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Assert a Weak Case for 'Just Cause for Termination' at Your Peril!

08-Dec-15

By Sarah Levine and Hugh McPhail, Q.C.

A recent Alberta Court of Queen's Bench case sends a strong caution to employers: act in good faith in performing the employment contract or be prepared to pay. In Karmel v Calgary Jewish Academy, the judge awarded a staggering $200,000.00 in aggravated damages to the employee for the harm he suffered from the employer's bad-faith handling of his termination. This award was in addition to the $606,027.97 awarded to the employee for the outstanding balance owed to him under the contract.

The plaintiff was a school principal at the Calgary Jewish Academy. A minor conflict between the principal and the President and Chair of the Board led to the eventual breakdown of the employment relationship. This Board member had a significant role in pushing for, and eventually succeeding in, the employee's termination before the expiry of its fixed term. The Court found on the evidence that the employee was wrongfully dismissed, despite his numerous, good-faith attempts to reconcile with the Board member. Not only did the employer not have grounds to terminate the employee with cause, the court concluded that it pursued a dishonest strategy of papering a path to the employee's termination so as to avoid paying out the remainder of his five year contract. The court noted, with reference to recent Supreme Court of Canada authority, that the law requires employers to be candid, reasonable, honest and forthright with their employees. The trial judge concluded that the employer failed in its duty to act honestly in the performance of its contractual obligations for a period of about 18 months through its attempts to orchestrate the unjustified termination for alleged just cause. Aggravated damages of $200,000 were awarded to the employee for the additional harm he suffered due to the manner in which the employment contract was breached.

This case continues a trend in other provinces with similarly massive awards. In the recent Ontario Superior Court of Justice decision of Gordon v. Altus Group, the Court found that the employer did not have cause to justify the employee's termination. The employer was found to have 'puffed up complaints' to justify the termination and punitive damages of $100,000.00 were awarded. The Court based this significant damage award on the employer's 'outrageous behaviour,' 'terrible conduct', and failure to honestly perform the employment contract by honouring a contractual arbitration clause. The $100,000.00 punitive damage award was in addition to the $168,845.00 awarded to the employee for the payout of his ten-month notice period.

If an employer is considering justifying a termination for cause, they would do well to ensure that the employee's alleged misconduct is serious, and not exaggerated, otherwise the employer risks a significant damages sanction from the Court. Do not orchestrate a weak 'just cause' case or prevail in alleging 'just cause' for termination unless there is a strong foundation for doing so.

The Alberta Court of Appeal has said that you will be protected from damages based on improperly alleging cause when you have an "honest belief, especially with arguable grounds," but how confident can you be that the judge will believe you?

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