Archive for December, 2009

End of Wallace damages isn’t all good news for employers

By Jeffrey R. Smith (jeffrey.r.smith@thomsonreuters.com)

In 1997, the Supreme Court of Canada introduced a concept that would become standard in wrongful dismissal cases where an employer acted in bad faith in the course of firing an employee. The concept involved extending a dismissed employee’s reasonable notice period — or usually compensation in lieu of — if the court found the employer treated the employee poorly when it fired her. This notice extension became known as Wallace damages and was a frequent element in wrongful dismissal cases for a decade.

However, the Supreme Court of Canada shifted gears in the summer of 2008 and altered the employment law landscape once again. In the landmark case Keays v. Honda Canada, it threw out the concept of extending an employee’s notice period and adopted a new way of compensating victims of bad-faith dismissal. In the new way of doing things, a fired employee would have to prove there was an actual loss from the employer’s bad-faith conduct and the court would award damages based on the value of that loss.

This new way of determining bad-faith damages was hailed by many as good news for employers because it eliminated what was often arbitrary notice extensions that had no pattern or predictability. With damages based on actual losses, the amount could be more certain. Also, some thought the instances of bad-faith damages being awarded might go down, since the onus was on the employee to prove actual loss.

Unfortunately for employers, the news was not all good.  Some saw the potential for even bigger damage awards if employees could prove huge losses. While the overall number of bad-faith awards have decreased since Keays, this fear seems to have been well-founded in light of a recent Alberta case.

In October, the Alberta Court of Queen’s Bench found an Alberta branch of investment firm Merrill Lynch acted in bad faith when it fired an investment advisor without cause. Under the Wallace way of doing things, the court would have likely added several months to the advisor’s award of 12 months’ pay in lieu of notice, equal to $600,000. However, the advisor was able to show Merrill Lynch’s actions significantly damaged his career and the court found his damages from bad-faith totaled $1.6 million, or almost three years’ pay on top of the one year already awarded.

Employment lawyer Stuart Rudner of Miller Thomson LLP in Toronto — who appeared before the Supreme Court on behalf of the Human Resources Professionals Association, an intervenor, in the Keays case — discusses the significance of this development in bad-faith damages on page 5 of the Jan. 11, 2010, issue of Canadian HR Reporter.

“On its face, (this case) appears to be a perfect example of what employment law commentators suggested could happen as a result of the Supreme Court’s decision in Keays,” says Rudner in his column. “This case appears to be one of those rare examples where not only can the employee prove he suffered actual damages as a result of the employer’s bad faith, but the amount of damages is far beyond what any employee would have received via a ‘Wallace bump’ under the old regime.”

What does this mean for employers who thought they had seen an end to the big bumps to wrongful dismissal awards for bad faith? Even though bad-faith damages are becoming less frequent, they could be bigger when they are awarded. If an employee can prove bad faith was severe and she suffered extraordinary losses, the employer might be worse off. Perhaps the often arbitrary extension of notice periods under the Wallace regime wasn’t so bad for employers after all.

Jeffrey R. Smith is the editor of Canadian Employment Law Today. For more information, visit www.employmentlawtoday.com.

What do you think of the Alberta court’s decision? Join the conversation by adding a comment.

Blogging the hand that feeds you

By Jeffrey R. Smith (jeffrey.r.smith@thomsonreuters.com)

Facebook, Twitter, MySpace, LinkedIn, blogs — it seems just about everyone is putting something about themselves on the Internet and networking on these types of sites that are sometimes referred to as “Web 2.0.” Many people are practically addicted to using these sites, posting their status and sending messages all day. The concern for employers is not if, but how much, employees are using these sites while at or in association with their work.

There are the standard concerns about using company time and resources to visit non-work related websites and many employers have computer-use policies that address these issues. Some employers actually ban or block access to certain sites by employees at work, such as the Ontario government’s ban on Facebook. But, as much as they may try, it’s almost impossible to completely prevent employees with computers from spending at least few minutes on personal Internet use, even if it’s just checking personal email.

However, what might be of more concern to employers is employees who post things about the employer on their own sites away from work. Pictures of the employee in uniform on her Facebook page or posting something on a blog about the company can be done outside the workplace on the employee’s own computer. Can the employer do anything to prevent this?

In January 2007, employees of Ontario grocery chain Farm Boy created a Facebook page where they blogged about things they did at work, including theft and other misconduct. The company saw the page and fired the employees.

In 2008, an employee of British Columbia grocery distribution company EV Logistics was fired after he posted racist and violent comments on his blog, including support of Nazism. The employee also mentioned EV Logistics in his post. However, an arbitrator reinstated the employee because he took down the blog, posted an apology in its place and apologized to his employer.

An employee of the Alberta government wasn’t so lucky in 2008 after she blogged about her office. She made negative comments about her department and made negative comments about her supervisor and co-workers. She also posted emails and other information that identified her employer. In this case, the arbitrator found the employment relationship was damaged beyond repair, the online comments were malicious and the employee wasn’t initially sorry for posting them.

The Canadian Charter of Rights and Freedoms protects freedom of expression, but only in the public realm. In the context of employment in the private sector, companies have the right to protect their businesses and reputations from negative comments. In at least some circumstances, employers can discipline or dismiss an employee who includes company information in a private blog. But where does the line between discipline and dismissal exist? If an employee is apologetic and takes the blog down as in the EV Logistics case, does that lessen the damage if the blog has already been viewed by many people? How negative does a blog have to be to justify dismissal?

Employers can take action to counter comments by an employee that could be damaging to the employer or other employees, but it’s probably safe to assume the comments would have to be particularly egregious to warrant full dismissal.

Jeffrey R. Smith is the editor of Canadian Employment Law Today, a sister publication to Canadian HR Reporter that looks at employment law from a business perspective. For more information, visit www.employmentlawtoday.com.

What do you think? Join the conversation by adding a comment.