As I outlined in a previous article, When a Termination Becomes a Wrongful Dismissal, when an employee is terminated without good legal reason, the employee will generally be entitled to damages for wrongful dismissal. An assessment of these damages would include considering the employee’s age, tenure, job responsibilities and the prospects of future employment.
However, courts also have the authority to award aggravated or punitive damages in certain circumstances. A recent BC Supreme Court case provides a very good example of when this type of compensation may apply.
Mr. Lau is 30 years old and was an employee of major Canadian bank from 2007 until 2012. In 2011 Mr. Lau became licensed to sell mutual funds and worked as an account manager. By all accounts, Mr. Lau appears to have been an exceptional employee.
In January 2012, an elderly client of the bank made an appointment with Mr. Lau to discuss a maturing GIC. Upon reviewing the client’s file, Mr. Lau contacted Mr. Tse, one of the bank’s Investment Retirement Planners, to be included in the client meeting and to advise the client on investment options. According to Mr. Lau, he and Mr. Tse met with the client in his office, where with the client’s consent, they transferred some of her investments into short-term mutual funds.
Four days later, the client returned to the bank, stating that she was uncomfortable with the new investments. She ultimately filed a complaint against Mr. Lau, stating that she didn’t understand what she was buying and that there was no one else involved in their meeting (i.e. no Retirement Planner).
The bank conducted an internal investigation where it reviewed computer activity for Mr. Lau and Mr. Tse, watched security video footage and read internal emails. Remarkably, the investigator did not interview Mr. Lau, Mr. Tse or the client, but nonetheless came to the conclusion that Mr. Tse did not attend the meeting, and that Mr. Lau fabricated Mr. Tse’s involvement so as to benefit from a sales commission. The investigation also found that Mr. Lau improperly recorded the transaction, an error which Mr. Lau took full responsibility for.
Relying on the investigation report, the terminated Mr. Lau. According to the Bank’s court filings:
The Plaintiff’s employment was terminated for cause as a result of falsification of bank records and failing to tell the truth when questioned regarding an interaction with a client of [the bank]. The Plaintiff’s actions were contrary to [bank]’s Code of Conduct, and the [bank] had lost confidence in the Plaintiff’s honesty, integrity and trustworthiness.
Following the termination, the bank filed public records with the BC Securities Commission, stating that Mr. Lau was terminated for cause as a result of fabricating bank records and for dishonesty, essentially making him unemployable as a mutual fund dealer.
The Court Action
Not surprisingly, Mr. Lau filed a civil claim against his former employer for his wrongful dismissal. Following a lengthy trial, the judge found that Mr. Lau did not lie about the client meeting and that he took responsibility for the filing errors. The bank’s claim that Mr. Lau was terminated for just cause was rejected, and Mr. Lau was awarded the equivalent of 9 months severance for his wrongful termination. The judge specifically noted that the BC Securities Commission filing and the challenges that Mr. Lau faced in finding comparable employment as a result were important factors in arriving at the notice period.
Apart from the severance awarded to Mr. Lau, what makes this case interesting was the court’s award of aggravated damages against the bank for breach of their obligation of good faith and fair dealing. In citing the Supreme Court of Canada in Honda Canada Inc. v. Keays:
If the employee can prove that the manner of dismissal caused mental distress that was in the contemplation of the parties, those damages will be awarded not through an arbitrary extension of the notice period, but through an award that reflects the actual damages
In awarding Mr. Lau $30,000 for aggravated damages, the court noted that the bank failed to meet its implied obligations of good faith and fair dealing, and that because Mr. Lau was primarily terminated on the basis of a false accusation, it is now virtually impossible for him to find employment at another financial institution. Of particular interest, the court accepted that Mr. Lau had suffered ‘mental distress’ without any medical evidence.
This case can certainly be viewed as a warning for companies conducting investigations into allegations of employee misconduct. While it may be tempting to cut corners in the interests of time or money, there’s no excuse for incomplete or negligent investigations.
The results are telling. Had Mr. Lau been terminated in good faith, a 30-year-old with 5 years tenure in a non-specialized, non-management position may be entitled to 4-5 months severance. However, as a result of his employer’s bad faith conduct in terminating him, he was awarded roughly the equivalent to 17 months salary in pay-in-lieu of notice and aggravated damages.