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Employment - Honest Performance

. Krmpotic v. Thunder Bay Electronics Limited

In Krmpotic v. Thunder Bay Electronics Limited (Ont CA, 2024) the Ontario Court of Appeal considered aggravated damages, mental distress damages and the duty of honest performance in the employment law context:
AGGRAVATED DAMAGES

[29] The appellants submit that the trial judge erred in awarding the respondent aggravated damages. They say that, following Honda Canada Inc. v. Keays, 2008 SCC 39, [2008] 2 S.C.R. 362, the trial judge could award aggravated damages only if there was evidence of both mental distress – that is, distress beyond the normal distress and hurt feelings resulting from dismissal – and that the mental distress was caused by the manner of dismissal. Accordingly, they contend, not only did the trial judge err in considering mental distress and the manner of dismissal separately, but also that, once he rejected the respondent’s claim for damages for mental distress, the trial judge was precluded in law from making an award for aggravated damages.

[30] I do not accept the appellants’ submission. In my view, it reflects an unduly narrow view of the employer’s duty of good faith during the termination process and the meaning of mental distress in that context. Further, I see no error in the trial judge’s determination that Mr. Caron’s conduct in the termination meeting breached that duty and caused Mr. Krmpotic harm deserving of compensation.

[31] The principles governing the employer’s obligations on termination are clearly articulated in a series of Supreme Court of Canada decisions that include Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (SCC), [1997] 3 S.C.R. 701, at para. 98; Keays, at para. 58; and Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26, [2020] 3 S.C.R. 64, at paras. 40, 44. Those principles can be summarised as follows.

[32] The duty of honest performance applies to all contracts, including employment contracts. It encompasses the employer’s duty to exercise good faith during the course of dismissal from employment. Breach of the duty of good faith occurs through conduct that is unfair or made in bad faith, as for example, by being “untruthful, misleading or unduly insensitive”. Callous or insensitive conduct in the manner of dismissal is a breach of the duty to exercise good faith.

[33] While the normal distress and hurt feelings resulting from dismissal are not compensable, aggravated damages are available where the employer engages in conduct that is unfair or amounts to bad faith during the dismissal process by being untruthful, misleading, or unduly insensitive, and the employee suffers damages as a consequence. As the trial judge noted, in Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419, 120 O.R. (3d) 481, at para. 66, this court confirmed that aggravated damages compensate an employee for the additional harm suffered because of the employer’s conduct.

[34] Mental distress is a broad concept. It includes a diagnosable psychological condition arising from the manner of dismissal but is not limited to that. There is a spectrum along which a person can suffer mental distress as a result of the manner of dismissal. At one end is the person who suffers the normal distress and hurt feelings resulting from dismissal, which are not compensable in damages. At the other end of the spectrum is the person who suffers from a diagnosable psychological condition as a result of the manner of dismissal. In between those two end points, there is a spectrum along which the manner of dismissal has caused mental distress that does not reach the level of a diagnosable psychological injury.

[35] In my view, on a full reading of his reasons, the trial judge approached the issue of mental distress in that fashion. The fact that Mr. Krmpotic had not established, through medical evidence, that he had suffered a diagnosable psychological injury, was not the end of a consideration of the issue of mental distress damages. As the trial judge correctly understood, he had to go further and determine whether (1) the appellants’ conduct, during the course of termination amounted to a breach of their duty of honest performance; and (2), if so, whether Mr. Krmpotic suffered harm – beyond the normal distress and hurt feelings arising from dismissal - as a result of that breach. The trial judge found in Mr. Krmpotic’s favour on both matters: the appellants had engaged in conduct that amounted to bad faith during the dismissal process; and, Mr. Krmpotic suffered harm beyond the normal distress and hurt feelings that result from dismissal. These findings were fully open to the trial judge.

[36] The trial judge found that Mr. Caron breached the duty of good faith in the manner of dismissal in a number of ways. Mr. Caron claimed that Mr. Krmpotic had been dismissed for financial reasons and that the appellants’ financial statements would support that claim. However, he refused to produce the financial statements. Further, while the trial judge found that Mr. Caron was not directly untruthful with Mr. Krmpotic during the termination meeting, he had “no hesitation” in finding that Mr. Caron was neither candid nor forthright. He found that Mr. Krmpotic’s employment was terminated because his physical limitations restricted him from continuing to perform the wide array of job duties and responsibilities that he had performed for the appellants over the previous 29 years. He described Mr. Caron’s conduct during the termination process as the antithesis of what is required by the duty of good faith in dismissal. Mr. Krmpotic was terminated within two hours of returning to work after his back surgery. During the termination meeting, instead of being candid, reasonable, honest, and forthright, Mr. Caron engaged in conduct that was untruthful, misleading, and unduly insensitive.

[37] Reading the trial judge’s reasons as a whole, it is clear that he accepted that as a result of the manner of dismissal, Mr. Krmpotic was plagued by anxiety, depression, fear, poor sleep, frustration, and feelings of helplessness. That is, he found that Mr. Krmpotic suffered harm beyond the normal distress and hurt feelings resulting from dismissal.

[38] Accordingly, I see no basis for appellate interference with the trial judge’s determination of this issue.



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Last modified: 15-05-24
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