In the context of an employment relationship there are circumstances in which a “hardball” approach is not only recommended but warranted to protect an employer’s rights and interests. However, playing “hardball” purely for strategic or improper purposes is apt to fully expose an employer to substantial liability, costs and even reputational damage.
A recent decision by the Ontario Court of Appeal provides an insightful reminder that “hardball for hardball’s sake” is a dangerous game for an employer to play (Ruston v. Keddco Mfg. (2011) Ltd., 2019 (ONCA 125)).
Central to the case, was Keddco’s duty of good faith and fair dealing in terminating Ruston’s employment. Every employer is under a legal duty to act in good faith in the manner of and reasons for the termination of an employee. Generally speaking, that required Keddco to conduct itself in a truthful, candid, honest and reasonably sensitive manner.
Keddco did none of that.
During the termination meeting, Keddco sought to threaten and intimidate Ruston by alleging he engaged in gross misconduct as if to justify the summary termination of his employment. At the same time, Keddco refused to provide him with details or particulars of the alleged misconduct depriving him of an opportunity to defend himself. Ruston was told that if he retained a lawyer “things would get expensive”.
Again, in attempt to threaten and intimidate Ruston, as a litigation strategy Keddco asserted a “just cause” defence and filed a counterclaim against him seeking damages in excess of $1.5 million. The facts alleged by Keddco in support of its defence and counterclaim were entirely unsubstantiated at trial. It became clear that Keddco’s litigation strategy was solely intended to force Ruston into submission by causing him to suffer anxiety and mental distress.
Keddco’s conduct, through litigation and at trial, caused delay and put Ruston to extra expense. For example, he was forced to retain expert evidence to respond to certain allegations of misconduct at a cost of $30,000.00. The unsubstantiated “just cause” defence and counterclaim served to lengthen and complicate the legal proceedings unnecessarily.
The Final Score
Not surprisingly, Ruston won big.
The wrongful dismissal damages totalled in excess of $480,000.00. Based upon Ruston’s age (54), length of service (11 years), position (President) and other factors his common law notice entitlement was assessed at 19 months.
In addition, Ruston was awarded:
- $100,000.00 in punitive damages intended to punish Keddco and deter similar conduct in the future; and
- $25,000.00 in moral damages intended to compensate Ruston for mental distress caused by Keddco’s bad faith conduct.
Ruston also received approximately $550,000.00 in legal costs after an 11 day trial and a further $35,000.00 in costs on Keddco’s unsuccessful appeal.
Not only was Keddco liable to Ruston for damages and costs in excess of $1.1 million, it incurred its own legal costs and considerable reputational damage along the way. Given the unprecedented damages and costs awarded the case garnered significant media attention and legal discussions.
What lesson can employers learn from this case? There are several.
- Be mindful of the duty of good faith and fair dealing. The rules of the game legally require employers to act in a truthful, candid, honest and sensitive manner in terminating an employee
- Don’t run interference with an employee’s right to seek advice
- Don’t threaten or intimidate an employee in the manner of termination for some improper purpose
- Don’t allege “just cause” (gross misconduct) lightly. If you do not have cogent and strong evidence to prove the misconduct you are guaranteed to swing and miss
- It’s off base to use a counterclaim for strategic purposes
Most importantly, seek and rely upon sound employment law advice to assess whether playing “hardball” is warranted in your circumstances.
Disclaimer: Information made available in this article is provided for general information purposes only and is provided without representation for its accuracy or completeness. It is not legal advice and should not be relied upon. You should not take any action or fail to take any action based on the information set out in this article or on this website. Consult a lawyer at Sullivan Mahoney LLP and seek professional legal advice tailored to your unique situation.