • Medical evidence: “This was the first decision of its kind to establish that medical evidence was not necessary to award moral damages,” MacDonald explains.

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