Amy Frankel - Forte Law

Employment Law, Layoff, Wrongful Dismissal

BC Court Awards Punitive Damages to Employee based on Errors in Employer’s Termination Letter

The fine print matters in termination letters, even in mass layoffs. The wrongful dismissal case of Moffatt v. Prospera Credit Union, 2021 BCSC 2463 is a cautionary tale for employers in British Columbia. In Moffatt, the Court took the highly unusual step of ordering the employer to pay punitive damages for mistakes in its termination letter. In doing so, the Court recognized the vulnerability of recently terminated employees:

This is a situation concerning recently terminated employees who are potentially significantly vulnerable, and in distress. The Defendant’s lack of attention to detail in the termination letter, especially where the errors fall so clearly in their favour, is unacceptable, and draws an award of punitive damages.

The errors in the termination letter included: (1) an offer of two weeks pay pursuant to the Employment Standards Act which was less than the three months the employee was entitled to receive based on her employment contract, and (2) a doubling of the non-solicitation period of the employee’s contract. The Court also noted that the employer instructed the employee to sign a release of claims within one week.

Punitive damages are rarely awarded in wrongful dismissal cases. The Supreme Court of Canada has stated that “conduct meriting punitive damages awards must be ‘harsh, vindictive, reprehensible and malicious’, as well as ‘extreme in its nature and such that by any reasonable standard it is deserving of full condemnation and punishment.’” Honda Canada Inc. v. Keays, 2008 SCC 39.

In Moffatt, the employer argued that the errors were not intentional, harsh, vindictive, reprehensible or malicious, but were an oversight that occurred while preparing over 100 termination letters as part of a reorganization. Basically, the argument was that it was just a mistake. In rejecting this argument, the Court stated:

[T]here is an obligation on an employer terminating an employee in such circumstances to act in good faith and reasonably. A ‘cookie cutter’ termination letter drafted without regarding to the individual circumstances of each employee falls short of the standard required.

* * *

The volume of termination letters an employer issues does not lessen the obligation to ensure they are correct. There is no volume discount on correctness for termination letters.

The employer also argued that it was willing to correct the errors when the employee’s lawyer pointed them out. The Court refused to let the employer off the hook:

The Defendant’s argument highlights the crux of the problem. In this instance, the Plaintiff hired a lawyer. Had she not, these errors may not have been discovered and corrected. Given the circumstances of a termination, and its highly emotionally charged nature, it is equally as likely that the plaintiff, or others in her position, could have simply signed the termination letter.

The Court acknowledged the test for punitive damages from Honda but noted that punitive damages may also promote the goals of deterrence and denunciation. The Court went on to award punitive damages for the “purposes of deterrence and denunciation” in the amount equivalent to two-and-a-half months’ salary which was the amount the employee would have lost if she had signed the termination letter. While not calculated in the decision, this appears to be around $7,500 in punitive damages. The punitive damages were in addition to an award of 3 months’ pay in lieu of notice.

Lesson for Employers: Termination letters should be prepared meticulously with careful reference to the employee’s employment agreement and the requirements of the Employment Standards Act. Even innocent mistakes can be costly.

Lessons for Employees: Do not take an employer’s termination letter at face value. Refer to your employment contract and the Employment Standards Act before signing a termination letter or release and have your termination package reviewed by an experienced employment lawyer.

This blog is not intended to serve as legal advice, and only provides general information. Every situation must be considered on its own facts. Need legal advice? Contact us by phone at 604 535-7063 or email [email protected].

Covid-19

New COVID-19 Paid Sick Days Law in British Columbia

Effective immediately, employees in British Columbia are entitled to up to three paid sick days if they are unable to work for reasons related to COVID-19. Before this change, there was no legal requirement for employers to offer paid sick time. Employees are entitled to paid sick leave if:

the employee has been diagnosed with COVID-19 and is acting in accordance with an order or medical advice;
the employee is in quarantine or self-isolation in accordance with public health guidelines or orders; or
the employer has directed the employee not to work due to concern about the employee’s exposure to others.

Part-time and full-time employees are entitled to this paid leave between May 20, 2021, and December 31, 2021, regardless of how long they have been employed.

Employers are responsible for paying employees their regular wages for these paid sick days. If employers do not have an existing paid sick leave program, the provincial government will reimburse them up to $200 per employee per day. Reimbursement will be administered by WorkSafe BC and will not impact WorkSafe BC’s employer premiums or its accident fund. Details on the reimbursement program and how to register are expected to be available sometime in June.

This paid sick day law was enacted as a temporary amendment to the Employment Standards Act, 1996 (the “ESA”) and can be found at section 52.121. The three paid sick days are in addition to the three unpaid sick days that are available to employees for COVID-19 related reasons.

COVID-19 Paid Vaccination Leave

British Columbia also recently enacted a paid vaccination leave that entitles employees to up to three hours of paid time off to be vaccinated against COVID-19. This paid leave is retroactive to April 19, 2021. Employees are entitled to an additional three hours of paid time off for a second vaccine dose.

Permanent Paid Sick Days Starting January 1, 2022

Also on May 20, 2021, the ESA was amended to provide BC employees who are unable to work due to illness or injury with permanent paid sick days. This permanent paid sick leave program will start on January 1, 2022. The bill amending the ESA does not state the number of paid sick days that will be available to employees. The government is expected to announce this after consultation with stakeholders.

Employment Law, Legal Advice

Equity, Stock Options, RSUs – The Basics

So, your employer granted you stock options, restricted share units (RSUs), phantom stock options or some other kind equity compensation. Great news, right? Or is it? Over the years, countless employees have confided in me that they aren’t exactly sure what they have received, what the value is, or how to realize the value. If this sounds familiar, read on!

Understand the Jargon

Equity compensation comes with a vocabulary all its own – vesting, exercise price, tranches, stock options, restricted shares, phantom stock, equity plan, to name a few such terms. What are vested options vs. unvested options? What is a stock option vs. stock? A restricted share unit vs. a share? These words and concepts can be the difference between a big dollar equity payout and zero. If you don’t know the jargon, it will be impossible to understand what you’ve been granted, so you need do some research.

Ask Questions

All employees are entitled to understand their compensation packages. Unfortunately, when it comes to the daunting landscape of equity compensation, it can be hard to know what questions to ask, or even whom to ask. And when equity compensation is part of a new hire package, many are understandably reluctant to ask for details. As a starting point, ask questions of the company’s human resources department or the recruiter who hired you. If they can’t help you, find someone who can. Always ask for copies of documents that are referenced in the compensation letter such as the underlying stock option or equity “plan”, and the “standard equity grant agreement.” The small print really can make all the difference.

What Happens if You Leave the Company?

Equity compensation is generally used as a retention tool, sometimes referred to as “golden handcuffs” to keep you with the company. This means that payouts may only happen if you stay for a long period of time, and have no value if you leave the company before a set date. For this reason, it’s important to know what happens to your equity compensation if you resign or your employment is terminated. For example, an ill-timed resignation may mean you lose your right to significant portions of your equity package. This underlines the importance of taking the time to ask questions at the outset to avoid nasty surprises down the road. If you are thinking of quitting or have been terminated, it’s a good idea to consult with an employment lawyer who has experience with equity compensation as there could be a lot at stake.