Many employers play hardball with employees they terminate. They make a lowball offer for termination pay and drag employees into litigation, hoping the time and costs of litigation will deter employees from pursuing the full extent of their claims. While this approach could be effective, a recent decision addressed the risks of being unnecessarily aggressive, with a significant costs award in light of the hardball tactics.

In Janmohamed v. Dr. M. Zia Medicine Professional Corporation, 2022 ONSC 6561 (“Janmohamed“), the employee accepted the employer’s $15,000 offer to settle their wrongful dismissal dispute.  However, since the parties could not agree on costs, they asked the court to assess it. Justice Myers awarded $30,000 in legal costs against the employer, on the basis of what is “fair and reasonable” in the circumstances. Thereby doubling the settlement the employer agreed to pay the employee!

This case serves as a warning to employers about the potential financial risks of playing hardball with employees for wrongful dismissal claims.

Justice Myers made it clear that employees terminated without cause are “entitled to pay in lieu of reasonable notice” and that employers should not feel entitled to strategically take an aggressive stance to wear down an employee. Notwithstanding finding that neither party held the moral high ground, Justice Myers found that there is a noticeable power imbalance, and that employers should not be incentivized to lowball, forcing employees to sue to obtain what everyone knows is justly due.  Justice Myers concluded that this power imbalance was highly unfair to the employee, and that it would be fundamentally unjust in this case to leave the plaintiff under water as a result of having to bring the employer to a position that the employer should have offered at the time it terminated the employee.

In another case, Chu v China Southern Airlines Company Limited, 2023 BCSC 21 (CanLII) (“Chu”), the employer was ordered to pay $100,000 in punitive damages and $50,000 in aggravated damages after the courts found that Chu was wrongfully dismissed. Mr. Chu was also awarded a 20-month notice period, resulting in an award of approximately $58,000 for lack of notice given. In this case, China Southern Airlines (CSA) demoted Mr. Chu multiple times and placed him in roles for which he was unqualified. After he failed to perform up to the expected standards, he was dismissed at the age of 68. The court found that CSA dealt with the situation in a “duplicitous and unfair” manner and did not fulfill basic employer legal obligations – such as provide Mr. Chu with a record of employment (ROE).

Employers should handle termination situations in a fair and reasonable manner by making a reasonable offer and being open to compromise to resolve the dispute. By taking this more level approach, employers can minimize the risk of costly legal fees, putting the risk on the employee if they are the ones taking an unreasonable stance.

Moreover, it is essential for employers to be aware of an employee’s legal rights on termination. This means that an employer must ensure that it at least fully complies with the Employment Standards Act 2000 in Ontario and the equivalent legislation in different jurisdictions. Employers should consider renewing contracts yearly to stay in compliance. Where they have failed to meet the ESA standards, other entitlements will be due in accordance with  of an employee’s common law entitlements. Additionally, employers should ensure that the termination process is handled reasonably and in good faith.

The cases of Janmohamed and Chu. serve as a cautionary tales for employers about  financial risks of taking an unreasonably hardline approach during the termination process.