By Howard Levitt and Maria Belykh
Courts have shown they have zero tolerance for companies that breach the ‘duty of good faith’
HBC broke one fundamental tenet of employment relations in the process of severing ties, breached the “duty of good faith” it owed him.
What does a duty of good faith mean? Put simply, it requires employers to not be unduly insensitive or unreasonable when terminating. They must be candid and forthright. This overarching legal principle exists to protect employees from the power imbalance between themselves and their employers.
HBC breached its duty of good faith in a number of ways, the court found.
First, it offered Pohl continued employment with the company, albeit, in a lesser-paid, minimum wage role as a sales associate with no guaranteed minimum weekly hours. HBC said it was offering him a chance to limit the extent of the harm he suffered from being terminated from his managerial role while continuing to work for his life-long employer. The court disagreed.
The second transgression HBC committed was failing to pay Pohl his minimum Employment Standards Act entitlements until two months after his termination, ignoring Pohl’s lawyer’s repeated requests for the payment.
Courts have grown intolerant of employers who do not pay employees the bare minimum of what they are entitled to upon dismissal. They have been clear that employers must both pay the minimums and inform the employee that they will do so at a minimum at the outset of any settlement negotiations, which HBC failed to do.
The court also took issue with HBC’s failure to issue Pohl’s record of employment (ROE) within a timely fashion contrary to the Employment Insurance Regulations. The ROE was not only two years late, but it contained false information. HBC mischaracterized the termination as a layoff with an unknown expected date of recall. Pohl sought to prove that the employer made the misrepresentations for the purposes of applying for the Canada Emergency Wage Subsidy to which it was not entitled. The court made no finding either way on this.
Finally, the court also found that making a show of walking the employee out the front door immediately after terminating him was unduly insensitive. Although this is standard practice in many Canadian organizations, this finding reveals how much judges are willing to bend the line of sanctionable impropriety when they find that an employer is acting inappropriately in other ways.
Justice Centa referred to HBC’s conduct as “untruthful, misleading, and unduly insensitive.” He ruled that “HBC was placing its interests above (Pohl’s) and that this increased his sense of exploitation, humiliation, and depression.” In addition to receiving 24 months’ reasonable notice, he awarded Pohl $55,000 for the employer’s multiple transgressions.
It would be wise to learn a few lessons from HBC’s experience and similar cautionary tales:
- Pay the employee any outstanding wages upon termination, including vacation pay.
- Pay the employee their statutory minimum entitlements, including termination pay, severance pay, and vacation pay as a lump sum within the requisite time limit. Do not hold off on negotiating the ultimate package.
- Continue the employee’s benefits during the statutory notice period.
- Issue the employee a record of employment within the requisite time limit.
- Ensure that the ROE contains accurate information that does not misrepresent the reason for the employee’s termination.
- Specify that you will do all the above in your letter of termination.
- Any alternative job offers should be made in good faith and, where possible, offer comparable terms of employment.